China’s Regulatory Challenges

Photos courtesy of China Medical Equipment Fair (CMEF)

China, with a population of 1.3 billion and annual GDP growth of 5%, has been one of the most attractive markets for western businesses. Accompanying recent economic growth is the government’s move to strengthen market controls and protect consumers. As the top government agency supervising pharmaceuticals, medical devices and nutritional products, China’s State Food and Drug Administration (SFDA) has over the years consistently improved its controls on products, manufacturers and distribution through laws and regulations governing various elements from product development to sales and marketing of healthcare products.

Based on SFDA regulations, all products made outside China must pass a series of document reviews, product testing and/or factory inspections and be registered with the agency before they can be sold to Chinese consumers. However, because of loopholes and confusing language and descriptions in some regulations, registering a product with the SFDA has become a daunting task for U.S. companies. Many manufacturers spend at least six to nine months to complete their registrations.

Even having gone through one registration process is no guarantee that the next registration experience will occur smoothly. Some companies that have taken to enlisting the help of local Chinese advisors sometimes complain of being kept in the dark of what really transpires and being asked to provide documentation without sufficient explanation of their requirement. The iterative process can indeed be a frustrating experience for the uninitiated.

This article will explain the details of the SFDA registration process for foreign-made products and offer practical advice for dealing with Chinese regulators in product registration and other regulatory-compliant issues.

The SFDA Structure

The SFDA was founded on the basis of the former State Drug Administration and reports to the State Council, which is responsible for regulating medical device manufacturers and products, pharmaceuticals and drug makers as well as nutritional supplements and their producers. The SFDA is also responsible for drafting, publishing and implementing rules and regulations in these industries, overseeing product surveillance, adverse incident reporting and management of quality issues after products are marketed.

Under regulations signed into law in April 2000, all new medical devices must be registered at SFDA. Products made in foreign countries and Chinese-made Class III (the most restrictive class) must be registered at the agency’s head office in Beijing, while Chinese-made Class I and II devices can be registered with the local provincial SFDA agency.

In addition to SFDA regulations, China is implementing another regulation that governs the electrical safety and EMC of certain products entering into China. This relatively new certification, called China Compulsory Certification (CCC), became effective in 2003. Medical devices listed on CCC’s mandatory list must obtain CCC certifications before being allowed into the country. More details about CCC will appear in future issues.

The Registration Process

The registration process for foreign-made products can be segmented into four stages: document preparation (stage one); type testing and clinical trials (stage two); registration submission (stage three); and issuance of the registration certificate (stage four).

At the beginning of the registration process, manufacturers and their registration representatives need to work together to generate the following documents to be included in the registration application package:

• Manufacturer’s validity of business: For American companies, this can be a business license issued by the state, an FDA registration of establishment or FDA statement to foreign government or other documents that indicate the legal establishment of the business in the home country.
• Approval or certification by home regulatory bodies issued to the product: For U.S.-made products, an FDA 510(K) letter is a must. If a product is not regulated by the FDA, a document stating that fact is sufficient.
• If the product has not been approved, the SFDA will request the product to be tested and evaluated according to Chinese regulations. For Class II and III products, clinical trial and type testing are to be completed in China under Chinese protocols and standards. The manufacturer must provide risk analysis of the product design to SFDA officials to establish product safety.
• Product standard for product registration: According to the regulations, each registration must include a product standard, an abbreviated version of actual product standards that companies use to manufacture the product. For imported products, the standards should reference Chinese national or international standards to which the product complies, product classification, product feature and safety criteria, testing methods as well as product labeling, packaging and transportation requirements.

China has adopted many international standards such as ISO or IEC but given these standards its own Chinese numbers (beginning with GB or YY). Because regulations on product standards lack detail, the use of a local expert to draft the standard, in the format expected by SFDA, may be necessary. Many registration companies have access to these experts, and the expenses are typically included in the registration project fees. The product standard is one of the most critical documents in the process because it can be used as the reference against which type testing is performed.

Companies going through the product standard preparation stage should recognize that this stage requires the utmost cooperation between the registration representative and the manufacturer because of the tricky balance between protecting the intellectual property of the technology and the need to reveal enough information to satisfy the SFDA. Establishing product standards is also time-consuming due to review and modification efforts by multiple parties. Therefore, good communication between manufacturer and agent at this stage can dramatically shorten the review and speed up the registration process.

• User’s manual or instruction for use: The user’s manual in the manufacturer’s home language and in Chinese must be included in the submission package. After registration approval, the submitted manual will be on file at the SFDA and could be referenced when the agency conducts random compliance checks of products on the market. Manufacturers need to include the Chinese user’s manual as part of product accessories for future shipments to China.
• Authorization of registration representation: The manufacturer issues this authorization to its representative, who must submit the acceptance letter with a copy of its business license. Be aware that the SFDA specifically requires that a Chinese company representing a foreign manufacturer must be authorized in a related business (i.e. companies in the automotive business are not allowed to participate in the registration of a medical device). Given the complexity of medical devices and the associated activities in type testing and clinical trials, it is imperative to select a representative who understands the technical aspects of the product.
• Authorization of proxy of manufacturer in China: This new requirement was added in August 2004. This authorization states that the manufacturer’s representative is responsible for reporting adverse incidents as well as being the company’s main contact for the SFDA.

The SFDA may require the authorization letter to state that the representative assumes the legal responsibilities of the manufacturer. While this requirement seems to reflect SFDA’s recent focus on adverse incident reporting and re-certification initiative, it also has created problems with companies without legal entities in China. We are currently in discussions with the SFDA regarding the legal ramification of this requirement.

• Authorization of after-sales service agent in China: The manufacturer needs to appoint a local agent responsible for post-market service. In addition to an authorization letter, the entity’s acceptance letter and its business license must be included in the registration package. With requirements similar to the registration representative, the post-market agent must be a legal entity with a license to carry out medial device-related businesses.
• Guarantee letters by the manufacturer: These letters include the manufacturer’s guarantee that the product sold in China are the same as those sold elsewhere; a guarantee letter certifying that documents included in the registration package are true and accurate is also required.

The second stage of the registration process is type testing and clinical trial, which apply to Class II and Class III products.

• Type testing: This must be conducted by SFDA-authorized testing centers in China. A revision of the regulations last year combined the task of product standard evaluation with type testing. There are currently 27 SFDA-certified testing centers. Companies are free to shop around for the most suitable for their product. These facilities typically follow standards and protocols listed in the product standards. At the end of testing, a report is issued to the manufacturer, who must include it in the registration document.

Similar to managing the drafting of product standards, type testing requires close management and constant follow-up by project managers, to ensure that all questions and concerns raised by the test center are answered and resolved and that the tests are carried out in conformance with the standards.

• Clinical trials: These are daunting tasks, but for foreign-made products approved by their domestic regulatory agencies, no additional trials are required. Instead, the manufacturer needs to provide clinical trial information filed with its home agency to support product safety. These documents need to be translated into Chinese for inclusion in the registration package.

After passing type testing and clinical trial requirements, the manufacturer can take a breather while its registration representative compiles the documents for SFDA submission (stage three). Many times the package is accepted without a hitch. Be prepared for possible literal enforcement of the regulations by some SFDA officials who may impose additional requirements. It is advisable that companies stay open minded and comply with these unforeseen requirements if they seem reasonable. However, a company can request more information or file an appeal with the SFDA head office if the company believes that certain requirements are unfair or unrealistic.

Once the document package is accepted, the registration fee of 3000 RMB (about $363) per registration must be paid to the SFDA, which will trigger the review process within the agency’s document evaluation center. SFDA promises to complete its review within 90 business days. However, when the reviewer has questions or requests additional information, the clock stops until the questions are answered or the document provided.

Stage four is an exciting moment when the registration certificate is issued. However the regulatory manager needs to remember to “clean up” a few issues in their production materials to ensure compliance to the regulations. These include adding:

• The SFDA registration number to the product labeling
• The product standard number to the user’s manual
• A Chinese manual into the production system to ensure all devices have a Chinese version in the box.

These tasks, although minor, can impact a company’s compliance status. As the SFDA strengthens its programs on vigilance of products on the market, these minor issues can grow into problems if a product fails to meet these requirements.

Also worth mentioning is the need to provide updated information to SFDA when changes occur with the product, the post-market service agent or the user’s manual. Many updates require a simple filing with SFDA. However, if the product has been improved or new technology adopted, a new registration is needed.

After 10 years in the medical device market and regulatory field, the author would like to share a few practical points regarding the management of SFDA registration.

First, the process is complicated. Even though the SFDA has improved its regulations and addressed loopholes in its document, the regulation is far from perfect or complete. Ambiguity within the rules often causes confusion and leads to individual interpretation. Adding to it, the language barriers and time difference make communication difficult and time-consuming. To improve efficiency and ensure a project is completed on time, a U.S. project manager must be appointed and must have executive support to put the proper priority on resources. The project manager needs to stay active and be responsive to requests from China. Coherent and close communication and fast response will ease a lot of pain and anxiety within the organization and ensure deadlines are met.

Second, many manufacturers have not realized the lengthy process at SFDA and only put SFDA registration on the product launch agenda when China sales efforts are underway. It is to the manufacturer’s advantage to start the registration process as soon as possible. A good starting point is when the manufacturer has just submitted its FDA filing. The product standard can be drafted then since the technical document for the product is available. It is also a good time to start communications with type testing centers and gather all necessary documents. Type testing and other steps can start as soon as the product is approved by the FDA.

Third, hire a consultant who knows your product and the industry and has experience registering products with the SFDA. It is equally important that the consultant has the best interest of the manufacturer at heart. The consultant needs to have the access to go to SFDA hierarchy when faced with difficult issues and has the tenacity and courage to work out a solution in the best interest of the manufacturer.

Finally, after a product is registered, efforts should be taken to complete the last compliance tasks with the product packaging.

In summary, SFDA registration is mandatory for all products, whether they are made in China or abroad. Despite difficulties and ambiguities in the regulations, there are general guidelines that help with the process. With adequate resource and commitment, as well as effective management and close communication, it is possible to navigate this difficult process with good results. It should be emphasized that the SFDA is continually issuing new rules and regulations governing new products or new business models. It is the duty of the manufacturer to stay informed of these changes and be aware of the potential impacts on its products in China.

Chang-Hong Whitney is vice president of Whitney Consulting in Littleton, MA. She has been consulting for western companies on doing business in China since 1994, focusing on the medical device market. Her services include China regulatory affairs, market research and databases, China operation and strategy formulation. Whitney holds an MBA from Babson College (Wellesley MA) as well as undergraduate degrees in electronic engineering and international business from Chinese universities. She can be reached by phone at (978) 486-3242 or by e-mail at [email protected]. The firm’s web site is www.whitneyconsulting.net.