Key Asian Medical Regulatory Issues


Over the next 20 years, healthcare in Asia will grow at about two times the healthcare growth rate in the West. With increased wealth and the availability of better medical products, Asians are now living longer, healthier lives. Thus, Asia offers attractive investment and marketing opportunities for foreign medical companies. Foreign medical companies entering or expanding their presence in Asia must familiarize themselves not only with the business situation, but also with the changing regulatory environment in the region. While many Asian governments are drafting legislation to create more efficient and transparent medical regulatory systems, some difficult and costly requirements still exist.

Changing Pharmaceuticals Regulations in Asia

In the pharmaceuticals area, several trends are currently evolving. Drug pricing and reimbursement rates are slowly being changed to shift more of the burden of drug costs from the government to the people. In Japan, Korea, and Taiwan, reimbursement rates for many drugs have been lowered. At the end of 2001, the Korean Ministry of Health and Welfare cut the reimbursement prices of 5,575 insurance-covered drugs by an average of 7.63%.1 Prices on an additional 400 drugs were cut during the first quarter in 2002.2 The government also plans to gradually prohibit the reimbursement of certain over-the-counter (OTC) products. A total of 6,000 OTC drugs, including cold remedies, ointments, and digestives, will no longer be reimbursed by the national health insurance system.3 Despite the increase in cost to the consumer, demand for foreign and branded drugs is growing due to greater consumer wealth and confidence in these foreign products.

Governments are enacting measures to control government expenses on healthcare. In July 2002, the Japanese government enacted the Health Insurance Reform Bill.4 This reform will shift healthcare cost burdens toward workers , while maintaining the cost burdens of the elderly. The main changes as a result of the bill are: 1) co-payment for medical services for active workers will increase from 20% to 30% of total fees beginning in April 2003, 2) insurance premium rates for government controlled health insurance will increase from 7.5% to 8.2% in April 2003, and 3) as of October 2002, co-payment for medical services for elderly people were set at 10% of total fees.

In many countries throughout Asia, medical product registrations are becoming fairer to foreign manufacturers. Previously, foreign drug makers were confronted with more extensive demands and requirements for product registration , compared to local manufacturers. For example, in the past, foreign drug makers were often asked by the Japanese government to re-do their clinical trials in Japan because Japanese “bodies” were different from those of Westerners. Today, the Japanese government accepts foreign clinical data (as long as it is done according to Japanese (GCP s) with bridging studies ) instead of requiring all clinical trials to be redone in Japan.

On September 15, 2002 a new definition for “new drugs ” was introduced into China. Instead of “drugs not previously manufactured in China ,” the definition for new drugs was changed to “drugs not previously marketed in China.”5 This change in definition places foreign and local drug manufacturers on a more level playing field when submitting applications for new drug registrations. Under the old definition, drugs manufactured by local producers w ere not considered new drugs because they were manufactured in China , putting foreign manufacturers at a disadvantage if they did not have manufacturing facilities in China. With the new definition, both local and foreign drug makers are subject to the same regulations regardless of whether or not they have manufacturing facilities in China.

Besides greater equality between foreign and local entities in drug product registration, China has also opened doors for foreign drug distribution services to enter the country. Under the previous system, foreign multinational manufacturing companies (that are unable to establish “holding companies”) had been limited to distributing only products that were manufactured in China. Most multinationals manufacturing in China were unable to co-mingle products manufactured throughout the country in a single distribution warehouse. Products manufactured outside of China also could not be sold with products made in China. Companies were able , therefore, to conduct distribution operations through joint ventures with Chinese counterparts. However, beginning January 1, 2003, foreign drug wholesalers and retailers will be allowed to conduct business (without a Chinese partner) in China as a result of the country meeting its World Trade Orgnaization (WTO ) conditions.

Changing Medical Device Regulations in Asia

In South Korea, new legislation is expected to make medical device regulations, which have not been clear, more transparent. It is anticipated that the Korean National Assembly will write draft legislation called the “Medical Devices Act” to be introduced this year. The main regulatory body in charge of overseeing medical devices in South Korea is the Korea Food and Drug Administration (KFDA) which was established in 1996. Through the Medical Devices & Radiation Health Department, the KFDA performs quality assurance inspections and conducts research on medical devices. Since the KFDA’s establishment, the agency has maintained much of its medical device regulation in general terms. While there are some specific requirements outlined for product registration in Korea ( e.g., documentation, technical review, and type tests), the details required for product approvals are not codified. This has led to confusion among many foreign medical device manufacturers. The new legislation aims to better codify specific regulatory procedures and requirements.

The “Medical Devices Act” aims to make regulations more transparent by making medical device regulations distinct from the current Pharmaceutical Affairs Law,6 under which much of Korea’s medical device regulations have developed. Some of the Medical Devices Act’s proposed changes includ e: adjustment and clarification of the definitions of products subject to medical devices regulation ; inclusion of medical software under KFDA regulation ; addition of specific provisions regarding used, reprocessed, or leased devices ; transforming from a three -tier classification scheme to a four -tier scheme ; and implementing new postmarket surveillance regulations.

Since China’s accession into the WTO in December 2001, the Chinese government has made concerted efforts to streamline and simplify the medical regulatory system. For example, a major change includes the introduction of a new safety licensing system for 19 product groups and 132 product categories , including medical devices.7 In addition, as of May 1, 2002, the China Compulsory Certification (CCC) mark has replaced the old China Commission for Conformity Certification of Electrical Equipment (CCEE) and China Commodity Inspection Bureau (CCIB) marks. The CCC will replace the previous certification systems as the new safety licensing system for the specified products. There will be a transition period of one year for converting CCEE – and CCIB -certified products to the CCC system. Both CCEE and CCIB marks will be invalid after May 1, 2003.8

Since 1985, Japan’s In Country Caretaker (ICC) system has allowed foreign medical manufacturers without a local office in Japan to register products “directly” in their own name. In other words, Japanese law does not allow medical companies without a local presence to register their products in their own name, unless an ICC is used. While generally more costly than indirect registration through a distributor (where the registration is in the distributor’s name), registration through an ICC offers foreign manufacturers distinct advantages — most notably increased control over marketing strategies – because manufacturers can more easily change distributors via the ICC system. Over the years, more and more foreign companies entering the Japanese market have recognized the value of the ICC system and have retained ICC companies to assist them in their efforts to register their products directly in their own name.

In mid 2002, Japan ’s Ministry of Health, Labor, and Welfare ( MHLW) announced major changes that will significantly change and dismantle the regulatory system as it exists today.9 Effective April 2003, foreign sales approval will be subject to the following new requirements. First, a foreign manufacturer must appoint a representative in Japan , and th at representative must hold a license to sell medical devices. Second, the foreign manufacturer and its local representative will be jointly responsible for regulatory compliance with regard to import procedures, good manufacturing practice s, and post market ing surveillance. Finally, the representative must be able to adequately perform both the regulatory functions traditionally performed by an ICC, as well as the testing, warehousing, and tracking duties traditionally performed by the importer. These new requirements place a heavy burden on existing ICCs, many of which are small firms without the capacity to take on this greater role. There will be a three-year grace period , however, for the implementation of these new rules. Some smaller ICC’s already are adding appropriate manpower to meet the new regulations and requirements. Medtech companies should be wary of “conflicts of interests” if their ICC is affiliated with their current distributor in Japan.


The regulatory changes occurring in Asia are indicative of the growth of the medical industries in the region. As Asian governments continue to streamline and make their regulations more transparent, the attraction of the Asian markets will continue to grow among foreign medical product manufacturers. The region holds great promise for growth; however, medical manufacturers must be knowledgeable of the regulatory environments in order to be successful in the Asian medical markets.

  1. Kim Min-hee, Prices of 5,575 drugs drop by an average of 7.63%, THE KOREA HERALD, Dec. 25, 2001.
  2. Park Yoon-bae, Gov’t Seeks to Cut Drug Prices, Doctor Fees to Quench Inflation, THE KOREA TIMES, Jan. 1, 2002.
  3. Shin Sung-sik, 6,000 Drugs Lopped Off Government Subsidy List, JOONGANG ILBO NATIONAL, Oct. 5, 2001.
  4. Health Insurance Reform Bill Passed at Lower House, ADMIS (Advanced Medical Information Systems) Healthcare Industry News of Japan, July 2002 Issue.
  5. New SDA Regulations for Drug Product Registration Expected , PRN (Pro Re Nata, Inc.) Profile, Volume 5, Number 6, Jun. 14, 2002.
  6. Medical Device Requirements for the Republic of Korea (South Korea), Office of Microelectronics, Medical Equipment and Instrumentation, Department of Commerce, United States of America, Nov. 15, 2001.
  7. For more information on China’s CCC mark, please visit
  8. For more information on China’s CCC mark, please visit
  9. Fundamental Reform Plan of Pharmaceutical Affairs Law, ADMIS (Advanced Medical Information Systems) Healthcare Industry News of Japan, February 2002 Issue.