Outlook for the Pilot Regime of Medical Device Market Authorization Holder in Yangtze River Delta Region

On 24 October 2019, the drug administrations in Shanghai, Zhejiang Province, Jiangsu Province, and Anhui Province collectively issued a Notice on the Pilot Regime of Medical Device Market Authorization Holder in Yangtze River Delta Region¹ (the “Notice”), which took effect as of the date of issuance. The Notice was formulated based on the Notice of National Medical Products Administration regarding the Extension of Pilot Regime of Medical Device Market Authorization Holder, promulgated by the National Medical Products Administration (the “NMPA”) on 1 August 2019 (the “NMPA Notice” ² ), and follows the Opinions on Deepening the Reform of the Evaluation and Approval System and Inspiring Innovation of Drugs and Medical Devices promulgated by Central Committee of the Communist Party of China and General Office of the State Council on 8 October 2017.

This Notice is aimed at enhancing the collaboration of Yangtze River Delta Region to increase the region’s competitiveness on a global scale. It is also one step further towards the implementation of the integrated development of the pilot regime of medical device market authorization holder (the “Medical Device Market Authorization Holder Regime”) and the medical device industry in the Yangtze River Delta Region.

According to the Notice, the applicant of the medical device market authorization holder located in the Yangtze River Delta Region can apply for the Medical Device Registration Certificate (the “Medical Device Market Authorization Holder”) for class 2 and class 3 medical devices (including commissioned production of innovative medical devices and samples but excluding the medical devices listed in the List of Medical Devices Prohibited from Commissioning Production³ ) by commissioning another manufacturing enterprise which is also located in the Yangtze River Delta Region to manufacture its registered medical device (the “Commissioned Enterprise”). The Notice does not provide substantial changes to the implementation plans of pilot areas compared to what has been provided in the NMPA Notice. Both of them allow the applications amongst different pilot areas, i.e., the Medical Device Market Authorization Holder and the Commissioned Enterprise can be located in different pilot areas. However, it emphasizes on the overall and collaborative efforts of the Yangtze Delta Region to achieve the integrated development of the Medical Device Market Authorization Holder Regime as follows:

Collaboration of Medical Device Market Authorization Holders in Yangtze River Delta Region

The Notice mentions that the provincial or municipal enterprises included in the pilot areas according to the NMPA Notice which intend to participate in the regime of Yangtze River Delta Region, shall be subject to this Notice, and other inter-provincial pilot areas can be further negotiated. This implies that the Medical Device Market Authorization Holder is encouraged to entrust a Commission Enterprise situated in the Yangtze River Delta Region as its primary choice rather than entrust a Commissioned Enterprise located in other pilot areas.

New requirements for Medical Device Market Authorization Holders and Commissioned Enterprise

1) Good reputation and credit

In addition to the conditions of a Medical Device Market Authorization Holder and a Commissioned Enterprise stipulated in the NMPA Notice⁴ , except for the location requirement of the Medical Device Market Authorization Holder and the Commissioned Enterprise (which is located in the Yangtze River Delta Region), the Notice also requires the Medical Device Market Authorization Holder and the Commissioned Enterprise to have good reputations, have not been included in the list of companies with seriously illegal and dishonest acts⁵ or have been imposed with joint credit punishment by relevant authorities⁶.

According to the Notice, the Medical Device Market Authorization Holder is obliged to conduct a comprehensive assessment of the quality management and production capacities of the Commissioned Enterprise, and an assessment report shall be formed. The Commissioned Enterprise is required to conduct internal audits on a regular basis and complete the annual quality management self-examination on its quality management system and production capacity, which were not explicitly stipulated as obligations under the NMPA Notice.

2) Supervision of commissioned third parties for the storage and transportation of medical devices

The procedures related to the application for the medical device manufacturing license have not been changed under the Notice; however, the Notice strengthens the Medical Device Market Authorization Holder’s obligation to evaluate and assess the quality assurance and risk management capacities when entrusting a third party to store or transport medical devices, and to execute the commissioning agreement to clarify the quality liabilities, operating protocols and to supervise such commissioned third party.

In addition, the Notice adapts the annual reporting system from the implementation plan in Shanghai⁷, under which the Medical Device Market Authorization Holder shall provide a report reflecting the production, sales, post-marketing supervision, risk management of medical devices to the competent drug administration on an annual basis.

3) Intellectual property rights protection

The Medical Device Market Authorization Holder is required to conclude intellectual property rights protection agreements with its Commissioned Enterprise and other commissioned third parties to specify the liabilities and obligations of each party. However, the terms and conditions which should be included in such intellectual property rights protection agreements are not specified in the Notice.

4) Encouraging the Commissioned Enterprise to pass the medical device quality management certification

Although the implementation plan in Shanghai has already mentioned that the Medical Device Market Authorization Holder and the Commissioned Enterprise are encouraged to pass a third-party quality certification, the Notice specifies that passing the certification in accordance with the Medical Device Quality Management System for Regulatory Requirements (YY/T0287/ISO13485) is not compulsory but encouraged to be fulfilled by the Commissioned Enterprise.

5) Encouraging the Medical Device Market Authorization Holder to purchase commercial liability insurance

The Notice only mentions that the Medical Device Market Authorization Holder is encouraged to purchase commercial liability insurance, but still silent on what the average insurance premium will be, what exactly the insurance liabilities of the insurance company are, what should be excluded from the insurance coverage. So far, according to the Commercial Insurance Guidance for Medical Device Market Authorization Holder Regime published on the website of Shanghai Food and Drug Administration, the insurance products available on the Chinese market are biomedical human clinical trial liability insurance and biomedical product liability insurance⁸. The guidance for the Yangtze River Delta Region is still yet to be tailor-made by relevant authorities.

Strengthen regional supervision convergence

1) Division of supervision duties

The Notice specifies the supervision of the Medical Device Market Authorization Holder shall be handled by the local drug administration where such Medical Device Market Authorization Holder is located, and the supervision of the Commissioned Enterprise shall be handled by the local drug administration where such Commissioned Enterprise is located. The application of the Medical Device Registration Certificate for class 3 medical devices shall be reviewed and approved by the NMPA and cooperated by the provincial drug administration.

2) Interim supervision measures for the Yangtze River Delta Region to be promulgated

According to the Notice, the drug administrations in Shanghai, Jiangsu Province, Zhejiang Province, and Anhui Province are researching and drafting the implementation plan for the Yangtze River Delta Region and the Interim Measures for Cross-regional Supervision of the Medical Device Market Authorization Holder Regime in the Yangtze River Delta Region are expected to be promulgated soon.

¹ Regional Planning for the Yangtze River Delta was approved by the State Council in May 2010, under which Shanghai, Jiangsu Province, Zhejiang Province and Anhui Province are collectively referred to as the “Yangtze River Delta Region”, and according to the keynote speech given by the President Xi at the opening ceremory of 2nd China International Import Export, the integrated development of the Yangtze River Delta area has been introduced as a national strategy. The Outline of the Regional Integration Development Plan of the Yangtze River Delta has been approved by the National Development and Reform Commission in July 2019; however, the full text of this outline has not been fully disclosed to the public as of the date hereof.

² To view our published publication with regard to the NMPA Notice, please access the full text here.

³ Announcement of the Publication of List of Medical Devices Prohibited Commissioning Production dated 26 September 2014. The medical devices prohibited from commissioning production mainly refer to the medical device which is considered as difficult to control the quality during the production, and important to the human health, such as artificial organ medical device, implants material and etc.

⁴ According to the NMPA Notice, the applicant of the Medical Device Registration Certificate can mandate a Commissioned Enterprise to manufacture the samples, and the holder of the Medical Device Registration Certificate can mandate the Commissioned Enterprise to manufacture the medical device under its Medical Device Registration Certificate. The Medical Device Market Authorization Holder shall meet the following conditions: (1) it is a manufacturing company whose registered address or manufacturing premise is located in one of the pilot areas, or a research institution is located in one of the pilot areas; (2) it has technical staffs and management personals who have the professional knowledge regarding the legal issues, quality management, post marketing issues, as well as the relevant knowledge regarding the regulatory requirements and standard of medical device; (3) it has set up a quality management system; and (4) it has the capacity of undertaking the quality safety responsibility of medical device.

⁵ According to the Administrative Measures for Lists of Parties with Seriously Illegal and Dishonest Acts (Revised Draft for Comment) released by the State Administration for Market Regulation on 10 July 2019, any enterprise, individual industrial and commercial household, other organization, and natural person who is in violation of laws and regulations on market regulation, including supervision and management of medical products, management of intellectual property rights, could be imposed upon administrative penalties and be published on the National Enterprise Credit Information Publicity System.

⁶ “Building Integrity, Disciplining and Trustworthiness Cooperation Memorandum” promulgated by and among the Supreme Court, the Ministry of Public Security, the State-owned Assets Supervision and Administration Commission, the State Administration for Industry and Commerce, China Banking Regulatory Commission, China Civil Aviation Administration and the China Railway Corporation on 20 March 2014, stipulates the construction of the inter-departmental cooperative supervision and joint punishment mechanism for dishonest persons subject to enforcement, and the construction of the credit supervision, warning and punishment system.

⁷ Implementation Plan of Pilot Regime of Medical Device Market Authorization Holder within China (Shanghai) Pilot Free Trade Zone dated December 1, 2017.

⁸ You may find the guidance via this website.