Pharmaceutical and medical device companies operating or intending to market products in China will need to pay attention to the cost of regulatory approvals following a recent announcement from the China Food and Drug Administration ('CFDA') that it intends with immediate effect to increase the application fees for both clinical trials and marketing approvals. On 27 May 2015 the CDFA issued the 'Charging Standards for Drug and Medical Device Registration, the Implementation Rules on Drug Registration Fees (interim) and the Implementation Rules on Medical Device Registration Fees (interim)', all effective from the date of announcement.

The regulatory body last updated its fee structure over 20 years ago in 1995 and has stated that the charging standards for the industry were now too low and had not kept up with inflation and other industry forces.

The CFDA has also stated that companies should expect to pay the full cost of the review process, which had until the announcement been effectively resourced by taxpayer revenue.

Updated fee structure

The fees vary for domestic and imported products, generic drugs and medical devices. Under the new rules, domestic manufacturers of new drugs are required to pay ¥192,000 (US$31,000) for clinical trial approval and ¥432,000 (US$70,000) for marketing approval. For imported drugs the fees are ¥376,000 (US$61,000) and ¥593,900 (US$96,000), respectively. Similar to other countries, applications for generic drugs will be less costly, with marketing approval with clinical testing costing ¥318,000 (US$51,000) for domestic manufacturers and ¥502,000 (US$81,000) for foreign manufacturers.

New CFDA Pricing Structure for Pharmaceuticals and Medical Devices

 Click here to view table.

Fees for the first registration of imported medical devices have been set by the CFDA at ¥210,900 (US$34,000) and ¥308,800 (US$50,000) for type 2 and type 3 devices, respectively. The fees for the registration of domestic medical devices are to be set by the finance department of the provincial government where the devices are to be registered. The changes to the fees for medical device registration follow the recent introduction of measures introducing a more stringent regulatory requirement for imported medical devices than for those manufactured domestically.

The new fee arrangements disproportionately affect foreign manufacturers, with higher fees across the board for drugs and devices compared with those imposed on domestic manufacturers. Companies with a large number of products awaiting assessment will see a sharp increase in total payable fees which they may well not have budgeted for. Although the fee increases appear steep, CFDA officials are keen to point out that the increased fees are still may multiples lower than the fees charged by the equivalent regulatory agencies of other countries including the U.S. and Japan. For example, the CFDA's fee for the registration of a novel drug is only 5.2 percent of the fee charged by the FDA in the U.S.

Medical innovation exemption

For small enterprises conducting medical innovation in China in certain product areas, the CFDA has stated that marketing approval and fees for phase II and III trials will be waived. Such products include natural medicines for the treatment of AIDS and malignant tumours that are not currently available in China; novel chemical and biological drugs not available in China or elsewhere; and novel vaccines not available in any market. The CFDA will have the final decision on whether the product is to be considered innovative. As a result of the innovation waiver, some larger companies may establish small spin-offs to focus on innovative technologies, although the cost of establishing a new company cannot be underestimated.

Easing the pressure on the CFDA

The announcement comes at a time of pressure at the CFDA with the agency experiencing an ever increasing number of applications, both from domestic companies and foreign companies seeking to enter the lucrative Chinese market. It is hoped that by increasing fees to a more reasonable level, the 'blanket' approach of certain domestic companies in applying for registrations for many product categories and dosage forms without a serious intent to immediately market, can be prevented. In its most recent 2014 'Annual Report of Drug Evaluation', the CFDA reported that the backlog of applications awaiting assessment had risen from 14,235 in 2013 to 18,597 at the end of 2014, with most applications being assessed within 6 to 8 years following submission. Earlier this year, the deputy minister of the CFDA announced that the CFDA will soon publish a new policy aimed at reforming China's drug evaluation system with the underlying principle being to 'encourage innovation, spotlight clinical demands and enhance the healthy development of the pharmaceutical industry.' The reforms are expected to include a further recruitment drive at the CFDA and the introduction of contracts with third party service providers.

Although the new fee structure has been set, only interim guidance concerning the implementation of the new charging system has so far been published. While the full impact of the increased fees remains to be seen, it is to be hoped that increased resources at the CFDA and its provincial offices may contribute, along with other measures, to decreased application processing and review timelines.