Regulatory, Pricing and Reimbursement: China

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An intro to the regulatory, pricing and reimbursement scenario for pharmaceuticals in China. Prepared in association with Fangda Partners, one of China’s most prestigious and well-regarded law firms. This is an extract from The Pharma Legal Handbook: China, which can be purchased here for USD 99.

 

1. What are the regulatory authorities with jurisdiction over drugs, biologicals, and medical devices in your country?

Responsibilities for the administration of drugs (including biologicals) and medical devices are assumed by several governmental agencies, including the following key players:

  • The National Medical Product Administration (NMPA), formerly known as the China Food and Drug Administration, which is responsible for issuing marketing authorizations of drugs and medical devices and monitoring product quality.
  • The National Health Commission (NHC), which is responsible for the overall guidance of healthcare reform, administering China’s Essential Drug List (EDL) and managing the drug tendering and procurement policies.
  • The Ministry of Human Resources and Social Security (MOHRSS), the authority that takes the lead in formulating the National Drug Reimbursement List (NRDL).

 

2. What is the regulatory framework for the authorization, pricing, and reimbursement of drugs, biologicals, and medical devices?

DRUGS

  • Key Regulations

The fundamental legislations for the drug industry are the Drug Administration Law and its Implementing Rules. A wide range of other regulations and implementing measures have been issued by the NMPA to guide the pharmaceutical industry.

  • Authorization

Steps to obtain the marketing authorization for drugs are mainly set out in the Drug Registration Administrative Measures. In general, all new drugs must go through four steps before being marketed: pre-clinical research, application for clinical trial, clinical trial and approval for production.

    • Pre-clinical research of a drug shall be conducted in accordance with the Good Laboratory Practices (GLP).
    • After completing the pre-clinical research, the applicant must obtain approval for clinical trials from the NMPA’s Center for Drug Evaluation (CDE) to conduct new clinical drug trials. In July 2018, NMPA promulgated a new rule that if an applicant for clinical trial does not receive any negative opinions from the CDE within 60 days after the date of accepting the application, the drug clinical trials may be conducted in accordance with the plan submitted to the CDE.
    • After the approval of a clinical trial, the applicant shall conduct the clinical trial at good-clinical-practice (GCP) certified institutions. Clinical trials are divided into Phase I, Phase II, Phase III and Phase IV, among which, Phase IV is post-marketing clinical trials.
    • Upon completion of Phase III clinical trial, the applicant can submit a new drug application for approval to manufacture and launch such new drugs.
  • Pricing

The price control of drugs was previously based upon a scheme of maximum retail price (MRP) of drugs set by the government, which was abolished (with the exception of narcotic and certain psychotropic drugs) in June 2015. On the other hand, public hospitals were allowed to mark-up drugs by around 15% above procurement prices, which has been replaced by the “zero-mark-up” (i.e., no-profit, the drug price that hospital charges the patient should be the same as it pays to the drug suppliers) policy since July 2017.

  • Reimbursement

In terms of the reimbursement of drugs, China’s medical insurance system was first adopted in 1998 and has now been gradually expanded to provide coverage for the majority of the population. Participants of the national medical insurance program and their employers (if any), are required to contribute to the payment of an insurance premium on a monthly basis. Medical insurance program participants are eligible for full or partial reimbursement of the cost of medicines included in the NRDL, which includes 2,535 drugs that are divided into Class A and Class B drugs. Class A drugs typically include low-priced and clinically necessary drugs that are fully reimbursed, and the Class B drugs catalogue typically includes higher-priced or new drugs that generally require the patients to assume 10-30% of the drug’s cost. Each province is allowed to issue its own drug reimbursement list (PRDL) based upon the NRDL, provided that Class A drugs in the NRDL should be kept and maintained and the adjustment to the Class B drugs should not be greater than 15%.

MEDICAL DEVICES

  • Key Regulations

The fundamental legislation for the medical device industry is the Medical Device Supervision and Administration Regulations. A wide range of other regulations and implementing measures have been issued by the NMPA to guide the medical device industry.

  • Authorization

Under the Medical Device Registration Administrative Measures, devices can be categorized into Class I, Class II and Class III devices. Class I devices are simple devices that are exempted from clinical trials and administered through a filing system. Class II and Class III devices are more complex devices with medium or high risks and should be supported by clinical trials (unless being on the list of devices exempted from clinical trials) and registered with the NMPA before entering into the market.

  • Pricing

There is no MRP scheme in the medical device sector. Similar to the mark-up policy previously applicable to drugs, public hospitals are still allowed to charge a certain mark-up on the medical devices purchased by them (for example, a maximum of 5% mark-up is allowed in Shanghai, provided that the purchase price for a medical device exceeds RMB  4,000, and the mark-up should not exceed RMB  200).

  • Reimbursement

At the national level, there is a negative list that precludes certain devices (such as glasses and massage devices) from governmental reimbursement. Detailed reimbursement coverage and rate for medical devices are subject to local policies at each province.

 

3. What are the steps to obtain authorization to develop, test, and market a product?

Please refer to Question 2 above regarding the authorizations of drugs and medical products.

 

4. What are the approximate fees for each authorization?

The table below lists the government fees charged by NMPA for each category of registration:

Category Sub-category Fee (RMB 10,000)
Domestic drug New drug Clinical trial approval 19.2
Marketing authorization 43.2
Generic drug Marketing authorization (clinical trial is waived) 18.36
Marketing authorization (clinical trial is required) 31.8
Supplementary registration Regular registration items 0.96
Registration items requiring technical review 9.96
Renewal application Set by the provincial authority
Imported drug New drug Clinical trial approval 37.6
Marketing authorization 59.39
Generic drug Marketing authorization (clinical trial is waived) 36.76
Marketing authorization (clinical trial is required) 50.2
Supplementary registration Regular registration items 0.96
Registration items requiring technical review 28.36
Renewal application 22.72
Domestic devices Class III Marketing authorization 15.36
Post-marketing amendment registration 5.04
Renewal registration 4.08
Imported devices Class II Marketing authorization 21.09
Post-marketing amendment registration 4.2
Renewal registration 4.08
Class III Marketing authorization 30.88
Post-marketing amendment registration 5.04
Renewal registration 4.08

 

5. For how long are marketing authorizations/registrations valid? How are marketing authorizations/registrations renewed?

Marketing authorizations for drugs and medical devices are valid for a term of five years. The applicant must prepare and submit the renewal application documents to the provincial NMPA six months before the expiry of the marketing authorization. In addition to reviewing of the application documents, the authority may determine to conduct technical review and on-site inspection when it deems necessary.

 

6. How does the authorization process differ between brand-name products and generic products? Are there differences for local manufacturers versus foreign-owned manufacturers?

In March 2016, NMPA issued the Reform Plan for Registration Category of Chemical Drugs which reclassified drug applications as follows:

 

Category 1 drugs New drugs that have not been marketed anywhere in the world.
Category 2 drugs Improved new drugs that are not marketed anywhere in the world.
Category 3 drugs Drugs that have equivalent quality and efficacy to the brand-name drugs have been marketed abroad but not yet in China.
Category 4 drugs Drugs that have equivalent quality and efficacy to the brand-name drugs and have been marketed in China.
Category 5 drugs Drugs that have already been marketed abroad, but are not yet approved in China.

 

In general, generic drugs follow similar registration pathways to brand-name drugs. The applicant needs to conduct bioequivalence (BE) tests for generic drugs to demonstrate conformity with the brand-name drugs. BE tests are administrated through the record-filing system, instead of the review and approval process applicable to new drugs. The BE applicant only needs to file record on the Clinical Trial Management Public Platform designated by NMPA and can start the clinical trial after obtaining the filing number. In addition, Category 1 new drugs may be entitled to certain preferential policies that are not applicable to generic drugs, including fast-track approval treatment by the CDE, a monitoring period up to five years (during which the NMPA will not accept any applications for new drugs with the same active ingredient) and more flexible drug manufacturing technology transfer options.

Local drug manufacturers and foreign-owned drug manufacturers in China are subject to the same drug approval procedures.

 

7. How are combination products (drug + drug, drug + biologic, drug + device, biologic + device, drug + biologic + device) regulated?

Drug (including biologics) + device combination products must obtain marketing authorizations from the NMPA. For such combination products, if the drug plays a major function, the combination products should be registered as a drug; if the device plays a major function, the combination products should be registered as a medical device.

There is no “drug + drug” authorization system in China.

 

8. How is compliance with regulation monitored and evaluated? Is the regulatory regime comparable with the U.S. Food and Drug Administration or the European Medicines Agency expectations and requirements?

The NMPA and its local counterparts have the jurisdiction to enforce the Drug Administration Law and its Implementing Rules, the Medical Device Supervision and Administration Rules, and other guidelines and regulations on drugs and medical devices.

In June 2017, China joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) – an international organization founded by drug administrators of US, EU and Japan to facilitate international collaboration in the pharma industry. Some of the ICH technical guidelines have already been used as the basis of NMPA regulations.

 

9. What is the potential range of penalties for noncompliance?

Pursuant to the Drug Administration Law and its Implementing Rules and the Medical Device Supervision and Administration Rules, noncompliance (depending upon the specific illegal activities) could be subject to different administrative penalties, including the monetary fine, confiscation of illegal gains, suspension of business activities, revocation of marketing authorization and other permits and license. In the worst scenario, violation of drug and medical device legislations may result in criminal liabilities.

 

10. Is there a national healthcare system? If so, how is it administered and funded?

HEALTHCARE SYSTEM REFORM

The PRC government has promulgated several healthcare reform policies and regulations to reform the healthcare system. On March 17, 2009, the Central Committee of the PRC Communist Party and the State Council jointly issued the Guidelines on Strengthening the Reform of Healthcare System. On December 27, 2016, the State Council issued the Notice on the Issuance of the 13th Five-year Plan on Strengthening the Reform of Healthcare System. On April 25, 2017, the General Office of the State Council issued the Main Tasks of Healthcare System Reform in 2017. Highlights of these healthcare reform policies and regulations include the following:

  1. One of the main objectives of the reform is to establish a basic healthcare system to cover both urban and rural residents and provide the Chinese people with safe, effective, convenient and affordable healthcare services. By 2020, a basic healthcare system covering both urban and rural residents shall be established.
  2. Another main objective of reform is to improve the healthcare system, through the reform and development of a graded hierarchical healthcare system, modern hospital management, basic medical insurance, drug supply support and comprehensive supervision.
  3. The reforms aim to promote orderly market competition and improve the efficiency and quality of the healthcare system to meet the various medical needs of the Chinese population.

HOSPITALS

China’s hospital system consists of both public and private medical institutions and insurance programs. Public hospitals are owned by the government and funded by out-of-pocket payments by patients, governmental subsidies and various governmental insurance schemes (including Urban Employee Basic Medical Insurance (UEBMI) and Urban and Rural Resident Basic Medical Insurance (URRBMI), both are managed by the MHRSS).

Private hospitals are controlled and operated by private entities and are mainly funded by out-of-pocket payments by patients and commercial insurance schemes (governmental insurance coverage for private hospitals has been quite low).

REIMBURSEMENT

Please refer to Questions 2 & 13 above regarding the medical reimbursement system in China.

ESSENTIAL DRUG LIST

In 2009, the Chinese government issued the National Essential Drug List System, which aim to promote essential medicines sold to consumers at fair prices and ensure that the general public in the PRC has equal access to the drugs contained in the National Essential Drug List. the Ministry of Health promulgated the first National Essential Drug List on August 18, 2009 and the latest version was revised and released on October 25, 2018, which includes a total of 685 drugs.

 

11. How does the government (or public) healthcare system function with private sector healthcare?

Because of governmental insurance coverage and pricing regime, the public hospitals are of a “non-profit” nature and are serving the majority of Chinese patients. Private hospitals can be set up either for profit or non-profit, hospitals for profit are usually set up to attract patients with high-level income or with commercial insurance coverage. According to statistics issued by the NHC, as of May 2018, there are 12,145 public hospitals and 19,461 private hospitals; during the period of January – May 2018, the total number of patients visiting in public hospitals and private hospitals are 1,230 million and 210 million, respectively.

 

12. Are prices of drugs and devices regulated and, if so, how?

Please refer to Question 2 above regarding the regulation of the price of drugs and device products.

 

13. How are drugs and devices used by patients paid for? What roles do public and private payers play?

At private hospitals, drugs and devices are mainly paid out of pocket by patients or covered by commercial insurance (to the extent available).

At public hospitals, a majority of medical expenditures can be covered by UEBMI or URRBMI (subject to certain exceptions and ceilings) and the patients need to pay out of pocket for the remaining expenditures. The table below compares the quantity of coverage, reimbursement rates and reimbursement ceiling under UEBMI and URRBMI:

Insurance Scheme Annual Contributions Approximate Coverage Levels for Medical Services and Drugs Annual Coverage Ceilings
URRBMI Varies by region, for example:

Shanghai

Ÿ   Individual: US$ 16-54 (RMB 110-370) (depending on age)

Beijing

Ÿ   Individual: US$ 26 or 44 (RMB 180 or 300) (depending on age and identity)

Varies by region, for example:

Shanghai

Ÿ   Inpatient: 60%-90% (depending on age and hospital level)

Ÿ   Outpatient: 50%-70% (depending on age and hospital level)

Beijing

Ÿ   Inpatient: 75%-80% (depending on hospital level)

Ÿ   Outpatient: 50%-55% (depending on hospital level)

Varies by region, for example:

Shanghai

Ÿ   No coverage ceiling

Beijing

Ÿ   Inpatient: US$439 (RMB 200,000)

Ÿ   Outpatient: US$29,286 (RMB 3,000)

UEBMI Varies by region, for example:

Shanghai

Ÿ   11.5% of employee wages: 9.5% from payroll tax on employers and 2% employee contribution

Beijing

Ÿ   12% of employee wages: 10% from payroll tax on employers and 2% employee contribution

Varies by region, for example:

Shanghai

Ÿ   Inpatient: 85%-92% (depending on age and working status)

Ÿ   Outpatient: 50%-90% (depending on age and working status)

Beijing

Ÿ   Inpatient: 85%-97% (depending on working status, hospital level and actual expenditure)

Ÿ   Outpatient: 70%-90% (depending on age and working status)

Varies by region, for example:

Shanghai

Ÿ   No coverage ceiling

Beijing

Ÿ   Inpatient: US$43,881 (RMB 300,000)

Ÿ   Outpatient: US$2,927 (RMB 20,000)

 

14. Who dispenses drugs and devices to patients and how are those dispensers compensated?

Drugs and devices are dispensed by hospitals or retail drug stores. Dispensers are compensated through UEBMI and URRBMI.

 

15. What are the professional and legal responsibilities of those who dispense drugs and devices? What role do they play in providing patient care, information, and safety?

Hospitals and drug stores must purchase drugs and devices from qualified manufacturers or distributors, and comply with other legal requirements on acceptance, storage, transport, distribution and dispensing of drugs or device products.

Hospitals and drug stores should monitor and report adverse drug reactions (ADR) to the NMPA within a statutory period of time, and take corresponding remediation actions (such as recall of products) to ensure the patient safety.

 

 


Click the following links to read more legal articles from China:

  1. Regulatory Pricing and Reimbursement Overview
  2. Preclinical and Clinical Trial Requirements
  3. Marketing, Manufacturing, Packaging & Labeling, Advertising
  4. Traditional Medicines and OTC Products
  5. Product Liability
  6. Patents & Trademarks
  7. Regulatory Reform