To implement the Drug Administration Law of the PRC, a draft version of the Measures for Supervision and Administration of Drug Supply was publicized in September 2019 for public opinion. After that, a modified and improved version of the Measures for Supervision and Administration of the Quality of Drug Supply and Use was publicized in November 2021 for public opinions.
Upon its coming into effectiveness as of 1 January 2024, the Measures are aimed at strengthening the supervision and administration of drug supply and use, and at standardizing the quality management activities of drug supply and use. The Measures stipulate the requirements for obtaining or change of the trading license for drug wholesale and drug retail activities. The Measures also specify the responsibilities of drug Market Authorization Holders ("Drug MAH Holder") and drug trading entities in terms of entrusted sales, record-keeping, entrusted storage and transportation etc. Below please find some of the key issues regulated by the Measures in relation to drug supply.
1. Drug Trading License
a) Conditions and Requirements
Drug wholesale enterprises and drug retail enterprises shall respectively meet the conditions as provided in the Measures, in terms of quality management institutions and personnel, warehousing, quality management system etc. For those who engage in drug retail chain activities, there should be drug retail chain headquarters to exercise unified management of retail shops.
The Measures differentiate the requirements for those who engage in prescription drugs, Class-A over-the-counter drugs, and Class-B over-the-counter drugs. For those applying for a drug trading license, drug administrative authorities will carry out technical review of the submitted materials and on-site inspection, while for those who solely engage in retail activities of Class-B over-the-counter drugs, drug administrative authorities will conduct pro forma review of the documents submitted and issue a drug trading license on the same day.
b) Items on Drug Trading License
There are two kinds of items to be registered on the Drug Trading License:
- Licensed items including operation address, business scope, way of operation and warehouse address.
- Registered items including name of enterprise, unified social credit code, legal representative, main responsible person, quality responsible person etc.
Article 20 and Article 21 of the Measures provide the standardized wording of items to be included into the business scope of drug wholesale enterprises and drug retail enterprises. For drug retail enterprises, the operation category shall also be stated in the business scope, which include prescription drugs, Class-A over-the-counter drugs, and Class-B over-the-counter drugs. If an enterprise engages in refrigerated or frozen drugs, it shall be indicated in its business scope. The business scope of drug retail chain store shall not exceed that of the drug retail chain headquarters.
c) Change of Items on Drug Trading License
In case of change of licensed items on the Drug Trading License, such change shall be approved by the license-issuing authority. A drug trading enterprise shall not change such licensed items without approval (Article 23 of the Measures).
In case of any change to the registered items on the Drug Trading License, a drug trading enterprise shall apply for the change of registration of its Drug Trading License within thirty days after the change takes place (Article 24 of the Measures).
If a drug trading enterprise intends to continue its operation upon the expiry of its Drug Trading License, it shall apply to the license-issuing authority for review and issuance of a new Drug Trading License within the period of two to six months prior to the expiry of the original Drug Trading License. If such application is brought to the authority within two months before the expiry of the Drug Trading License, it shall not continue its operation upon the expiry of the Drug Trading License, until drug administrative authorities have granted a new Drug Trading License. (Article 26 of the Measures)
2. Supply Management
a) Responsible Persons
Article 33 of the Measures provides that the legal representative and main responsible person of drug trading enterprises shall take overall responsibilities towards drug trading activities. Such persons shall meet the requirements set by the Drug Good Supply Practice ("Drug GSP"). The main responsible person shall take overall responsibilities for the daily management of the enterprises and equip the enterprises with quality responsible person, while the quality responsible person shall take overall responsibilities towards drug quality management and ensure drug quality.
b) Entrusted Sales
If a Drug MAH Holder entrusts the sale of the drugs held by such Drug MAH Holder to a drug trading enterprise, the drug trading enterprise shall have the corresponding business scope. The entrusted party shall not re-entrust the sale to any other parties. The Drug MAH Holder shall sign an entrustment agreement with the entrusted party and specify relevant terms including drug quality liabilities, etc. and the Drug MAH Holder shall supervise the sales activities of the entrusted party. Also, such Drug MAH Holder which entrusts a third party for sales shall report to the drug administrative authorities at province level where it is located. If the entrustment is across provinces, the Drug MAH Holder shall report to the drug administrative authorities at province level where the drug trading enterprise is located as well. (Article 34 of the Measures)
c) Prohibited Sales
Article 36 of the Measures stipulates that a drug trading enterprise shall not engage in sale of vaccines, preparations for medical institutions, Chinese medicine formula granules and other drugs that are prohibited by the State. Drug retail enterprises are not allowed to sell narcotic drugs, psychotropic drugs of the first category, radiopharmaceuticals, drug-type easy-to-control poisonous chemicals, anabolic agents, peptide hormones (except insulin), termination-of-pregnancy drugs, and other medicines the retailing of which is prohibited by the State.
d) Material and Record-keeping
Article 38 of the Measures lists the materials that a Drug MAH Holder or a drug wholesale enterprise shall provide to the purchasing entities when selling the drugs, including without limitation the copies of the Drug Manufacturing License and the Drug Trading License, the approval certification documents of the drugs and their testing reports, the power of attorney of the salesperson, proof which indicates the name of the supply entity, the general name of the drug, Drug MAH Holder information etc. The Measures also emphasize that such materials shall be affixed with the official company seal, and the electronic seal which conform to the legal requirements shall have same legal effect.
Article 40 of the Measures requires that a Drug MAH Holder and a drug trading enterprise shall keep record of the relevant qualification materials and sales records for a term of no less than five years and shall not in any case be less than one year after the validity term of the drugs.
e) Entrusted Storage and Transportation
Article 45 of the Measures stipulates that if a Drug MAH Holder or a drug trading enterprise entrusts a third party for storage or transportation of the drugs, it shall conduct appraisal of the quality assurance capabilities and risk management capabilities of the entrusted party, conclude an entrustment agreement with such party and agree on the terms and conditions, such as the drug quality liabilities and practice standards etc. The Drug MAH Holder or the drug trading enterprise shall also supervise such entrusted party and carry out regular inspections.
If a Drug MAH Holder carries out entrusted storage, it shall report to the drug administrative authorities at province level both at where the Drug MAH Holder is located and where the entrusted entity is located. If a drug trading enterprise carries out entrusted storage, it shall proceed in accordance with the rules of change of warehouse address.
Article 47 further stipulates that the entrusted entity for drug storage or transportation shall carry out drug storage or transportation in accordance with the Drug GSP and shall not re-entrust storage to any third party. If the entrusted entity intends to re-entrust transportation, it shall obtain the consent of the entrusting party and conclude a quality assurance agreement, assuring that the drug transportation process complies with the Drug GSP.
f) Warehouse of Drug Wholesale Enterprises
Article 48 of the Measures stipulates that if a drug wholesale enterprise sets up warehouses across provinces, the drug administrative authorities at province level where such enterprise is located shall communicate with those where the warehouse is located, and if the conditions are met, it shall be dealt with in accordance with the process of change of warehouse address. Drug wholesale enterprises shall carry out unified quality management of the warehouses that locate at different places.
3. Legal Liabilities
Article 66 of the Measures stipulates that in case of violation of the Measures and the violators take the initiative to eliminate or mitigate the detrimental consequences of such violating acts, or if the violating acts are minor and have been corrected in time without causing any detrimental consequence, or if it is the first time of violation with minor detrimental consequences and such violation have been corrected in time, the punishment for such violation acts can be mitigated, reduced or exempted. If there is evidence to prove there is no subjective fault, no administrative punishment shall be imposed.
Article 67 to Article 73 of the Measures specify the detailed administrative punishment for violating the Measures.
4. Preliminary Comments
To comply with the Measures, the Drug MAH Holders and drug trading enterprises shall implement statutory requirements in terms of entrusted sales, record-keeping, entrusted storage and transportation etc. as specified in the Measures, in order to ensure the quality of the drugs. In case of any change to the licensed items or registered items on a Drug Trading License, the drug wholesale enterprise and drug retail enterprise shall proceed with the change formalities within the statutory time limit at the competent drug administrative authorities.