The Chinese medical device industry has been rapidly developing and expanding these years. According to the deputy director general of the NMPA, the main business revenue of medical devices across the country exceeded CNY 720 billion in 2019, accounting for 20% of the global medical device market. Considering such rapid development and the increasing need for health, it is necessary to revise the Regulations on Supervision and Administration (“Regulation”), to improve the institutional system and promote industrial innovation. In this context, an amendment of the Regulation (“Amended Regulation”) was adopted by China State Council on December 21st, 2020, with the effective date of June 1st, 2021.
Compared with the last amendment of the Regulation in 2017 (“2017 Regulation”), the primary revisions under the Amended Regulation are (i) establishing the Market Authorization Holder (MAH) system; (ii) optimizing the administrative examination and approval procedures; (iii) encouraging innovation; and (iv) increasing penalties for illegal acts.
1. Establishing the MAH System
1.1. General introduction
Under the 2017 Regulation, the registration and production of medical devices have to be conducted by the same entity, except innovative medical devices. The MAH system, untying the registration and production of medical devices, was first piloted in Shanghai Pilot Free Trade Zone in 2017, and expanded to 21 provinces in 2019. After years of pilot, the MAH system is now officially introduced in the Amended Regulation and to be implemented nationwide (excluding the implantable medical devices with high risk). A MAH is not obliged to conduct production by itself, but has the option to contract the production to qualified CMOs, which is particularly beneficial to R&D institutions and companies (Article 34).
Nevertheless, it is not provided whether cross-border contract production is allowed. Judging from the current dual management of import and domestic medical devices, it is unlikely that cross-border contract production will be liberalized.
1.2. Responsibilities and obligations of the MAH
The MAH assumes legal responsibilities for the safety and effectiveness of medical devices during the whole process of research, development, production, operation and use, i.e., the so-called “life cycle” (Article 13). Specifically, obligations of a MAH include, in particular (i) establishing a quality management system and maintaining its effective operation; (ii) formulating post-marketing research and risk management and control plans and ensuring their effective implementation; (iii) conducting monitoring and re-evaluation of adverse events; (iv) establishing and implementing a product traceability and recall system (Article 20).
Besides, an overseas MAH shall designate a domestic enterprise to assist the overseas MAH in fulfilling the preceding obligations (Article 20). Different from that in the Drug Administration Law, it is not explicitly stipulated in the Amended Regulation that the domestic enterprise designated by the overseas MAH shall undertake the above-mentioned obligations and bear joint liabilities with the overseas MAH. Nonetheless, legal liabilities are provided in case such designated domestic enterprise fails to perform relevant obligations (Article 98).
1. 3. Transfer of registration certificates of medical devices
Under the Amended Regulation, free transfer of medical devices registration certificates is not provided, which is different from that under the drugs MAH system. It is noticed that exploring the transfer of medical devices registration certificates was mentioned in the official notice[1] issued by the Hunan Provincial Medical Products Administration during the MAH pilot. It is worthy of attention whether the transfer of medical device registration certificates will be liberalized in the future.
2. Optimizing the Administrative Examination, Approval and Filing Procedures
The medical device production, operation and other links need to go through strict administrative examination, approval and filing procedures. Out of the requirements of comprehensive and deepening reform of the management system of simplifying administration and delegating powers, the Amended Regulation optimizes the administrative examination, approval and filing procedures of medical devices in the following aspects.
2.1. Allowing self-inspection report for registration of Class II and Class III medical devices
In the past, inspection reports issued by inspection institutions must be submitted for registration of Class II and Class III medical devices, and self-inspection report is only applicable to Class I medical device filing. However, the number of medical device inspection institutions is limited, while the number of medical devices is growing fast, the inspection needs are not met in practice. We believe that allowing self-inspection report for registration of Class II and Class III medical devices would save the time and cost of medical device registration, and solve the problem of long-waiting for inspection caused by limited inspection institutions (Article 14).
2.2. Introducing exemption of clinical assessment
Under the 2017 Regulation, a registrant has to either resort to clinical trials or comparison and analysis of the clinical documentation and data of the same-type medical devices to prepare clinical assessment materials, which can be a laborious task. The Amended Regulation grants exemption of clinical assessment to medical devices with a clear working mechanism, finalized design and mature production technology, provided that the same-type medical devices on the market have been used clinically for many years without records of serious adverse events (Article 24). This exemption of clinical assessment can contribute to lightening the registration burden, but it remains to be seen to what extent it will be implemented in practice.
2.3. Other measures optimizing the administrative examination, approval and filing procedures
Firstly, special approval mechanism is introduced, including the conditional approval system, emergency use system and special approval system for importing clinically urgently needed Class II and Class III medical devices (Article 19, Article 57).
Secondly, clinical trial tacit approval system is established (Article 27). Where clinical trials for Class III medical devices have high risks to human beings, they shall be approved by the medical products administrative department in advance. In case the decision whether the clinical trial is allowed is not notified to the applicant within the prescribed time limit, it shall be deemed that approval is granted.
Thirdly, the examination and approval time limit for production of Class II and Class III medical devices and that for operation of Class III medical devices are shortened from 30 working days into 20 working days (Article 32, Article 42).
Lastly, operation of Class II medical devices whose product safety and effectiveness are not affected by the circulation process can be exempted from filing (Article 41).
3. Encouraging Innovation
Encouraging research and development of innovative medical devices is one of the critical concerns of the NMPA in the medical device industry. A number of provisions in the Amended Regulation reflects this idea. For instance,
(1) innovative medical devices will be entitled to priority in examination and approval (Article 8);
(2) the country encourages companies to cooperate with universities, scientific research institutes, medical institutions, etc. to carry out medical devices research and innovation, and will strengthen the protection of intellectual property rights of medical devices (Article 9). It is suggested that the involved parties attach importance to and have clear arrangements regarding the ownership of intellectual property rights, follow-up R&D rights, intellectual property licensing and transfer, follow-up commercial implementation in the course of co-development or contract development;
(3) innovative medical devices that have not been registered overseas may be allowed for registration in China without submitting the documents certifying approval of sales of the same issued by the competent authority of the home country. It remains to be seen how many overseas companies will actually benefit from this policy, given that the threshold for identification of innovative medical devices is pretty high.
4. Increasing Penalties for Illegal Acts
The Amended Regulation comprehensively increases the penalties for various violations.
Firstly, violations subject to penalties are added. For example, Article 89 and Article 98 respectively set out the penalties to MAHs and the designated domestic enterprise of overseas MAH for failure to fulfil their obligations.
Secondly, the amount of fines is greatly raised, up to 30 times the products value.
Thirdly, a dual penalty system is introduced, i.e., penalties can be imposed on both companies and individuals. This means that if a company violates the Amended Regulation, the relevant liable persons, including the legal representative of the company, the person chiefly in charge and the person directly in charge will face personal liabilities, including confiscation of income obtained from the company during the period of the illegal act, fines up to 3 times the income obtained from the company during the illegal act and industry bans (in severe cases, life-long bans).
To this end, compliance becomes even more significant to companies. It is suggested that companies and executives update and refine the compliance policies pursuant to the new changes brought about by the Amended Regulation. In particular, the decision mechanism could be of critical importance to clarify and clear up personal liabilities of certain persons in case of a violation. Though it is not clear how the law enforcement officials will determine division of liabilities, it is imperative to record the objections of involved persons in writing, offer updated trainings to employees, explicitly require employees and the partners (such as suppliers and contract producers) to comply with its compliance policies.
Summary
In general, on one hand, the Amended Regulation brings new opportunities to the industry. Companies can make full use of the various optimized procedures and systems to speed up their product market access; on the other hand, companies are also facing more compliance challenges and risks throughout the medical device life circle.
With the promulgation of the Amended Regulation, the related supporting legal instruments will be published in the near future, which will impact the implementation of the Amended Regulation in the next years.
