Optimizing Supervision System and Promoting Industrial Development – Interpretation of Key Points of Regulations on Supervision and Administration of Medical Devices (2021 Amendment)

By King & Wood Mallesons on August 2, 2021

Authors: Huang Jianwen, Zhang Yu, Regulatory & Compliance Group, King & Wood Mallesons

Medical devices are related to the life and health of the people and the overall situation of the country’s social development. With the rapid development of China’s medical device industry, Regulations on Supervision and Administration of Medical Devices, as the “Basic Law” of the industry’s supervision, has undergone two amendments in 2014 and 2017 since its promulgation in 2000. On October 8, 2017, the General Office of the Central Committee of the CPC and the General Office of the State Council issued the Opinions on Deepening the Reform of Evaluation and Approval System and Encouraging Innovations in Drugs and Medical Devices (the “Opinions on Deepening the Reform and Encouraging Innovations”), which put forward new requirements for deepening the reform of evaluation and approval system of medical devices. In order to adapt the rapid development of the medical device industry and the further reform of the regulatory system of industry, the newly revised Regulations on the Supervision and Administration of Medical Devices (the “New Regulations”) was adopted by the Decree of State Council (No. 739) and signed by the Premier of the State Council on February 9, 2021. The New Regulations have been implemented since June 1, 2021.

Compared with Regulations on Supervision and Administration of Medical Devices (2017 Amendment) (the “2017 Edition of the Regulations”), the New Regulations pay more attention to promoting the innovative development of the medical device industry, and simultaneously focus on the quality and safety of medical device products. Through the study of the New Regulations, we understand that the New Regulations are mainly amended in the following five aspects: (1) establishing a system of medical device registrant and filing applicant to promote the full implementation of the system of market authorization holders and to consolidate the responsibilities of enterprises; (2) consolidating the achievement of the reform and comprehensively optimize the approval and record-filing procedures; (3) encouraging innovation of medical devices and treating the innovation of medical devices as the focus of development; (4) clarifying the regulatory requirements for hot issues such as online distributions of medical devices; (5) adjusting the legal liabilities to increase the number of penalty circumstances and increase the penalty for illegal acts.

This article will interpret the main contents and the highlights of the amendment of the New Regulations, and analyze the changes in China’s medical device regulatory system under the New Regulations and its impact on the industry development.

I. The New Regulations formally establish the system of medical device registrant and filing applicant, and promote the full implementation of the system of market authorization holders

The establishment of the registrant and filing applicant system for medical devices is the key content of this amendment of the New Regulations, which corresponds to the system of market authorization holders for drugs under the drug regulatory system.

In October 2017, the Opinions on Deepening the Reform and Encouraging Innovations proposed to “promote the full implementation of the system of market authorization holders” and to “allow medical device research and development institutions and scientific researchers to apply for marketing permits for medical devices”. In December of the same year, Shanghai Medical Products Administration issued the Implementation Plan for the Pilot of Medical Device Registrant System in Shanghai Pilot Free Trade Zone, China, and the pilot of medical device registrant system began to implement.

In August 2019, the National Medical Products Administration (the “NMPA”) issued the Notice on Expanding the Pilot of Medical Device Registrant System (the “Notice on Expanding the Pilot”), expanding the scope of the pilot to 21 provinces and cities such as Beijing, Tianjin, Hebei, Liaoning, Heilongjiang and Shanghai, etc. on the basis of the pilot of medical device registrant system in Shanghai, Guangdong and Tianjin Free Trade Zones.

The New Regulations formally implement the system of medical device registrant and filing applicant at the level of administrative regulations, and raise it from a pilot system to a basic system applicable nationwide. According to Articles 13 and 103 of the New Regulations, medical device registrant and filing applicant refer to enterprises or research and development institutions that have obtained medical device registration certificates or submitted medical device filling. Medical device registrant and filing applicant shall strengthen the quality management of medical devices throughout their full life cycle, and shall be responsible for the safety and effectiveness of medical devices in the process of their development, manufacture, distribution and use.

1. Scientific research institutions and research and development enterprises that do not have manufacture capacity can also become registrant and filing applicant of medical devices

Before the pilot implementation of the medical device registrant system, according to the Provisions for Medical Device Registration (2014 Amendment) and other regulations, except for domestic innovative medical devices approved in accordance with the special approval procedures for innovative medical devices, when applying for the medical device registration, the applicant shall not entrust other enterprises to manufacture samples [1]. Therefore, medical device registrant and filing applicant needed to have the manufacture capacity.

After the pilot of the registrant system starts, according to the Notice on Expanding the Pilot issued in 2019, the applicant might entrust an enterprise with corresponding manufacture capacity to manufacture samples. The Notice on Expanding the Pilot allows the manufacture address listed in the medical device registration certificate to be the entrusted manufacture address, with the name of the entrusted enterprise marked in the remarks column. Simultaneously, the Notice on Expanding the Pilot clearly states that “scientific research institutions” can apply for the registration of medical devices. According to this, the pilot of the registrant system began to “untie” the registration and manufacture. Market entities such as research institutions and research and development enterprises that have no manufacture capacity can apply for the registration of medical devices and become the registrant.

The New Regulations continue the provisions of the Notice on Expanding the Pilot and specify in the definitions of medical device registrant and filing applicant that “research institutions” can become medical device registrant and filing applicant after obtaining registration certificates or handling the filing [2]. According to this, the New Regulations pave the way at the level of Lex superior for the feasibility of scientific research institutions, research and development enterprises and other entities that do not have manufacture capacity to become medical device registrant and filing applicant.

On March 26, 2021, NMPA issued the Provisions for Medical Device Registration (Draft Revision for Comments). The draft revision for comments has deleted the provision that samples of the non-innovative medical devices cannot be entrusted to manufacture, and we expect this content to be more specifically implemented and reflected in subsequent supporting regulations.

2. Medical device registrant and filing applicant shall be responsible for the safety and effectiveness of medical device products throughout their full life cycle

According to Article 13 of the New Regulations, medical device registrant and filing applicant shall be responsible for the safety and effectiveness in the process of development, manufacture, distribution and use. Specifically, the obligations of registrant and filing applicant include establishing a quality management system suitable for the products and maintaining its effective operation; formulating postmarket research and risk control plans and implementing them effectively; carrying out monitor and re-evaluation of adverse events according to the law; and establishing and implementing the product traceability and recall system [3].

First, in the development process, on the one hand, the registrant and filing applicant are responsible for the safety and effectiveness of the medical devices under development according to the law, and the Medical Products Administration that accepts the application for registration shall review the safety and effective quality management capability of the medical devices of the applicants [4]. On the other hand, the registrant and filing applicant shall also formulate post-market research and risk control plans and implement them effectively.

Second, in the manufacture process, the New Regulations clearly provide that registrant, filing applicant and entrusted manufacture enterprises shall (1) establish and perfect a quality management system suitable for the medical devices manufactured and guarantee their effective operation in accordance with the Good Manufacturing Practice for Medical Devices; (2) manufacture the products in strict accordance with the registered or filed product’s technical requirements and guarantee the manufactured medical devices shall meet the mandatory standards and the registered or filed product’s technical requirements; and (3) regularly carry out self-examination on the operation of the quality management system and submit self-examination reports in accordance with the regulations of NMPA [5].

Third, in the process of distribution and use, on the one hand, the New Regulations require that medical device distribution activities shall have a quality management system and quality management institutions or personnel suitable for the medical devices being operated, establish and perfect a quality management system suitable for the medical device being operated and effectively operate such system [6]. On the other hand, registrant and filing applicant shall also carry out adverse events monitor and re-evaluation according to the law, and establish and implement product traceability and recall system. For medical device adverse events, registrant and filing applicant shall establish a medical device adverse events monitor system, equipped with adverse events monitor institutions and personnel suitable for their products, actively carry out adverse effects monitor for their products, and report the investigation, analysis, evaluation, product risk control, etc., to the monitor technical institution for medical device adverse events according to the regulations of NMPA. If medical device adverse events monitor and evaluation results indicate that the medical devices may have defects, registrant and filing applicant shall actively carry out re-evaluation of marketed medical devices [7].

3. The relevant requirements for the manufacture entrusted by the medical device registrant and filing applicant

The New Regulations continue the requirements of the Notice on Expanding the Pilot and specify that medical device registrant and filing applicant can entrust enterprises that meet the requirements of New Regulations and have corresponding conditions to manufacture medical devices.

According to the second paragraph of Article 34 of the New Regulations, medical device registrant and filing applicant shall be responsible for the quality of the entrusted medical devices. They shall ensure the manufacture of medical devices in accordance with the statutory requirements, and shall sign an entrustment agreement with the entrusted manufacture enterprise, and specify the rights, obligations and responsibilities of both parties in the entrustment agreement. The entrusted manufacture enterprise shall organize the manufacture in accordance with laws and regulations, the Good Manufacturing Practices for Medical Devices, mandatory standards, product technical requirements and the entrustment agreement, be responsible for the manufacture, and accept the supervision of the entrusting party.

For the varieties of medical devices that can be commissioned, similar to the provisions in the Notice on Expanding the Pilot [8], the third paragraph of Article 34 of the New Regulations clearly provides that implantable medical devices with high risks shall not be commissioned, and the specific catalogue shall be formulated, adjusted and published by NMPA.

In addition, in the pilot phase of the registrant system, the Notice on Expanding the Pilot also requires the registrant to sign a quality agreement with the entrusted manufacture enterprise, and the entrusted manufacture enterprise shall submit the entrustment agreement and the quality agreement to the Medical Products Administration and handle the entrusted filing [9]. The New Regulations do not specify in detail this part of the content.

On March 26, 2021, NMPA issued the Administrative Measures for the Supervision of Medical Devices Manufacturing (Draft Revision for Comments). The draft revision for comments made it clear that the medical device registrant and filing applicant shall sign an entrustment agreement and a quality agreement with the entrusted manufacture enterprise, and the entrusted manufacture enterprise shall submit the entrustment agreement and the quality agreement when applying for a manufacture license. In addition, the draft revision for comments also specified the main contents to be included in the entrustment agreement. Simultaneously, the draft revision for comments also required the legal representative or the person in charge of the registrant and filing applicant to assume full management responsibility for quality and safety of the medical devices manufactured, and required that the registrant, the filing applicant and the entrusted manufacture enterprises to have management representatives to assume management responsibilities such as establishing, implementing and maintaining the effective operation of the quality management system. We will continue to pay attention to subsequent amendment of this content by supporting regulations such as the Administrative Measures for the Supervision of Medical Devices Manufacturing.

4. Overseas medical device registrant and filing applicant shall designate the domestic enterprise legal person to undertake relevant obligations

According to Article 20 of the New Regulations, the domestic enterprise legal person designated by the overseas medical device registrant and filing applicant shall assist the registrant and filing applicant to fulfil their obligations as a registrant and filing applicant. Although the New Regulations do not explicitly require the domestic enterprise legal person designated by the overseas registrant and filing applicant to assume the legal obligations of the overseas registrant and filling applicant and bear joint and several liabilities [10], similar to the provisions of the Drug Administration Law, if the domestic enterprise legal person designated by overseas medical device registrant and filing applicant fail to fulfil the relevant obligations, they also need to bear legal liabilities such as correction, warning, fine and prohibition of business entry according to Article 98 of the New Regulations [11].

5. The New Regulations do not clearly provide that the medical device registration certificate can be transferred

The Drug Administration Law amended in 2019 clearly provides that drug marketing authorization holders can transfer their drug marketing authorizations under certain conditions [12]. The following Provisions for Drug Registration (2020 Amendment), and the Provisions for the Change Management of Post-approval Drugs (Interim) also detail the transfer requirements and procedures for drug marketing authorizations. However, the currently effective medical device supervision regulations (the Provisions for the Medical Device Registration, etc.) and the revised New Regulations do not clearly provide that the medical device registration certificate can be transferred. However, we noticed that in the pilot phase of the registration system, the pilot scheme for medical device registrant in some areas of China has put forward the pilot principle of “actively exploring the transfer of registration certificates” [13]. Therefore, whether the government will release the feasibility of transferring medical device registration certificates in the future still needs to be paid attention.

II. The New Regulations consolidate the results of the reform, and comprehensively optimize the approval and filing procedures

The registration, filing, manufacture and distribution of medical device products needs to go through the strict administrative approval, licensing and filing procedures to ensure the quality and safety of medical device products. In order to implement the Opinions on Deepening the Reform and Encouraging Innovations, the New Regulations have systematically optimized the procedures for administrative evaluation and approval, licensing and filing of medical device products under the requirements of China’s comprehensive reform of the management system.

1. The optimization of the procedure for product registration and filing

A. Allow applicants for Class II and Class III medical device product registration to submit product self-inspection reports

Product inspection is a necessary step in the registration and filing of medical devices. The 2017 Edition of the Regulations provides that when applying for the filing of Class I medical device products, the applicant may submit a product self-inspection report, but when applying for the registration of Class II and Class II medical device products, the product inspection report submitted by the applicant shall be issued by the medical device inspection institution.

Article 14 of the New Regulations clearly provides that no matter whether an application is for Class I medical device products filing or for Class II and Class III medical device products registration, the applicant may submit a product self-inspection report or entrust a qualified medical device inspection institution to issue an inspection report. This will effectively alleviate the problem of long queues for inspection caused by the limited number of qualified medical device inspection institutions, and save the time and cost of product registration.

B. Optimization of clinical evaluation system

Clinical evaluation is another important step in the registration and filing of medical devices. When applying for registration or filing of medical device products, the clinical evaluation data of the products shall be submitted to prove the clinical performance and safety of the products. Compared with the 2017 Edition of the Regulations, the New Regulations provide clearer provisions and a series of system optimization for the clinical evaluation system of medical devices.

Introduce the system of “exemption from clinical evaluation”

According to Article 25 of the New Regulations, clinical evaluation of medical devices can be conducted based on product characteristics, clinical risks, existing clinical data, etc., (a) through clinical trials, or (b) through analysis and evaluation of clinical literature and clinical data of the same variety of medical devices, to prove that medical devices are safe and effective. During the clinical evaluation of medical devices, when the existing clinical literature and clinical data are not sufficient to confirm the safety and effectiveness of medical device products, clinical trials shall be carried out. In other words, “clinical evaluation” includes “clinical trials” and “analysis and evaluation of clinical literature and data of the same variety of medical devices”.

In addition, although the 2017 Edition of the Regulations and the New Regulations both provide the “exemption” system in the “clinical evaluation” stage, there are significant differences between the two “exemption” systems.

Although the 2017 Edition of the Regulations adopts the “exemption from clinical trials” system, medical device products exempted from clinical trials also need to conduct the clinical evaluation. According to the 2017 Edition of the Regulations, the filing of Class I medical device products does not require clinical trials, whereas the registration of Class II and Class III medical products can be exempted from clinical trials when they meet certain conditions. For the Class I medical devices not requiring clinical trials, the data obtained through literature and clinical use of similar products shall be submitted to prove that the medical device is safe and effective. For Class II and Class III medical device products exempted from clinical trials, according to the Technical Guidelines for Clinical Evaluation of Medical Devices, supporting materials including the comparison table between the applied products and registered products of the same variety shall be submitted.

The New Regulations directly provide the “exemption from clinical evaluation” system. According to Article 24 of the New Regulations, the registration and filing of medical device products shall be subject to the clinical evaluation. However, the clinical evaluation may be exempted if one of the following conditions is met: (1) the working mechanism is clear, the design is finalized, the production process is mature, the approved medical devices of the same variety have been used clinically for many years without serious adverse events, and the regular usage will not be changed; (2) other non-clinical evaluation can prove that the medical device is safe and effective.

Therefore, compared with the 2017 Edition of the Regulations, the New Regulations adopt a more thorough “exemption” system, and eligible medical products can be exempted from clinical trials and even clinical evaluation. According to this, the New Regulations will reduce the burden on applicants for registration and filing of medical device products to a certain extent.

Introduce the system of “implied permission for clinical trials”

The system of “implied permission for clinical trials (临床试验默示许可)” is an important measure to deepen the reform of the evaluation and approval system for drugs and medical devices in China.

The system of “implied permission for clinical trials” has been adopted in the Drug Administration Law amended in 2019 and the Provisions for Drug Registration amended in 2020. Although the “implied permission for clinical trials” system for medical devices has been implemented since March 2019 when NMPA issued the Announcement on Adjusting the Approval Procedure for Clinical Trials of Medical Devices before the New Regulations were promulgated, the promulgation of the New Regulations marks the formal establishment of the “implied permission for clinical trials” system in the field of medical devices at the level of administrative regulations.

According to Article 27 of the New Regulations, NMPA shall, when evaluating and approving clinical trials, make a comprehensive analysis of the equipment, professional personnel and other conditions of the institution that propose to undertake clinical trials of medical devices, the risk level of the medical devices, the implementation plan of clinical trials, the comparative analysis report of clinical benefits and risks, etc., and make a decision within 60 business days from the date of accepting the application and notify the applicant of clinical trials. If NMPA fails to notify within the time limit, it shall be deemed to have agreed.

Allow “extended clinical trials”

In 2017, the Opinions on Deepening the Reform and Encouraging Innovations put forward the reform requirement of “supporting the extended clinical trials”. In March 2020, NMPA and National Health Commission jointly issued the Regulations for Administration of Medical Device Extended Clinical Trials (Interim) which clearly provides that “extended clinical trials” refer to the activity and process in which patients suffering from life-threatening diseases without then-existing effective treatment methods can use medical devices that have not yet been approved for marketing in institutions that conduct clinical trials. The promulgation of the New Regulations further implement the provisions of “extended clinical trials” at the level of administrative regulations.

According to Article 29 of the New Regulations, for medical devices that are undergoing clinical trials for the treatment of diseases that are seriously life-threatening and do not have effective treatment methods, if the medical observation indicates that such medical devices may benefit patients, after ethical review and informed consent, they can be used free of charge for other patients with the same disease and condition in institutions that conduct clinical trials of such medical devices, and the data of safety can be used for registration application of medical devices.

“Extended clinical trials” extend the range of subjects in clinical trials, meet the clinical needs of the public simultaneously where necessary test data are obtained, and enable patients in urgent needs of clinical treatment to obtain medical devices for testing as soon as possible.

A. Introduce the special approval mechanism

The Opinions on Deepening the Reform and Encouraging Innovations has put forward the reform measures of “speeding up the evaluation and approval of clinically urgently needed drugs and medical devices” and “supporting the research and development of rare disease treatment drugs and medical devices” in 2017. This amended New Regulations formally introduce a series of special approval mechanisms, including conditional approval system, emergency use system and special approval for importing the clinical medical devices urgently needed.

Conditional approval system

The first paragraph of Article 19 of the New Regulations provides that the Medical Products Administration that accepts the application for registration may take conditional approval decisions for medical devices that are urgently needed for treating rare diseases, diseases that are seriously endangering lives and of which there is no effective means of treatment, and public health events, and specify relevant matters in the medical device registration certificate.

Emergency use system

Paragraph 2 of Article 19 of the New Regulations provides that in the event of a particularly major public health emergency or other emergency that seriously threatens public health, National Health Commission under the State Council shall, according to the needs of prevention and control of the incident, put forward suggestions for the emergency use of medical devices, which may be used within a certain range and within a certain period upon the approval of NMPA.

Special approval for importing the clinical medical devices urgently needed

Article 57 of the New Regulations provides that medical institutions that urgently need to import a small amount of medical devices due to clinical needs may import them after obtaining the approval of NMPA or the governments of provinces, autonomous regions and municipalities directly under the central government authorized by the State Council. Imported medical devices shall be used for specific medical purposes in the designated medical institutions.

It is worth mentioning that the “special approval for importing the clinical medical devices urgently needed” has been implemented on a pilot basis in Boao Lecheng Pilot Zone in Hainan and other areas. The promulgation of the New Regulations has raised the content of the regulations from the regional pilot to administrative regulations applicable nationwide. “Special approval for importing the clinical medical devices urgently needed” gives power for the provincial government to approve the importation of special medical devices, helps to alleviate the contradiction between the complicated administrative approval process for importation of medical devices and the urgent needs of patients for clinical use of medical devices to a certain extent.

2. Optimization of the procedures for product manufacture and distribution

A. Shortening the approval time limit of manufacture and distribution license

The New Regulations have shortened the approval time limit for applying for the manufacture license of Class II and Class III medical devices and for applying for the distribution license of Class III medical devices from 30 business days provided in the 2017 Edition of the Regulations to 20 business days [14]. The shortening of the time limit for evaluation and approval reflects the increase of efficiency of government administration and saves time and cost for enterprises.

B. Distributing some of Class II medical devices can be exempted from filing

The New Regulations provide that enterprises engaged in the distribution of Class II medical devices shall carry out the filing of the distribution. However, according to the provisions of NMPA, for some of Class II medical devices, if the safety and effectiveness of which are not affected by the distribution process, such Class II medical devices might be exempted from filing [15].

III. The New Regulations encourage medical device innovation, and incorporate medical device innovation into the focus of development

In 2017, the Opinions on Deepening the Reform and Encouraging Innovations put forward the requirements of “encouraging research and development of innovative medical devices” and “giving priority to the review and approval of innovative medical devices”. The content of many systems in the New Regulations fully reflects the goals of encouraging the innovative development of medical devices industry and releasing the innovative vitality of the market.

1. The priority review and approval of the innovative medical device

Article 8 of the New Regulations provides that the State formulates plans and policies for the medical device industry, brings medical device innovation into the focus of development, gives priority to the review and approval of innovative medical devices, supports the clinical promotion and use of innovative medical devices, and promotes the high-quality development of the medical device industry.

2. Improve the medical device innovation system

The New Regulations propose to strengthen the protection of the intellectual property rights of medical devices, emphasizing to increase the independent innovation ability of medical devices. The New Regulations support basic research and applied research on medical devices in the aspects of scientific and technological projects, financing, credit, bidding and purchasing, medical insurance, etc. It also supports enterprises to cooperate with universities, research institutes and medical institutions to carry out research and innovation of medical devices.

In this regard, we suggest that all parties involved in medical device innovation and research should attach importance to signing relevant written technology development agreements, and make clear arrangements in the agreements regarding the ownership of intellectual property rights, subsequent research and development rights, licensing and transfer of intellectual property rights, and subsequent commercial implementation in the case of cooperative development or entrusted development.

3. Allow the importation of innovative medical devices that are not marketed abroad

According to the 2017 Edition of the Regulations, when applying for registration or filing of imported medical devices, the certification documents allowing the medical devices to be marketed by the competent authority of the country (region) where the applicant is located shall be submitted. According to this, the 2017 Edition of the Regulations stipulates the imported medical devices to be only those that have been marketed overseas.

However, the New Regulations make exceptions to the innovative medical devices. According to Articles 15 and 16 of the New Regulations, for innovative medical devices that are not marketed abroad, it is not required to submit proof documents of allowing the medical devices to be marketed for sale issued by the competent authority of the country (region) where the applicant is located. This will help accelerate the pace of overseas innovative medical devices to enter the Chinese market and help China to join the global synchronous research and development system of innovative medical devices.

II. The New Regulations clarifies the regulatory requirements for hot issues such as medical devices online distribution

Compared with the 2017 Edition of the Regulations, the New Regulations clarifies the regulatory requirements in some hot issues of medical devices industry, including medical devices online distribution and laboratory developed tests (LDT).

1. The New Regulations clarifies the regulatory requirements for online distribution of medical devices

The distribution of drugs and medical devices through e-commerce channels is currently a hot issue in the distribution of medical products. Compared with drugs, the government has earlier regulated the online distribution of medical devices. In 2017, the government promulgated the Measures for the Supervision and Administration of Online Distributions of Medical Devices, which provided in detail the qualification requirements and filing requirements of enterprises engaged in online distributions of medical devices and providers of third-party platforms for online trading services of medical devices, as well as the requirements of the online distribution activities of medical devices and the online trading services of medical devices. This amended New Regulations specify the regulatory requirements for online distributions of medical devices at the level of administrative regulations.

According to the first paragraph of Article 46 of the New Regulations, the entity engaged in the online distribution activity of medical devices shall be the medical devices registrant, filing applicant or medical device distribution enterprise. The distributors engaged in online distribution of medical devices shall inform the Medical Products Administration of the local government at the districted city level of the relevant information on online distribution of medical devices, except for Class I medical devices and Class II medical devices that are exempt from distribution filing.

With respect to the obligations of operators of e-commerce platforms, according to the second paragraph of Article 46 of the New Regulations, operators of e-commerce platforms that provide services for online transactions of medical devices shall carry out real-name registration of distributors of online medical devices, examine their business licenses, registration and filing status of medical device products they distribute, and supervise their distribution behaviors. If an e-commerce platform operator discovers that an online medical device distributor violates the provisions of these regulations, it shall promptly stop such distributors and immediately report to the Medical Products Administration of the local government at the districted city level. If any serious illegal act is discovered, it shall immediately stop providing online trading platform services to such distributors.

It is worth noting that the New Regulations and the Measures for the Supervision and Administration of Online Distributions of Medical Devices are inconsistent in some places. For example, the Measures for the Supervision and Administration of Online Distributions of Medical Devices provide that enterprises engaged in online distributions of medical devices shall be medical device manufacture and distribution enterprises that have obtained medical device manufacture license, distribution license or filing according to the law [16], whereas the New Regulations provide that the entity of online distributions of medical devices shall be the medical device registrant, filing applicant or medical device distribution enterprises, excluding the manufacture enterprises from the scope of entity distributing the medical devices online. Another example is that, the Measures for the Supervision and Administration of Online Distributions of Medical Devices provide that all enterprises engaged in online distribution of medical devices shall submit the filing to the regulatory authorities, but the New Regulations exempt Class I medical device distribution enterprises and Class II medical device distribution enterprises from submitting the filing.

In view of the earlier promulgation of the Measures for the Supervision and Administration of Online Distributions of Medical Devices and the fact that the New Regulations are the Lex superior, the Measures for the Supervision and Administration of Online Distributions of Medical Devices might be amended based on the New Regulations. It is suggested that relevant enterprises continue to pay attention to the dynamic changes in the supervision and administration of online distributions of medical devices.

2. Legalization of LDT in IVD industry

Laboratory developed tests (“LDT”) has been implemented for many years in the United States, the European Union and other regions, that is, in vitro diagnosis methods developed, confirmed and used by the laboratory for diagnostic purposes. The LDT reagent is not required to be reported to the regulatory authorities, but it can only be used by laboratories and cannot be sold to other parties. In recent years, with the rapid progress of gene sequencing and other technologies, the IVD industry in China has developed rapidly, but no relevant laws and policies have been issued to legalize LDT.

According to Article 53 of the New Regulations, if there is no IVD of the same variety marketed in China, qualified medical institutions may, based on their clinical needs, research and develop such product on their own and use them within these entities under the guidance of practicing physicians. According to this, there is legitimate space for laboratories of medical institutions to use LDT in its business operation, which is undoubtedly a benefit in the IVD industry.

IV. The New Regulations increase the circumstances of penalties, and increase penalties for illegal acts

In order to implement the strict regulatory requirements and create a fair competitive environment for law-abiding enterprises, the New Regulations adjust the legal liabilities, increase the circumstances of penalties, and increase the penalties for illegal acts.

1. Increase the circumstances of penalties

According to the newly added systems, the new Regulations adjust the legal liabilities accordingly and increase the corresponding circumstances of penalties. For example, Article 89 of the New Regulations provides penalties for medical device registrant and filing applicant who fail to fulfill their obligations as registrant and filing applicant. Article 92 provides penalties for operators of e-commerce platforms who fail to fulfill their obligations as operators of e-commerce platforms for online transaction of medical devices. Article 98 provides penalties for domestic legal person designated by overseas medical device registrant and filing applicant who fail to perform relevant obligations.

2. Increase the penalties for illegal acts

The New Regulations greatly increase the amount of fines imposed on illegal acts, increase the imposed penalties of prohibiting the industry and market access, and strictly implement the “punishment of individuals” rule. We will list some of provisions below to explain the situation.

A. Greatly increase the amount of fines imposed on illegal acts

Illegal acts	The 2017 edition of the Regulations	New Regulations
Manufacture and distribution of unregistered medical devices and unlicensed manufacture and distribution of medical devices	10 to 20 times the value of goods worth more than RMB 10,000	15 to 30 times the value of goods worth more than RMB 10,000
Providing false information or taking other fraudulent means to obtain administrative license	RMB 50,000 to RMB 100,000
Manufacture and distribution of medical devices that have not been filed and manufacture and distribution of medical devices without manufacture or distribution filing	Under RMB 10,000	5 to 20 times the value of goods worth more than RMB 10,000
Providing false information when handling the filing	–
Manufacture, distribution and use of medical devices that do not meet the requirements of the standard or the technical requirements of the registered or filed products, and the distribution and use of medical devices that do not have a certificate of conformity, are expired, invalid or obsolete, etc.	5 to 10 times the value of goods worth more than RMB 10,000

B. Increase the imposed penalties of prohibiting the industry and market access

Illegal acts	The 2017 Edition of the Regulations	New Regulations
Manufacture and distribution of unregistered medical devices and unlicensed manufacture and distribution of medical devices	Medical device license applications from relevant responsible persons and enterprises will not be accepted within 5 years.	Medical device license applications from relevant responsible persons and enterprises will not be accepted within 10 years.
Providing false information or taking other fraudulent means to obtain administrative license
Overseas medical device registrant and filing applicant who refuse to perform the administrative penalty decision	–	Import of medical devices is prohibited within 10 years

C. Strictly implement the “punishment of individuals” rule

Illegal acts	New Regulations
Manufacture and distribution of unregistered medical devices and unlicensed manufacture and distribution of medical devices	If the circumstances are serious, the income received therefrom by the legal representative, the principal responsible person, the directly responsible person in charge and other responsible personnel of the entity violating the law during the occurrence of the illegal act shall be confiscated, and a fine of not less than 30% but not more than 3 times of the income received shall be imposed. These personnel shall be prohibited from engaging in the manufacture and distribution of medical devices for life.
Providing false information or taking other fraudulent means to obtain administrative license
Manufacture and distribution of medical devices that have not been filed and manufacture and distribution of medical devices without manufacture or distribution filing	If the circumstances are serious, the income received therefrom by the legal representative, the principal responsible person, the directly responsible person in charge and other responsible personnel of the entity violating the law during the occurrence of the illegal act shall be confiscated, and a fine of not less than 30% but not more than 2 times of the income received shall be imposed. These personnel shall be prohibited from engaging in the manufacture and distribution of medical devices for 5 years.
Providing false information when submitting the filing	The income received therefrom by the legal representative, the principal responsible person, the directly responsible person in charge and other responsible personnel of the entity violating the law during the occurrence of the illegal act shall be confiscated, and a fine of not less than 30% but not more than 3 times of the income received shall be imposed. These personnel shall be prohibited from engaging in the manufacture and distribution of medical devices for 10 years.
Manufacture, distribution and use of medical devices that do not meet the requirements of the standard or the technical requirements of the registered or filed products, and the distribution and use of medical devices that do not have a certificate of conformity, are expired, invalid or obsolete, etc.

Conclusion

Since June 1, 2021, the New Regulations have been officially implemented. In view of the regulations, normative documents, technical guidelines and other documents supporting the New Regulations are under formulation and amendment, NMPA issued Announcement No. 76 of 2021 to clarify the relevant matters concerning the implementation of the New Regulations. We understand that the introduction of the New Regulations has brought changes and injected new vitality into the supervision of medical devices in China at the legislative level. The amendment of the Regulations on Supervision and Administration of Medical Devices focuses on industrial development and encouraging innovation. On the one hand, it brings favorable policies to medical devices enterprises; on the other hand, it also puts forward higher requirements for the operation of enterprises in a compliant manner. In this regard, enterprises engaged in medical device research and development, manufacture, distribution and others should attach great importance to the amendment and change of the New Regulations and continue to pay attention to the adjustment dynamics of subsequent supporting regulations and policies, to realize their own rapid development in a compliant manner.

Thanks for the significant contribution of Donggui Yao, Xiaoyu Hao and Keyao Zeng to this Article.

Footnotes

[1] See Article 9 of the Provisions for Medical Device Registration.

[2] See Article 103 of the New Regulations.

[3] See Article 20 of the New Regulations.

[4] See Article 17 of the New Regulations.

[5] See Article 35 of the New Regulations.

[6] See Articles 40 and 44 of the New Regulations.

[7] See Articles 62 and 66 of the New Regulations.

[8] The Notice on Expanding the Pilot provides that the products listed in the Catalogue of Medical Devices Prohibited from Commission issued by NMPA are not included in the pilot, that is, implantable medical devices listed in the Catalogue of Medical Devices Prohibited from Commission are not allowed to be commissioned.

[9] Paragraph 2 of Article 3 of the Notice on Expanding the Pilot: Sign an entrustment agreement and a quality agreement with the entrusted manufacture enterprise to specify the technical requirements, quality guaranty, division of responsibilities, release requirements and other responsibilities in the commissioned manufacture, and specify the release requirements for product manufacture and marketing. Paragraph 4 of Article 5 of the Notice on Expanding the Pilot: Entrusted manufacture enterprises shall submit filing to the provincial Medical Products Administration, and shall submit documents such as entrustment agreement and quality agreement when filing.

[10] See Articles 38 and 136 of the Drug Administration Law.

[11] Article 98 of the New Regulations provides: If the domestic enterprise legal person designated by the overseas medical device registrant or filing applicant fails to fulfil relevant obligations in accordance with the provisions of these Regulations, the Medical Products Administration in the province, autonomous region or municipality directly under the Central Government shall order to make corrections, give a warning and impose a fine of RMB 50,000 to RMB 100,000. If the circumstances are serious, a fine of RMB 100,000 to RMB 500,000 shall be imposed, and the legal representative, principal responsible person, directly responsible person in charge and other responsible personnel of the entity violating the law shall be prohibited from engaging in the manufacture and distribution of medical devices for five years. If overseas medical device registrant and filing applicant refuse to perform the administrative penalty decisions made in accordance with the New Regulations, their medical devices will be prohibited from importation for 10 years.

[12] Article 40 of the Drug Administration Law (Revised in 2019): Subject to the approval of NMPA, the holder of the drug marketing authorization may transfer the drug marketing authorization. The transferee shall have the capabilities of quality management, risk prevention and control, liability compensation and others to ensure the safety, effectiveness and quality controllability of drugs, and the transferee shall fulfill the obligations of market authorization holders.

[13] See the relevant contents in the Implementation Plan of the Pilot of Medical Device Registrant System in Hunan.

[14] See Articles 32 and 42 of the New Regulations.

[15] See Article 41 of the New Regulations.

[16] See Article 7 of the Measures for the Supervision and Administration of Online Distributions of Medical Devices.

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