China's New Medical Device Regulations Bring Big Changes

This article by partner Katherine Wang was published by Law360 on July 23, 2018.

The People's Republic of China Ministry of Justice recently published a comprehensive draft amendment outlining the proposed revisions to the current Medical Device Regulations, previously known as the State Council Order # 650. The draft amendment is now ready for public comments until July 24, 2018.

This draft amendment updated a previous draft amendment¹ (“2017 draft”) issued by the former China Food and Drug Administration last October. Several regulatory reform initiatives announced by China’s State Council were formally included in the draft amendment, e.g. compassionate use (or expanded access) of devices that treat life-threatening diseases without any effective cures, and conditional approvals for devices treating rare diseases, life-threatening disease that do not have any effective cures, and public health emergency.

In addition, the draft amendment introduces some noteworthy changes to the 2017 draft:

Refine the Marketing Authorization Holder Regime

The draft amendment refined the legislative structure of the 2017 draft to adapt to the MAH framework. For example, the draft amendment creates a new provision listing the MAH’s statutory obligations. Also, the draft amendment clarifies that MAH can distribute devices they own without obtaining a separate device distribution approval/recordal nor a GSP certificate.

Simplify the Clinical Evidence Requirements

The current MDR requires medtech companies to either conduct clinical studies in China or submit clinical evaluation reports illustrating equivalence to previously approved products of the same type to show safety and effectiveness. These requirements create considerable challenges for time to market. The draft amendment provides a favorable response to the industry by allowing medtech companies to submit foreign clinical study data in lieu of China study data. China studies are only required for products that are high risks or support or maintain life, and the clinical trial authorizations are deemed issued after 60 days from the date of IDE filing in the absence of a rejection or deficiency notice. Further more, clinical evaluation is only mandatory for Class 3 devices.

Reinforce Post-Approval Compliance Obligations

The draft amendment provides that the China National Drug Administration, the provincial drug administration and the local administration for market regulation would be responsible for GCP, GMP and GSP enforcement, respectively. Overseas inspections will be organized by the CNDA. While the 2017 draft already enhanced the penalties for noncompliance, the draft amendment introduces more rigorous sanctions. The manufacture and distribution of “disguised medical devices”², a new term created by the draft amendment, can lead to fines in the range of 15 to 30 times of the sales value. For other types of noncompliance, the amount of fines is also increased.

Consolidate the Approval Authority for Class 2 Devices

The draft amendment intends to remove the provincial drug administration’s review and approval authority for Class 2 devices, and transfer such authority to the CNDA. The CNDA would be authorized to delegate the approval authority to certified review and approval agencies.

Prohibit the Importation and Distribution of Used Devices

The draft amendment proposes to add a provision that explicitly prohibits the importation and distribution of used devices.

Add the Unique Device Identification Requirement

The draft amendment proposes to add a provision that requires all medical devise to bear a unique device identification.

Ease Control over the Distribution of Certain Class II Devices

The current MDR requires distributors of Class 2 devices to file for a record with the local drug administration. The draft amendment intends to further simplify regulatory control over the distribution of Class 2 devices if such devices do not pose considerable risks. The CNDA will publish a catalogue of Class II devices that can be exempted from the record filing requirement.

Impact

The draft amendment, once approved by the State Council, will significantly impact the medtech industry in China. The CNDA has shifted its focus from pre-approval control to post-approval enforcement. Various regulatory reform initiatives unveiled by the CNDA in the draft amendment echoed this change in regulatory paradigm. Historically, Chinese medtech companies must arrange products to pass the mandatory registration type tests at government-designated testing centers, present clinical data on Chinese patients, and set up a full-fledge manufacturing facility in order to legitimately supply products in the market. The prolonged approval process and the capital-intensive commitment prevented many small to mid-size medtech companies from accessing the market. The draft amendment will address many of the longstanding hurdles. For example, medtech companies will be permitted to use self-test reports for proving conformity to product technical requirements. This can potentially save up to six months in the time to market. Replacing the manufacturing authorization holder system with the marketing authorization holder system will encourage more R&D-focused companies to seek regulatory approvals for their products. Last but not least, lowering the bar for clinical evidence will likely save companies from conducting additional clinical studies in China, and can accelerate time to market for products with low or moderate risks.

While medtech companies may be more efficient in securing marketing authorizations, they will need to invest more in building and maintaining an effective quality management system that can ensure continuous post-approval compliance. The CNDA requires medical devices to comply with China’s mandatory technical standards, which are not always consistent with the latest ISO standards. Manufacturers of imported medical devices might take an opportunistic approach in the past, creating product technical requirements that could conform to the mandatory standards on paper, but deviate from the actual product specifications in reality. These nonconforming products will be deemed as disguised devices under the draft amendment, and both the foreign legal manufacturers as well as their Chinese legal agents will face serious penalties. The significant increase in fines (rising from 20 times to 30 times of sales value) and personal liabilities imposed on individual managers will likely urge companies to thoroughly review their quality management systems and close potential gaps as soon as possible.

The draft amendment is believed to be close to the final shape, and it will likely be ready for the State Council’s endorsement later this year. The CNDA will allow a grace period to smoothly transitioning the regulatory framework, and it will announce more implementing regulations or guidance to help medtech companies navigate the new terrains. Medtech companies should revisit their regulatory strategy and examine their compliance status with the amended Medical Device Regulations in due course.

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¹ See our alert dated Nov 1, 2017 (https://www.ropesgray.com/en/newsroom/alerts/2017/11/China-FDAs-Device-Regulations-Ready-for-Public-Comments.aspx)

² Disguised medical devices are defined as follows: (a) an unapproved device; (b) a non-device that is claimed to be a device; (c) a device that is approved based on misrepresentation or falsified information; (d) a device that is in reliance of a forged regulatory approval.