A Q&A guide to life sciences in China.
The Q&A gives a high level overview of key issues including pricing and state funding, manufacturing, marketing, clinical trials, advertising, labelling, patents, trade marks, and product liability.
To compare answers across multiple jurisdictions, visit the Life Sciences Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to life sciences. For a full list of jurisdictional Q&As visit www.practicallaw.com/lifesciences-mjg.
The life sciences industry in China is being increasingly tightly regulated in an effort to improve standards and eliminate abuses. There are both overarching similarities and pointed differences with the legal and regulatory framework of the US and EU.
The key legislation and guidelines that regulate the drugs and biological products industry in China are:
Drug Administration Law (2001).
Implementing Provisions of Drug Administration Law (2002).
Administrative Regulations on Drug Registration (2007). These were introduced to improve standards for the evaluation of drugs after a corruption scandal involving the then head of the State Food and Drug Administration (SFDA).
Regulations on Supervision and Administration of Drug Manufacture (2004).
Regulations on Supervision and Administration of Drug Distribution (2007).
Administrative Regulations on Drug Importation (2003).
These laws and regulations are expanded in the following central practice guidelines:
Good Laboratory Practice (GLP) (2003).
Good Clinical Practice (GCP) (2003).
Good Manufacturing Practice (GMP) (2010).
Good Supply Practice (GSP) (2000) (currently under revision).
Medical devices are regulated under separate legislation, including:
Provisions on Supervision and Administration of Medical Devices (2000) (currently under revision).
Administrative Regulations on Medical Device Registration (2004) (currently under revision).
Regulations on Supervision and Administration of Medical Device Manufacture (2004).
Administrative Regulations on Medical Device Distribution Enterprise Licences (2004).
Good Manufacturing Practice for medical devices (2010).
The primary authority for both drugs and medical devices is the SFDA, which regulates the whole life cycle of pharmaceutical and medical device products, including:
Clinical trials.
The approval of production licences and marketing authorisations (MAs).
Distribution.
Post-market surveillance.
Product recall.
Since 2007, many of the SFDA's responsibilities have been decentralised to provincial FDAs.
Other key regulatory authorities include the Ministry of Health (MOH), the National Development and Reform Commission (NDRC), the Ministry of Human Resources and Social Securities (MOHRSS), the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM).
The regulatory framework for pricing and reimbursement is dealt with in Question 3.
Biological products are regulated as a sub-class of drugs. Biological products are subject to specific additional regulatory requirements, including a longer timeline for review before grant of MAs and higher GMP and GSP standards.
Combination products are regulated as either drugs or as medical devices, depending on which element plays the primary function. For example, pre-filled insulin syringes are regulated as drugs, while catheters with anti-bacteria coating are regulated as medical devices.
The most recent round of health sector reforms was launched by the State Council in April 2009 with a view to creating a universal and predominantly government funded basic medical care system with decentralised control. Government investment has increased hugely as a result.
China has now established a National Basic Medical Insurance System comprising:
Basic Medical Insurance System for Urban Employees. This was established in 1998 to cover the basic medical expenses of outpatient and hospital treatments incurred by employees in urban areas. Participation is mandatory and fully funded by contributions from both employees and employers, in proportion to their monthly salary.
Basic Medical Insurance System for Urban Residents. In 2007 the Chinese government decided to extend the basic medical insurance system to cover persons living in urban areas who are not in employment (including children, students, senior citizens and other unemployed persons). Participation is voluntary and subsidised.
Novel Rural Co-operative Medicare System. This was established in 2003 to cover the basic medical expenses of hospital treatment incurred by the rural population of China. Participation is voluntary and subsidised.
Urban and Rural Medical Aid System. This was established in 2006 to provide financial support to the economically disadvantaged population of China. The fund is used to cover the cost of individual contributions to the basic medical insurance system and costs that are not covered by the insurance system. This system is funded by central and local government, as well as from public donations and charitable funds.
China's healthcare reforms have been coupled with significant downward pressure on pricing for pharmaceutical and medical device companies.
The following drugs are subject to government pricing:
Drugs on the National Reimbursable Drug List (NRDL), which contains a large proportion of the most commonly used pharmaceuticals.
National Essential Drugs (NEDs). The 2009 Essential Drug List covers 307 items, of which 205 are Western generic medicines. The NEDs system is a key component of the health reforms, although its implementation has been problematic.
Drugs protected by a Chinese pharmaceutical substance patent. (This term is not defined in the Regulations.)
Controlled drugs, including:
narcotics;
psychotropic medicines;
birth control products; and
vaccines for the national immunisation programme.
The system of government pricing is managed by the Regulations on Government Drug Pricing 2000, which is currently under revision.
Drug pricing is regulated by the NDRC. The NDRC and Provincial DRCs periodically issue national and provincial catalogues of drugs subject to government pricing (Pricing Catalogues) that identify all products in the four categories mentioned above.
The NDRC is responsible for setting the maximum retail price of NEDs and reimbursable prescription drugs under the basic medical insurance system. Provincial DRCs issue a maximum retail price for all products other than those subject to central NDRC pricing, including reimbursable over-the-counter (OTC) drugs. For controlled drugs, a fixed ex-works price (that is, the price of the drug inclusive of taxes and exclusive of transportation costs from the manufacturer) or CIF (cost-insurance-freight) price is granted by the NDRC. Since April 2010, a maximum ex-work price and a maximum retail price are set by the NDRC for narcotics and Class I psychotropic medicines. Maximum retail prices are typically reviewed around every two years.
The manufacturer itself is permitted to set prices for drugs that are not covered by a Pricing Catalogue, although some local DRCs may require the self-determined price to be filed for monitoring purposes. Shanghai is an exception as all drugs sold on the Shanghai market are subject to government pricing.
Downward pressure on prices is also achieved by the Central Bidding Procurement system. Under the National Essential Medical System established in September 2011, all 31 provinces in China have now established central drug procurement agencies. All drugs used by state-owned medical institutions must be purchased through a bidding process organised by the local branch of the MOH. Procurement is organised on the basis of generic product names. Tender submissions are reviewed by a panel of experts that score each candidate product in terms of, among other things, product quality, price and accessibility. However, the system has been criticised for over-emphasis on pricing, especially for NEDs.
Patient reimbursement is regulated by MOHRSS and its local branches. MOHRSS issues an NRDL that specifies which products are reimbursable under the basic medical insurance system. The NRDL is updated every few years and implemented through provincial reimbursable drugs lists issued by local branches of MOHRSS.
The current 2009 NRDL contains 2,127 drugs, of which 1,140 are Western medicines (in 23 therapeutic classes) with many of the listed drugs being specialist drugs, anti-microbial agents and cardiovascular drugs.
Drugs are divided into two classes. Class A drugs are reimbursed in full, whereas Class B drugs are typically higher priced speciality drugs that are reimbursed in a percentage determined by provincial branches of MOHRSS. The non-reimbursed portion is the responsibility of the patient. Some drugs appear in more than one reimbursement class, depending on formulation.
Medical devices are typically reimbursed as part of a medical procedure.
Pharmacists in China are employees of hospitals or pharmacies. Their compensation is not specifically regulated.
To establish a drug manufacturing company in China, a drug manufacturer must obtain and maintain the following licences and certifications:
A Drug Production Licence (DPL) issued by the provincial FDA in the province where the manufacturing plant is located.
GMP Certification issued by SFDA or provincial FDA.
A business licence issued by the SAIC or its local equivalent (depending on the investment size).
To obtain a DPL, a manufacturer must be able to show that it has:
Qualified medicinal and engineering professionals with recognised qualifications.
Adequate premises and facilities with adequate hygiene standards.
The necessary infrastructure, instrumentation, equipment and personnel capable of carrying out quality control checks to maintain consistent quality levels.
Suitable internal procedures to ensure product quality.
The Provisions for Guiding Foreign Investment Direction 2002 establish three categories for foreign investment projects:
Encouraged projects.
Restricted projects.
Prohibited projects.
All remaining foreign investment projects are deemed to be 'permitted'.
Foreign investment is prohibited in several areas connected with Chinese traditional medicines. The Foreign Investment Catalogue (2011 Revision) also restricts foreign investment in the production of a number of products including:
Chloramphenicol, Penicillin G, Lincomycin, Gentamincin, Dihydrostreptomycin, Amikacin, Tetracycline Hydrochloride, Oxytetracycline, Midecamycin, Leucomycin, Ciprofloxacin, Norfloxacin and Ofloxacin.
All vaccines distributed under the national immunisation program. (14 vaccine products have been included in the national immunisation programme, including the BCG vaccine and poliomyelitis vaccine, which were previously included in the encouraged projects category.)
Blood products.
Foreign investment in the restricted category attracts governmental scrutiny in the approval process, often requiring higher-level government approvals and, in particular cases, restrictions on the percentage of foreign shareholding.
The recently amended Catalogue has removed foreign investment in pharmaceutical distribution (at both the retail and wholesale level) from the restricted category.
Applications for DPLs are made to the provincial FDA where the manufacturing site is to be located. A preliminary assessment of whether the manufacturing plant is in compliance with the national pharmaceutical development plan and industrial policies must be carried out within 30 days of acceptance of the application.
The manufacturer can start to build the plant after preliminary approval has been received but must apply for a full DPL once the plant is operational. The provincial FDA is expected to inspect the plant and facilities and grant (or deny) a DPL within 30 business days of receiving the application for the full DPL.
A business licence granted by SAIC or its competent local branch is required after receipt of the DPL. If foreign investment is involved, the manufacturer must also apply to the local branch of MOFCOM for a Foreign Investment Approval Certificate applying for a business licence. To obtain both permits usually takes between one and two months.
The manufacturer must apply to the SFDA (for biological products, injections/infusions and radioactive products) or the provincial FDA (for all other products) for a GMP Certification. The application must be made within 30 days of receipt of a marketing authorisation (MA) for the relevant products (see Question 8). The SFDA or the provincial FDA is expected to carry out an onsite inspection and grant (or deny) a GMP Certification within a further 45 business days.
Fees vary in different authorities. For GMP Certifications, the fees are in a range from CNY20,000 to CNY30,000 (as at 1 November 2011, US$1 was about CNY6.3). Fees for DPLs are generally moderate.
A DPL is valid for five years and is renewable on application to the provincial FDA six months before expiry.
Business licences are subject to successfully passing an annual inspection by the competent local branch of SAIC.
A GMP certificate is renewable every five years on application to, and subject to passing an inspection by, the SFDA or a provincial branch. The renewal application must be filed six months before expiry.
The local branches of the SFDA at provincial, municipal and township levels are empowered to monitor compliance with manufacturing regulations and GMP. The SFDA acts in a largely supervisory role, but can monitor compliance in its own right.
SFDA and local FDAs can impose incremental sanctions, depending on the severity of non-compliance, including:
A rectification notice.
A stop-production order.
Monetary fines.
Revocation of the DPL.
In addition to the product registration related legislation listed in Question 1, the key legislation and guidelines governing the conduct of clinical trials in China are the:
Provisional Regulations on Qualification of Clinical Trial Institutions 2004.
Guidelines on Ethics Committee Review of Clinical Trials 2010.
Phase I, II and III clinical trials (that is, pre-marketing clinical trials) conducted in China are subject to receipt of SFDA approval, known as a Clinical Trial Authorisation (CTA). There is no approval requirement for post-marketing clinical trials.
Clinical trials must also be approved by the ethics committee of each study site and can only be conducted at SFDA-approved clinical research institutions. Products used in clinical trials must be manufactured in compliance with the GMP and tested by a qualified testing institution. For imported drug applications, trial drugs can be imported, provided they are first tested by a qualified testing institution in China.
The key stages and timing in the review process for CTA applications are:
Preliminary examination of the application: 35 business days.
An independent sample test by a qualified institution (for biologicals and imported products): 60 to 90 business days.
Technical evaluation of the test report, clinical data and other supporting materials by the Centre of Drug Evaluation (CDE): 90 business days.
Grant of the CTA by SFDA: within a further 20 to 30 business days.
The applicant will be given up to four months to submit any supplemental documents required by the CDE (in a Deficiency Notice), following which the CDE is expected to complete further technical evaluation within around 50 days.
The whole process typically takes around 12 to 18 months. Applications for CTAs for imported drugs follow the same procedure but with an additional 20 business days afforded for a panel review of testing standards and test results.
A CTA is valid for three years from issue.
China has largely adopted the International Conference on Harmonisation's Good Clinical Practice (ICH GCP), which means:
Study investigators must obtain the informed consent of each trial subject.
The informed consent form must be signed and dated both by the investigator and the individual patient or, if the patient is a child or incapacitated person, by a legal guardian.
Before conducting a clinical trial, the sponsor of the trial must give the investigators an Investigator's Brochure and other materials, information and data related to the study drugs. The sponsor must also provide adequate training to the clinical trial investigators.
Clinical trials must be conducted in compliance with GCP and the protocols approved by the ethics committee of each study site. Investigators must take necessary measures to protect patient safety. Any serious adverse events must be promptly reported to the SFDA, the sponsor and the ethics committee. The sponsor must relay this report to any other investigators inspecting the same drugs in the same study.
A sponsor must maintain insurance policies for study subjects to cover compensation for study-related injuries and death (GCP).
Marketing authorisation (MA) applications for domestically manufactured products are submitted to the SFDA through the local FDA, which carries out a preliminary assessment and onsite inspection.
The importing of drugs (as well as the repackaging of imported drugs) must also be approved by the SFDA. Import drug licence (IDL) applications for imported products are made directly to the SFDA. Foreign applicants must be approved pharmaceutical manufacturers in their own countries but are required to apply through their local offices or domestic agents in China.
New dosages, new dosage forms, new methods of administration and new indications must be submitted for approval.
The applicant must demonstrate that the drug is both:
Safe and therapeutically effective for use by human beings.
Manufactured to suitable standards of quality control.
MA applicants must provide sufficient and reliable research data to demonstrate the safety, efficacy and quality of the drug. Clinical trial data obtained in foreign countries will not suffice for the purpose of obtaining SFDA approval, but must be submitted as a part of the application dossier. Therefore, local clinical trials must be carried out before application.
Phase III clinical trials may be authorised on the basis of Phase II approvals obtained overseas. However, the SFDA can require the repetition in China of Phase I and Phase II trials. Biological drugs are always subject to full-phase clinical trials. A foreign manufacturer must also conduct Phase III clinical trials in China for imported products. For generic drugs, only a bioequivalence study or a 100-pair controlled study is required.
The need to conduct clinical trials can be waived by the SFDA for rare and special diseases, including AIDS and haemophilia.
An established domestic MA applicant must hold a DPL and GMP Certification before applying for authorisation. Newly established manufacturing plants must apply for GMP Certification within 30 days of receiving the MA.
In addition to the renewal requirements and post-marketing pharmacovigilance requirements described below, specific post-marketing conditions may be mandated by the SFDA in any individual case.
The key stages and target times in the review process for new drug applications are:
Acceptance and preliminary examination of the application: 35 business days.
An independent sample test of three batches of the drug by a SFDA-designated drug evaluation centre (for domestically manufactured non-biological products): 60 business days.
Technical evaluation of the test report, clinical data and other supporting materials by the CDE: 150 business days.
Grant of the MA by the SFDA: within a further 20 to 30 business days.
The applicant will be given up to four months to submit any supplemental documents required in a Deficiency Notice. After this, the CDE must complete further technical evaluation within about 50 days.
The whole process typically takes around 12 to 18 months. MA applications for imported drugs follow a similar procedure except that no further sample test is required because testing will have been carried out as part of the CTA application (see Question 7, Authorisations).
For domestically manufactured generic drugs, the CTA and MA application procedures are combined, and the step of preliminary approval by Provincial FDA does not have to be repeated.
Application fees currently vary from CNY3,000 to CNY29,300, depending on the classification of the products. Fees are given on SFDA's website (www.sda.gov.cn/).
An MA for pharmaceutical products is valid for five years and can be renewed by application to the competent provincial FDA (for local products) or SFDA (for imported products) within six months before the MA's expiry date.
Local and foreign drug manufacturers must undertake pharmacovigilance obligations for marketed products, and to update the drug insert sheet in a timely manner. In particular, manufacturers must monitor and report adverse drug reactions according to the Administrative Regulations on Drug ADR Reporting and Monitoring (2011). The website for ADR reporting is www.adr.gov.cn/.
The SFDA is also empowered to order a monitoring period of up to five years for any approved new drug.
An abridged approval procedure is available for certain domestically manufactured new pharmaceuticals, including:
Newly discovered pharmaceutical substances that have not previously been marketed in China.
Chemical or biological pharmaceuticals that have not been marketed in either China or in any overseas jurisdiction.
New pharmaceuticals for AIDS, cancers and certain other rare diseases.
New pharmaceuticals for diseases which currently lack any effective medical treatment.
On 7 January 2009 the SFDA implemented the Requirements for Special Approval of New Drug Registrations. Once the SFDA has granted special approval, the applicant will benefit from:
Accelerated timelines for technical evaluation: shortened to 80 business days for CTA applications and to 120 days for MA applications for new drug applications.
Greater possibility for direct communication with the SFDA.
Priority review status.
Foreign MAs are not recognised by the SFDA. However, any imported drug to be marketed in China must have been approved in a foreign country before the manufacturer is permitted to make an application for approval in China.
The SFDA and local FDAs have a broad compliance and market monitoring remit and powers to directly intervene with the operation of pharmaceutical enterprises.
A breach of the conditions of a pharmaceutical MA can result in:
Imposition of a fine of up to CNY30,000.
Revocation of the MA.
Prohibition on application for MAs for other products for up to three years.
Revocation of the DPL, in the most serious cases.
The Third Revision to the Patent Law which came into effect in 2009 adopted international exhaustion for patents. Third parties are now permitted to import and sell patented products that have been sold in an overseas market by the patentee or others with his authorisation.
The Trade Mark Law (2001) is currently undergoing revision and is likely to be amended in line with the new position on patents. The new legislation is expected to be promulgated sometime in 2012.
The giving of any gifts or other incentives (monetary or otherwise) to healthcare establishments or medical practitioners is prohibited (Anti-Unfair Competition Law (1995)). Off-book rebates will be considered bribery. Sales discounts must be correctly recorded in books of account.
The receipt of donations or financial support by functional divisions or individual doctors is prohibited (Provisional Regulations on Administration of Medical Institutions Receiving Public Donation and Financial Support issued by MOH in 2007). Sponsorship for academic events is considered to be a type of financial support and must be provided directly to the medical institution concerned.
Consultancy agreements with individual doctors are generally permitted, provided that the consultancy fees are set at a fair market value and provided that the arrangement is not actually a disguised form of financial inducement.
The local branches of SAIC and the SFDA are the enforcers of anti-bribery laws in the life sciences sector and are empowered to:
Impose monetary fines and confiscate illegal income.
Revoke business licences.
Revoke DPLs and drug distribution licences.
In serious cases, both the party offering the bribe and the recipient can be held criminally liable.
Websites containing information about medicinal products, whether or not for a commercial purpose, must be approved by the SFDA and must maintain an Internet Medical Information Provider Certificate. A general prohibition applies to the online publication of information related to anaesthetics, psychopathic drugs, toxic drugs, radioactive drugs, drugs indicated for addition and drugs prepared by hospitals.
E-mails containing commercial advertising cannot be sent without the express consent of the recipient.
OTC products (but not prescription medicines) can usually be ordered for delivery by mail. Online drug stores require a drug distribution licence in addition to an Internet Medical Information Provider Certificate.
Restrictions on the content of medicinal product advertisements are found in several pieces of legislation, including:
The Regulations on Drug Advertisements Review 2007.
The Standards on Reviewing and Publishing Drug Advertisements 2007.
Provincial FDAs are responsible for reviewing and approving drug advertisements. Local branches of the SAIC are empowered to enforce drug advertisement laws.
Drug advertisements containing a drug name, indication or any other drug-related information must be approved by the provincial FDA where the manufacturer or the import agent is located.
Advertisements for prescription drugs can only be published in academic publications designated by the MOH and the SFDA.
Drug advertisements cannot:
Contain any information that is inconsistent with the drug insert sheet approved by SFDA.
Contain efficacy claims or unscientific statements.
Use the names or images of government authorities, medical research institutions, academic institutions, experts, scholars, medical professionals or patients in support of efficacy.
Strictly speaking, only SFDA-approved brand names (see Question 23) can be used in drug advertisements and only in conjunction with the generic product names. However, currently these rules are not always strictly enforced.
Internet advertising must comply with the requirements set out in Questions 14 and 15.
The packaging and labelling of medicinal products marketed in China is regulated by the SFDA and its local branches under, among other laws, the Administrative Regulations on Drug Insert Sheets and Labels 2006.
The following information must be put on the labels of medicinal products:
Generic name.
Active ingredients.
Specifications.
Name of manufacturer, batch number and manufacturing date.
Marketing authorisation number.
Use-by-date.
Approved indications.
Method of administration and dosage.
Adverse reactions and warnings.
The packaging and labelling of medicinal products must be in Chinese and approved by the SFDA during the MA application. Both registered trade marks and approved brand names can be used on product labels. However, only approved brand names can be used in drug advertisements or other promotional materials, although this rule is rarely enforced.
China pays great attention to the development of traditional Chinese medicinal products. In addition to regulations applicable to pharmaceutical products in general, China has adopted measures that apply specifically to traditional Chinese medicines, including:
The Good Agricultural Practice for Chinese Crude Drugs certification system sets out guidelines on:
the use of plants and animals as raw materials for traditional Chinese medicines;
the production of traditional medicinal products.
Traditional Chinese medicinal products and materials that have high medical value and the ability to treat difficult diseases are given exclusive administrative protection for an initial period of up to 30 years.
The basic criteria for patentability as an invention patent under the Patent Law (2009) are:
Novelty.
Inventiveness ("notable progress" or "advantageous technical effect").
Practical utility.
Chinese examination practice is similar to that of the European Patent Office (EPO) and has essentially adopted the EPO's "problem-solution approach" to the assessment of inventiveness. This reflects the influence of training that Chinese examiners have received from the EPO since 1985 under a bi-lateral co-operation program. However, there are some differences in Chinese examination. For example, under the novelty test applied by the State Intellectual Property Office (SIPO) in China, anticipation only occurs when prior art is from the same technical field as the invention. This is similar to the US approach for evaluating obviousness, in which consideration is limited to analogous prior art. Another difference is that, in China, there is less emphasis on the need for disclosure to be enabling.
As a physical product, medical appliances can also be protected as utility model patents, which have a lower inventiveness threshold.
Innovative medical products (including pharmaceuticals and medical devices), manufacturing processes and second medical use claims are patentable. However, methods for the diagnosis or treatment of diseases are not.
A generic manufacturer is entitled to seek an MA for a drug that is still under patent up to two years prior to its expiry. An MA application is not generally considered by the courts to constitute an infringing act itself. However, the SFDA should suspend approval until after the patent expires. The applicant is also required submit statement that the drug will not infringe any third party patents. No such patent linkage is applied to MA applications for medical devices, although some provincial FDAs require a non-infringement statement to be submitted for certain devices (that is, Class II devices).
In practice, the system for pharmaceuticals works poorly in the absence of a Chinese equivalent of the US FDA's Orange Book or any other means for SFDA to verify the statements made by MA applicants. Following a final court determination of infringement, the patent holder is entitled to apply to the SFDA for cancellation of the infringer's MA.
Patent applications are made to the Patent Division of SIPO (www.sipo.gov.cn). Foreign applicants are required to appoint a local agent. SIPO's English language website provides guidance on the application procedure and fees.
SIPO publishes invention patents 18 months after the application date or at an earlier date if requested by the applicant. Applications are examined by SIPO to confirm whether the substantive conditions for patentability are met. Substantive examination typically occurs within three years of the application date or at an earlier date if requested by the applicant. It usually takes between one and two years to complete substantive examination. Utility model patents are examined only on formal grounds.
China does not operate a patent deposit system. Applications are examined by SIPO to see whether the substantive conditions for patentability are met before a patent is granted (see above, Process and timing). Utility model applications are not substantively examined.
An invention patent is valid for 20 years subject to payment of annual renewal fees. A utility model patent or an industrial design patent is valid for ten years.
There is no Chinese equivalent of a supplementary protection certificate or patent term extension, and the period of protection of a patent cannot be prolonged.
Validity and infringement issues are dealt with in separate proceedings by separate tribunals. Consequently, invalidation cannot be introduced as a counterclaim in an infringement action.
Invalidation actions are brought before the Patent Review Board (PRB) of SIPO. PRB decisions can be appealed to the courts.
Patent infringement actions must be started before one of the 78 designated Intermediate People's Courts authorised to hear patent disputes. There is an automatic right of appeal to the corresponding Higher People's Court in the same city.
Infringement is generally defined under the Patent Law as any exploitation of a patent without the authorisation of the patent holder. Infringing acts include:
The unauthorised manufacture, offer for sale, sale, use or importation of any patented products.
The unauthorised use of a patent process.
The offer for sale, sale, use or importation of products manufactured by the use of a patented process.
The manufacture, use or importation of patented medicines or medical apparatus for the purpose of conducting clinical trials is exempted under a specific defence.
Unusually, China permits enforcement of patents through both specialised patent courts and administrative action conducted by local AICs. However, the enforcement powers of the AIC are weak and fines are generally small. The AIC is also not empowered to grant damages. AIC investigations and enforcement can nevertheless be useful both as a means to collect evidence for use in court proceedings or as a nuisance tactic to deploy against persistent infringers (such as repeat factory raids).
Remedies available in court proceedings include final injunctions, compensatory damages (not punitive damages) or, when actual losses are difficult to determine, an account of profits. However, procedural formalities for evidence gathering create difficulties for patent holders seeking to prove either actual loss or the defendant's profit from the infringement.
Compensation on the basis of a notional licence royalty is also provided for in the newly revised Patent Law as a third tier basis for calculating monetary awards, but court practice is still inconsistent. As a result, patent holders are often only able to claim default statutory damages. Statutory damages for patent infringement are capped at a maximum of CNY1 million.
Courts are empowered to issue preliminary injunctions to restrain infringement. However, stringent criteria apply and, in practice, preliminary injunctions are rarely granted in patent actions in which there are substantive issues to be tried.
Six years' data exclusivity is given to research data that has only been disclosed in an application for an MA for a drug containing a new chemical entity.
Medicinal brands can be protected by registration as a trade mark. Under the Trade Mark Law (2001), to obtain a trade mark registration the following principal criteria must be met:
The trade mark must be distinctive.
The use of trade mark must not infringe the pre-existing rights of any other party, such as the owner of an earlier copyrighted work, design patent or registered trade mark.
Grounds for rejecting a trade mark application include:
Descriptive marks, which solely and directly indicate characteristics of the relevant products or services (such as quality, raw materials or function).
Marks otherwise lacking in distinctiveness.
Generic names.
There is no prohibition on a medicinal brand being registered as a trade mark.
Brand names for certain new pharmaceutical products marketed in China can also be approved on application to the SFDA. This provides exclusivity for use in respect of that pharmaceutical (including products with the same active pharmaceutical ingredient (API) but in different dosage forms) if it is distributed by the same manufacturer. The SFDA will not grant the same brand name to other pharmaceuticals from other manufacturers. The application for brand names can be submitted together with the MA application, or through a supplemental application after the MA is granted.
Applications for a registered trade mark are made to the Trade Mark Office (CTMO) (www.ctmo.gov.cn). Foreign applicants must appoint a local agent. The CTMO's English language website provides summary guidance on the application procedure.
The official fee for filing an application for a single mark in a single class comprising up to ten separate goods or services is CNY1,000 (with a further fee of CNY100 for each additional item in the specification).
After accepting an application, the CTMO will conduct a preliminary examination. Due to the current workload of CTMO, this is currently taking around 12 to 18 months to complete. If no objection is raised by the CTMO on preliminary examination, the application will be published. The application is open for opposition by a third party for the next three months. If no opposition claim is filed or if the opposition is overruled, the CTMO will issue a trade mark registration certificate.
The initial duration of protection is ten years commencing on the date of registration, which can be renewed by payment of a fee.
There are no ways to extend a trade mark.
A registered trade mark can be revoked if it violates the conditions for registration (see Question 24, Conditions and legislation) or was obtained by improper means.
Trade marks that have not been used for a continuous period of three years are also liable for cancellation. Applications are made to the Trade Mark Review and Adjudication Board of CTMO. These decisions can be appealed to the Beijing No.1 Intermediate People's Court.
Trade mark infringement includes:
Using a trade mark that is the same as (or similar to) a registered trade mark on the same or similar products without the consent of the trade mark owner.
Rebadging branded products.
A trade mark owner can bring a civil claim against the infringing party. If infringement is found, courts can issue an injunction and award compensatory damages or an amount corresponding to the illegal gains of the infringing party. If either of these amounts is difficult to establish, the courts have the power to order statutory damages of up to CNY500,000.
Local AICs are also empowered to investigate alleged trade mark infringement and may confiscate and destroy infringing products. However, fines are typically low and the AIC has no power to award damages.
The import of different technologies, under licence or under any other form of technology contract requires different levels of government approval depending on the type of technology involved. The Catalogue of Technologies Prohibited or Restricted from Import (2007) lists the types of technology where transfer into China is either prohibited or subject to approval from local branches of MOFCOM and the Ministry of Science and Technology. By law, a technology import contract for restricted technology only comes into effect once the approval of MOFCOM and the Ministry of Science and Technology has been given. Similar controls exist for the export of technology from China.
There is a two-stage approval process:
An application must be made for a letter of intent (LOI) for the import of technology: 30 working day approval period.
The importer must submit an application for approval of the executed contract: ten working day approval period.
It is also possible to conclude the agreement before the LOI is issued and apply for the import approval afterwards. This procedure has a 40 working day approval period.
All other licences need only be registered with MOFCOM within (usually) 60 days after becoming effective.
Patent and trade mark licences must also be recorded at SIPO and CTMO, respectively. Failure to register does not affect validity but will prevent the approval of remittance of royalty payments, among other things, out of China by the State Administration of Foreign Exchange.
China is a party to the following international conventions:
WIPO Paris Convention for the Protection of Industrial Property (Stockholm version) 1967.
Patent Co-operation Treaty 1970.
WIPO Madrid Agreement Concerning the International Registration of Marks 1891 (Madrid Agreement).
WIPO Protocol Relating to the Madrid Agreement 1989.
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights 1994 (TRIPS).
Product liability is governed by the Consumer Interests Protection Law (1994) and the Product Quality Law (2000).
The Consumer Interests Protection Law provides that consumers or other users who suffer personal injuries or property damage are entitled to claim damages from either the manufacturer or the distributor. In addition, a person who makes business premises or sales space available to the distributor may be held jointly liable.
The Product Quality Law provides that parties who suffer personal injury or property damage due to defects in products are entitled to claim damages from the manufacturer of the product or the distributor of the product.
Two elements must be satisfied to establish product liability:
The product is defective.
The defect causes personal injury or damage to property, other than to the product itself.
Both the manufacturer and the distributor of defective products can be held liable. Liability can also extend to other merchants who are perceived by consumers to be responsible for the sale or distribution of products, including the owners of department stores.
Any product liability claim must be brought no later than the earlier of either:
Two years from the date when the claimant discovers or ought reasonably to have discovered the damage.
Ten years from the date when the product is sold to the first customer. (However, this does not apply where an express warranty period exceeds the ten-year period.)
Class actions are in theory permitted for product liability claims. However, the authors are not aware of any product liability class actions in China to date.
Foreign claimants can bring product liability claims in Chinese courts on the same terms as Chinese citizens.
Product liability will not be established if any of the following circumstances are proved:
The product has not been placed into distribution.
The relevant defect did not exist when the product was sold.
The level of technical awareness at the time the product was sold was not sufficient to detect the defect.
If personal injury is suffered because of a product defect, remedies include compensation for:
Medical expenses.
Loss of earnings.
Cost of future living expenses of both the claimant and his dependants.
Statutory compensation for disability or death.
Punitive damages (at the discretion of the judge) are allowed under the Tort Law (2010) in cases where a product manufacturer or distributor is shown to have manufactured or sold defective products that cause death or serious injury, despite its awareness of the defect.
China's Vice Premier Li Keqiang, who is expected to emerge in a prominent position in the leadership transition in 2012, has recently expressed the government's intention to open-up supplementary healthcare services through private investment. However, the focus of the government's healthcare reforms is likely to continue to be:
The basic medical insurance system.
The essential drug system.
The funding of basic healthcare provision through public hospitals.
Main areas of responsibility.
Formulating and implementing quality management regulations related to R&D, manufacturing, distribution, and the use of drugs and medical devices.
Issuing marketing authorisations for drugs and medical devices.
Through local FDAs, issuing DPL, drug distribution licences, GMP Certifications, GSP Certifications and drug advertisement approvals.
Conducting post-marketing surveillance and re-evaluation of drugs and medical devices.
Main areas of responsibility.
Regulating medical institutions and healthcare professionals.
Formulating laws and regulations related to healthcare, drugs, medical devices and food safety.
Formulating and implementing national pharmaceutical policies, including the national essential drug system.
Main areas of responsibility.
Issuing Catalogues of Drugs Subject to Government Pricing.
Setting government guiding prices for the drugs listed in the Pricing Catalogue.
Main areas of responsibility.
Approving and regulating foreign investment in China.
Formulating plans, policies and standards related to drug distribution.
T +852 2913 2660
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E richard.bird@freshfields.com
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Qualified. England and Wales, 2000; Hong Kong, 2010
Areas of practice. Patent and trade mark litigation; IP-commercial and transactional; life sciences regulation.
Recent transactions
T +86 10 6535 4541
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E ya.ma@freshfields.com
W www.freshfields.com
Qualified. China, 2006
Areas of practice. Life sciences regulation and compliance; corporate law.
Recent transactions
Assisting various multi-national pharmaceutical companies in China with:
