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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-
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-
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.
Recommendation
FIGURE 1
Sponsor Preliminary Review Sample Examination
The New Drug Application S,A PDA PICP
process in China.
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
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).
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
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
80
60
40
20
0
1985 1990 1995 2000
Regulation and Approval of New Drugs in China DRUG REGULATION 37
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.
stores. The Chinese government plans to build
5. Ministry of Health, China. Provisions for Importa-
large drug distribution centers to foster compe-
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
tion system is essential to the healthcare system Drug Administration; 1999.
and is very important in preventing the dispens- 7. State Pharmaceutical Administration of China.
ing of counterfeit drugs. Foreign drug distribu- Provisions for Drug Administration Protection. Bei-
tion companies will have a considerable advan- jing, China: State Medical and Drug Administra-
tage when they enter the Chinese marketplace, tion Bureau; 1993.
due to their experience and services. 8. State Drug Administration, China. Provisions for
Since China joined the WTO, the Chinese New Drug Approval. Beijing, China: State Drug Ad-
ministration; 1999.
drug regulatory system has been in a constant
9. State Drug Administration, China. Drug Registra-
state of change. This has created a degree of un-
tion Procedure. Beijing, China: State Drug Admin-
certainty and confusion for the domestic drug
istration; 2000.
industry and for foreign firms operating in Chi-
10. Center for Drug Evaluation, China. National new
na. In the next few years, however, a new model drug registration database, 2001. www.cde.org.cn.
for the Chinese pharmaceutical marketplace Accessed May 2, 2002.
will be shaped, benefiting both the Chinese 11. State Drug Administration. Administrative pro-
people and the Chinese pharmaceutical indus- tection approvals: 1993–2000. www.sda.gov.cn.
try. Accessed September 10, 2001.
12. Summary of the National Pharmaceutical Ad-
ministration in 2001. Xinhua News Agency.
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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