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The inherent shortcomings of regulatory environment in china
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The inherent shortcomings of regulatory environment in china

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Analysis of challenges and opportunities of operating regulatory affairs environment related to medical device market in China and by extension the APAC region in general.

Analysis of challenges and opportunities of operating regulatory affairs environment related to medical device market in China and by extension the APAC region in general.

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The inherent shortcomings of regulatory environment in china The inherent shortcomings of regulatory environment in china Document Transcript

  • The Inherent shortcomings of Regulatory Environment in China Tony Hussey & Mingzi Deng Supervised by Dr. Eric Kupferberg 2012
  • Table of Contents OVERVIEW OF MEDICAL DEVICE IN CHINA..............................3 Introduction.....................................................................................................3 Low Price, High Volume Market....................................................................3 The Medical Device Science &Technical Industry “Twelve-Five” Development Program............................................................................................................4 Program Background and Aims.....................................................................4 Four targets for achievement during the “Twelve-Five” period (until 2015).4 The government strategies for achievement................................................5 Chinese Medical Device Regulator Construction.............................................5 Ministry of Health (MOH)...............................................................................5 General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ).........................................................................................................6 State Food and Drug Administration (SFDA).................................................6 CHALLENGES OF CHINESE MEDICAL DEVICE REGULATORY ENVIRONMENT .....................................................................8 Regulations and Law.......................................................................................8 Medical Device Supervision and Administration Regulation (2000)..............8 Medical Device Registration Administration (2004) .....................................8 The Inherent Shortcomings of Regulatory Environment..........8 SFDA now part of MOH, some responsibilities shifted ..................................8 Big market with uncompleted regulations....................................................9 New patent law amendments.......................................................................9 High expensive on hospital services...........................................................10 IP protection and trade secrets...................................................................10 THE IMPACT OF US, EU & CHINESE COMPANIES....................11 The number of Joint Ventures decreased....................................................11 Major device companies conducting R &D in China....................................11 Issues of manufacturing..............................................................................11 Dealing with Chinese competitors..............................................................11 Regulatory challenges................................................................................12 WHAT I DID FOR MY INTERN................................................12 WHAT I CAN SHAPE MY COMPANY AND INDUSTRY IN FUTURE13
  • OVERVIEW OF MEDICAL DEVICE IN CHINA Introduction Low Price, High Volume Market China, with the largest number of population in the word has become a very attractive market to western entrepreneurs since the opening-door policy during late 1970s. The very fact that China Medical Device Market has switched to a high volume and particularly pronounced market in the last five years since the healthcare reform released by Chinese government. 850 billion RMB (US$124 billion) was counted in central fiscal expenditure budget to create a solid platform for universal healthcare access for all by 2020 especially on the construction of hospitals, clinics and healthcare centers, which will obviously lead to more spending on medical devices, basic hospital equipment at an unprecedented rate in a short time. The expanded insurance coverage, urban population growth, public and private healthcare investment are the main factors driving the growth of medical device market. Until 2011, China has about 21000 hospitals and more than 902000 community clinics. For 2011, China’s GDP is estimated at US$6.8 trillion achieving GDP growth of 9% p.a. for the past 20 years. It estimates that medical device market growth to be in the region of 13.1%; one of the fastest growing markets in the world. Some main import and export cities like Shenzhen and Zhuhai has a rapid increased number of imported medical device products. By the end of 2010, China’s import and export value reached US $22.7 billion, an increase of 23.47% over 2009. China’s imports of medical equipment increased of over 27%. Sometimes it just hard for western people to figure out the “People”, “Money” and “Change” in China, the emerging market. But the truth is as soon as the best analysis and knowledge they got, the real regulatory environment they familiar with; they will realize the high volume of the market. Instead of the dream of the America Dream, it would be the dream of Chinese Dream. View slide
  • The Medical Device Science &Technical Industry “Twelve-Five” Development Program Program Background and Aims China’s latest Five-Year Plan (The Twelve Five-Year Program Outline for National Economics and Social Development of People’s Republic of China- 2011 to 2015) includes a specific section for accelerating medical device Science & Technical industry development. The Ministry of Science and Technology (MOST) released this program in November 2011. It requires China’s government and related agencies to adopt particular practices to accelerate the development of medical device industry and implement the related regulations and supervisions during the current Five-Year Plan Period. Four targets for achievement during the “Twelve-Five” period (until 2015) 1.Technology target: breakaway 20-30 key technique and core component, to form 200 core patents; have great breakthrough in quality of cutting edge technique to benefit industry. 2.Product target: innovate and produce 50-80 kinds of medical devices at urgent needs, used for clinical prevention, diagnosis, treatment, rehabilitation, and emergency usage. Emphasize those in large demand, broad application as well as those base facilities and materials, which rely on import. Actively developing devices used in chronic disease screening, minimally invasive surgery, regenerate repair, digital medical and rehabilitation nursing. 3.Industry target: give key support to 10-15 large scale medical device enterprises or groups, give support to 40-50 high-tech enterprises with innovation and creativeness, establish 8-10 medical device technology industry bases and 10 state grade new type medical device display and application bases to perfect device chain, optimize industry construction, improve market coverage, promote world competition in medical device industry. 4.Ability target: largely improve the ability of innovation and creativeness in medical device industry, cultivate and import academic pacesetters and team to set up 20-30 platforms of technique research, establish 10 national engineering research centers and View slide
  • state key laboratories, perfect national medical devices system in standard, test and evaluation, to play a role of alliance in technology innovation strategy, to promote great combination of produce, study, research and medication so that, make sure the sustainable development in medical devices industry. The government strategies for achievement 1. Intensify leading innovation Increase state investment in technology, rearrange multichannel resources, encourage inter –state cooperation, emphasize talent cultivation. 2. Perfect policy measures by strengthen inter-section coordination, completing relevant law and regulation, emphasizing intellectual property protection. 3. Optimize industry environments Improve environment for products application, promote enterprise reconstruction, perfect industry chain, focus on district development, enlarge share in international market. The Twelve-Five Program stresses increasing China’s industry scale and innovative ability. It also specifies the main invested basic medical devices and innovated products including computed radiography and X-ray systems; magnetic resonance imaging (MRI) contrast media agent; diagnostic devices for cardio-pulmonary disease, diabetes, and neurological disorders; HIV monitor test kits; test kits for gynecologic cytology smears preparation system; home-based or self care; micro- miniature and remote surgery techniques, DNA-based diagnostics, tissue-engineered organs. It also encourages the investment on advanced information technologies, which provide solutions to some of the most persistent and debilitating healthcare problems. Chinese Medical Device Regulator Construction Ministry of Health (MOH) The Ministry of Health, founded in 1949 is an executive agency of the state that plays the role of providing information, raising health awareness and education, ensuring the accessibility of health services, and monitoring the quality of health services provided to
  • citizens and visitors. Specifically, the ministry’s responsibilities include drafting laws, regulations, plans and policies related to public health, overseeing disease prevention and treatment, reforming medical institutions, overseeing state hospitals, administering the tendering process and drawing up medical science and technology development projects. Following the incorporation of the SFDA under its authority in 2008, the MOH took on the additional responsibilities of managing major food safety incidents and overseeing the State Administration of Traditional Chinese Medicine (SATCM). General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) AQSIQ is a ministerial administrative organ directly under the State Council of the People's Republic of China in charge of national quality, metrology, entry-exit commodity inspection, entry-exit health quarantine, entry-exit animal and plant quarantine, import-export food safety, certification and accreditation, standardization, as well as administrative law-enforcement. AQSIQ takes the responsibility of organizing to draft the laws and regulations of quality supervision, inspection and quarantine, working out and announcing the relevant rules, taking in charge of quality management, management of metrology, management of inspection and quarantine clearance, management of entry-exit health quarantine, management of import and export commodity inspection, etc. State Food and Drug Administration (SFDA) Created in 1998, the State Food and Drug Administration (formerly the State Drug Administration) serves as the ultimate national authority for approval and regulation of human-use drugs, animal-use drugs, nutritional supplements, cosmetics, and food. The SFDA regulates the drug approval process in a manner similar to that of the U.S. Food and Drug Administration. The PRC Drug Regulation Law of 2001, formulated by the SFDA, regulates drug manufacturing through GMP quality control, outlines enforcement of intellectual property laws, and drug-related advertising. The State Council, the highest administrative authority in China, supervises the MOH, which then oversees the SFDA. There are two departments in SFDA related to the medical device- Department of Medical Devices and the Inspection Bureau. The department of Medical Devices is responsible for the medical devices research and producing progress. The Inspection
  • Bureau supervises the process of medical devices distribution and using, and punishes the manufacturers who build the unlicensed medical devices. These two departments have their own responsibility, but also cooperate with each other, in order to ensure the safety and effectiveness of the medical devices.
  • CHALLENGES OF CHINESE MEDICAL DEVICE REGULATORY ENVIRONMENT Regulations and Law Medical Device Supervision and Administration Regulation (2000) This regulation established the authority of SFDA in Device regulation; defined the classification and built the clinical trial requirements for Class II and III products. It is the landmark and fundamental legislation for medical device. It has requirement for every 4 years’ re-registration, manufacturing and distribution and licensing, adverse event reporting and prohibition of reuse of single-use products, etc. Medical Device Registration Administration (2004) It covers all devices marketed in China and requires that manufacturer of Class II, III devices needs GMP compliance. All Class II, III devices require clinical trial data. Bu the clinical trial in China can be exempted based on considerations of whether the product is approved in the foreign country; whether the QMS of the manufacturer has been evaluated by SFDA; whether there has been China complaint for other similar products made by the manufacturer in the past 4 years; whether the device uses sources such as ultrasound, microwave, laser, X-ray, Gamma ray, or radionuclide. There are some other guidance or documents like Device Specific Guidance Document (5/11/2011), Medical Device Recall Administration Regulation (5/20/2011), SFDA Guidance on Adverse Event Reporting (09/16/2011), etc. The Inherent Shortcomings of Regulatory Environment SFDA now part of MOH, some responsibilities shifted In 2006, a series of corruptions raised within SFDA executive departments. Zheng Xiaoyu, the former chief administrator of SFDA, was sentenced to death and executed on July 10, 2007. Cao Wenzhuang who is in charge of the former SFDA drug registration department was sentenced with a stay of execution. Hao Heping, the former head of
  • medical devices at the SFDA was sentenced to 15 years’ prison. Other related SFDA officials were also arrested for corruption and abuse of authority. In 2010/2011, UK “Bribery Act” Enacted to limit the foreign corruption in the worldwide and has the penalties up to 10 years of offenses and up to $2,000,000 or twice the gross gain of the products for provision. To better govern the SFDA to make sure it can fulfill its role on public health supervision, Chinese Central Bureau shift some of its responsibilities to MOH. Big market with uncompleted regulations Although China has needs for the large number of qualified medical devices, the related guidance and regulations are not good enough. The current category version for medical devices classification in China is too old with unclear and unscientific standards without completed principles and requirements followed with the general control, special control and high-risk control. Senior scientists reviewing or auditing review is necessary when it is unsure how to make a product name. Classification should not only be proved by a report from manufacturer or a governor, but also some relevant scientific authority. Those are too complicated for companies to follow up. Not only the standards, but also the laws and regulations are constantly changing. Take the State Council Order 276 for example. Order 276 is regulation for the supervision and administration of medical devices, governing China’s health sector. It is enacted in April 1st, 2000 and has been amended on several occasions by “red letters”, which is given legal effect. But until Sep. 6, 2010, Order 276 has been amended 6 times, expanded from 6 chapters, 48 articles to 9 chapters, 88 articles. New patent law amendments One of the other challenges of Chinese regulatory environment is the amount of copies of products and technologies is always in flood. China has the much lower price of laboring market compared with western countries and the less market surveillance. On March 5, 2008, the third amendment draft of China’s Patent Law was passed by China’s People’s Congress. The draft has new regulations on disclosure rules, foreign application
  • processes, co-ownership rights, and compulsory licenses. Chinese government began to take more control to avoid unauthorized and adulterated products. Despite recent changes to China’s Patent Law, foreign-based suppliers should use proper caution and diligence in developing strategies based on patent protection. High expensive on hospital services Chinese population at the age of 50+ is expected to increase from 26% in 2006 to 32% in 2020. More needs for medical services and equipment would be rapidly increased with the increased number. As the same time, government grants hospital more operational autonomy. In 2004, 350 billions RMB spend on healthcare system, only 50 billion of them came from government compared with 250 billion RMB in 2000. The main incomes of hospitals are from patients’ payment on healthcare service and equipment expenses. Instead of buying all medical equipment by government, hospital has its autonomy to purchase their needs. More and more advanced equipment is using in hospital and the expense is added to patients and insurance company. City-specific insurance program differ widely in device coverage and reimbursement rates. Only a few main cities like Shanghai, Beijing, Hangzhou and Suzhou has reimbursement from the rate of 50% to 80%. The other cities are not reimbursed. The Ministry of Health (MOH) also requires approval from the government before hospitals can purchase high-value medical devices. This process can result in biases towards established or favored medical devices, and can deter physicians from proactively educating themselves on new equipment. IP protection and trade secrets The strength of IP protection in China is much lower compared with Singapore, Australia and New Zealand. The New Employment Contract Law was released in 2008 to allow confidentiality provisions for trade secrets and intellectual property. Technology owners also have rights under various IP laws and the Civil Law, whereas technology contracts are required to contain confidentiality provisions. Market entry strategies must be driven by careful planning, contracting and ongoing operational monitoring.
  • THE IMPACT OF US, EU & CHINESE COMPANIES Understanding China business practices may be somehow different than those in west. The number of Joint Ventures decreased In 1999, China has 78% foreign companies are joint venture operations. But until 2005, the number of the amount has decreased to 27%. The problems are the hard understanding of unclear law and regulations; corrupt business practice; lack of infrastructure and different goal of domestic companies and foreign companies. More formulations of operations has been created like representative office, branch office and wholly owned foreign enterprise to adapt the changing regulatory environment. Major device companies conducting R &D in China Several foreign companies such as General Electric (GE), Philips and Hitachi has their own research and development (R&D) center in China and more and more large international companies moved their R&D center into China. They are attracted by the low salary, low costs and sophisticated manufacturers. The fact is company can hire a chemical scientist from the top of Chinese universities at salary of $10,000 annual in China compared with $50, 000 in US. And also the cost of conducting clinical trials is often lower in China. It is easy for the access of patient recruitment based on the large number of population. As part of global studies, China has more R&D centers in drug before, but now more focusing on device. Issues of manufacturing Who owns the factory and who own the company could always be the questions the potential foreign investor should think about. Determine if Chinese cooperators really understand western business values; that who will own the mold or designs when things go bad. Make sure legal documents are regulated accordingly to avoid extra re-registration fee and unnecessary cost on examine and approve. Dealing with Chinese competitors While Chinese domestic companies focus more on low-level device manufacturing as well as enhancing the quality of products with low cost according with the medical device needs MOH listed. West medical device companies changed their strategy to
  • focus more on innovation rather than engineering to develop high advanced medical devices and services. Last year, Johnson & Johnson met the problem to re-register its product due to the previous registration information unshared with its Chinese local agent. Some companies spent a lot on products registration but find out no market at all later…So not only the regulatory environment the west company should pay attention to, but also the real market environment including cultural difference and financial difference. Regulatory challenges National Development and Reform Commission (NDRC) is looking to expand a policy requiring direct sales for all medical devices in china. The introduction of this policy would heighten competitive barriers for foreign suppliers, who would be forced to make significant investments in domestic direct sales networks. WHAT I DID FOR MY INTERN During my six months intern in Whitney consulting company, a medical device registration and marketing research company in MA, I assisted with a medical device company registering its In Vitro Diagnostic (IVD) Products complained with Chinese regulation and guidance. I also helped my supervisor with document filing, translation and information collecting for several different clients. After the real experience I got from work, I became more familiar with the registration procedures as well as the tendency of market in medical device industry. As a regulatory affairs specialist, I am not supposed to make any creative changes on my work. This position requires all your attention to focus on each word of regulations and related guidance. In my intern position, most of the time, I work independently doing web design and translation work. Those works are pretty technical sometimes, which I have to do it by myself and try to figure out all the technical issues and learn how to use the correct words for translations. Work independently will avoid a lot of conflicts with people and it will be easier for me to control the time without pushing anyone else to get the work done. It gives me more time and space to think independently. But the weakness part is I cannot receive the comments instantly from my coworkers. If I don’t know how to do during the
  • work, I have no one to ask about except my boss. Most of the time, the boss does not want to answer too much questions and they are very busy. I am supposed to complete all the assignments with my own ability. But it shapes my career very well. I narrowed down my career path and try to focus on medical device area instead of the whole pharmaceutical industry. I learned how to compare the difference between Chinese and American regulations and figured out the strength and weakness of Chinese healthcare system, which completely formed my knowledge system. It does not change my career goals at all but enhance it and make it clear than before. Looking back to my experience, if anything can be approved, I would prefer to spend more time on communicating with my supervisor asking for comments and spending more time on my work. The more time I spend, the better the work would be. You never know what the life could be. But if you pay enough attention on it, you can lead the life to go the way you want. WHAT I CAN SHAPE MY COMPANY AND INDUSTRY IN FUTURE Knowing China and its intricate relations is critical in complying with the Chinese rules and regulations. The relationship, which is part of Chinese culture, is hard but very important for western investigators and manufacturers to know and to master. What I can do is to master the culture difference and regulation differences of the emerging market and provide professional advices to western companies on both product registration and marketing strategy. With more real update information I got from industry and comparison between China and US healthcare industry, I can be an expert and know both needs of companies and industry and help with marketing analysis and government decision-making.