As a consequence of the introduction of the new Regulation on the Supervision and Administration of Medical Devices (“New Regulation”), effective since 1 June 2014, the China Food and Drug Administration (“CFDA”) has revised and promulgated a series of administrative measures to implement the provisions contained in the New Regulation. One of these measures, the Measures related to the Administration of Registration and Filing of Medical Devices (“Updated Registration Measures”) entered into force on 1 October 2014, replacing the Measures related to the Administration of Registration of Medical Devices (“Old Registration Measures”). Key changes introduced by the Updated Registration Measures are set out below:
1. Registration of Class I medical devices no longer require
The Updated Registration Measures no longer require the registration (i.e. approval) of Class I medical devices with the local FDA or CFDA. Class I medical devices only need to be filed with the FDA at municipal level (for domestic medical devices) or with the CFDA (for imported medical devices). Filing is completed upon submission of the application documents.
Class II and Class III medical devices still need to be registered1.
2. Increased liabilities for registration agents of imported medical devices The Updated Registration Measures introduce new obligations for registration agents, one of which is the requirement to act as coordinator between the relevant FDA and the foreign manufacturer in the event of a recall of an imported medical device. Further, a registration agent must now bear joint and several liability in connection with any claims relating to defective products or poor after-sales service, whereas in the Old Registration Measures, the liabilities of registration agents were unclear: agents should assume “relevant” liabilities. There are two main concerns arising from the new obligation that a registration agent should bear joint and several liability in connection with such claims: 1) Since registration agents have no control over either after-sales service or the quality of the products themselves, registration agents only previously assumed responsibility for the registration of medical devices; after-sales service and quality control matters were handled by another party or by a Chinese subsidiary of the foreign company.
2) The new provision appears to be in violation of the PRC Product Quality Law, which states that only a manufacturer or distributor can be held liable if one of its products is found to be defective. There is no legal basis for extending liability for defective products to registration agents by an administrative regulation and this is likely to be unenforceable by the courts.
Notwithstanding the caveats described above, the potential for increased liability is likely to discourage registration agents from accepting mandates from foreign investors. Where they do so, it is likely that agents may request guarantees. These new provisions may also encourage foreign companies to set up their own subsidiaries or representative offices in China to deal with medical device registration matters as an alternative to using agents, if agents are unwilling to assume such risks. 3. Reform of the approval regime for clinical trials of medical devices
The Old Registration Measures stipulated that clinical trials for Class II medical devices were subject to the approval by the FDA at the provincial level and clinical trials for Class III medical devices were subject to the approval of the CFDA. According to the New Regulation, clinical trials for Class II and Class III medical devices need only be filed with the FDA for approval at provincial level, with the exception of those Class III medical devices which are assessed as posing a serious risk to the health of trial subjects, which require CFDA approval. Any approval granted for such clinical trials is valid for three years. If the trial is not carried out within this period, the approval will lapse and the applicant must submit a new application. The detailed rules on filing and approval of clinical trials as well as the detailed list of Class III medical devices that are subject to the requirement for clinical trial approval are currently under consideration by the CFDA. 4. Different regulatory treatment on change of manufacturing address for imported and domestic medical devices If the place of manufacture of an imported medical device changes, a foreign manufacturer must apply to the relevant FDA office for approval. However, if the manufacturing address of a medical device manufacturer located in China changes, only registration (i.e. notification) is required, which is a much less onerous procedure.
5. Uncertain future for medical device asset deal in restructuring or acquisition In order to better implement the Updated Registration Measures and provide more clarity for the transition from the current regime to the new rules under the Updated Registration Measures, the CFDA has published a Circular dated 1 August 2014 (Shi Yao Jian Xie Guan (2014) No.144) (Circular related to the Matters of the Implementation of the Measures related to the Administration of Registration and Filing of Medical Devices and the Measures related to the Administration of Registration of In Vitro Diagnostic Reagents) (“Circular No.144”). In Circular No.144, provisions regarding the requirement for approval of a change of name of a domestic medical device manufacturer as a result of an asset sale or purchase were abolished. The legal implications of this abolition are unclear but may lead to either of the following:
- the abolition may mean that there is a complete ban against the acquisition of a Medical Devices Registration Certificate through an asset purchase; or
- the abolition may mean that the powers currently delegated to the provincial FDA by the CFDA relating to the approval of asset purchases are withdrawn.
This change in the law is likely to have far-reaching consequences and may completely change the way that a deal involving the acquisition or restructuring of a medical device manufacturer is structured.
In summary, the Updated Registration Measures have introduced more stringent regulatory requirements for imported medical devices than for those manufactured in China. This is likely to pose difficulties for foreign companies in selecting registration agents. The Updated Registration Measures also reform the administration of clinical trial application processes in respect of medical devices. Moreover, the Updated Registration Measures also bring more uncertainty to potential purchasers of assets during the restructuring or acquisition of a medical device company. The practical impact of the new legislation will no doubt become clearer in due course.
1 In September 2014, the CFDA issued rules for both the filing of Class I medical devices and for the registration of Class II and Class III medical devices.