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China's Pharmaceutical Marketing Authorisation Holder Mechanism
Wednesday, May 1, 2019

China’s Pharmaceutical Marketing Authorisation Holder pilot programme has now been extended until  November 2019, providing further opportunities for businesses to enter the rapidly expanding Chinese pharmaceutical market.

Based on the differences between types of approval, pharmaceutical licensing administrative systems can  be divided into two categories. The first type is segregated management, which is found in Pharmaceutical Marketing Authorisation Holder (MAH) systems in countries such as the United States, Japan, and across the European Union. Under this system, MAH and Production Authorisation Holders (PAHs) can be the same or different entities. The second type is a hybrid model of pharmaceutical production and marketing licensing administrative systems. In these types of systems, a pharmaceutical marketing license can only be granted to a PAH.  This is typical in countries such as China. The regulatory system under the hybrid model has two key shortcomings when compared with that of the flexible segregated management system.

 Pharmaceutical research and development institutions, and scientific research personnel, can only obtain short-term or hidden/unintended benefits of their research and development through licensing technology and pre-arranged sharing with pharmaceutical manufacturers. This leads to a lack of motivation to conduct research. 2.  Originally, it was possible to meet pharmaceutical production goals by engaging pharmaceutical manufacturers that already had similar types of pharmaceutical production requirements. Owing to institutional restrictions, however, pharmaceutical manufacturers are continuously building new  production lines in order to list drugs on the market, which has resulted in duplicate construction and a  waste of industry resources.

"An MAH is permitted to manufacture or sell pharmaceuticals" 

With the rapid development of China’s pharmaceutical market, the existing regulatory system can no longer meet the sector’s mechanical demands. On 5 November 2015, an MAH mechanism pilot programme was launched in ten provinces and cities (the Pilot Areas) and has now been extended until 5 November 2019. Scientific research personnel and pharmaceutical research and development institutions in the Pilot Areas can apply for an MAH qualification and thus obtain the required pharmaceutical marketing license and the drug approval number. An MAH is permitted to manufacture or sell pharmaceuticals, either on its own or through a manufacturer or distributor. An MAH also bears complete legal liability for pre-clinical research, clinical drug trials, production, distribution, and adverse drug reaction monitoring. According to data released by the State Council in October 2018, as of the end of September 2018, 1,118 applications to become an MAH were filed in the  Pilot Area. Of these applications •  786 were made by pharmaceutical manufacturers, accounting for 70.3% of all applications. •  331 applications were made by pharmaceutical research and development institutions, accounting for 29.6% of all applications. •  Only one application was made by a scientific researcher, accounting for 0.1% of all applications. The application was eventually withdrawn. 186 drug clinical trials have already been approved, and 122 test products have applied for approval for market listing. 

MAH System Development and Outlook 

Although the MAH system is still in the pilot stage,  the Chinese authorities have already begun preparations to fully implement it at all levels in the legal system and the pharmaceutical administration system. This includes incorporating the MAH system into the Pharmaceutical Administration Law (Amended Draft), issued in November 2018, and the Pharmaceutical Registration Administration Law (Revised Draft), released for public comment in October 2017. The Chinese Government has already completed a draft of the Administrative Measures for Pharmaceutical Marketing Authorisation Holders. 

“186 drug clinical trials have already been approved"

The government is also continuously issuing laws  and regulations aimed at resolving problems encountered during the pilot programmes. For example, the National Medical Products Administration issued a public announcement  in September 2018 to request implementation of  the MAH report on adverse reactions. Once these problems are resolved, the complete implementation of the MAH system will be imminent. It is expected that this will greatly promote the development of the medical service outsourcing industry in the Chinese market. Companies such as contract research organisations (CRO), contract manufacturing organisations (CMO) and contract sales organisations (CSO) will benefit greatly.

Practical Implications

Because an MAH authorisation means fast-track treatment and an accelerated marketing process during the pilot period, many companies immediately converted their existing applications to MAH applications once the MAH pilot programme started. Companies that wish to explore the Chinese pharmaceutical market and possess pharmaceutical technology but do not currently hold the proper pharmaceutical production qualifications in China, will need to become an MAH. They first need to be recognised as a Pharmaceutical Research and Development Institution (PRDI). According to current regulations, a PRDI should be •   A pharmaceutical research and development institution established in the Pilot Area and  capable of undertaking the liabilities independently and responsibly • Able to assume liability for drug quality and safety. These standards are rather vague, which has created uncertainty and room for maneuver in practice. The competent government science and technology supervising departments usually determine whether or not an entity qualifies as a Research and Development Institution. There are clear standards in place for the original value of fixed assets for research and development (R&D), the number and positions of R&D personnel, and R&D fund investment. The criteria for the identification of a Pharmaceutical Research and Development Institution is, however still unclear (authors’ emphasis). In practice, it is quite possible for a Chinese subsidiary company of a foreign pharmaceutical company that is equipped with R&D personnel and facilities to apply for the MAH qualification under the existing pharmaceutical administration system. Pharmaceutical companies that already have manufacturing facilities in China can also apply for the MAH qualifications for pharmaceutical products that are outside their existing manufacturing capacity by engaging a third party CMO. 

License Transfers

As long as the MAH system is fully implemented under China’s national pharmaceutical administrative regulations, relevant examination and approval formalities regarding pharmaceutical license transfers are expected to be further simplified. Under the current regulations, the original license holder must first apply to cancel its license, and then the transferee company has to apply for a new license. Under the MAH regulations, it is expected that the pharmaceutical license will be transferable directly via a change registration system, as long as certain statutory MAH requirements are met.  

The Future is Bright, But Caution is Key

While the MAH system can certainly facilitate pharmaceutical transfer deals among pharmaceutical companies in China, it should be noted that the MAH must bear full legal liability for the entire pharmaceutical production chain and subsequent sales, as well as the entire life span of the pharmaceutical product management cycle. If the MAH trusts other enterprises to manufacture the pharmaceutical product, the MAH will face issues of product consistency, effective supervision, and the compliance of the other entity with its obligations under their agreed upon method of cooperation. 

Contributing Author: Joyce Xie

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