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DRUG REGULATION 29

The Regulation and Approval


of New Drugs in China
Chinese drug legislation, enacted in 1985, re- Trade Organization agreement, went into effect
quires that new drugs be approved by the na- on December 1, 2002. This paper reviews Chi-
tional drug regulatory authority before they can na’s new drug approval history, regulatory poli-
be marketed in China. Since enactment of this cy and administration, and related issues with
Rongling Deng
*WHO Fellow, Tufts Center legislation, China has significantly improved its respect to China’s climate for pharmaceutical
for the Study of Drug regulatory review process for new drugs. During innovation and the Chinese pharmaceutical in-
Development, the same time period, the pharmaceutical in- dustry. We provide approval data for new chem-
Tufts University, Boston,
Massachusetts dustry in China has shown considerable expan- ical entities (NCEs) approved from 1985
sion. With China’s membership in the World through 2000, and draw a picture of China’s
Kenneth I Kaitin, PhD
Director, Trade Organization, the Chinese pharmaceuti- NCE review policies and the NCE approval
Tufts Center for the Study of cal industry is experiencing change and will process. We also offer views on changes to Chi-
Drug Development,
Tufts University, Boston, continue to do so. The new Drug Registration na’s environment for pharmaceutical innovation
Massachusetts Regulation, which is compatible with the World since joining the World Trade Organization.

Key Words
China;
INTRODUCTION nificant changes in the new regulation are a re-
World Trade Organization; China’s pharmaceutical industry has made sig- vised definition of a new drug and a new policy
New chemical entity; of marketing exclusivity in China. We do not
Drug development;
nificant progress since the early 1990s. As the
Pharmaceutical industry industry developed, intellectual property be- cover the details of the 2002 regulation in this
Correspondence Address came more important and intellectual property paper. Rather, we focus on the development and
Kenneth I Kaitin, PhD, protection has improved, especially after China approval of NCEs in China from 1985 through
Director, Tufts Center for the
Study of Drug Development, gained membership in the World Trade Organi- 2000. Our results provide a picture of the cur-
192 South St., Suite 550, rent climate for pharmaceutical innovation in
Boston, MA 02111 (e-mail:
zation (WTO) on December 11, 2001. China’s
kenneth.kaitin@tufts.edu). pharmaceutical market offers great potential to China and offer a baseline for measuring the im-
both national drug firms and foreign firms in- pact of initiatives to modify and improve the
*Ms. Deng is Senior Officer
at the Sichuan Drug terested in doing pharmaceutical research and process for bringing new drugs to the Chinese
Administration, Chengdu, market.
China. She conducted this development in China.
research while on a two-year In this paper, we review China’s history of NCE
World Health Organisation
fellowship at the Tufts Center regulatory policy and administration, and dis- R E G U L AT O RY I S S U E S
for the Study of Drug cuss related issues with respect to China’s cli- A BRIEF HISTORY OF NEW DRUG
Development.
mate for pharmaceutical innovation and changes REGULATION IN CHINA
in the Chinese pharmaceutical industry. In our In 1963, the Chinese Ministry of Health planned
analyses, we use the Tufts Center for the Study drug regulation to manage new drugs. In 1979,
of Drug Development’s definition of an NCE; the Ministry of Health and the State Pharma-
that is, any NCE not previously approved for hu- ceutical Administration of China jointly pub-
man use, excluding diagnostic agents, vaccines, lished the New Drug Management Regulation.
and other biologic compounds (1). In China, Under this regulation, pharmaceutical manu-
“new drug” includes more than NCEs, but we se- facturers did not need to conduct systematic
lected only class 1 NCEs (see below) for this scientific experiments on new drugs. Local com-
analysis. panies easily received approval from the provin-
The new Drug Registration Regulation, which cial department of health to market a drug any-
is compatible with the WTO agreement, went where in China.
into effect on December 1, 2002. The most sig- In the early 1980s, drug regulation became in-

Drug Information Journal, Vol. 37, pp. 29–39, 2004 • 0092-8615/2004


Printed in the USA. All rights reserved. Copyright © 2004 Drug Information Association, Inc.
30 DRUG REGULATION Deng, Kaitin

creasingly important to the public health. China der patent protection from 1986 to 1992 in the
enacted its first comprehensive Drug Adminis- United States and other major Western coun-
trative Law in 1985 (2), which had the goals of tries. These regulations were enacted as a result
protecting the public health and promoting of international pressure to provide intellectual
economic development in the pharmaceutical property protection, in accordance with the
sector by establishing a legislative process for United States-China Memorandum of Under-
the regulation of drug manufacturing, distribu- standing of January 1992.
tion, and purchasing. This marked the begin- In 1999, a new bureau responsible for new
ning of a new era of drug regulation in China. drug review was established. The State Pharma-
The Drug Administrative Law was revised on ceutical Administration of China, the Division
February 28, 2001. of Drug Administration in the Ministry of
The Drug Administrative Law stipulates the Health, and the Division of Traditional Chinese
responsibilities and obligations of drug manu- Medicine in the Traditional Chinese Medication
facturers, distributors, and institutions that pro- Administration Bureau were merged into the
vide services to the drug industry. It requires State Drug Administration. The new organiza-
premarket testing and approval for new drug tion revised major provisions of drug regulation
products, and prohibits drug adulteration. that had lagged behind the times and added
In the same time period, two new regulations new provisions and guidances related to new
were added in an amendment: Provisions for New drugs, new biological products, and imported
Drug Approval (3) and Provisions for New Biolog- drugs. These regulations covered the drug regis-
ical Product Approval (4), which were revised in tration procedure, new drug protection and
1999. These regulations require sponsors of New technology transfer, Good Clinical Practice
Drug Applications to provide adequate preclini- (GCP), and Good Laboratory Practice.
cal data to verify the drug’s safety and to justify
the commencement of clinical trials. They also NEW DRUG CLASSIFICATION
provide drug classifications and outline the pro- From a regulatory perspective, NCEs fit into
cedures for submitting New Drug Applications. three classes of new drug classification. The
Other major regulations relate to new drug re- statute defines “new drug” as any drug that has
view. China’s first importation rule was enacted not yet been manufactured in China. Marketed
in 1988, requiring certain imported drugs to be drugs with a new dosage form, route of adminis-
registered. Provisions for Importation Registra- tration, or indication, and marketed drugs that
tion were enacted in 1991 (5) and revised in are new combinations, are also subject to new
1999 (6). Provisions for Drug Administrative drug regulatory review. New drugs are divided
Protection (7) were enacted in January 1993, into five classes. NCEs fit into three classes. Un-
providing 7.5 years of administrative protection der this definition, an imported NCE that has
(marketing exclusivity) for drugs that were un- been sold in the marketplace but not manufac-

Rationale for Classification of New Chemical Entities in China


TABLE 1
Marketing Abroad Foreign Pharmacopeia Importation
Class 1 No No No
Class 2 Yes No No
Class 4* Yes Yes Yes
* If the drug is either in a foreign pharmacopoeia or imported, the drug is class 4.
Regulation and Approval of New Drugs in China DRUG REGULATION 31

tured in China is generally considered a new the Center for Drug Evaluation extended its
drug by local manufacturers. In the five classes mandate to include the review of imported
of new drug classification, class 1, class 2, and drugs, generic drugs, and over-the-counter
class 4 are related to NCE review (Table 1): medications.
Provincial agencies also conduct part of the
• Class 1 NCEs are true NCEs that have not been
marketed in the world,
new drug reviews. These agencies review raw
• Class 2 NCEs are new drugs that have been market- data, investigate facilities, and conduct estab-
ed abroad, but are not part of foreign pharma- lishment inspections. They assist the State Drug
copoeia and have not been imported into China, Administration in the preliminary drug registra-
• Class 3 compounds are new combinations of al- tion work. The National Institute for Control of
ready approved drugs, Pharmaceutical and Biological Products and
• Class 4 compounds include the following: 1. NCEs Provincial Institutes for the Control of Pharma-
that have been listed in the foreign pharmacopoeia ceutical Products repeat certain experiments,
of developed countries/regions (ie, the United particularly with regard to specifications, sub-
States, the European Union, and Japan), or have mitted in each application and determine
previously been imported into China, 2. New
whether the applicant’s quality standards are
dosage forms of approved compounds, or 3. New
adequate.
routes of administration for approved compounds,
The new drug review process consists of the
and
• Class 5 compounds are new indications for ap-
clinical study application and the new drug ap-
proved NCEs. plication. After receiving official approval, the
applicant can conduct clinical trials. Prior to
NCE review in China is based on whether an 1999, all NCE applications were first submitted
NCE is marketed abroad, and if so, for how long. to the Provincial Drug Administration. The NCE
According to the NCE classification above, mar- sample was sent to the Provincial Institutes for
keting is the primary threshold, since it shows the Control of Pharmaceutical Products for ex-
that the NCE has been used in humans for a pe- amination, and the Provincial Institutes for the
riod of time. The other threshold of inclusion in Control of Pharmaceutical Products offered
a foreign pharmacopoeia or importation pro- suggestions to the Provincial Drug Administra-
vides information on the extent to which the tion, through which the application was trans-
NCE has been accepted worldwide. Different ferred to the State Drug Administration or the
classes require different application data. Drugs Center for Drug Evaluation. After the State Drug
that reach the Chinese marketplace are general- Administration received the recommendation
ly from one of three sources: from the Center for Drug Evaluation, it made a
1. They are developed by local pharmaceutical com- decision as to whether the application should
panies, be approved, and this message was sent to the
2. They are the result of joint ventures, or sponsor.
3. They are the result of importation. However, in the revised regulation of 1999
(see Figure 1), a class 1 NCE clinical and mar-
THE REVIEW PROCESS keting application is submitted directly to the
The Drug Administrative Law authorizes the State Drug Administration for fast review. Via
State Drug Administration to approve new drugs the State Drug Administration, the application
for marketing. The State Drug Administration is transferred to the Center for Drug Evaluation
makes new drug approval decisions based on for a technical evaluation. The applied sample is
proposals from its Center for Drug Evaluation, sent to the National Institute for Control of
which is responsible for scientific review of new Pharmaceutical and Biological Products for ex-
drugs. The Center for Drug Evaluation plays an amination correspondingly. For class 2 and 4
essential role in new drug registration. In 2000, NCEs, the process has not changed significantly.

Drug Information Journal


32 DRUG REGULATION Deng, Kaitin

Recommendation
FIGURE 1
Sponsor Preliminary Review Sample Examination
The New Drug Application S,A PDA PICP
process in China.

Note: PDA=Provincial Class 2-5


Drug Administration,
Recommendation
SDA=State Drug Adminis-
tration, CDE=Center for
Decision-maker Sample Examination
Drug Evaluation,
SDA NICPBP
PICP=Provincial Institute
for the Control of
Pharmaceuticals,
Sponsor
NICPBP=National Insti-
F
tute for the Control of
Pharmaceutical and Bio-
logical Products, S=Stan- Scientific Review
Class 1
dard Review, A=Accelerat- CDE
ed Review, F=Fast Review
1. Approval

Make decision 2. Recommendation

3. Refusal

Sponsor

FAST REVIEW AND ACCELERATED REVIEW protection), which starts on the date of new
The Provisions for New Drug Approval in 1999 drug approval, is an important incentive to
include fast review and accelerated review (8). sponsors. In China’s regulations prior to 1999,
Fast review, intended to encourage drug innova- class 1 new drugs have eight years of exclusivity,
tion in China, is used for class 1 NCEs. Applica- class 2 drugs have six years, class 3 drugs have
tions for fast review are submitted directly to the four years, and class 4 drugs have three years.
State Drug Administration. Accelerated review is The exclusivity was extended in 1999; Class 1
intended to expedite the development of new NCEs have 12 years of exclusivity, class 2 and 3
therapies for life-threatening conditions and to NCEs have 8 years of exclusivity, and class 4 and
limit the number of manufacturers producing 5 NCEs have 6 years of exclusivity (Table 2) (9).
the same new drug. Applications for accelerated Although marketing exclusivity is important in
review are submitted to the local drug adminis- providing incentives for pharmaceutical re-
tration. Accelerated review is used for new drugs search and development, it is a complex provi-
in classes 2 to 5 that first submit clinical studies sion in China. Under this statute, several spon-
and for life-saving new drugs (eg, for cancer, sors may develop the same compound and the
HIV/AIDS, and orphan diseases). same formulation simultaneously. This reduces
the regulation’s original incentive. Therefore, in
NEW DRUG MARKETING EXCLUSIVITY revised provisions, the Chinese authority has
When the Drug Administrative Law was enacted the right to control the number of new drug
in 1985, Chinese patent law considered drugs to manufacturers. In general, the authority prefers
be a special commodity used to treat diseases that no more than three companies produce the
and save lives that, from a public health view- same new drug at the same time. This measure is
point, should not have patent protection. How- to prevent too many companies from manufac-
ever, marketing exclusivity (ie, administrative turing the same product. This rule does not ap-
Regulation and Approval of New Drugs in China DRUG REGULATION 33

New Drug Marketing Exclusivity TABLE 2

Class 1 Class 2 and 3 Class 4 and 5


Exclusivity 12 years 8 years 6 years

ply to new drugs that are currently under patent ences several times a year. The conference in-
or have administrative protection. cludes Center for Drug Evaluation staff, outside
experts, and the sponsor. For fast reviews, con-
NEW DRUG REVIEW TIME sulting conferences can be held when the Cen-
Due to a scarcity of reviewing resources in Chi- ter for Drug Evaluation finishes its review. Con-
na, many drug applications in the recent past sulting conferences are similar to U.S. Food and
were not reviewed in a timely manner. Every as- Drug Administration advisory committee meet-
pect of society criticized the slow review ings, except that the meetings are closed to the
process. In an effort to improve the process, the public. Results of the conferences, however, are
Center for Drug Evaluation set limits on drug often accepted by the Center for Drug Evalua-
registration review time (Table 3). Total review tion.
time is not to exceed 3.5 months for fast review,
16.4 months for standard review, and 7.2 PRECLINICAL AND
months for accelerated review. The clock stops CLINICAL REQUIREMENTS
when the Center for Drug Evaluation or a Data and clinical study requirements differ by
provincial agency issues an action paper (eg, ap- the class of drugs. The principle requirements
proval, recommendation, or refusal). If the Cen- are noted in Tables 4 and 5. Whereas applica-
ter for Drug Evaluation requests more data to tions for class 1 NCEs must include in vitro, pre-
demonstrate the safety and efficacy of the new clinical, and clinical data, applications for class
drug, it has 15 days to review supplemental data 2 and class 4 NCEs require fewer data. Class 2
for fast and accelerated reviews and 4 months NCEs can submit a pharmacology document.
for standard reviews. Class 4 NCEs do not require pharmacology re-
For standard reviews, the Center for Drug search data and can substitute bioavailability
Evaluation usually holds consulting confer- studies for clinical trials (8).

Timeframe for New Drug Review TABLE 3

Provincial State Drug Center


Time Drug Administration for Drug State Drug
(days) Administration (file) Evaluation* Administration Total
Fast Review 251 72 30 (15) 29 106 days (3.5 months)
Accelerated Review 100 12 60 (15) 29 216 days (7.2 months)
Standard Review 100 12 180 (120) 80 492 days (16.4 months)
Imported Review — 30 60 after meeting (60) 80
Note: 1. The Provincial Drug Administration is responsible only for raw data review and facilities or establishment inspections.
2. Before submitting an application to the State Drug Administration, the National Institute for the Control of Pharmaceutical and Biological Products should com-
plete the technical test on the product in the application within 100 days, or for a vaccine, within 150 days.
* Numbers in parentheses are supplemental review days.

Drug Information Journal


34 DRUG REGULATION Deng, Kaitin

Data Requirements for NCEs


C L A S S 1 N C E R E G I S T R AT I O N
TABLE 4 CLASS 1 NCES (FROM 1985 THROUGH 2000)
In Vitro Preclinical Clinical Study China approved 40 class 1 NCEs from 1985
through 2000 (10). Twenty-six of these NCEs
Class 1 Yes Yes Yes
were developed by Chinese pharmaceutical
Class 2 Yes  Yes companies, 12 NCEs were developed by for-
Class 4 Yes No  eign-based, global pharmaceutical firms (in
most cases, they submit applications in the
Note: = documented data or experimental data
name of their joint ventures in China), and 2
NCEs were developed by foreign start-up re-
search companies that outsource manufactur-
IMPORTED DRUGS ing to local Chinese companies.
Importing drugs is an effective way to provide Of the 26 NCEs developed by Chinese compa-
patients with access to new therapies as soon as nies, 17 were developed independently by do-
possible. It also promotes the progress of the mestic research institutes for the following cate-
Chinese pharmaceutical industry. The current gories: anti-malarial (6), anti-cancer (2), anti-
regulations state that sponsors of imported platelet (1), anti-infective (1), anti-toxin (1),
drugs should conduct clinical trials (or bioe- anti-AIDS (1), anti-allergin (1), anti-dizziness
quivalence studies) in accordance with Chinese (1), abortifacients (2), and cardio-protective
procedures and requirements (5). If an imported (1). The remaining nine NCEs used information
drug has not previously been marketed in China, provided in foreign publications at the outset of
the sponsor must conduct clinical trials in com- the research program, and were then developed
pliance with the provisions for new drug ap- by Chinese domestic institutions.
proval and GCPs. Usually, imported products re- In 2000, China approved 17 NCEs: 6 of these
ceive a five-year imported drug license. The were sponsored by Chinese pharmaceutical
sponsor must submit an application to renew the manufacturers, 10 were sponsored by foreign-
license six months before the expiration date. based global pharmaceutical firms (or their

TABLE 5 Clinical Study Requirements for NCEs

Clinical Study Number of Subjects NCE Classification

Phase Blinded Open Class 1 Class 2 Class 4


Clinical trials 1 No 20~30 Yes  No
2 ≥100 No Yes Yes No
3 ≥300 (experiment) Yes No No
4 N >2000 Yes No No
Bioequivalence Bioavailability 18–24 No No Yes
(or Clinical Random ≥60 No No No No or Yes
equivalent) comparative
clinical trial
Note: = documented data or experimental data
Regulation and Approval of New Drugs in China DRUG REGULATION 35

18
FIGURE 2
16
Annual new chemical
14 entity approvals in China.

12

10

0
86

87

88

89

90

91

92

93

94

95

96

97

98

99

00
19

19

19

19

19

19

19

19

19

19

19

19

19

19

20
joint ventures in China), and 1 was sponsored forcement, however, is not adequate. Foreign
by a foreign start-up research company which and domestic companies have complained that
outsourced manufacturing to a local Chinese they could not gain effective intellectual prop-
company. erty protection in the Chinese market. Protec-
tionism and counterfeit drugs are the primary
ISSUES IN THE CHINESE problems. The Chinese authority has acknowl-
PHARMACEUTICAL INDUSTRY edged these problems and is revising pharma-
INTELLECTUAL PROPERTY PROTECTION ceutical laws and regulations to eliminate provi-
Before January 1, 1993, there was no patent pro- sions that violate the WTO agreement or
tection for drugs. Local pharmaceutical compa- Trade-Related Intellectual Property Rights, and
nies could legally copy new drugs developed China has agreed to protect undisclosed tests or
and patented in other countries. The Chinese data submitted in the marketing application
authority now provides new drug marketing ex- process. In the meantime, China has taken
clusivity to sponsors to provide incentives to, measures to crack down on fraudulent pharma-
and stimulate the growth of, the pharmaceutical ceutical products.
industry. In 1992, the United States and China
negotiated a memorandum of understanding re- ADMINISTRATIVE PROTECTION
quiring China to protect intellectual property. From 1993 to 2000, China issued 75 adminis-
As a result, on January 1, 1993, a new patent law trative protection licenses to foreign pharma-
took effect that includes drugs. Moreover, on ceutical companies under the Administrative
the same day, the Chinese authority implement- Protection Law (Figure 3). These were for drugs
ed the Drug Administrative Protection Law, that had patent protection in their country of
which provides foreign companies with 7.5 years origin between 1986 and 1992, but had not
of administrative protection for drugs that had been previously marketed in China (11). For
patent protection abroad from 1986 to 1992, drugs not previously marketed in China, compa-
but had not been previously marketed in China. nies submit an application via their agents or
Since 1993, NCEs in China have had patent subsidiary companies in China. The license
protection. This is a very important step toward grants the sponsor monopoly status for 7.5
improving intellectual property protection. En- years, during which time local companies are

Drug Information Journal


36 DRUG REGULATION Deng, Kaitin

35
FIGURE 3
30
Administrative protection
licenses in China. 25
USA
20
EC
15
JP
10

0
1993 1994 1995 1996 1997 1998 1999 2000 total

prohibited from copying the drug. Sponsors of Nearly all major international pharmaceutical
drugs with administrative protection licenses companies have joint ventures in China (12).
must apply to import the drug into China or Many pharmaceutical companies are part of
manufacture it in China within one year of the China’s stock market, and many other types of
date of the license. companies invest in pharmaceutical research.
These companies have the funds to recruit tal-
THE CHINESE ented professionals and invest in new drug de-
PHARMACEUTICAL INDUSTRY velopment. Many other small manufacturers,
From 1990 to 2000, the Chinese pharmaceuti- however, are disorganized and of poor quality.
cal market expanded rapidly. Pharmaceutical When these small companies close, start-up
sales climbed from 32 billion Yuan ($3.9 billion) companies take over their businesses. These
in 1990 to 162.7 billion Yuan ($19.7 billion) in start-up companies have new technology and
2000 (Figure 4). There are 6731 pharmaceutical knowledge of the market. They take advantage of
manufacturers in China. Sixty companies pro- policies to obtain funding. Start-up companies
duce 33% of the revenues and generate 70% of are a promising part of China’s future pharma-
the profits of the entire pharmaceutical indus- ceutical industry.
try. One thousand and one manufacturers have The Chinese authorities have encouraged the
1256 Good Manufacturing Practice certificates. development of NCEs by enacting more favor-

180
FIGURE 4
160
Annual pharmaceutical
sales. 140

120
Source: Data from State
Billion Yuan

Statistics Bureau in China. 100

80

60

40

20

0
1985 1990 1995 2000
Regulation and Approval of New Drugs in China DRUG REGULATION 37

able policies. In addition, some national pro- REGULATORY REVISIONS


grams focused on pharmaceutical innovation The Chinese authority will be revising China’s
invest in the development of certain NCEs. drug administrative regulations to comply with
Some NCEs developed under these programs the WTO agreement. The definition of a new
have been approved for marketing, and some are drug will be harmonized with worldwide stan-
currently in clinical trials. Local companies are dards. This will lead to other changes, such as
trying to increase their utilization of foreign ad- the creation of new drug classifications, domes-
vanced technology, although lack of money is tic administrative protection of new drugs,
often a major obstacle. In the future, more New generic drug regulatory procedures, a registra-
Drug Applications submitted in China will be tion process for imported drugs, simplification
the result of joint sponsorship by international of registration procedures, clinical trial regula-
and local pharmaceutical companies. China will tions, and other new regulatory practices.
remain an attractive location to foreign drug The Chinese authority is likely to cancel all
companies, because China offers many advan- administrative protection procedures in the
tages in terms of the size of its marketplace, the near future in favor of internationally recog-
relatively easy access to patients who are avail- nized patent protection, but it is still possible
able for clinical trials, and inexpensive investi- for China to protect life-saving drugs, in a man-
gator costs for clinical trials. ner similar to the orphan drug program in the
United States. Drug registration policy and reg-
CLINICAL TRIALS AND CONTRACT istration procedures will be more transparent
RESEARCH ORGANIZATIONS IN CHINA and easier for applicants, whether the sponsors
As a site for clinical trials, China provides spon- are domestic or foreign companies. Provisions
sors with potentially lower costs and a large pa- that limit the number of manufacturers of
tient base. An increasing number of foreign generic products will be eliminated.
companies are conducting clinical trials in Chi- The new drug policy will be quite different
na. Some conduct clinical trials in China to mar- from current drug policy, and will greatly impact
ket their products in the country and others the development of China’s pharmaceutical in-
seek additional research data to support prod- dustry. Currently, China’s pharmaceutical mar-
uct development and their applications in for- ketplace is complicated, with some products un-
eign markets. der patent protection and some under domestic
In recent years, several foreign contract re- administrative protection. The WTO agreement
search organizations (CROs) have established a specifies the direction of new drug policy. This
presence in China. However, due to the relative- will simplify China’s pharmaceutical regulation.
ly high expense of working with these CROs, The new Drug Registration Regulation took
non-Chinese pharmaceutical companies are effect on December 1, 2002. The new regula-
their primary clients; that is, CROs typically tion changes the definition of China’s “new
conduct clinical trials on behalf of foreign phar- drug,” from previously “not marketed” to “not
maceutical companies. CROs have remained ac- manufactured” in China. Under this definition
tive in China since the country joined the WTO. and consistent with the WTO agreement, Chi-
Many domestic drug companies hesitate to na’s framework of drug regulatory review is fun-
work with foreign CROs due to the price barrier, damentally different from the past. For NCEs,
although this creates a competitive disadvan- marketing exclusivity will be protected by patent
tage for local firms. Domestic start-up CROs rather than administrative protection.
meet some needs of domestic drug companies;
although these start-up CROs currently submit HEALTHCARE SYSTEM REFORM
applications to the regulatory authority on be- Pharmaceuticals play an important role in Chi-
half of their clients, many do not yet conduct na’s healthcare system, especially because
clinical trials. healthcare institutions rely greatly on drug sales

Drug Information Journal


38 DRUG REGULATION Deng, Kaitin

for their revenues. According to data from the ceuticals was reduced to 4.7% on January 1,
Ministry of Health in 2001, 50% of hospital rev- 2003 (13). Registration for imported drugs is
enues are from pharmaceutical sales in urban now similar to registration for domestic drugs.
areas. In rural regions, more than 80% of health Since China’s accession into the WTO, Chi-
center revenue is from pharmaceutical sales. nese companies have had the freedom to import
Healthcare system reform will greatly change and export products. As of December 11, 2002,
new drug development and delivery. Introduc- joint ventures with foreign firms that have a mi-
tion of health insurance, hospital reforms, and nority ownership had importing and exporting
changes in payment systems would transform rights. As of December 11, 2003, joint ventures
the current model of pharmaceutical manufac- with foreign firms that have a majority owner-
turing and distribution. ship will have importing and exporting rights.
Although healthcare reform is critical, it is not By December 11, 2004, all companies will have
easy to achieve in China. While some metropoli- importing and exporting rights, and pharma-
tan areas are well-developed, people in many ru- ceutical wholesale and retail trade services will
ral regions still live in considerable poverty. Eco- be open to foreign companies (14).
nomic differences between rural and urban Over the next decade, the domestic pharma-
regions and the disparity between incomes in ceutical industry will lose its protection and
urban and rural areas make primary healthcare face a high level of competition from foreign
problematic. Limited resources add to the prob- companies and joint ventures. Multinational re-
lem. The government is responsible for provid- search-based pharmaceutical firms will have ad-
ing primary healthcare to all Chinese people. vantages over Chinese firms in the NCE market-
However, there are many competing goals in place. Since most large pharmaceutical firms
China. Decentralization makes local govern- have been in China’s marketplace through joint
ment at every level emphasize economic growth ventures, tariff reduction will not significantly
rather than investment in public health. In addi- lower the price of their drugs. Although the tar-
tion, healthcare costs are soaring. iff is reduced, the drug prices of international
Capping drug prices is a direct measure that pharmaceutical firms are still much higher than
governments take to control increasing expens- those of domestic companies that copy those
es. Whereas containment of drug prices may be drugs. Tariff reduction will not have a major im-
necessary in order to provide affordable drugs, pact on China’s drug marketplace because of
price controls may hamper the development of price controls, location of companies, and other
the Chinese pharmaceutical industry. In-depth factors.
reform of healthcare financing and payment The generic marketplace, however, will be a
and organizations in the healthcare system is hot point for domestic and foreign companies.
critical to ensure that primary healthcare ser- Most domestic companies implement their mar-
vices are available to all China’s citizens. keting strategies on generic products, and the
WTO would offer opportunities for foreign
PERSPECTIVES SINCE JOINING THE WTO generic companies.
China’s membership in the WTO promotes The State Drug Administration has announced
progress. China has agreed to establish a system that all local drug manufacturing establishments
to make laws and regulations more transparent should have approved Good Manufacturing
and predictable and to treat domestic and for- Practice (GMP) certification by June 30, 2004.
eign pharmaceutical companies in the same Establishments that do not have GMP certifica-
manner. Intellectual property rights are protect- tion will not be allowed to produce pharmaceuti-
ed, and effective measures are being taken to en- cals. Establishments that have GMP certification
sure further the development of intellectual can do contract manufacturing, which would en-
property protection. China’s tariff for pharma- able them to manufacture products for start-up
Regulation and Approval of New Drugs in China DRUG REGULATION 39

companies that have access to technology but 3. Ministry of Health, China. Provisions for New Drug
no manufacturing facilities. Approval. Beijing, China: Ministry of Health;
China’s distribution system will also change. 1985.
According to the State Drug Administration, 4. Ministry of Health, China. Provisions for New Bio-
logical Product Approval. Beijing, China: Ministry
503 drug chain retailers in China own 18527
of Health; 1985.
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tion Registration. Beijing, China: Ministry of
tition. Domestic distributors, however, do not
Health; 1991.
have much experience in advanced manage- 6. State Drug Administration, China. Provisions for
ment of distribution systems. A good distribu- Importation Registration. Beijing, China: State
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and is very important in preventing the dispens- 7. State Pharmaceutical Administration of China.
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Since China joined the WTO, the Chinese New Drug Approval. Beijing, China: State Drug Ad-
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drug regulatory system has been in a constant
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state of change. This has created a degree of un-
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certainty and confusion for the domestic drug
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10. Center for Drug Evaluation, China. National new
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for the Chinese pharmaceutical marketplace Accessed May 2, 2002.
will be shaped, benefiting both the Chinese 11. State Drug Administration. Administrative pro-
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Acknowledgments—The authors thank Dr. Joseph Di- big5.xinhuanet.com/gate/big5/news.xinhuanet.
Masi for his helpful advice during the course of this com/zhengfu/2002-02/07/content_272025.htm.
research project, Peg Hewitt for her assistance in the Accessed May, 2, 2002.
preparation of the manuscript, and Dr. Ling Su for his 13. US Department of Commerce, International
thoughtful insights and critical review of the manu- Trade Administration. Pharmaceutical industry
script. fact sheet: China. www.mac.doc.gov/China/Docs/
industryfactsheets/pharmaceuticals.html. Ac-
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