2023 Regulatory Developments in the Chinese Healthcare Industry

The Implementing Rules for the Regulations for the Administration of Human Genetic Resources (人类遗传资源管理条例实施细则) (the “Implementing Rules” ) came into effect on July 1, 2023. The Implementing Rules, along with subsequent operational guidelines and policy clarifications from the China National Center for Biotechnology Development, provided clear compliance directives for healthcare companies in the industry.

The regulatory authority has actively addressed industry concerns and challenges in previous HGR management, particularly regarding the identification of "foreign entities" and "Chinese entities”. The authority also focused on the scope of human genetic materials and information. After the adoption of more lenient and practical approaches to address these issues, in the second half of 2023 healthcare companies in the industry reportedly experienced increased efficiency in completing their approval or filing processes related to the HGR management.

This positive development reflects the authorities' efforts in streamlining compliance procedures and facilitating smoother operations in HGR management.

(b) Laboratory-Developed Tests (LDTs):

LDTs have been a focal point of discussion among PRC In Vitro Diagnostics (IVD)companies since the enactment of Article 53 of the Regulations on the Supervision and Administration of Medical Devices (医疗器械监督管理条例) (the “Article 53” ) in 2021.

To pilot and accumulate management experience on Article 53, the National Medical Products Administration (NMPA) and the National Health Commission (NHC) jointly issued the Notice on the Pilot Work of Self-Developed In Vitro Diagnostic Reagents by Medical Institutions (关于开展医疗机构自行研制使用体外诊断试剂试点工作的通知) (the “Pilot Work” ) in early 2023. This initiative commenced with six Beijing tertiary hospitals in the pilot list, and then expanded to four Shanghai tertiary hospitals after Shanghai's adoption of its local implementation policy to the Pilot Work in March 2023.

Furthermore, in October 2023, the Guangzhou Municipal Development and Reform Commission proposed in its Several Policies and Measures for Promoting the High-Quality Development of the Biomedical Industry in Guangzhou (Draft for Comment)(《广州促进生物医药产业高质量发展的若干政策措施（征求意见稿）》) to conduct LDTs in phases, encouraging qualified medical institutions to collaborate with key enterprises in the LDT industry to carry out pilot projects.

The implementation of the Pilot Work in Beijing and Shanghai, coupled with the subsequent proposal in Guangzhou, marks a critical stride in creating a robust and sophisticated regulatory environment for LDTs in the IVD industry.

(c) Ethical Reviews:

Ethical reviews received increased attention in 2023, as evidenced by the implementation of both the Ethical Review Measures for Human Life Science and Medical Research (涉及人的生命科学和医学研究伦理审查办法) in February, and the Measures for Science and Technology Ethics Reviews (Trial Implementation) (科技伦理审查办法(试行)) in September.

These new measures heightened governance demands for ethical oversight and stipulated the establishment of ethics committees across a broad spectrum of entities, extending from traditional healthcare institutions to those engaged in ethically sensitive areas, including life sciences, medicine and artificial intelligence.

In addition to the new regulations discussed above, notable legislative progress was also made in various areas in 2023, including healthcare data compliance and data outbound, updated advertising regulations for drugs, medical devices, health food, food formulated for special medical purposes and etc., details of which are beyond the scope of this article.

(a) New Legislation:

In China, the products in the CGT industry can be classified into two categories based on different regulatory approaches: the drug registration mode and the investigator-initiated clinical trial (IIT) mode.

For stem cell products under the drug registration mode, the Center for Drug Evaluation ( “CDE” ) of the NMPA released the Guiding Principles for Pharmaceutical Research and Evaluation Technology of Human Stem Cell Products (Trial) (人源干细胞产品药学研究与评价技术指导原则(试行)) in April and the Guiding Principles for Clinical Trial of Human Stem Cell and Its Derivative Cell Therapy Products (Trial) (人源性干细胞及其衍生细胞治疗产品临床试验技术指导原则(试行)) in June. In addition, the CDE also issued the Guiding Principles for Non-Clinical Research of Human Stem Cell Products (Draft for Comments) (人源干细胞产品非临床研究技术指导原则(征求意见稿)) in October.

As for IIT involving somatic cell therapy, the Guidelines for Clinical Trial on Somatic Cell Therapy (Trial) (体细胞临床研究工作指引(试行)) (the “Somatic Cell IIT Guidelines” ) issued in August 2023 filled the existing gap where regulations existed for stem cell IIT, but not for somatic cell IIT.

It is noteworthy that, in accordance with the Somatic Cell IIT Guidelines, somatic cell IIT requires the completion of dual filing procedures, which is similar to the requirement in stem cell IIT. This includes filing procedures for both the clinical research institution and the clinical project. Furthermore, while it is clear that clinical data from stem cells can be used for drug registration evaluation under certain conditions, the same clarity does not exist in the Somatic Cell IIT Guidelines for somatic cell IIT. Further clarification on this matter is needed.

(b) Export Control in the CGT industry:

On December 21, 2023, the Ministry of Commerce and the Ministry of Science and Technology issued the revised Catalogue of Technologies the Export of Which Is Prohibited or Restricted in China (中国禁止出口限制出口技术目录) (the “New Catalogue” ). Compared to the previous draft version, which caused some controversy, the New Catalogue incorporated social feedback and removed CRISPR gene editing technology and synthetic biology technology from the restricted export technologies list.

Therefore, according to New Catalogue, the only affected technology for the CGT industry is "Gene editing technology for modifying human reproductive cells containing genetic material (i.e., embryo cells, oocytes, sperm cells), which is characterized by ethical controversies and the potential for significant harm", which falls into the prohibited export technologies list.

(c) Foreign Investment Policy:

The CGT industry is undoubtedly the most affected by the Measures for Foreign Investment Access (Negative List) (外商投资准入特别管理措施 (负面清单)) (the “Negative List” ). However, the CGT industry has received positive policy signals in 2023.

In a policy briefing by the State Council Information Office in June 2023, the government expressed an inclination to bring about reforms by advocating for a reasonable reduction of the Negative List for foreign investment access, deepening the understanding of expanding foreign market access, and studying measures to reduce the negative list for foreign investment access in the Hainan Free Trade Port.

While waiting for an overall revision of the Negative List, pilot breakthroughs can be expected in certain aspects of foreign investment access restrictions in the CGT industry. For example, the Opinions on Further Optimizing the Foreign Investment Environment and Increasing the Attraction of Foreign Investment (进一步优化外商投资环境加大吸引外商投资力度的意见), issued by the State Council in July 2023, emphasized the need to increase efforts in attracting foreign investment in key areas, accelerate the implementation of foreign investment projects in the biopharmaceutical field, encourage foreign-invested enterprises to lawfully conduct clinical trials of CGT drugs already listed overseas, and optimize the application process for the registration of overseas-produced drugs transferred for production domestically.

With a positive policy inclination at the national level, various regions have also introduced policy opinions to encourage foreign investment in the CGT industry in 2023. In the Work Plan to Support Beijing in Deepening the Construction of the National Service Industry Comprehensive Demonstration Zone (支持北京深化国家服务业扩大开放综合示范区建设工作方案) released at the end of November 2023, it was proposed to explore feasible ways for foreign founders, executives, advisors and core technical staff of domestic CGT companies to complete their shareholding before going public. Cities such as Tianjin, Shenzhen, and Shanghai have also issued policies to promote the development of the CGT industry and accelerate the creation of high-level innovation hubs in the life sciences sector.

This series of innovative initiatives can be expected to foster innovation and promote orderly market access for foreign capital in the CGT industry.

Those in the Chinese healthcare industry cannot overlook the ongoing significant anti-corruption movement that began in May 2023. In contrast to previous annual efforts by relevant departments to rectify the healthcare industry, the latest medical anti-corruption campaign addresses the prominent corruption issues existing within the pharmaceutical sector, aiming for comprehensive, end-to-end and all-encompassing systemic governance.

The key focus areas include: (a) addressing misconduct in key areas of the pharmaceutical industry, such as corruption issues in the sales and procurement of pharmaceutical products, bribery cases involving pharmaceutical representatives, and corruption within industry organizations or associations; (b) strengthening supervision and management of the healthcare insurance fund to continuously combat fraudulent activities; and (c) implementing the "Nine Guidelines for Ethical Conduct in the Medical Profession" to govern healthcare practitioners and prevent acts such as receiving "red envelopes", kickbacks and other forms of personal illegitimate gains.

The effects of the campaign have already been seen in just over two months. At least 155 officials, including some retired officials, have been investigated, which is twice the number from the previous year. This demonstrates the campaign's determination to root out corruption within the Chinese healthcare industry and establish a more transparent and accountable system.

The relentless pursuit of integrity through anti-corruption campaigns is reshaping the industry's ethical boundaries. To consolidate these efforts and ensure the integrity and transparency of the healthcare industry in China, the NHC announced the Hospital Inspection Work Management Measures (Trial) (医院巡查工作管理办法(试行)) and the new cycle of Large Hospital Inspection Work Plan (2023—2026) (大型医院巡查工作方案（2023—2026年度) in December 2023, specifying that from December 2023 to the end of October 2026, a new round of three-year inspections will be conducted through a combination of self-inspections and field audits.

The year 2023 saw continuous innovation in healthcare regulation and an incremental elevation of compliance standards in China. The coordinated implementation of key policies has provided clearer guidance for the industry's development, contributing to the formation of a more open, regulated, and vibrant healthcare industry ecosystem.

Looking ahead to the rest of 2024, there is a sense of cautious optimism. This is likely to be a year where the industry not only consolidates its gains but also breaks new ground. Through continued policy refinement, international cooperation, and a firm commitment to ethical practice, the Chinese healthcare industry is poised to embark on another year of unprecedented growth and achievement.