Highlights on the Administrative Measures on Supervision of Pharmaceutical Manufacturing

The Administrative Measures on Supervision of Pharmaceutical Manufacturing (the “Measures”) promulgated by the State Administration of Market Regulation on 22 January 2020 will be implemented in less than one month (i.e. as from 1 July 2020). Compared with the previous version, which took effect on 17 November 2017, the new Measures have incorporated changes mainly in the aspect of implementing the market authorization holder (“MAH”) regime, which is one of the notable reform changes under the Drug Administration Law of the People’s Republic of China (the “PRC”), effective as from 1 December 2019 (the “Drug Administration Law”).

On 30 March 2020, the National Medical Products Administration (“NMPA”) also issued the Announcement on the Implementation of Relevant Matters Concerning the Newly Revised Administrative Measures on Supervision of Pharmaceutical Manufacturing (the “Announcement”) to clarify certain matters in relation to the implementation of GMP and MAH (each as defined below) in practice during the transition period.

1. MAH is required to obtain a Pharmaceutical Manufacturing License

According to Article 7 of the Measures and the Announcement, regardless of whether an MAH manufactures drugs by itself or entrusts a qualified pharmaceutical manufacturer to do so, it shall apply for a Pharmaceutical Manufacturing License (“PML”).

The Announcement further explains the legal relationship between the MAH and its entrusted pharmaceutical manufacturer: they are considered as relationship of entrustment, and thus the legal consequences of such fiduciary relationship shall be borne by the MAH.

Although the new amendments of the PRC pharmaceutical laws and regulations conform to the reformation of the regulatory thinking on simplifying and reducing administrative licensing and approvals, the Measures add an additional administrative approval for the MAH instead of reducing the approval procedures, with the aim at further enhancing the administration of MAH. This is especially the case for a CRO company which applies to become an MAH. Before the Measures are promulgated, a CRO MAH did not need to hold a PML, and could entrust a qualified pharmaceutical manufacturer to produce drugs with the local FDA pursuant to the Drug Administration Law, whilst after the Measures take effect, an MAH will be required to obtain a PML before entrusting a pharmaceutical manufacturer.

If an MAH wishes to apply for the PML, it must fulfill the following conditions according to Articles 6 and 7 of the Measures:

a) it employs pharmaceutical technicians, engineering technicians and corresponding skilled workers who possess qualifications obtained pursuant to the law, and its legal representative, person-in-charge of the enterprise, person-in-charge of manufacturing, person-in-charge of quality control and other relevant personnel shall satisfy the criteria stipulated in the Drug Administration Law and the Vaccines Administration Law;

b) it has organization and personnel that are competent to carry out quality control and quality inspection for pharmaceuticals it manufactures; and

c) it has rules to ensure the quality of pharmaceuticals and complies with the requirements of good manufacturing practice (“GMP”).

The above provisions clarify the ambiguity set forth in the pilot measures related to the MAH effective as of 26 May 2016 which did not provide the conditions for a CRO company to become an MAH. This implies that in case of internal restructuring of pharmaceutical companies to meet the MAH arrangements by setting up several CROs companies to hold drug market authorisations, it is not realistic to set up various holding vehicles in the form of a mere CRO to hold a market authorization of each specific drug unless such CRO has met the minimum requirements set forth above.

However, the above Measures do not clearly stipulate how such CRO MAH can actually comply with the relevant GMP requirements for the pharmaceutical manufacturing whereas the manufacturing is in fact carried out by the entrusted company.  Despite the above, a clear message has been sent out through the Measures that both the MAH Holder and the entrusted company shall comply with the GMP standards, which implies that if the CRO is a MAH, it shall also be responsible for ensuring the safety of the products and take all relevant risks in connection with such entrusted manufacturing.  More detailed rules should be promulgated in order to clarify how such CRO MAH can effectively comply with the GMP standards, so that it can obtain the PML under these Measures.

2. GMP continuous and compliance inspections and examinations

The application for GMP license was officially canceled by the Drug Administration Law but replaced by GMP continuous inspections and GMP compliance inspections according to the Measures. The MAH shall establish and improve the quality management system for production, carry out manufacturing business in accordance with applicable national standards, submit and continuously update site management documents in accordance with regulations, and conduct a risk assessment and continuous improvement of its quality system operation process to ensure its entire process of pharmaceutical production continuous to meet legal requirements.

Article 52 of the Measures further clarifies the link between on-site inspection of drug registration and the pre-market GMP compliance inspection. Based on the innovation and risk characteristics of a certain drug, the pre-market GMP compliance inspection should be carried out by the different levels of medical product administrations (“MPAs”). As provided in the Announcement, after a product has passed the on-site inspection of drug registration and acceptance standards in accordance with the Drug Administration Law and implementation regulations as well as relevant GMP regulations, the workshop, and production line of that certain product shall be indicated on the duplicate of the PML.

According to the Announcement, any enterprise who has obtained the PML prior to 1 July 2020 whilst its production line or workshop has not yet passed the GMP compliance inspection, shall apply for and pass such inspection before the above date.

3. Changes of PML

According to the Announcement, any existing PML shall continue to be valid within its validity period. After the entry into force of the Measures, any pharmaceutical manufacturer applies for any change, replacement or renewal of its PML shall comply with the provisions of the Measures. The original validity period for any change or replacement of the PML remains unchanged, whilst the validity period of renewal will be calculated from the date of renewal.

According to the Measures, in case of any change to the permitted items (i.e. manufacturing premises, and manufacturing scope) on a PML, the applicant shall apply for and submit relevant documents which can evidence that it has fulfilled the conditions set forth in Article 6 of the Measures to the competent MPA for examination and approval. If the applicant intends to establish a new workshop or production line, or any alteration or expansion of its current workshop or production line at the original premises or another locality, it shall comply with the relevant provisions and technical requirements and submit the relevant materials to the local competent MPA for approval and a GMP compliance check shall be conducted.

If an MAH who has obtained the PML entrusts a pharmaceutical manufacturer to produce drugs, it shall apply for the change of its PML in accordance with the Measures. Information of both enterprises (the MAH and its entrusted company), product name, approval number and validity period shall be stated in the duplicate of that PML.  If the workshop or production line of the entrusted pharmaceutical manufacturer has not passed the GMP compliance inspection, it shall apply for such compliance check with the competent MPA where it is located for approval before undertaking any activities for the production of the drug entrusted by the MAH.

4. Drug Commissioned Manufacturing

Pursuant to the Announcement, for those enterprises who have already obtained a drug commissioned manufacturing approval, such approval shall continue to be valid within its validity period; however, if either party (either a MAH or its entrusted manufacturer)’s PML expired, changed, renewed or the original drug commissioned manufacturing approval expired, such original entrustment shall be terminated automatically. Such MAH shall apply for the change of its PML in accordance with the Measures. No drug commissioned manufacturing approval will be granted any more or issued separately after the  entry into forceof the Measures.

The MAH who holds the valid PML or the drug commissioned manufacturing approval shall conclude an entrustment agreement and a quality agreement with its entrusted pharmaceutical manufacturer. On 2 March 2020, the NMPA issued the Guidelines for the Quality Agreement on Drug Commissioned Manufacturing (Draft for Comment) and the Reference Template for the Quality Agreement on Drug Commissioned Manufacturing (Draft for Comment). According to the Announcement, any existing foregoing agreements between the MAH and its entrusted pharmaceutical manufacturer may need to be amended or restated according to the foregoing guidelines and reference template.

According to the Measures, any change in a registration item in the PML, the holder shall submit to the original issuing MPA an application for modification within 30 days upon obtaining the approval from the market supervision authorities for the change of such enterprise’s registered business scope. Another practical issue relating to the drug commissioned manufacturing mode is that the registered business scope of an MAH. Based on our preliminary research and phone consultations with the authorities, it is advisable for an MAH, especially a CRO MAH (normally would be registered as a high-technology company, technology development company, etc.) to register its business scope as “drug commissioned manufacturing (details refer to the drug registration approval held by the MAH)”.