Compliance with China’s Drug Marketing Authorization Holder Local Agent and Registration Agent Requirements 药品上市许可持有人境内代理人与注册代理人的合规要求
In recent years, China’s current drug regulations and draft proposals have introduced a new requirement that foreign drug market authorization holders (MAHs) must designate a local agent in China. Therefore, multinational pharmaceutical companies operating in China should understand the qualifications of a local agent, appoint a local agent in a timely manner, and enter into written agreements to facilitate seamless business operations in China through close collaboration with the local agent.
1. MAH, Local Agent, and Registration Agent | 持证商，境内代理人，以及注册代理人
In 2015, China initiated a pilot program for the MAH system across several provinces and municipalities. In 2019, the MAH-centered regulatory framework was officially established in China following the amendment of the Drug Administration Law (DAL). Article 30 of the DAL defines an MAH as an enterprise, drug research and development institution, or any other entity that holds a drug registration certificate. An MAH is responsible for the entire lifecycle of drugs, including non-clinical research, clinical trials, manufacturing and distribution, post-marketing research, and adverse-reaction monitoring, reporting, and handling. An MAH may bear administrative, civil, and criminal liabilities for violation of the DAL and related regulations.
Article 38 of the DAL provides that a foreign MAH shall designate a domestic entity as its local agent to perform the MAH’s obligations and assume joint and several liabilities. The implementation details are outlined in two draft proposals issued by the National Medical Products Administration (NMPA) that have not yet come into effect: the Draft Interim Provisions on Local Agents of Foreign Drug Marketing Authorization Holder (the Draft Interim Provisions), issued on July 31, 2020, and the Draft Amendment to the Implementation Regulation of the Drug Administration Law (the Draft Regulation), issued on May 9, 2022.
Prior to the 2019 DAL, foreign applicants for drug registration were already required to designate “registration agents” in China, a term likely to be confused with foreign MAHs’ “local agents.” The latest regulations on drug registration agents are in the Drug Registration Regulation revised in 2020, which stipulates that a foreign applicant for drug registration must designate a Chinese domestic entity as its registration agent to handle registration-related matters. The applicant bears full responsibility for the product. The registration agent does not assume joint and several liability with the applicant.
This article will focus on the similarities and differences between MAH local agents and registration agents in four aspects: qualifications and requirements, obligations and liabilities, procedures and timelines, and the MAH of cross-border licensed products.
2. Qualifications and Requirements | 资质与要求
(1) Local Agent | 境外持证商境内代理人
Article 38 of the DAL provides that an MAH local agent shall be a corporate entity established within China. Domestic branches of companies incorporated in China and representative offices of foreign companies located in China do not have legal personality and therefore cannot serve as local agents. In practice, multinational companies typically designate their wholly-owned or joint venture subsidiaries in China or their Chinese partner companies as their local agents.
The Draft Regulation further stipulates that a local agent must possess certain capabilities in quality management and risk control. It must also establish a comprehensive pharmaceutical quality assurance system that includes management departments and professional technicians. While the Draft Regulation requires that an MAH shall have the capability of compensation for liability, it does not explicitly impose that requirement on the local agent. Given that the local agent should fulfill the MAH’s obligations, it is important that the MAH selects its local agent through a comprehensive evaluation in practice.
(2) Registration Agent | 注册代理人
Article 9 of the Drug Registration Regulation stipulates that a registration agent must be a corporate entity established in China. As with local agents, a foreign company’s subsidiary in China or its Chinese partner company can serve as the registration agent, while a domestic branch of a company incorporated in China or a representative office of a foreign company is unqualified. In addition, there are no established laws or regulations that define the competencies required for a registration agent in quality management, risk control, or liability compensation. In practice, the registration agent should be familiar with the laws, regulations, and technical requirements of drug registration. The MAH can evaluate and appoint the registration agent according to its own needs.
3. Obligations and Liabilities | 义务和责任
(1) Local Agent | 境外持证商境内代理人
According to Article 38 of the DAL, the local agent shall assume the obligations of a foreign MAH. Following the establishment of the MAH system, some laws and regulations stipulated the responsibilities of local agents. For instance, Article 47 of the Administrative Measures on the Supervision of Drug Manufacturing provides that the local agent shall be responsible for drug market release and drug quality and coordinate with foreign inspections. Article 9 of the Administrative Measures for the Registration of Medical Representatives (for Trial Implementation) requires the local agent to be responsible for the registration and management of pharmaceutical representatives. Article 4 of the Administrative Provisions on Drug Annual Reporting establishes the requirement for the local agent to submit annual reports.
However, there is controversy over how the obligations of local agents apply under laws and regulations that took effect before the 2019 DAL. For instance, the NMPA issued the Announcement on Direct Reporting of Adverse Reactions by Marketing Authorization Holders in 2018, requiring MAHs of imported drugs to designate representative offices within China or domestic corporate entities as agents to take charge of the monitoring, evaluation, and risk control over adverse reactions of imported drugs. It calls for future laws and regulations to clarify whether the agents responsible for the monitoring and evaluation of adverse reactions are MAH local agents or pharmacovigilance agents separately appointed.
The Draft Regulation does not specify the obligations of MAH local agents. Pursuant to the Draft Interim Provisions, local agents shall establish drug quality assurance systems; establish and maintain drug traceability systems and drug annual reporting systems; establish management systems of drug post-marketing changes; undertake drug post-marketing affairs, such as handling product recalls, quality complaints, and compensation; establish pharmacovigilance systems; submit reference materials; and accept random inspection. Local agents are also expected to collaborate with the Chinese regulatory authorities during government inspections, investigations, and enforcement on noncompliance identified at foreign MAHs’ manufacturing sites. However, the requirements for MAH local agents have not yet come into effect.
For any violations, the MAH and its local agent shall assume joint and several liability, which typically includes administrative liability (such as a monetary penalty, revocation of licenses, or debarment for 10 years) and civil liability (such as cessation of infringement, compensation for losses, or continued performance).
(2) Registration Agent | 注册代理人
A registration agent is responsible for handling drug registration matters. Currently, there are no specific laws or regulations governing the obligations and liabilities of a registration agent. In practice, a registration agent is generally responsible for submitting materials and communicating with regulatory authorities in China. The drug applicant remains the liable entity, and the registration agent bears no joint and several liability during the drug registration process.
4. Procedures and Timelines | 流程与时间
(1) Local Agent | 境外持证商境内代理人
Current legislation and guidelines do not specify the procedures and timelines necessary for a foreign MAH to apply for the appointment of its local agent. The Draft Regulation proposes two schemes for designating local agents. In the first scheme, before the drug market authorization is approved, the foreign applicant shall designate a qualified Chinese domestic corporate entity as its local agent whose relevant information should be included in the drug registration certificate. In the second scheme, after the approval of the drug market authorization, the MAH shall designate a qualified Chinese domestic corporate entity as its local agent and register with the provincial medical products administration where it is located, and the drug can be marketed only after the registration is completed. If the first scheme is adopted, the application for local agents and drug marketing authorization should be carried out simultaneously. If the second scheme becomes effective, the application procedure for local agents will depend on the local regulations and practices of provincial authorities.
(2) Registration Agent | 注册代理人
The Draft Regulation does not specify the application procedure for registration agents. According to the current requirements, the applicants for clinical trials and marketing authorization shall submit the registration agents’ information as part of the application. In other words, a foreign applicant for clinical trials or market authorization in China shall designate its registration agent before the investigational new drug or new drug application is submitted.
5. MAH of Cross-Border Licensed Products | 跨境许可引进药品的境外持证商
In recent years, an increasing number of drugs have been introduced into the Chinese market through cross-border licensing. For drugs manufactured outside China, Chinese regulatory authorities require the MAH in China to be consistent with that in the foreign market. The MAH of cross-border licensed drugs is typically the foreign licensor or the foreign affiliate of the Chinese licensee and meets the requirement using one of two approaches:
Approach 1: The foreign licensor acts as the MAH in China with the Chinese licensee acting as its local agent.
Approach 2: The foreign affiliate of the Chinese licensee acts as the MAH in China. Specifically, the Chinese licensee obtains the marketing authorization of the drug in a third country or region outside mainland China (e.g., Hong Kong, Taiwan, Singapore, or EU member states) through its existing or newly established affiliate therein, and the affiliate acts as the MAH in China.
The first approach, where the foreign licensor acts as the MAH in China, is adopted in the vast majority of cross-border drug licensing transactions. The benefits are the process is fairly straightforward and facilitates the expedited launch of products in China. However, since the MAH shall be responsible for the safety, efficacy, and quality controllability of the product of which the foreign licensor is not the actual operator, the licensor is often unwilling to act as the MAH in China. In this case, we suggest the licensor adopt appropriate risk-prevention measures. For example, it should include sufficient representations and warranties in the agreement; require the licensee to compensate for any losses incurred due to its failure to fulfill the obligations of local agents; and require the licensee to obtain prior review and approval from the licensor before its submission of files to regulatory authorities to ensure compliance with relevant Chinese laws and regulations, such as the DAL and the Regulation on the Administration of Human Genetic Resources.
A small number of cross-border licensing transactions adopt the second approach, where the foreign affiliate of the Chinese licensee first obtains the drug marketing authorization in a country or region outside mainland China and then acts as the MAH in China. This approach exempts the licensor from the obligations and liabilities of an MAH in China, reducing its regulatory risks. However, the licensor has to give up the marketing authorization in a third country or region or transfer it to the licensee. For the licensee, the time, cost, and uncertainty may increase because it has to obtain the drug market authorization in a third country or region. Moreover, it also has to bear the cost of maintaining the operation of the foreign affiliate to meet the drug marketing requirements in the third country or region.
After weighing the pros and cons of the two approaches, the stakeholders involved in cross-border licensing transactions may opt for the more suitable option to serve as the MAH in China, balancing timelines, cost, and complexity.
6. Conclusion | 结语
The MAH local agent and registration agent play important roles within China’s unique regulatory landscape. The Draft Regulation introduces new qualification criteria for MAH local agents as well as timeframes and processes for their appointment. Pharmaceutical companies are advised to monitor future developments regarding the Draft Regulation and adapt their collaboration strategies with local agents accordingly to ensure timely compliance once the amended Implementation Regulation of the Drug Administration Law comes into force.
© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.