HONG KONG – China has again demonstrated efforts to improve its health care system by motivating drug innovation and strengthening regulation. This time it is being done through overhauling the country's drug administration law and introducing a similar law for vaccines.

Last month, the Chinese authorities submitted a second draft of the Drug Administration Law to policymakers for deliberation, in which they aimed to introduce structural changes to encourage innovation and strengthen post-approval compliance obligations.

"Over the years, the Chinese government has launched ambitious health care reforms with the aim to achieve equitable access to health care services, and to build an effective and inexpensive health care system for both urban and rural residents," Sakshi Sikka, senior pharmaceuticals and health care analyst at Fitch Solutions, told BioWorld.

The drug administration law is "fundamental to pharmaceutical companies' operations," according to Katherine Wang, partner in the life sciences group at Ropes & Gray.

"While the proposed draft codifies many reform initiatives that accelerate market access of innovative drugs, it also signals aggressive post-approval enforcement and severe sanctions," she said in a note this month.

The second draft reorganizes the law according to phases of the product life cycle and features a chapter on the duties of marketing authorization holders (MAHs) – an overhaul compared to the first draft, which only amended individual provisions of the law.

The draft comes in five chapters – general principles, the research and development (R&D) and registration of the drugs, the MAHs, the manufacturing of the drugs, and the commercialization of the drugs. There are 60 provisions in total.

In terms of incentivizing new drug R&D, the draft stipulates that pharmaceutical innovation should be based on clinical value. New drug R&D should focus on new therapeutic mechanisms, address multiple targets, or involve interventions that systemically affect biological functions.

That chapter also stipulates that ethical principles must be followed when conducting clinical trials for drugs, and the duties of the ethics committee must be specified. The participants in the clinical trials must be informed of the risks arising from the trial and give their consent. Drugs undergoing clinical trials can be used on patients with the same indications after the regulators have reviewed them.

The emphasis on ethical principles follows the highly controversial case of two gene-edited babies in China last November. He Jiankui, an associate professor at the Southern University of Science and Technology in Shenzhen, claimed to have used CRISPR/cas9 gene editing technology to edit the genes of twin embryos to make them resistant to HIV infection. The case prompted the world to question China's regulation of ethics and conduct. (See BioWorld, Nov. 22, 2018, and March 4, 2019.)

In the chapter on MAHs, the draft stipulates that the MAH system will be implemented for both domestic and imported drugs. The MAHs can also transfer their marketing authorizations when approved by the drug authority, which regulators believe can vitalize the market and boost drug innovation.

The MAH system has been in place since 2015 to allow individuals and research institutes to apply for the registration approval of new drugs in a bid to motivate innovation. The MAHs can then either start a manufacturing company or outsource manufacturing.

Responsibilities of the MAHs are also specified in the draft. They are held accountable for the preclinical studies, clinical trials, manufacturing, commercialization, postmarketing studies, adverse event monitoring and reports of the drug.

That also highlights the draft's focus on post-approval compliance, as the MAHs are required to initiate postmarketing studies and implement measures to monitor adverse events and control risks.

To make innovative drugs more accessible, the MAHs can also establish an online presence on third-party portals registered with local drug administrations.

The new draft also places emphasis on drug pricing. Besides price monitoring, the authorities may even intervene in the pricing of urgently needed drugs.

Other measures to address unmet clinical needs include priority reviews for and import of urgently needed drugs.

Troubled by the vaccine scandal last year, the Chinese government also drafted dedicated legislation to regulate vaccines. The Vaccine Administration Law emphasizes innovation and drug safety.

Last July, China's second-largest rabies vaccine producer, Changchun Changsheng Life Sciences Ltd., was ordered to stop production and recall batches of its rabies vaccines after the regulators uncovered falsified data and inspection records. The scandal affected public confidence in the country's vaccines.

Vaccines that meet urgent needs for disease prevention and control will be granted priority review. The government will also fund the R&D of new multivalent vaccines.

Both laws, for drugs and vaccines, significantly increase penalties for violations. Those who sell counterfeit drugs or vaccines will face administrative fines of up to 15 to 30 times – instead of up to 10 times – the sales value of the affected products.

Focus on innovation

Overhauling the drug administration law is just the latest effort by China to reform its health care system to make it more innovation-focused.

Sikka said the acceptance of overseas clinical trial data is the most important step. "This removed the need to conduct additional trials in the country and resulted in faster and greater approval of clinical trials," she explained.

China's eagerness to boost pharmaceutical innovation derives from the fact that most Chinese pharmaceutical firms devote less than 15% of their sales to R&D, whereas R&D spending by global drug firms is typically 15% to 30% of sales, Sikka said.

The government's commitment to sector development is evidenced by the "Made in China 2025" plan, a macroeconomic strategy that aims to reduce reliance on foreign imports.

"The protectionist stance toward local manufacturers will create competition for foreign drugmakers and impede market access for innovative drugmakers," Sikka noted.