Beyond Compliance: New Chinese Pharmaceutical Excipient Regulation is No Substitute for Taking Common Sense Steps to Protect Supply Chain (Part Two)

This is the second in a two-part analysis on China’s new Pharmaceutical Excipient Measures. Part One is available here.

On February 5, 2013, SFDA circulated for comment the first batch of 28 excipients that are subject to registration. This list covers gel capsules as well as excipients used in sterile injectable formulations — those derived from natural sources and those with specific toxicological concerns.  It is not known if and when additional excipients will be added to this list or what set of risk characteristics might be considered in making such a decision.   Also unknown are the general criteria SFDA will use to determine “high risk” for excipients.  It is likely that SFDA will continue to add excipients it deems to be high risk to this list on a case-by-case basis; notwithstanding that, absent a clear definition of risk, such an approach could discourage the development of new excipients.

Arguably, before detailed compliance steps can be taken, further clarification from the SDFA is needed.  For example, in terms of procedures and data requirements, does the SFDA envision that the documentation required to be submitted to register a new or listed excipient will be the same as those set out in the (heretofore unmentioned) “Pharmaceutical Excipients Registration Data reporting Requirements” (SFDA Notice No. 61, 2005)? Or will new, and as yet unidentified, data requirements be imposed by the SFDA at the later date?  Likewise, the Measure does not set out what specific issues must be addressed by the quality agreement before it is considered to meet the new obligations placed on the parties by the Measure.  Perhaps parties may consider using model quality agreements currently available from a number of US or EU based trade associations in lieu of clear guidance from SFDA.

Still, the commercial implications of the Pharmaceutical Excipient Measure can be far-reaching.  First, the e-GMP and registration requirements may drive the excipient market towards consolidation, as the larger and more technically advanced suppliers are likely to be better positioned to meet such obligations.  Thus, for drug makers – particularly, those relying on a single supplier, it will be critical to ensure the continued availability of supply while the excipient industry transitions towards compliance with the Measure.  Second, the new excipient registration regime may favor the existing domestic excipients that are not considered to be high risk over the development or importation of innovative excipients that must be registered.  If so, this could discourage entry into the Chinese market (and possibly the global pharmaceutical supply chain) of new excipients which may better preserve the efficacy, safety, and/or stability of active pharmaceutical ingredients in the finished drug.  Should these trends occur, it may be necessary to re-examine the common belief of China as a source of low-cost excipients.

Beyond the larger industry trends, drug makers — whether operating within or outside of China — who obtain their excipients from distributors should be aware that the Pharmaceutical Excipient Measures is silent with respect to the obligation of distributors.   When distributors are not required to ascertain the source of the excipient, the quality and safety of their supply, or to otherwise follow good distribution practices (GDP), then the quality protection established by the Measure is unlikely to inure to the drug maker.   Instead, rigorous vetting of the distributor, periodic and rigorous audits, and a program of sampling and analyses as well as the GDP requirement will be necessary to protect the drug maker, as will the involvement of the drug makers’ legal departments to fashion contractual protection.

For drug makers that source their excipients directly from Chinese producers, the principle that the excipient users bear the ultimate responsibility for all excipients used governs.  If drug makers are to be held accountable, they need to approve any changes made throughout the supply chain, all the way down to the supplier of raw materials and excipients.   This means, beyond simple compliance with the Pharmaceutical Excipient Measures, drug makers must establish a supplier qualification and oversight program.  In addition, they should consider involving both their quality and legal departments to review supply agreements with their excipient producers.  Supply and quality agreements are often neither drafted nor executed at the same time nor by the same team of people.  Thus, involvement by both departments will help to align both documents.  Further, the supply agreement can be used to provide for commercial protections and remedies in the event of a breach in supply quality.

For drug makers located outside of China, it is paramount to employ a feet-on-the-ground approach to ensure the quality of raw material.  They should consider engaging those who are American-trained and who understand the high level of GMP guidelines issued by the U.S. FDA to conduct audits of Chinese excipient facilities, rather than relying on the regulatory authorities of the SFDA (and its provincial counterparts) under the Pharmaceutical Excipient Measures.  The recent tragedy of Heparin contamination [PDF] is illustrative:  The drug maker Baxter sourced Heparin from Wisconsin-based Scientific Protean Laboratories.  The latter makes the active ingredient for Heparin at a plant in China, which it co-owned with a Chinese joint venture partner.  Prior to the 2007 outbreak of contamination, Baxter did not audit the Chinese facility, as its supply contract is only with the Wisconsin-based entity.  The U.S. FDA also approved the Chinese plant as a supplier for Baxter without conducting a pre-approval inspection, in part because it confused this plant with another site in its database.  In fact, the Chinese plant was classified as a chemical plant and, therefore, unlikely to be registered with and subject to the oversight of SFDA.  Baxter stopped making Heparin in 2008 after it was linked to 350 illnesses and four deaths.

In recent years, concern for the quality of finished drugs has increased with the global spread of the supply chain.  Compliance with the Pharmaceutical Excipient Measures, therefore, should be seen as the necessary first steps for drug makers and excipient producers to forge stronger links in their supply chain – not only to ensure the quality and safety of the finished product, but also to improve the traceability of raw material further up the chain, so they can truly know the origin, production and handling of each batch of each excipient used.

China’s New Pharmaceutical Excipient Regulation Stresses Responsibility for Quality Assurance, Supply Chain Management (Part One)

This is the first of a two-part analysis on China’s new Pharmaceutical Excipient Measures. Part Two is available here.

On February 1, 2013, China’s “Measures to Strengthen the Supervision of Pharmaceutical Excipients” (Notice No. 212, 2012) (“Pharmaceutical Excipient Measures” or the “Measure”) came into force.  This Measure was issued by the State Food and Drug Administration (SFDA) in the wake of a recent drug contamination incident that began with the March 2012 discovery of 77 million medicinal gel capsules made from industrial gel containing chromium, a carcinogenic heavy metal.  The ensuing investigations led to the official announcement in May that 254 pharmaceutical suppliers, constituting 12.7% of capsule makers, were producing tainted products.  Ultimately, the authorities ordered 42 capsule makers to stop production, closed 84 production lines, revoked the licenses of seven companies, and referred 13 company officials for criminal prosecution..

The SFDA issued the Pharmaceutical Excipient Measures in August 2012, imposing new obligations on both pharmaceutical preparation producers (i.e., finished drug makers [“drug makers”] as distinguished from producers of active pharmaceutical ingredients) and excipient manufacturers.  The Measures place the responsibility for the quality of excipients directly on drug makers by requiring that they:  (1) audit suppliers both at the start of the business relationship and periodically throughout its duration, in accordance with the 2011 revision of pharmaceutical good manufacturing practice (GMP); (2) test batches of excipients according to relevant quality specifications; and (3) check the control records of each supplier.  Central to the drug maker/excipient producer relationship is the use of quality agreements: legally binding agreements negotiated by the parties to define mutual responsibilities for quality activities and how quality issues will be resolved, so as to ensure that the excipients produced under the agreement will be safe and are suitable for the drug maker’s intended use.

Likewise, excipient producers are responsible for taking measures to ensure the quality of their products, including:  implementing and adhering to excipient good manufacturing practices (e-GMP), as issued by the SFDA in 2006; auditing their own raw material suppliers; conducting testing on each batch of excipient produced; and notifying their customers of changes that may affect product quality.

In addition, the Pharmaceutical Excipient Measures set out an enhanced regulatory regime; namely, for drug makers, registration of their products will now include information identifying the types of pharmaceutical excipients used, suppliers, quality standards, and results of supplier audit.  Further, a supplemental application must be filed in connection with changes in excipient use and must include analytical data on the excipient as well as an audit of its supplier.

For excipients that are new to the (Chinese) market or considered high risk, prior registration and approval are required and their manufacturers must obtain a Drug Production License.  Excipient registration requirements include submission of certain requested documents and on-site inspection, in accordance with e-GMP, by provincial-level FDA (PFDA).  As for all other excipients, records of the product and its manufacturer must be established and maintained with the PFDA.  Again, appropriate documents must be provided, although on-site inspections and random testing will be conducted only as necessary.  Imported excipients will be regulated under this bifurcated scheme as well.  In addition, the SFDA will set up a national database to monitor the production and application of all pharmaceutical excipients, plus a credit reporting system for excipient producers.

For more on the Pharmaceutical Excipient Measures, read Part Two of our analysis.

China’s Ministry of Environmental Protection (MEP) Releases Regular Reporting Requirements for Four New Substances


On January 4, 2013, China’s Ministry of Environmental Protection (MEP) released regular reporting requirements for four new substances under its chemical registration regime. Two of the newly certified compounds are classified as hazardous and the other two as dangerous.  Under China’s new chemical registration regime, the “Provisions on the Environmental Administration of New Chemical Substances (MEP Decree No. 7),” companies with certificates must file annual reports to the Chemical Registration Center (CRC) of the MEP.  The reports detail activities that occurred with the registered chemicals.

This announcement marks the sixth set of chemicals to be certified under China’s registration program for new chemical substances. More details on the affected chemicals, as well as reporting deadlines and contact information with the Chemical Registration Center of the MEP, are available in the MEP’s original notice (in Chinese).