On 1 August 2012, as a result of the toxic capsule scandal, the State Food and Drug Administration (“SFDA”) issued Provisions on Strengthening the Supervision and Administration of Pharmaceutical Excipients (the “Provisions”). The aim of the Provisions is to streamline the chaotic administration of pharmaceutical excipients and impose tighter regulations on excipient manufacturers. The Provisions, which will come into effect on 1 February 2013, are considered to be the most stringent pharmaceutical excipients regulations thus far and are likely to cause considerable debate within the pharmaceutical industry.

The Provisions strengthen the administration of the production and use of pharmaceutical excipients in three main ways:

1. Pharmaceutical excipients manufacturing enterprises

Pharmaceutical excipients manufacturing enterprises must strictly comply with the Standards for Quality Control of Pharmaceutical Excipients (“Pharmaceutical Excipients Good Manufacturing Practice – GMP”) when manufacturing pharmaceutical excipients. This means that the Pharmaceutical Excipients GMP, currently only a reference standard, will soon become compulsory.

2. Licence regime applicable to new pharmaceutical excipients manufacturers

The SFDA will implement a licence regime for new pharmaceutical excipients and for those pharmaceutical excipients considered to have a high safety risk. Manufacturing enterprises producing pharmaceutical excipients which are subject to licence administration must obtain a pharmaceutical manufacturing licence as well as pharmaceutical excipient registration authorisation.

Other manufacturing enterprises producing excipients that are not subject to licence administration need only file the company and products with the SFDA for record and are not required to apply for the two above-mentioned authorisations.

Although the Provisions are due to be implemented very soon, the list of pharmaceutical excipients subject to licence administration has not yet been published.

3. Quality control liabilities imposed on pharmaceutical manufacturers in relation to their excipient suppliers

The Provisions emphasise that pharmaceutical manufacturing enterprises are responsible for the quality and safety of pharmaceutical excipients. In compliance with chapter 8, section 7 (audit and appraisal of suppliers) of the Pharmaceuticals GMP effective as of 1 March 2011, pharmaceutical manufacturing enterprises will be responsible for auditing and appraising all excipient suppliers and must check the quality control records of each supplier. A quality agreement must be properly drafted and concluded between the pharmaceutical manufacturer and its main excipient supplier and must be part of the purchase agreement. The Provisions further detail that pharmaceutical manufacturing enterprises have to inspect all pharmaceutical excipients using pharmaceutical standards or related national excipient standards (where available) that are approved at the time of registration. If a pharmaceutical manufacturing enterprise fails to perform its above obligations, it may run the risk of being penalised under the PRC Drug Administration Law and Special regulations related to the enhancement of supervision and administration of safety of food and other products issued by the State Council (“Special Regulations”).

The administration regime for pharmaceutical excipients in itself is not new, but the Provisions make the regulations more enforceable.

  1. The Pharmaceutical Excipients GMP was issued in 2006 and has served as a reference standard since then. When the Provisions come into effect, the Pharmaceutical     Excipients GMP will become a compulsory standard. Therefore, where there are violations of the Pharmaceutical Excipients GMP, the local FDA will be entitled to impose penalties on excipient manufacturers (such as issuing a warning or ordering a cessation of activities until the authorisation in question has been revoked).
  2. The same applies to the registration of pharmaceutical excipients. Early in 2005, the SFDA issued a notice regarding the registration of pharmaceutical excipients which covered the procedure for registering new pharmaceutical excipients, imported pharmaceutical excipients, pharmaceutical excipients subject to state standards, and vacant capsules and pharmagel subject to state standards. However, in the absence of related registration measures there were no penalties for violating this registration notice. Thus, local FDAs have had difficulty in penalising companies who violate the above registration notice. The Provisions are aimed at providing a legal basis for the local FDA to penalise pharmaceutical excipients manufacturers who do not comply with the registration notice. The Provisions will provide additional pharmaceutical excipients categories in order to facilitate administration of pharmaceutical excipients manufacturers.

Those excipient manufacturers who do not obtain pharmaceutical excipient registration authorisation according to the Provisions run the risk of having the excipient classed as a sub-standard drug according to PRC Drug Administration Law.

Those excipients manufacturers who do not file for record under the Provisions will be penalised in accordance with the Special Regulations for non-compliance with legal conditions of manufacture.

However, it is likely that the change to how existing rules are implemented will bring about some degree of industry reform:

(1) Raising of industry entry threshold for pharmaceutical excipients manufacturers

Now that compulsory compliance with the Pharmaceutical Excipients GMP is coming into force, the threshold for entry into this industry will be raised and, consequently, many enterprises currently manufacturing pharmaceutical excipients, such as food manufacturing enterprises or chemical manufacturing enterprises, will be squeezed out of the industry because they will be unable to meet the standards enshrined in Pharmaceutical Excipients GMP.

(2) Stringent registration requirements will help to enhance the quality of pharmaceutical excipients

Due to the new categorisation of pharmaceutical excipients under the licence regime, it is expected that more pharmaceutical excipients will be subject to registration. Accordingly, more manufacturing enterprises will have to acquire a pharmaceutical manufacturing licence as well as pharmaceutical excipient registration authorisation before being able to commence production. The quality of pharmaceutical excipients will therefore be enhanced.

(3) Stringent obligation imposed on pharmaceutical manufacturers in relation to sourcing excipients

To comply with the Pharmaceuticals GMP and Pharmaceutical Excipients GMP, pharmaceutical manufacturers will have to take more care when selecting their excipients. Legal documents must be properly drafted in compliance with the above GMP rules.

In general, the Provisions establish a more stringent framework for the administration of pharmaceutical excipients based on existing rules and will certainly affect the industry.

Nevertheless, the real impact on the pharmaceutical industry remains unclear and depends on the enactment of a series of detailed rules.

From a legal point of view, it is still doubtful whether the above Provisions can be used as a legal basis to improve the enforceability of the related regulations to control pharmaceutical excipients. PRC Drug Administration Law clearly distinguishes pharmaceutical excipients from drugs according to its definition. Therefore, legally speaking, it is definitively established that pharmaceutical excipients are not considered to be drugs. The administration of pharmaceutical excipients will be either set out in the PRC Drug Administration Law in a particular chapter or stipulated in a separate regulation.

PRC Drug Administration Law does not include a related licence regime for pharmaceutical excipients; it states only that pharmaceutical excipients must meet the requirements for pharmaceuticals (Article 11). Therefore, it is legally groundless to provide any detailed licence, registration or penalty rules without authorisation via the PRC Drug Administration Law.

Moreover, even if the SFDA wanted to implement a separate regulation for the control of pharmaceutical excipients in addition to the PRC Drug Administration Law, the current penalties relating to pharmaceutical excipients are not well established. This is because according to the Provisions, all penalties must be based on PRC Drug Administration Law and the Special Regulations as well as the Implementation Opinions of SFDA on the Special Regulations, and none of these three important laws and regulations covers the registration or penalty regime for excipient manufacturers. These rules can only be used to penalise pharmaceutical manufacturers who have purchased excipients which do not meet the requirements of the approved pharmaceuticals.