China Cross-Border CMO: Hong Kong and Macao Drugs and Medical Devices Welcomed for Contract Manufacturing in the Greater Bay Area

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I. Overview

In recent years, China has adopted the Marketing Authorization Holder (the “MAH”) systems for medicines and medical devices (the “MAH systems”). MAH Systems separates the Marketing Authorization Certificate and Manufacturing License for drugs and medical devices, allowing MAHs to outsource manufacturing with the Contract Manufacturing Organization (the “CMO”) and focus on R&D. But in practice, the cross-border CMO has not been easy to obtain since then.

However, there is a breakthrough for cross-border CMO in the Guangdong-Hong Kong-Macau (GBA) Greater Bay Area. (To note) which is an important national economic development strategic area for China and enjoys exceptional and preferential policies. In June 2022, the National Medical Products Administration of China (“NMPA”) promulgated the implementation plan to support Hong Kong and Macao marketing authorization holders in drug manufacturing in nine mainland cities in the Guangdong-Hong Kong Greater Bay Area- Macau (the “ACS Pharmacare Plan“) and the Implementation Plan to Support Hong Kong and Macau Medical Device Registrants in Medical Device Manufacturing in Nine Mainland Cities in the Guangdong-Hong Kong-Macau Greater Bay Area (there “ACS ® diet“, together with ACS Pharmacare Plan are called the “ACS schemes”). The GBA plans provide guidelines for MAHs based in Hong Kong and Macao to outsource the manufacturing of drugs and medical devices in the nine mainland GBA cities. In this article, we will briefly present the implementation of the regulations relating to the cross-border CMO and the recent evolution within the framework of the GBA Plans.

Note: The GBA includes the two special administrative regions of Hong Kong and Macau, and the nine municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong (the “Nine continental cities”).

II. MAH Drug System

A. The National Drug MAH system allows MAH to contract manufacturing with CMO.

The Medicines Administration Act (2019) implemented the current Drug MAH system. The marketing authorization holder of the medicinal product may subcontract the manufacture to the manufacturer of the medicinal product if the following conditions can be met:

  1. both the marketing authorization holder of the medicine and the manufacturer obtain the manufacturing licenses for the medicines subject to contract manufacture;
  2. the manufacturer obtains certification that demonstrates compliance with the Good Pharmaceutical Manufacturing Practices (GMP) standard for drugs subject to contract manufacturing; and
  3. the MAH of the medicine assesses the manufacturer’s capacity for quality assurance and risk management, and concludes a quality assurance agreement and a contract manufacturing agreement with the manufacturer.

Regulations and policies do not prevent the foreign marketing authorization holder from outsourcing drug manufacturing to the domestic CMO. However, foreign drugs must be registered as domestic drugs before contracting manufacture. In practice, this is not easy to achieve. Since 2020, the NMPA has been leading the consultation on the Administration of national agents of foreign holders of a marketing authorization for medicinal products which reflects that the NMPA may authorize and provide guidance for the foreign marketing authorization holder to contract manufacturing with the domestic CMO and consider establishing a marketing authorization program. national agency. The consultation is not over yet. We will continue to update the regulatory momentum once the regulations and pilot policy come into effect.

B. When a drug manufactured outside China and authorized to enter the market in China is for domestic manufacture, the drug must be registered as a generic drug owned by a domestic company designated by the authorization holder of foreign marketing, the domestic company acting for the foreign Drug MAH and assisting with domestic contract manufacturing.

The following flowchart shows the registration process of the foreign marketing authorization holder to outsource the manufacturing of medicines to the domestic CMO:

  1. The foreign MAH must appoint a domestic company to act for the foreign MAH and assist with domestic contract manufacturing.

  2. National company applies to NMPA for registration of generic drug market access.

  3. The national company enters into the quality assurance agreement and the contract manufacturing agreement with the national CMO.

  4. The foreign MAH of the drug asks the NMPA to help the domestic company to change the manufacturing site of the drug from a foreign site to a domestic site.

C. The special arrangement for Drug MAH based in Hong Kong or Macao to contract manufacturing with domestic GBA companies is supported by the NMPA.

As an additional special arrangement to the national Drug MAH system, the GBA Drug Plan allows companies from Hong Kong and Macau that have a license to access the drug market in China (the “HK-MO MAH drug”) to outsource drug manufacturing to manufacturers in the nine mainland cities of the GBA. Compared to the nationwide approval procedure, the GBA Drug Plan releases restrictions and provides practical guidelines for the MO-HK Drug MAH to locate manufacturing in the GBA.

The following diagram shows the registration application process of HK-MO Drug MAH to outsource drug manufacturing to companies in Nine Mainland Cities in the GBA:

  1. The HK-MO Drug MAH must appoint a domestic company in the GBA to act for the MAH and assist in contract manufacturing.
  2. HK-MO Drug MAH concludes the Quality Assurance Agreement and Contract Manufacturing Agreement with CMO.
  3. The CMO applies to the Guangdong Medical Products Administration (“Guangdong MPA”) to add contract manufacturing of the drug to the manufacturing license, without having to register generic drugs.
  4. HK-MO Drug MAH submits additional application or filing documents to NMPA regarding change of manufacturing site.

III. MD MAH system

A. The MD MAH National System allows MAH to outsource manufacturing to CMO.

The Regulation on the supervision and administration of medical devices (2021) established the current MAH Medical Device System (the “MD MAH system”). The MD MAH can subcontract the manufacturing of medical devices with the CMO who respects certain conditions and enter into a quality assurance agreement and a contract manufacturing agreement with the CMO.

B. When a medical device manufactured outside China and allowed to enter the market in China is intended for domestic manufacture, a new medical device registration application must be submitted by a foreign-invested enterprise (the “FIE ”) of the foreign MD MAH, and the FIE will be named the national MD MAH.

According NMPA Announcement on Issues Concerning Domestic Manufacture of Imported Medical Devices, the manufacture of imported medical devices registered in category II and category III can be transferred to a national site through the FIE established by a foreign DM MAH. However, the national DM MAH (the FIE) can only manufacture medical devices by itself and must not subcontract the manufacture with the third-party CMO.

C. The special arrangement for the HK-MO MD MAH to outsource the manufacturing of medical devices to enterprises in the nine mainland cities of the GBA is supported by the NMPA.

The GBA MD plan allows Hong Kong and Macau MAH which holds a license to market medical devices in mainland China (the “HK-MO MD MAH”) to outsource the manufacturing of the medical device to medical device manufacturers in the nine mainland cities of the GBA.

The following diagram shows the application process for HK-MO MD MAH to outsource medical device manufacturing to the national CMO in the nine mainland GBA cities:

5. The HK-MO MD MAH establishes an FIE in the GBA and appoints the FIE as the agent for the purpose of amending the manufacturing site registration.

6. The HK-MO MD MAH concludes the Tripartite Quality Assurance Agreement and Tripartite Contract Manufacturing Agreement with FIE and CMO.

7. HK-MO MD MAH submits to NMPA with the help of FIE to modify the registered manufacturing site and Guangdong MPA audits if the conditions are met.

8. CMO reports contract manufacturing to Guangdong MPA.

The GBA MD plan goes further to unleash the MD MAH system in the GBA. Based on the GBA MD plan, the CSM does not have to be the FIE. Additionally, the GBA MD plan does not limit medical device categories to Category II and Category III. The CMO does not have to submit a new application for registration to the NMPA. Instead, it only needs to submit relevant contract manufacturing information to Guangdong PMA.

IV. Conclusion

The new NMPA rules in the GBA allow cross-border contract manufacturing of drugs and medical devices owned by HK-MO MAH and waive the localization requirement of domestic drug and medical device registration. Foreign R&D institutes and drug and medical device researchers may consider outsourcing manufacturing to the GBA. This could bring the HK-MO MAH closer to China’s growing supply chains and market. Foreign MA holders may consider moving products to Hong Kong or Macao before outsourcing manufacturing to China to save time and restructuring costs if they aim to locate manufacturing in China and access to the Chinese market. We will continue to update policies and support overseas customers in their business decisions and transactions.

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