NMPA: Continued Efforts on IP Protection, Fair Competition and Anti-Bribery

In March 2018, the transformation from CFDA to NMPA, which emerged into State Administration for Market Regulation (SAMR), was to make the linkage between pre-market approval and post-market surveillance, to strengthen the market supervision for pharmaceutical and medical device products’ lifecycle, and to utilize the administrative resources in SAQSIQ to prevent bribery.

In January 2019, NMPA issued Medical Device Master Files Filing Process (draft), mandating applicants to submit the technical confidential documents of the third-party enterprises, such as raw material suppliers, to the NMPA to support the registration applications. The purpose of the medical device master file was to protect the technical secrets of the documents’ owner and to avoid the repeated submission of the same technical documents by different parties.

In August 2019, NMPA published “Extension of Pilot Program for Market Authorization Holder (MAH) system” introducing the MAH system for 18 provinces including the booming med-tech markets of Beijing, Zhejiang, Jiangsu and Shandong. As the system implemented, MAHs and contract manufacturers will pay more attention to the intelligence property and competition issues.

Why Pay Attention to IP Protection, Fair Competition and Anti-Bribery

Unprecedented expense in healthcare from Government

According to the data in 2018, the expense in healthcare from Government accounted for 30% out of total expense in healthcare in China, which the sum of Medicare and Medicaid is only accounted for 37% in US; Also Chinese government plans to spend $125 million in healthcare market over the next three years, therefore, the authority of the central government will be challenged if such a large funds is not used properly.

Quality improvement for drug, medical device and IVD

In the past, since doctors and medical staff were underpaid and the law is imperfect, clinical professionals were easy to write more prescriptions or to order more examinations for the patients when the pharmaceutical and medical device companies bribed, such as paying cash, offering gifts, vacations and other benefits; This is one of the reasons why medical product quality is uneven since manufacturers are eager for growth.

In fact, as result of policies mentioned above, the pharmaceuticals and medical devices with low quality will lose the market. Instead the imported products with good quality will profit. For example, according to DRGs, mutual recognition of inspection results at all levels of hospitals will raise the quality requirements for imaging and IVD products.

Tackle unnecessary medical expense

Besides fair competition and anti-bribery, the State Council also promulgated other policies such as two-invoice system, Diagnosis-Related Groups (DRGs), and government-controlled procurement.

Long-term economic development

The Chinese long-term economic development and growth would be weaken if foreign companies are discouraged by unfair competition, bribery and intellectual property theft, because consumption has been the main driving force for Chinese economic growth – in 2019, the final consumer expenditure contribution rate to GDP growth was 60.5%, which replaced the previous development model that relied solely on exports.

In turn, Chinese government will not tolerate the unfair competition or bribery by foreign companies neither. For example, GlaxoSmithKline (GSK) fraud and bribery were caught that resulted in record penalties of nearly $500 million and a string of guilty pleas by executives, upended the power dynamic in China, unveiling an increasingly assertive government determined to tighten its grip over multinationals.