SARS SCARE TOUGHENS REGULATORY PROCEDURES FOR DIAGNOSTIC PRODUCTS FOR INFECTIOUS DISEASE IN CHINA
In November 2002, China’s State Drug Administration (SDA), which has been replaced by China’s new Food and Drug Administration, issued an official memorandum announcing new regulations related to diagnostic products. The memorandum indicated the following basic guidelines:

- Both the drug and medical device divisions of the SDA will govern rapid diagnostic products. The two divisions will implement better-defined classifications and follow more clearly defined individual responsibilities in the future.
- Until the new regulations are fully implemented, the SDA will continue to use the following criteria in the registration process of rapid diagnostic products
- If the testing method is biological, the product will be classified as a drug and will be under the responsibility of the drug division.
- If the testing method is chemical, the product will be classified as a medical device and the medical device division will be responsible for handing the product registration
- Until the new regulations are officially implemented, most diagnostic-testing products considered to be medical devices will be grouped under Class 3.

However, due to the recent SARS (Severe Acute Respiratory Syndrome) situation in China, the Ministry of Health will be categorizing diagnostic products related to infectious disease under the category of drugs. This is being done in order to enforce more rigorous regulatory procedures for drugs on these diagnostic products and to exercise greater control over products for infectious disease in China.

THIRD-PARTY CERTIFICATION FOR LOW-RISK MEDICAL DEVICES IN JAPAN
A third-party certification system for low-risk medical equipment will be introduced through Japan’s Pharmaceutical Affairs Law (PAL) revisions within the next two years. Products designated by the Ministry of Health, Labor and Welfare (MHLW) as “medical equipment requiring controls,” or “Designated Medical Equipment Requiring Controls,” will shift from ministerial level approval to approval by designated third parties.

Medical devices that previous fell into Risk Class II, and are designated as “medical equipment requiring controls” will only need to receive certification of compliance with specifications by a third-party certification organization. Certification standards will be based on basic requirements, technical standards, and the Japan Industrials Standards (JIS). However, details regarding what specific products will qualify as “Designated Medical Equipment Requiring Controls” and the procedures for certification have yet to be announced. The MHLW will assign a new agency, the New Independent Administrative Agency, to appoint appropriate bodies to conduct third-party review.

CHINA’S PHARMACEUTICAL PRICE CONTROLS THREATENS PROFIT MARGINS OF FOREIGN DRUG MAKERS
The Chinese government’s efforts to control the skyrocketing prices of pharmaceuticals in China are threatening the profit margins of foreign pharmaceutical manufacturers. The government’s measures to control drug prices has been two fold, the first is the implementation of a competitive bidding system which determines drug prices for hospital purchases, the second is a mandatory retail price reduction ordered by China’s State Council.

In January 2000, the government implemented a price tendering process that requires drug manufacturers to submit bids to the local governments to set prices for pharmaceutical purchases. This system was put in place in order to compel drug manufacturers to sell their products more inexpensively. The Chinese healthcare system would then reap the benefits of the lowered drug costs. However, due to the fragmented Chinese pharmaceutical market, drug makers are not able to make up for the lower prices by selling higher volumes. There has not been a systematic adoption of the tendering process in all cities, or even hospitals. Thus, some hospitals abide by the bidding system, while others do not, causing a rift in the pricing mechanism.

Besides the pressures from the tendering system, foreign pharmaceutical manufacturers must also face the cutting of retail prices for drugs by the State Planning Commission. Prices for widely used drugs have been slashed by 5% to 70% in the past three years, with much of the cuts falling within 15% to 20%. As a result of these price cuts, wholesalers have begun cutting back on orders for these drugs. The lowered prices of the drugs have meant lower profit margins for these middlemen.

In this environment of increasing pressure, Eric Von Zwisler, Chief China Executive of Zuellig Pharma, Asia’s largest drug distribution, sales and marketing company, suggests that in order for pharmaceutical manufacturers to make money in China, they must “keep a firm grip on the pricing of their products at the local level.” Foreign companies must increase their influence over the tendering process by becoming more involved with the local people involved in the bidding. These include the local doctors, hospitals, and distributors.

For example, Xian-Janssen Pharmaceutical (joint venture between Johnson & Johnson and several Chinese companies) has built up relationships with over 1,200 second and third tier distributors and wholesalers. This has allowed the company to have greater reach into China’s hospitals vis-à-vis its foreign competitors. The company has even sent some of its distributors for training in marketing and management to overseas universities such as the National University of Singapore in the past few years.

ELECTRONIC SUBMISSIONS FOR MEDICAL DEVICES IN ASIA
Many regulatory authorities in Asian countries are choosing to allow medical device product registration submissions to be done in electronic form. Previously, all governments required product registration applications to be completed in paper form, however, technical advances and the advent of a more digital age has led many countries to accept applications in electronic format.

Currently, Asian countries that are accepting electronic submissions for medical devices include Singapore, Malaysia, Indonesia, and Vietnam. China and Taiwan have yet to implement the capabilities of accepting electronic submissions but are expected to do so in the near future. In Singapore, product registration submission forms can be completed in Microsoft Word format and submitted to the Health Sciences Authority, Singapore’s medical regulatory authority.