该文章发表在钱伯斯（Chambers and Partners）2024大中华区法律指南中。环球律师事务所受邀第二次独家撰写中国医疗健康领域文章。
Transaction Market: Cautious, Steady, and Retrieving Value
The transaction market of this year can be characterized as cautious, steady, and retrieving value compared with the active market performance before 2021. The whole competitive landscape in licensing deals is increasingly severe, gradually shifting from quantitative superiority to quality and strategic competitiveness, and the risk tolerance requirements on both parties of the transaction are gradually demanding; on the other hand, cutting-edge and innovative technologies (e.g., Artificial Intelligence (“AI”)) are still highly favored by investors.
It should be noted that China’s regulatory policy continues actively attracting premium pharmaceutical enterprises, constantly promoting the localization of multinational companies, increasingly providing supports for the market access of high-quality products, and steadily strengthening the governance of related regulatory areas. In return, pharmaceutical enterprises enter into a new era of compliance reorganization under the escalating competitive situation.
Continuously Strengthening Foreign Investment Protection and Encouraging Product Innovation
The State Council, in its opinions related to the continuous strengthening of foreign investment protection in 2023, proposed to reinforce the protection of intellectual property rights in the procurement activities of medicines and medical consumables, and to take timely measures such as refraining from procurement and canceling the qualification of listing for the products that are identified as patent infringing by administrative rulings of the intellectual property administrative department or by effective courts’ judgement. Meanwhile, one of the biggest highlights in the negotiation for 2023 national reimbursement drug list (“NRDL”) is its emphasis on encouraging innovation, with new target drugs emerging constantly in the list, the NRDL is incrementally enabling innovative drugs to benefit patients in China. It is reasonable to anticipate that the innovative characteristics (e.g., the innovative drugs with patent value, or with new therapeutic effects) remain to be important factors in evaluating the competitiveness of products.
With Regulatory Methodology Conform to Healthcare Industry Business Practice
Elaborated Human Genetic Resources Administration and Ethical Review Regulations Came into Effect
In 2023, the human genetic resources administration embraced the revolution of supervising deregulation and service improvement. In addition to defining "human genetic resources information" in an enumerated manner and clarifying the definition of "foreign entities" in line with practical operation, this latest regulation facilitates and speeds up the compliance management of human genetic resources and international collaboration through simplifying and refining the administrative methods. In terms of ethical review, the new regulation implemented in 2023 pays special emphasis on the activities related to "human" rather than “medical science”, details the requirements of informed consents, and clarifies the ethical supervision of the research activities covered biological samples. It is foreseeable that the well-developed ethical review system will be progressively established in China.
Gradually Clarify the Compliance Pathways for Cross-border Transmission of Personal Information
The cyberspace administrative authority phases in the compliance pathways for the personal information cross-border transmission through executing a series of regulations. Besides passing the data security assessment by the Cyberspace Administrative Authority and obtaining the certification for personal information protection, the Regulation regarding the Standard Contract for Cross-border Transmission of Personal Information, which was implemented in 2023, provides a clearer approach under a standard contract and improves the implementations in the performance of the contract. Meanwhile, the competent authorities are also exploring, through the draft for public opinions, deregulation measures to promote the data free flow in a legitimate and efficient way, and we suggest relevant enterprises continuously and closely keep an eye on the updated trends.
Increasing Emphasis on the Compliance and Healthy Development in the Healthcare Industry
Along with the detailed administrative rules and tightening regulatory attitudes towards traditional supervision areas such as antitrust and anti-corruption, pharmaceutical enterprises encounter an opportunity to re-examine and optimize their compliance management with the promulgation and advancement of new regulations in the field of corporate social credit.
Antitrust Investigations Continually and Intensively Proceed
Antitrust investigations and supervisions are closely tied up with the healthcare industry. Among the typical cases disclosed in 2023 with respect to the special campaign for antitrust, five out of twenty-three cases are from the healthcare industry, and the violated matters mainly relate to the execution of monopoly agreements and abuse of a dominant market position, with fines amounting to 100 million RMB. Pharmaceutical enterprises, aim to properly mitigate the violation risks, are recommended to timely keep track of the law enforcement and conduct regular compliance reviews towards the market competition situation, clauses in the distribution agreements and the performance of distributors, etc.
Nation-Wide Anti-Corruption Campaign in the Healthcare Industry
In 2023, the centralized rectification work of corruption in the healthcare industry underscores comprehensive governance in all aspects, entire chain, full coverage. This committed to rehabilitating the fair market environment in the pharmaceutical and medical device purchase and sales activities, and further reducing and maintaining the sales expenses and costs of products. Complying with laws and regulations and internalizing the healthcare industry’s self-regulatory rules into enterprises’ compliance management systems will furnish pharmaceutical enterprises to a stable and sustainable future.
Social Credit System is Taking the Initial Shape
China has been stepping into an initiate stage to establish and consolidate the governance and regulations regarding the social credit systems in recent years, which making up for the lack of unified and consistent laws and regulations to govern the social credit system in various industries and fields. Discredit pharmaceutical enterprises might face restrictions in the access of NRDL, volume-based procurement activities, listing and bidding qualifications, etc. Therefore, there is of necessity and urgency to incorporate the credit monitoring process into the enterprise’s daily legal and compliance risk management.
Challenges and Opportunities from Frontier Technologies to the Healthcare Industry
Ethical Review of Science and Technology Activities Promotes Healthcare Industry Upwards to Good Development
The healthcare industry is the key supervised area in the science and technology ethics administration. Under the upwards to good technology development background, the effectiveness of Measures for Ethical Review of Science and Technology (Trial Implementation) in 2023 gives direct guidance to enterprises in related industries. The newly released regulation illustrates the scope of scientific and technological activities which is compulsorily under the ethical review in the form of examples, and specifies the legal responsibilities which force enterprises to reinforce the self-disciplining standard and comply with regulatory requirements for ethics of science and technology.
Legal Challenges Continuously Attaching to the Implementation of AI
AI, as the most commercially promising technology application, is progressively intermingling and interacting with multidimensional big data generated from healthcare industry, such as target discovery, compound synthesis, and optimization of clinical trial design. AI is a new impetus to the healthcare industry while triggering ethical and legal challenges. Pharmaceutical enterprises are recommended to pay close attention to the potential legal risks such as open-source risks, operational/algorithmic compliance, intellectual property infringement protection, personal information protection, and the ownership of outputs before engaging in AI application activities.