Chinese Increasing Inspections at U.S. Ortho Facilities

Get ready for more frequent and rigorous Chinese inspections at your manufacturing facility in Warsaw, Indiana, Memphis, Tennessee, or wherever orthopedic devices are made for distribution in China.

The Chinese government has been inspecting overseas drug companies since 2011 and device companies since 2015. Now, in the middle of a tariff fight, the government is shifting its regulatory philosophy from “stringent” pre-approval supervision to “rigorous” post-approval enforcement and is signaling “increased scrutiny” of foreign drug and device companies.

That’s the warning from Ropes & Gray Attorney Katherine Wang.

New Chinese Inspection Regulations

Wang, based in Shanghai, wrote on January 18, 2019, that the National Medical Products Administration (NMPA) just released the Regulations for Drug and Device Overseas Inspection (regulations). The regulations set out a working procedure for the Chinese government to use at foreign facilities to verify whether foreign drug and device companies’ research and development (R&D) and manufacturing activities adhere to Chinese statutory requirements and standards.

“In recent years,” wrote Wang, “the NMPA began to regulate the entire life cycle of imported drug and device products.” As of December 2018, it had inspected 131 drug products produced in 25 countries. So far, it has inspected 90 device products produced in 13 countries. “Experiences derived from past inspections enabled the NMPA to formalize a set of working procedures in the regulations.”

The regulations, she says, echo the NMPA’s risk-based regulatory approach. The selection of companies inspected largely depends on the company product’s overall risk level. “The NMPA generally considers red flags such as concerns expressed by the Chinese Center for Drug Evaluation (CDE) or Center for Medical Device Evaluation (CMDE) or foreign regulators, past violations, adverse events and quality complaints. The NMPA may also conduct random checks on foreign manufacturers.”

Inspection Scope

According to Wang, the government’s inspections look to verify authenticity, reliability and compliance of R&D and manufacturing activities. “The NMPA usually focuses on (i) consistency of actual manufacturing process with the processes registered with the NMPA, and (ii) China GMP compliance.”

During on-site inspections, she notes that foreign manufacturers must give the government full access to all relevant premises and documents, including real-time manufacturing processes of the product in question. She adds that the government may also extend its inspections to R&D partners and third-party vendors, such as suppliers of active pharmaceutical ingredients (API), excipients or packaging materials. “Foreign manufacturers should coordinate with their partners and vendors to enable these extended inspections. Any foreign manufacturers that do not cooperate with the inspection team will receive a failure notice from the NMPA.”

Inspection Results and Penalties

Wang says the government’s inspection results include (i) “pass,” (ii) “corrective action,” and (iii) “fail.” Penalties include corrective actions, warning letters, suspension of import and sales, product recall and rejection of product license renewal.

“In practice,” she writes, “most manufacturers have been required to take corrective actions in order to close deficiencies. For severe deficiencies, the NMPA would order manufacturers to suspend importation and sales of their products in China. Since the end of 2018, the NMPA has banned importation of 19 drug products and two devices that were affiliated with severe deficiencies.”

Wang adds that while domestic Chinese drug and device manufacturers have been frequently inspected by the government, foreign manufacturers experienced a “much lower” frequency of inspections. But the announcement of the new regulations signals the government’s desire to treat foreign and domestic companies equally.

She advises drug and device companies to carefully study the statutory requirements and standards, perform internal audits on the relevant facilities, and identify and close potential gaps as soon as possible to mitigate enforcement risks.

You can reach Ms. Wang at Katherine.Wang@ropesgray.com