China Further Encourages the Marketing Authorisation Holder Regime

Introduction

On 26 May 2016, the General Office of the State Council published the Marketing Authorisation Holder Regime Pilot Programme in ten pilot regions^[1] in China (the Pilot Programme).^[2] To speed up the progress of the Pilot Programme, on 15 August 2017, the China Food and Drug Administration (the CFDA) put forth the Notice regarding Matters related to Promoting the Marketing Authorisation Holder Regime Pilot Programme (the Notice).^[3] The Notice attempts to further clarify the rights and obligations of the marketing authorisation holder (the MAH), the accountability system of quality management and production and sales chains for contract manufacturing organisations (CMOs), the regulatory coordination of cross-region supervision and the division and fulfilment of regulatory supervision responsibilities. To be specific, the Notice especially clarifies the responsibilities of MAHs as compared to the responsibilities of CMOs. A MAH shall be ultimately responsible for a drug’s pre-clinical research, clinical research, manufacture, distribution, sales and adverse drug reaction monitoring. In addition, the Notice goes one step further to encourage consolidation of drug approval numbers previously held by various group companies into one entity which will act as the MAH. It further allows one MAH to have multiple CMOs across the pilot regions, which is a major breakthrough compared to the past practice.

This article highlights specific provisions in the Notice that are most relevant to pharmaceutical companies seeking to benefit themselves from the Pilot Programme.

The Marketing Authorisation Holder and Contracted Parties

The MAH

Before launching the Pilot Programme, CMOs with drug manufacturing licences (DMLs) are usually the ones that apply for drug approval numbers.^[4] However, the Pilot Programme allows qualified pharmaceutical research and development (R&D) institutions and researchers^[5] in those pilot regions to apply for drug approval numbers and marketing authorisations (MAs). The Notice further confirms that under the Pilot Programme, in addition to manufacturers with drug approval numbers, qualified pharmaceutical R&D institutions and researchers could apply to be MAHs, although they may not be qualified for drug manufacture.

CMOs

Under the Pilot Programme, qualified pharmaceutical R&D institutions and researchers who do not possess DMLs but are holders of MAs could contract with other qualified manufacturers^[6] to produce those authorised drugs they developed. In other words, the MAH of a particular drug could be a separate entity from the manufacturer of that drug. The Notice further stipulates that the MAH could contract with multiple qualified manufacturers upon application, provided that the quality and the efficacy of all produced drugs from different CMOs are identical. The promulgation of the Pilot Programme marks the deepening of China’s reform on drug registration system under the Pharmaceutical Administration Law of the People’s Republic of China.^[7] The Pilot Programme is a breakthrough point, as China’s drug registration system is in the process of transforming from a system that consolidates pharmaceutical marketing and manufacturing to a system that separates MAs from DMLs.

Multiple contracted parties for one MAH

The Notice reiterates that, in addition to CMOs, the MAH could also engage other contracted parties with respect to other duties involved in the business chain of pharmaceuticals. Such contracted party may undertake to research and develop, experiment, manufacture or distribute the pharmaceuticals concerned.

Responsibility of the MAH and contracted parties

Notwithstanding that the MAH has assigned its duties to various parties, the ultimate legal responsibility falls on the MAH with regard to the quality and safety of the drug. The contracted parties only bear responsibility to the extent set by the agreements between the parties and relevant laws and regulations. For example, CMOs would only be responsible to the MAH for the quality of the manufactured drugs as set by the agreement between them, whereas the MAH would be responsible for any quality problems once the pharmaceuticals flow to the market. The Notice requires the MAH to establish a pharmacovigilance system to continuously monitor any adverse drug reactions and the safety and effectiveness of its drug in accordance with the Measures for the Reporting and Monitoring of Adverse Drug Reactions.^[8] The MAH shall report to the CFDA annually for any feedback on the production, sales, prescriptions, pharmacovigilance and quality control of its drugs. When there are quality problems with a pharmaceutical on the market, the MAH of that pharmaceutical would be responsible for the recall, even if the pharmaceutical to be recalled is distributed and sold by other contracted entities with requisite GSPs.^[9]

Consolidation of MAH

To facilitate the Pilot Programme, the Notice suggests several ways of structuring for pharmaceutical companies who seek to take opportunity of this reform. Pharmaceutical production enterprises (the Transferor) could transfer their drug approval numbers to their parent group company (the Transferee). Such transfer needs to be reviewed by the provincial food and drug regulatory authority (the provincial CFDA) where the Transferor is located and approved by the CFDA, with due assistance from the provincial CFDA where the Transferee is located. The parent group company, after accumulating those drug approval numbers from its subsidiaries, could apply to be the MAH, with its subsidiaries as production sites. Then, the parent group company could implement a unified quality management system for better monitoring drug production in its subsidiaries, since the parent group company will be responsible for all the pharmaceuticals on the markets manufactured by its subsidiaries. For pharmaceutical R&D institutions with the capacity to manufacture drugs through their subsidiaries, the Notice suggests that such institutions could apply to be the MAH after their subsidiaries transferred their drug approval numbers to the institutions. Once an institution becomes the MAH, the institution could contract with its subsidiaries to manufacturer its drug. The Notice also provided detailed guidelines for pharmaceutical companies in anticipation of relocation of production sites in terms of who could be the MAH and who could be the CMO.

Coordination of Cross-Region Regulatory Supervision

The Notice mandates that local counterparts of the CFDA shall coordinate their supervision where the MAH has contracted with CMOs in a different pilot region. Usually, the supervision obligations of provincial CFDAs are independent and separate. The provincial CFDA where the MAH is located is responsible for overseeing the contract and the MAH’s management of the marketing pharmaceuticals. The provincial CFDA where the manufacturer is located is responsible for overseeing the production process and the quality of the pharmaceuticals. However, when there are product quality problems or serious adverse drug reactions, both provincial CFDAs where the MAH and the CMO are located shall coordinate their actions in investigating the incidents and imposing penalties on the MAH or the CMO.

Prioritised Pharmaceuticals

To facilitate the Pilot Programme, the Notice specifically provides that, with regard to those pharmaceuticals qualified under the Opinions of the CFDA on Solving the Backlog of Drug Registration and Application by Prioritizing Review and Approval,^[10] the CFDA shall prioritise the review and approval of applications concerning such pharmaceuticals, together with the pharmaceutical’s corresponding development site inspection, clinical trial data verification, sample testing and GMP accreditation. If the holder of a drug approval number, when submitting the application for the Quality Consistency Evaluation for Generic Drugs (the Evaluation) also applies to be the MAH, the CFDA shall explicitly name a MAH when approving the Evaluation.

Summary

The Notice is aimed at refining and clarifying some rules and principles set by the Pilot Programme. It further details the responsibility of the MAH in different circumstances, provides optimised business structure for pharmaceutical companies, calls on provincial CFDAs to cooperate and coordinate their supervision and provides a basis for a faster registration and approval process for certain prioritised pharmaceuticals. It is an effort to materialise the fruits of the Pilot Programme and push forward China’s drug registration system reform. Overall, the Notice will facilitate the consolidation of China’s pharmaceutical industries and make China’s pharmaceutical business more M&A friendly.