Keeping pace with advances in drugs, medical technologies and healthcare services is a significant challenge for many healthcare systems, including China – the world’s second-largest healthcare market.1 China’s challenge is particularly daunting because its goal is to raise the standard of healthcare drastically, while also encouraging the development of the most advanced technologies very fast. This is a process that usually happens gradually, but China is looking for a breakthrough by 2020.
To meet this challenge, China has been pushing for legal and policy reform on three fronts. First, it has been reforming its healthcare system, including the system for reimbursement for drugs and medical devices, under the state-run healthcare plans for urban residents and employees and rural residents. Second, it has been taking steps to encourage innovation in science and technology broadly, including medical therapies through government-funded programs, such as the precision medicine initiative (an effort to promote personalized medicine), and other grants for medical research in areas the government deems to be high priority. And, third, it has been reforming its regulations on the development, approval, manufacturing and distribution of drugs and medical devices, including procedures to facilitate the approval of products that fill key currently un-met medical needs.
Over the last three to four years, the central government, including the State Council and its agencies such as the National Health and Family Planning Commission (“NHFPC”), the China Food and Drug Administration (“CFDA”), and the Ministry of Science and Technology (“MoST”), have begun to more vigorously examine ways to encourage higher-quality drugs and medical devices that serve a broader range of patient needs, thereby integrating product innovation and healthcare needs. Indeed, the buzz-word now in many healthcare-related documents from the government is “innovation.” While this is certainly as true for drugs as it is for medical devices, a more comprehensive reform has taken place in the medical device space, whereas drug reforms have only begun implementation this year. This article examines how some of these reforms have taken shape.
Innovation and comprehensive policy reform for devices
Incentives for innovation have grown up alongside new regulations to ensure safety. The State Council issued a 12th Five-Year Plan on Drug Safety in 2012. That document made it clear the government would make it a priority not only to ensure that safe drugs would reach patients, but also to “support and encourage companies to engage in scientific and technical innovation and increase drug and medical device innovation.” These goals have been repeated more recently in the draft Plan Regarding Items in the Thirteenth Five Year Plan on Medical Device Scientific and Technical Innovation released for comment by the Ministry of Science and Technology in September, 2016. The overall goal is for state-sponsored or encouraged programs and products to steadily increase domestic innovation.
Meanwhile in 2014, the State Council amended the framework regulation governing the research and development, manufacturing and distribution of medical devices, referred to as the Medical Device Supervision and Administration Regulation. This reform was the starting point for a complete revision of all of the CFDA’s rules on medical devices, including Good Clinical Practices, manufacturing rules and Good Manufacturing Practices, and distribution rules and Good Supply Practices. The last pieces of this reform, such as regulations on post-market surveillance, are still being finalized. It also led to other more targeted reforms, such as the “innovative device” pathway.
A. Innovative Devices
Created by a new CFDA rule in 2014, the innovative device pathway provides benefits in the application review process to applicants who can meet certain criteria. Specifically, they must own the patent rights to the core technology in China (or have received those rights or usage rights via transfer) and demonstrate that their device is internationally regarded as innovative technology that would represent a clear clinical advancement in China. The applicant must also have completed the research and an initial prototype, and the research must be complete and traceable.
Applicants must file materials supporting these criteria for evaluation by a commission of experts organized by the CFDA’s Center for Medical Device Evaluation (“CMDE”). Preliminary decisions on innovative devices are also released publicly on CMDE’s website and must, like other priority review items now in China, be made available for public comment. Those admitted to the pathway do not get an express expedited timeline for approval, as they might in other jurisdictions. Rather, they get access to meetings and communications with reviewers at CMDE (not granted regularly as a matter of right) to better tailor their application to agency expectations, and the CMDE will prioritize the substantive “technical review” of the application and related testing. This aims to drive the process forward faster.
Beyond these benefits, the innovative device pathway offers another incentive. It was arguably an initial step in China toward adopting a marketing authorization holder concept. Under normal circumstances prior to the innovative device pathway, an applicant for a domestically manufactured device has to hold a manufacturing license and a product license. This was true even if the applicant in China wanted to contract out manufacturing in whole or in part to another facility that it did not own. This meant that the applicant had to have the necessary facility, personnel and quality systems to hold the manufacturing license.
Innovative device pathway changed that. Qualifying applicants are permitted to contract out manufacturing without holding their own manufacturing license.
This type of marketing authorization holder concept has now been adopted in a fuller fashion for drugs in a recent pilot program authorized by the National People’s Congress and implemented by a plan issued by the State Council in 2016. The intention of this type of a program, as made clear by recent documents is, at least in part, to permit “research institutions” and individual inventors to hold marketing permissions, incentivizing biotechnology innovation by smaller stakeholders. However, these reforms may also present companies that might have restricted themselves to offshore manufacturing with the opportunity to explore domestic options in China.
Recent annual reports from the CMDE indicate that it has reviewed 166 innovative device applications, granted 29 products with the innovative device review status, and ultimately approved nine innovative devices in 2015.
B. “Examination and Approval” Systems
Another concrete reform to further innovation at the regulatory level was the effort to facilitate faster approvals, particularly efforts to facilitate drugs and devices that meet un-met medical needs. In August 2015, China’s State Council issued an Opinion on Reform of the Drug and Medical Device Review and Approval System ( known as “Document No. 44”) — in part, a plan to ensure that CFDA has regularized and efficient procedures in place for approving drugs and medical devices, in particular those that meet un-met medical needs. In consultation with the National Development and Reform Commission, at roughly the same time, CFDA also increased the fees associated with registration applications, in part, in order to provide the resources necessary to meet these goals.
CFDA has now created procedures to implement priority pathways in this respect. For drugs, this includes innovative drugs that have not been marketed in or outside China, and certain drugs with clinical advantages and for specific indications: HIV/AIDs, tuberculosis, viral hepatitis, orphan diseases, oncology drugs, those with pediatric uses, and those for diseases prevalent among the elderly.
In line with Document 44, on October 25, 2016, CFDA finalized a priority review pathway for medical devices. This is a new pathway primarily for medical devices that address unmet medical needs and is distinct from the innovative device pathway. The priority categories under this pathway include devices that treat orphan or oncology-related indications, devices that treat diseases prevalent amongst children or the elderly, devices that treat a condition for which there is no existing effective clinical treatment in China, and devices that correspond with national initiatives and priorities for scientific research. The new priority pathway will become accessible to applicants from January 1, 2017.
While these reforms are still in their infancy, they show how CFDA continues to expand regulatory reform to meet goals regarding innovation and broader access to healthcare. Companies that are operating in this and the drug space may continue to find these types of opportunities presenting themselves as China and CFDA seek to implement such reforms to meet larger goals and targets, such as those in the 13th Five-Year Plan which is a driving force in encouraging innovation.
In the past year, according to the CDE and CMDE websites, a number of innovative drugs and medical devices have been granted special review status. However, the programs mentioned above are still new, and their impact remains to be seen. For example, China will have to determine whether in future revisions to medical device or drug legislation there will be a more permanent place for concrete special review timelines and a more generally applicable marketing authorization holder concept.
The views expressed in this article are not necessarily those of Covington and Burling, or of its clients.