China Pharma and Healthcare Update

China is the second-largest pharmaceutical and healthcare market globally. Driven by an aging population, high healthcare demands, regulatory reforms and increased investment flows, this rapidly growing sector has been one of the most active in China.  To keep you updated on the latest developments, we have formed a China pharma focus group comprising of multi-disciplinary experts in China which leverages the combined expertise of our China Joint Operation with Kewei Law Firm. In this e-bulletin, we focus on the recent regulatory, enforcement and industry developments.

On 30 March 2020, the State Administration for Market Regulation (SAMR) issued the Drug Registration Regulations and the Drug Manufacturing Regulations, both of which will take effect on 1 July 2020. These are important pieces of supporting legislation to implement the new Drug Administration Law which came into effect in December last year. The new drug administration regime aims at aligning China's regulatory approach to drug administration with international standards.  

Highlights of the implementing regulations are set out below. 

• The regulations set out detailed qualification requirements for the market authorization holder regime, including requiring a quality assurance system to be established, imposing overall responsibility for product quality on the legal representatives of the market authorization holder and requiring drugs manufactured by contract manufacturing organizations to be subject to the oversight of the local branches of the National Medical Products Administration (NMPA). Both market authorization holders and contract manufacturing organizations must have obtained drug manufacturing licenses before applying for market authorization for a particular drug. 

• Data integrity requirements are to be adopted throughout the R&D and manufacturing phases. The NMPA will conduct more frequent compliance inspections.

• The entity applying to the NMPA for clinical trial approval must be the sponsor of the trials, and such trials must be conducted within three years from the approval. Sponsors are required to provide annual safety updates during the trials.

• Expedited approval procedures will be adopted for breakthrough therapies and drugs dealing with a public health crisis (such as COVID-19).  

On 24 December 2019, the SAMR issued new regulations which integrate a number of previous measures and standards for advertising medical products and clarify the requirements. The Interim Measures for the Administration of Review of Advertisements on Drugs, Medical Devices, Dietary Supplements and Formula Food for Special Medical Purpose came to effect on 1 March 2020.

Under the Interim Measures, all advertisements for medical products must be reviewed and approved by the SAMR prior to publication or display. There are specific content requirements for advertisements, for example, using images of doctors, patients or medical institutions is prohibited. The Interim Measures also aim to streamline and shorten the approval procedures. The SAMR is required to decide whether to accept an application for advertisement approval within five working days and will then complete its review within ten working days after the application is accepted. Any approval is valid until the earlier of the expiry of the product’s registration/record certificate or the production license (or two years if there is no valid period specified on such certificate or license).

On 26 March 2020, the SAMR published its legislation plan for 2020 on its official website. There are a total of twelve legislation programs in relation to drugs and medical devices. The key legislation proposed to be introduced or amended in 2020 includes the Implementation Regulation for the Drug Administration Law, the Regulation for Supervision and Administration of Drug Operation and the Regulation for Supervision and Administration of Online Sales of Drugs. 

In January 2020, the SAMR indicated that it would enhance its antitrust law enforcement against API (Active Pharmaceutical Ingredient) manufacturers. This signals a key enforcement trend by China's top antitrust regulators with respect to the pharma sector.

On 9 April 2020, the SMAR issued an administrative notice fining three calcium gluconate API manufacturers for abusing their dominant market position. Following a complaint in 2019, the SMAR carried out a six-month investigation against the three manufacturers covering more than 30 upstream and downstream companies across ten provinces. They were fined a total of RMB325 million. For more details, please refer to China’s SAMR Continues Focus on Pharma Sector Amid COVID-19 Outbreak, Fining API Distributors Over RMB300m for Abuse of Dominance.

On 17 March 2020, the Health Commission of the Jiangxi Province announced that Lianyungang Chia Tai Tianqing Medical Co. Ltd. had been involved in commercial bribery and its drug procurement qualification for government procurement had, therefore, been revoked. This reflects the government's zero tolerance policy for bribery by drug companies. 

In light of the worldwide COVID-19 pandemic, on 25 April 2020, the Ministry of Commerce, the General Administration of Customs and the National Medical Products Administration of China issued a joint notice on the export of medical products. From 26 April 2020, the export of certain products (including COVID-19 detection reagents, medical masks, medical protective gowns, ventilators and infrared thermometers) will require the Chinese exporter to provide a written or electronic statement that the products have registration certificates for medical products and have met the quality standards of the importing country (region). This notice replaced a previous notice issued by the same authorities which required that such products must meet the quality standards of both China and the importing country (region).

On 15 March 2020, Shanghai Fosun Pharma Group Co., Ltd. announced that its wholly owned subsidiary has obtained a license from BioNTech SE to exclusively develop and market COVID-19 vaccine products in China based on its mRNA tech platform. Fosun Pharma will make license fee payments to BioNTech SE up to US$ 85 million. Fosun Pharma will also subscribe for 158 million shares of BioNTech SE for a consideration of US$ 50 million. According to the announcement, the vaccine is still at an early development stage and no clinical trial work has yet commenced. There is no timeline for the commercialization of the vaccine. 

On 16 February 2020, Asymchem Medical Group (Tianjin) Co., Ltd., a company listed on the Shenzhen Stock Exchange, announced that Hillhouse Capital will invest RMB2.31 billion for shares in the company and will become its largest institutional shareholder. This is the first such public investment following the new refinancing rules published by the China Securities Regulatory Commission which is intended to relax the requirements for private placement by listed companies. Asymchem is a leading contract development and manufacturing organization company in China. Hillhouse Capital’s investment signals PE investors' interest in such businesses in China. 

On 25 March 2020, Abbisko Therapeutics, an innovative biopharmaceutical company based in Shanghai, announced the completion of a $70 million Series C financing. The investment was led by Temasek, joined by several existing investors. This financing brings the total equity capital of Abbisko Therapeutics to $140 million. The funds raised will be used by Abbisko Therapeutics in several of its R&D programs for cancer treatments. 

On 2 March 2020, InnoCare Pharma Limited completed the biggest listing in Hong Kong since January 2020 raising US$ 289 million. The deal was secured by international investment banks, including Morgan Stanley, Goldman Sachs and UBS. InnoCare develops treatments for cancer and autoimmune diseases. Its marketing applications for lead drug candidate orelabrutinib, or ICP-022, as a therapy for hard-to-treat chronic lymphocytic leukemia and mantle cell lymphoma have been accepted for review by regulators in China.

KEY CONTACTS

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