China’s new Amended Drug Administration Law is being enacted to strengthen and streamline its regulation of the pharmaceutical industry as well as address prominent problems such as counterfeit drugs, substandard drugs and high drug prices. Fangda Partners’ Josh Shin explains how the new law strengthens penalties for counterfeit and substandard drugs.


The Amended Drug Administration Law intends to offer consumers and patients greater protection by increasing penalties on producers of counterfeit and substandard drugs.


Both the lower and upper limits on penalties for enterprises will be increased. For instance, enterprises that produce or distribute counterfeit drugs may be fined from 15 to 30 times their illegal gains, as opposed to the current fine of two to five times their illegal gains. The potential fines for manufacturing or distributing substandard drugs, have increased from one to three times their illegal gains to 10 to 20 times their illegal gains with a minimum fine of RMB 1,000,000 (about US$140,000). Heavier punishments may also apply for those enterprises that produce or sell counterfeit or substandard drugs taken by pregnant women or children. Finally, any enterprise that produces or sells counterfeit or substandard drugs may be fined and ordered to suspend operations, or even have its business license revoked.


The Amended Drug Administration Law also states that individuals may face legal liability for their involvement in producing or selling counterfeit drugs. Legal representatives, people in charge, those directly responsible, and others can face penalties, including monetary fines and debarment. These individuals may be barred from engaging in drug manufacturing and distribution for five years or may be barred for life and detained by the competent public security authority for not less than five days but not more than 15 days in serious circumstances.


The Amended Drug Administration also seeks to protect patients and consumers by ensuring that drug administration departments are properly exercising their supervisory duties. These departments will face heavy punishments for dereliction of duty when handling counterfeit or substandard drug cases.


The Amended Drug Administration Law provides a perfect opportunity to cement the progress made so far and to introduce new expectations for compliance through the product life cycle. However, the corresponding implementing rules remain to be developed to push forward these reform initiatives to benefit patients and those in the industry.


Innovation and compliance are two important shared goals of the government and pharmaceutical industry. With the constantly changing competitive landscape and fast-advancing medical technology, the pharmaceutical industry, as well as the regulators, must collaborate to find the most appropriate balance for risks and benefits.


The promulgation of the Amended Drug Administration Law specifies the nature of the Healthy China Initiative, which aims to overhaul and transform the healthcare industry, prompting companies to provide better products and services for people. In addition to the Amended Drug Administration Law, in recent years, China has said it will not impose import tariffs on anticancer drugs, it has accelerated the examination and approval process for new drugs, and built an all-process drug tracing system. These efforts have shown the country’s dedication to guarantee the safety and reliability at every stage of drug production, sales and use.


Read the full Chinese Pharma Legal Update