fter a four-year pilot program in 10 provinces, China’s MAH-based regulatory system was officially established with the implementation of the Drug Administration Law on December 1, 2019. Under this system, MAHs are authorized to produce drugs themselves or contract the production to drug manufacturing companies. As a result, the group of “B certificate holding companies” (companies with drug products that have entered the commercialization stage but do not yet have their own production capabilities) has grown significantly, becoming one of the main features of China’s pharmaceutical industry. At this stage of early implementation of a new regulatory mechanism, the trend of rapidly increasing numbers of MAHs entrusting contract development and manufacturing organizations (CDMOs) for drug manufacturing becomes a potential regulatory concern.

The DIA China 2023 Annual Meeting featured a dedicated session on Improving China’s Marketing Authorization Holder (MAH) System to Facilitate New Drug Development, where senior regulatory experts discussed its opportunities and challenges.

Since the first drug from the pilot program received marketing approval in June 2018, and the number of applications has since continued to increase, pressure on regulatory oversight has intensified. In response, more supporting regulations under the Drug Administration Law and the technical specifications related to MAHs have been introduced since 2020, further clarifying MAH’s responsibilities and requirements throughout the entire drug life cycle. For example, the Regulations on the Implementation of the Main Responsibility for Drug Quality and Safety Supervision and Management by the Drug Marketing Authorization Holders (in Chinese), which took effect on March 1, 2023, places greater emphasis on quality and safety management throughout the entire drug life cycle and clarifies the responsibilities and requirements of key personnel of MAHs.

Opportunities in MAH System Implementation

1) The MAH system aims to encourage innovation
Innovation is one of the main drivers for the pharmaceutical industry in China, as elsewhere. Research and development (R&D)-based pharmaceutical companies have become an important emerging force in promoting pharmaceutical innovation and transformation in the country. The implementation of the MAH system has changed the previous model of linking marketing approval to drug manufacturing companies, thus encouraging the separation of R&D and production. Under the new model, R&D companies can now establish their own production facilities or entrust other companies to produce drugs, thereby increasing production flexibility and stimulating the enthusiasm of R&D personnel to accelerate the speed of new drug entry into the market. As awareness of outsourcing production gradually increases, more R&D companies are encouraged to gradually become MAH holders and move towards drug commercialization.

2) The MAH system also promotes industrial structural adjustments and resource optimization, and strengthens the main responsibility of MAH
The MAH system allows product commercialization to be achieved through light asset operation, enabling B-certificate holders to use outsourced processing to compensate for their weak supply chain and resource integration capabilities. This has also given rise to a new batch of emerging companies: contract manufacturing organizations (CMOs) and contract development and manufacturing organizations (CDMOs). As the upstream and downstream companies continue to collaborate and develop, strong alliances are being formed, promoting the rationalization of industry resource allocation and division of labor. This has led to the prosperity of China’s innovative drug industry in recent years.

Furthermore, by strengthening the responsibility of R&D companies at the source, the MAH system requires MAHs to bear the main responsibility for the safety, effectiveness, and quality control of drugs throughout their life cycle. This helps to promote the implementation of MAH responsibilities, improve production quality, and promote scientific oversight by the regulatory authorities.

Challenges in Implementing the MAH System

Under the interaction and sustained influence of innovation and regulation guidance, China’s pharmaceutical industry is undergoing a transformation towards a new stage of high-quality development. However, challenges have arisen in the implementation of the MAH system during the transformation process.

1) Cooperation between MAH and CDMO in China
The National Medical Products Administration (NMPA) issued a notice in May 2023, soliciting public opinions on Strengthening the Supervision of Contract Development and Manufacturing Organizations (CDMO) in Producing Drugs for Marketing Authorization Holders (MAHs) (in Chinese). The notice has set strict requirements for the quality management system of MAH. This change was prompted by the problems encountered during the trial implementation of the MAH policy.

The biggest challenge for MAH holders lies in how to fulfill the main responsibility of ensuring the quality and safety of the drug throughout its life cycle while delegating production to CDMOs. The notice requires that “the Quality Person (QP) should have at least five years of practical experience in drug production and quality management, including at least three years of experience in sterile drug production and quality management.” However, the limited supply of experienced quality personnel in the industry makes it difficult for some B-certificate holders to find qualified QPs; thus, they are unable to carry out substantial oversight of experienced CDMOs.

Based on the practical situation of implementing the MAH system in recent years, even the innovative drug companies that have established a complete drug quality oversight and management system may not be able to exercise their own oversight and management rights and obligations. Some innovative drug companies have complained that the “inequality” between the entrusting party and the entrusted parties is a common occurrence in the industry, especially when the entrusting party is a small-scale R&D company, and the entrusted party is a large CDMO. In such cases, the entrusting party often lacks the power to effectively supervise and manage the production line of the entrusted party.

Therefore, MAHs without their own capacity for manufacturing should increase their experience in drug production, quality management, marketing authorization, and pharmacovigilance, and enhance their understanding of their full drug life cycle responsibility. They should establish a well-defined management department, equipped with appropriate personnel based on their own drug production scale, and establish a quality management system covering the entire drug production process. For example, they can establish on-site inspection and supervision teams, and monitor the ability of CDMOs to fulfill their production responsibilities.

2) Cross-border MAH Implementation
Since the MAH system has only recently been implemented in China, the current review and approval mechanism is still conservative regarding cross-border MAH implementation. Although the Drug Administration Law does not explicitly prohibit MAH and drug manufacturers from crossing borders, significant difficulties and challenges exist in practice. The approval practice of the NMPA generally does not allow MAH cross-border, which means that the MAH for drugs produced overseas must be an overseas company, while the MAH for drugs produced domestically must be a domestic company. This creates difficulties for domestic enterprises to register as the MAH of imported drugs, and vice versa.

In license-in transactions, the local licensee who introduces the product and assumes legal responsibility for it in the local Chinese market is often more willing and motivated to act as the MAH than the foreign licensor. For example, (1) if the licensed product will be produced domestically, it is relatively simple for both parties to agree that the licensee in China will act as the MAH, and this approach is not hindered by the current regulatory practice. (2) However, if the licensed product will remain an imported drug and continue to be produced in and supplied from overseas, the assignment of MAH and related responsibilities needs to be carefully considered. Given that the regulatory practices will continue to evolve, both parties will generally agree in the contract that if regulatory practices permit the licensee to act as the MAH in China when marketing approval of the licensed product is applied for, then the licensee should act as the MAH in China. At the same time, both parties should agree to adopt alternative approaches to achieve their intended business purpose if regulatory obstacles arise.

There is a need for further refinement of the implementation requirements and supporting documents for MAH, to address the management difficulties faced by domestic MAHs for drugs produced overseas, and for the entrustment of overseas enterprises to produce drugs.

In summary, China’s pharmaceutical industry has undergone a period of rapid growth. The implementation of the MAH and other policies has stimulated innovation and R&D initiatives among pharmaceutical companies, while also encouraging the separation of drug ownership and manufacturing activities, leading to the emergence of new business models in the industry. To achieve future high-quality development, the optimization of regulations by health authorities and the transformation of companies to better embrace the MAH system will be key.