On 30 May 2016, the China Food and Drug Administration (“CFDA”) issued the Announcement on Rectifying Operating Activities in relation to the Circulation of Medical Devices (“Announcement”).

What shall be inspected?

According to the Announcement, all enterprises engaging in the distribution Class II and Class III medical devices (“MD Enterprises”) shall perform a self-inspection on whether they have been conducting any of the following illegal activities since 1 June 2014:

  1. MD Enterprises engaging in the wholesale of medical devices selling medical devices to unqualified distributors or end-customers without necessary licenses; MD Enterprises purchasing medical devices from unqualified production or trading/distribution enterprises;
  2. MD Enterprises that are no longer meeting the statutory quality management standards and have failed to rectify their operation conditions; or MD Enterprises that have changed their business location or warehouse sites, expanded their business scope or have set up a warehouse without approval;
  3. Obtaining Medical Device Operation License by providing false application materials or by other deceptive means; or failing to perform statutory record filing or providing false materials for record-filing; or forging, altering, trading, leasing or lending Medical Device Operation License or Medical Device Operation Record-Filing Certificate;
  4. Engaging in the distribution of Class III medical devices without permission, or failing to extend the validity period of a Medical Device Operation License upon expiration according to law and continuing to distribute medical devices;
  5. Engaging in the operation of Class II or Class III medical devices without obtaining medical device registration certificate, in particular domestic agents of imported medical devices that engage in the distribution of unlicensed products;
  6. Engaging in the distribution of medical devices which do not meet compulsory standards or technical product requirements; or distributing expired, invalid and obsolete medical devices without eligible supporting materials;
  7. The instructions and labels of medical devices operated do not comply with the relevant provisions; or failing to transport or store medical devices according to the requirements of instructions and labels, in particular failing to manage medical devices requiring low temperature and cold storage; and
  8. Failing to establish and implement a medical devices entry inspection record system; or MD Enterprises engaging in the wholesale of Class II and Class III medical devices and the retail of Class III medical devices and failing to establish and implement a sales record system as required.

Measures to be taken, in case an illegal activity has been identified

In case a MD Enterprise finds itself engaging in any of the above illegal activities, it shall describe in detail the process, the involved medical devices and personnel connected with the illegal activities. The MD Enterprise shall also formulate rectification measures and plans, and produce a Self-Inspection and Rectification Report which shall be submitted to the municipal Food and Drug Administration (“FDA”) at its locality by 15 July 2016.

Legal consequence / punishment

Enterprises that can proactively locate problems and correct illegal activities prior to 15 July 2016 may be imposed lighter or mitigated punishment; otherwise, they are at risk to face much more severe punishments, including, in the worst case, the revocation of Medical Device Operation License.

Investigation targets

CFDA requires provincial FDA to target three kinds of MD Enterprises for investigation audits:

  1. MD Enterprises with low level of daily management, disordered purchase and sales channels, but fail (i) to discover a sufficient number of problems during the self-inspection or (ii) to take effective rectification measures;
  2. MD Enterprises engaging in the distribution of medical devices requiring low temperature and cold storage conditions; and
  3. Domestic agents of imported medical devices.

Against the above we recommend MD Enterprises to undergo inspection in line with the Announcement and to properly record their findings. It is expected that in the near future FDA will increase its efforts to increase the number of audits against MD Enterprises in China.