Since late 2023, the Chinese government has been providing policy and regulatory clarifications to encourage foreign investments and streamline their China operations in the life sciences industry. As we have discussed, there are geopolitical challenges in the relationship between the U.S. and the China biotech industry right now. Nevertheless, as has been reported by other news media outlets, large U.S. pharmaceutical companies have expressed their commitment to doing business in China. Thus, amidst the geopolitical and trade tensions, established and development stage biotechnology companies doing business in China or evaluating whether to do business in China should take note of the recent clarifications from Chinese regulators which signal greater flexibility and a trend towards acceleration of certain development stage steps. In spite of this greater flexibility from China, they should also keep in mind that the U.S. Congress is considering legislation, including the BIOSECURE Act,1 that has been designed to limit the ability of certain Chinese biotechnology companies to participate, directly or indirectly, in U.S. federal government procurement.
Stem Cell and Gene Therapies
Foreign direct investments in stem cell research, development and application of genetic diagnostics and treatment technologies have been prohibited in China since 2007. In March 2024, the national government indicated that this prohibition may be exempted on a trial basis on certain foreign invested companies incorporated in free trade zones of Beijing, Shanghai and Guangdong, suggesting that eligible companies will soon be able to conduct research in these areas locally.
Clinical Trial Approvals
The statutory timeline of regulatory approval for local clinical trials of innovative drugs has been shortened to 60 working days by the National Medical Products Administration (NMPA) since 2016. In early 2024, Beijing government proposed to introduce a pilot program among selected clinical sites, where clinical trials will be approved in parallel to the NMPA’s IND approval, aiming to further shorten the timelines for approval and commencement of clinical trials at those sites.
Meanwhile, the Chinese human genetic resources (HGR) approval procedures have been simplified or clarified to a certain extent about clinical studies conducted by foreign companies and their affiliates in China using Chinese human biological samples. The authority to render the HGR approvals has been transferred to the National Health Commission.
Expedited Approval Pathways for Local Manufacturing
China has been encouraging cross-border technology transfer for local manufacturing of innovative drugs and medical devices, and the NMPA has established a set of expedited approvals procedures to support those efforts, including dedicated NMPA approval teams, shortened approval timelines, reduced dossier requirements, and potential exemption of local studies. Multinational pharmaceutical and medical device companies may benefit from such expedited procedures for their “In China for China” initiatives.
Cross Border Data Transfer
China published several data protection laws in the last few years, adding extra compliance obligations on foreign companies and their Chinese affiliates in cross-border data transfer.
The national government recently proposed to develop additional rules to facilitate and simplify the review procedures for such data transfer, and urge government agencies to properly define “important data,” the transfer of which may be subject to security assessment. In furtherance of the above, the Cyberspace Administration of China (CAC) issued a regulation on March 22, 2024, exempting companies from the data export compliance obligations (security assessment, privacy protection certification or entering standard contracts, etc.) when transferring certain low-risk data overseas, including transfer of their employees’ personal information, or transfer of non-sensitive personal information of less than 100,000 individuals within one year. The CAC further clarifies in this regulation that companies do not need to comply with the transfer restrictions relating to “important data” unless their data is explicitly designated as “important data” by the relevant authorities.
Some local governments, such as Tianjin and Shanghai, have also published their local rules to define the scope of data that may be exempted from the export compliance obligations. Similar rules are expected to be published by more local governments.
1https://www.congress.gov/bill/118th-congress/house-bill/7085/text?s=1&r=1&q=%7B%22search%22%3A%22WuXi%22%7D
