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.