Five Major Changes and Fourteen Key Points of China's Revised Drug Administration Law: Legalizing Online Prescription Sales, Redefining 'Fake Drugs,' and Eliminating GMP/GSP Certification
On the evening of August 26, 2019, the newly revised Drug Administration Law of the People's Republic of China was officially promulgated and will come into effect on December 1, 2019. After an interval of 18 years, the Drug Administration Law has undergone substantial revision, expanding from 10 chapters and 104 articles in the 2015 version to 12 chapters and 155 articles.
A thorough review of the newly revised Drug Administration Law reveals the influence of numerous policies issued in recent years. These new measures, designed to promote industry development and standardization, have been systematically consolidated and incorporated into national laws and regulations following market validation, thereby formally integrating them into the routine framework of drug supervision.
In response to the changes introduced by the newly revised Drug Administration Law, reporters from VCBeat (WeChat ID: vcbeat) promptly engaged in discussions with industry experts to analyze the new benefits and changes that the formal implementation of the new regulations will bring to the industry:
Five Major Changes Brought by the New Regulations
1. Legalization of Online Sales of Prescription Drugs:It has been clarified that, under certain conditions, online sales of prescription drugs are permitted; however, the sale of various specially regulated pharmaceuticals—including vaccines, blood products, narcotic drugs, psychotropic substances, medicinal toxic drugs, and radioactive pharmaceuticals—remains prohibited.
2. New Regulations on Overseas Drug Purchases:Legally marketed overseas drugs imported without approval are no longer treated as counterfeit drugs; the definition of counterfeit and inferior drugs has been revised to focus on therapeutic efficacy.
3. Accelerated Clinical Trials and Drug Marketing Approval:A new chapter on drug development and registration has been added, formally enshrining the encouragement of pharmaceutical innovation into regulations; many recent policy reforms implemented to enhance approval efficiency have been extensively incorporated into the regulatory framework, aligning domestic policies increasingly with international standards.
4. GMP and GSP standards are incorporated into the inspections for manufacturing and operation licenses:Sections related to GMP and GSP certification have been removed; compliance with GMP and GSP standards will now be directly linked to pharmaceutical manufacturing and distribution licenses.
5. Full Implementation of the Marketing Authorization Holder System for Drugs:It permits drug marketing authorization holders to outsource drug production and distribution to other enterprises, thereby breaking the integrated “R&D, production, and sales” model.
For a long time, the e-commerce penetration rate of pharmaceutical sales in China has remained relatively low. The primary reason is that the vast majority of pharmaceutical sales in China occur in hospitals, particularly for prescription drugs, which account for as high as 70%–80%. Secondly, traditional retail pharmacies have established an extensive presence within communities, making it easy for residents to meet their medication needs through offline channels. However, most prescription drugs, especially those for chronic diseases, still require patients to spend considerable time and effort visiting hospitals for registration and prescriptions.
Although e-commerce platforms for pharmaceuticals offer convenience in purchasing prescription drugs, the safety of these medications is directly linked to patients' lives. Therefore, ensuring their safety is far more critical than enhancing convenience. Consequently, regulatory authorities have remained indecisive regarding regulations on the online sale of prescription drugs. During the second review, current practices stipulated a prohibition on the direct online sale of prescription drugs. However, during the deliberation and public consultation process, two differing opinions emerged. One viewpoint argued that allowing the online sale of prescription drugs would amplify drug safety risks and create security hazards, thus advocating for a ban. The other viewpoint held that, against the backdrop of national administrative streamlining and the "Internet Plus" initiative, and adhering to the principle of facilitating public access, drug regulation should be strengthened. Meanwhile, to meet the public's medication needs, interim and ex-post oversight of online prescription drug sales should be enhanced, and public services optimized, rather than implementing an outright ban.
Liu Pei, Director of the Department of Policies and Regulations under the National Medical Products Administration (NMPA), stated that during the revision of the Drug Administration Law, the National People’s Congress solicited opinions from various stakeholders and adopted an inclusive and prudent approach toward the online sale of prescription drugs. Prescription drugs are not included in the list of pharmaceuticals prohibited from online sales. This indicates that the online sale of prescription drugs is not explicitly banned; however, specific regulatory measures are still being formulated by the regulatory authorities and are currently in the drafting stage.
Changes in Regulations on Online Drug Sales (Compiled by VCBeat)
Based on the content of the press conference held by the General Office of the Standing Committee of the National People's Congress, we have summarized four key points:
1. For the online sale of prescription drugs, adhere to the principle of applying identical standards and integrated regulation for both online and offline channels, meaning that entities engaged in online sales must be licensed brick-and-mortar enterprises;
2. Online drug sales must comply with the retail operation requirements stipulated in the new Drug Administration Law;
3. In view of the unique characteristics of online sales, stricter requirements have been established for the online sale of prescription drugs. For instance, the pharmaceutical online sales network must be interconnected with the information systems of medical institutions to enable information sharing, primarily to ensure the authenticity of prescription sources and safeguard patients’ medication safety;
4. Distribution must also comply with the requirements of the Good Supply Practice for Pharmaceutical Products.
It is evident that the online sale of prescription drugs primarily involves two core components: prescription medications and prescriptions. The entities most closely associated with this process are pharmaceutical e-commerce platforms, hospitals, and internet healthcare companies.
As early as 2013, the “Notice on Strengthening the Administration of Online Drug Sales” stipulated that “drug retail chain enterprises may only sell over-the-counter (OTC) drugs through drug transaction websites and are strictly prohibited from displaying or selling prescription drugs on any website pages related to transactions.” This marked a challenging period for pharmaceutical e-commerce. Although online sales of prescription drugs were later permitted, they remain subject to stringent regulations.
The final version of the Drug Administration Law does not prohibit the online sale of prescription drugs; however, safety remains the primary concern of the National Medical Products Administration (NMPA), and such sales are permitted only under specific conditions.
Pharmaceutical E-commerce Seizes Opportunities While Ensuring Compliance
VCBeat interviewed multiple relevant companies to explore the potential changes that shifts in legal provisions may bring to the industry. It is a shared view among numerous pharmaceutical e-commerce players that the current legal amendments will stimulate and mobilize corporate initiative. The industry widely believes that once the ban on online sales of prescription drugs is lifted, pharmaceutical e-commerce will usher in new development opportunities.
The new regulations mandate that online sales of prescription drugs must maintain consistency between online and offline operations, and the entities selling these drugs online must be brick-and-mortar enterprises that have first obtained the necessary licenses. “In other words, a physical store must hold a license before it can sell drugs online,” said Huang Hui, Deputy General Manager of Yunkai Yamei. She believes that “platform-based e-commerce companies will leverage their traffic advantages to further absorb existing offline market share and attract more participants into the sector.”
Zhong Yi, founder of Yaofangwang Mall, noted that the overall scale of the pharmaceutical e-commerce industry has expanded. With more players expected to enter the market in the future, the sector is approaching a tipping point for rapid growth. This trend will enable small and medium-sized pharmacies to participate more effectively in pharmaceutical e-commerce, while also enhancing the industry’s ability to serve consumers.
Internet Healthcare and Pharmaceutical E-Commerce Will Develop in an Integrated Manner
The online sale of prescription drugs involves not only the distribution of pharmaceuticals themselves; official interpretations have specifically emphasized the need to ensure the authenticity of prescription sources. Prescriptions have long been a core resource for hospitals, and the outflow of prescriptions touches on sensitive institutional interests. Previously, media outlets exposed instances where pharmaceutical e-commerce platforms relaxed prescription requirements in pursuit of profit—a practice that regulatory authorities will absolutely not tolerate.
Currently, electronic prescriptions are primarily issued through two channels: one is via internet hospitals, and the other involves collaborations between enterprises and hospitals to explore the outflow of prescriptions. Consequently, this process encompasses multiple steps, including physician consultation, prescription issuance, pharmacist review, and medication delivery. For the industry to achieve rapid development, integration across all these segments is essential.
Liu Tong, Senior Vice President and Chief Public Affairs Officer of 111 Group, believes that the integrated development of internet healthcare and pharmaceutical e-commerce will accelerate, as will the construction of a comprehensive internet-based pharmaceutical and healthcare service system. Additionally, offline chain pharmacies may accelerate their digital transformation, which will not only expand sales channels but also facilitate regulatory oversight through the transparency and traceability offered by the internet.
Zhong Yi, founder of Yaofangwang Mall, also believes that pharmaceutical e-commerce platforms should strengthen collaboration with internet hospitals to become suppliers offering a comprehensive range of pharmaceutical products at competitive prices, while fully integrating into electronic prescription circulation systems to ensure medication safety for patients.
Diversified Opportunities Under Lawful Operations
With deregulation and industry convergence, relevant enterprises can identify further opportunities once they have clearly defined their market positioning. The newly revised Drug Administration Law defines the role of third-party platforms for online drug transactions. Ma Guanglei, General Manager of Yifuzhen, proposed that such third-party platforms must incorporate at least three key components to address issues concerning the authenticity of prescriptions, drugs, and patients.
He also stated that dispensing based on prescriptions is the fundamental logic for selling prescription drugs; if this logic is undermined, drug safety cannot be guaranteed. Third-party prescription-sharing platforms establish standardized integration with healthcare institutions’ Hospital Information Systems (HIS) to effectively verify prescription authenticity, comply with government oversight, and enable verification of transaction records with sales terminals.
Third-party trading platforms primarily provide accessible and convenient marketplaces, verify the authenticity of transactions, establish quality control systems, conduct qualification reviews for pharmacies and pharmaceutical products, and perform timely tracking and dynamic evaluations.
Third-party logistics platforms: After enterprises deliver medications to patients' homes, they verify patients' identities in person and ensure follow-up on pharmaceutical care services.
Healthcare IT companies can also provide solutions for prescription sharing, optimization of medical service processes, and virtual inventory for retail pharmacies by focusing on the development of foundational pharmaceutical data platforms, innovation in scenario-based applications, and AI empowerment.
Weimai also believes that pharmaceutical companies need new sales channels, and patients require more options. This necessitates the establishment of a supply chain or platform to match these flows of traffic, thereby creating new opportunities for internet healthcare, related pharmaceutical e-commerce, and health informatics enterprises.
Overseas drug purchasing services once became a focal point of social controversy. With the introduction of clear legal provisions, the medications procured by Xu Zheng’s character in the film *Dying to Survive* and by Dr. Chen Zongxiang in the Liaocheng fake drug case are no longer classified as “counterfeit drugs.”
The newly revised Drug Administration Law has redefined the criteria for counterfeit drugs; for instance, legally marketed foreign pharmaceuticals imported without approval are no longer classified as counterfeit. Officials have stated that these changes in the definition of counterfeit drugs represent a legal response to societal concerns.
Comparison of the Definition of Counterfeit Drugs under the Drug Administration Law (Compiled by VCBeat)
Based on the interpretations provided at the press conference held by the General Office of the Standing Committee of the National People's Congress, we have summarized four key points:
1. The scope of counterfeit drugs has been revised, and imported drugs without approval are no longer classified as counterfeit drugs. The definition of counterfeit and inferior drugs now reverts to being based on the efficacy of the drugs;
2. Imported drugs are still subject to approval. Drugs that have not been approved, even if they are legally marketed abroad, cannot be imported;
3. If a small quantity of drugs legally marketed abroad is imported without approval, and the circumstances are relatively minor, the penalty may be mitigated or waived;
4. The aforementioned provisions do not equate to a reduction in penalty severity; rather, they impose stricter legal liabilities. Cases involving the manufacture, import, or sale of counterfeit or substandard drugs shall still be penalized in accordance with the regulations governing the manufacture, import, and sale of such products.
“Counterfeit Drugs” were defined under two criteria in the 2015 amended version of the Drug Administration Law: “scientific falsity in composition” and “legal or procedural falsity,” with previous emphasis placed on treating these two as equivalent. There is no dispute over “compositional falsity”; if a drug lacks its active ingredient, it is unquestionably a counterfeit drug. The real controversy lies in “procedural falsity.”
Yang Chen, founder of Kang’antu, believes that the recent revision to the Drug Administration Law has severed the link between “counterfeit drugs with falsified ingredients” and those “treated as counterfeit due to lack of registration procedures.” However, determining whether a drug is legitimately circulated abroad rather than being an overseas “counterfeit” has raised new questions regarding drug traceability.
Yang Chen noted that the general public lacks the knowledge to properly authenticate such medications, relying instead on unscientific methods such as inspecting packaging, anti-counterfeiting codes, and the color and shape of the pills. True authentication requires professional analytical instruments, including high-performance liquid chromatography (HPLC), mass spectrometry (MS), and nuclear magnetic resonance (NMR) spectroscopy. This underscores the need for cross-border healthcare service providers to address traceability at its source—for instance, by developing blockchain-based systems for cross-border drug traceability and anti-counterfeiting. Such systems would enable monitoring and fraud prevention across the entire pharmaceutical supply chain, allowing patients to verify authenticity in the future simply by scanning a QR code with WeChat.
The Marketing Authorization Holder (MAH) system is a regulatory framework under which drug research and development institutions and manufacturing enterprises that possess drug-related technologies apply for marketing authorization, obtain drug registration certificates, market the products in their own name, and assume responsibility for the drug throughout its entire lifecycle.
In November 2015, China launched a pilot program for the Marketing Authorization Holder (MAH) system. The official guidelines were issued in May 2016, yielding positive results over the subsequent three years. Under these regulations, MAHs are required to establish a quality assurance system and assume responsibility for all stages and aspects of the drug lifecycle, including non-clinical studies, clinical trials, production and operation, post-marketing research, adverse reaction monitoring, reporting, and handling. MAHs are mandated not only to possess capabilities in quality management and risk prevention and control but also to have the financial capacity for compensation. This accountability-driven management model will exert greater pressure on pharmaceutical companies, thereby promoting the standardized development of the industry.
Policy Changes for Marketing Authorization Holders of Pharmaceuticals (Compiled by VCBeat)
In addition to assigning clear accountability, another key role of the Marketing Authorization Holder (MAH) system is to encourage innovation through its institutional design. The current regulations explicitly state that MAHs may “entrust drug manufacturers with production” and “entrust drug distributors with distribution.” MAHs are only required to oversee the production and distribution processes and ensure drug traceability.
For innovative drug companies, the new regulations have broken the integrated “R&D, production, and sales” model, enabling enterprises across different segments to form flexible partnerships, fulfill their respective roles, and enhance the efficiency of drug innovation.
Dr. Wang Yongzhong, CEO of Suzhou Bridge Bio, stated, “The decoupling of the ‘R&D, manufacturing, and sales’ process is a significant boon to the CMO industry, but we hope to see further policy relaxation from the government. Specifically, we advocate for the separation of drug substance and drug product manufacturing within the production stage. This would deliver even greater benefits to the innovative drug sector, particularly the biopharmaceutical industry.”
“Full-lifecycle drug management represents a significant positive development for CROs,” a senior industry practitioner told VCBeat. “Even after market approval, drugs still require substantial clinical activities, such as safety monitoring, Phase IV clinical trials, and pharmacovigilance. Previously, these areas received insufficient attention, resulting in limited industry engagement. With the formal introduction of regulatory requirements, pharmaceutical companies are certain to increase their investments in these domains.”
In recent years, national policy trends have continued to open up to innovative drugs, taking concrete actions to support the development of domestically produced innovative pharmaceuticals.
The current Drug Administration Law has added a dedicated chapter on drug development and registration to encourage the research and creation of new drugs, formally incorporating the encouragement of pharmaceutical innovation into national laws and regulations.
In the policy interpretation delivered at the press conference held by the General Office of the Standing Committee of the National People's Congress, six key points warrant attention:
1. Clarified the direction of encouragement, with a focus on supporting drug innovations that are guided by clinical value and have demonstrated efficacy in treating human diseases;
2. Innovate the review and approval mechanism, strengthen the capacity building of review agencies, improve communication mechanisms with registration applicants, establish an expert consultation system, optimize review processes, and enhance review efficiency, thereby providing organizational support for drug innovation;
3. Optimized clinical trial management to improve the approval efficiency of clinical trials;
4. Establish a linked review and approval system, under which related materials are reviewed and approved together with the drug product during the drug evaluation and approval process;
5. Priority review and approval has been implemented, with a “green channel” established for drugs in short supply that are urgently needed for clinical use, new drugs for the prevention and treatment of major infectious diseases and rare diseases, and pediatric medications;
6. Established a conditional approval system, shortening the development time for clinical trials and enabling patients with urgent treatment needs to access new drugs at the earliest opportunity.
The review of innovative drugs has continued to accelerate over the past two years. According to the “2018 Annual Drug Review Report” released by the Center for Drug Evaluation (CDE), the CDE accepted 25 new drug applications (NDAs) for Class 1 innovative drugs in 2018, representing a 150% increase compared with 2017. Among these, NDAs for 16 Class 1 innovative chemical drugs were accepted, a 100% increase from 2017; and NDAs for 9 Class 1 biological products were accepted, a 4.5-fold increase from 2017.
By the end of 2018, the backlog of registration applications under review had decreased from a peak of nearly 22,000 in September 2015 to 3,440.
Changes in the Implied Approval Policy for Clinical Trials (Compiled by VCBeat)
In the newly revised regulations, many new drug review policies implemented in recent years have been formally incorporated into the Drug Administration Law. Provisions have been included for the 60-day implied approval of clinical trial applications, ethical review of drug clinical trials, and conditional approval of urgently needed drugs. Furthermore, other measures—such as priority review for pediatric medications and novel drugs for rare diseases, and the shift from a registration system to a filing system for clinical trial institutions—clearly demonstrate China’s policy alignment with international standards.
“Special approval regulations for pediatric drugs and new therapies for rare diseases also represent new opportunities for us. In the past, many pharmaceutical companies were reluctant to invest in these areas due to the challenges associated with conducting clinical trials for pediatric medications and novel treatments for rare diseases. Current policy initiatives are now driving growth in these sectors. As more pharmaceutical companies commit resources to these fields, we will gain corresponding opportunities,” said a senior CRO industry practitioner.
In addition, to address the widespread public concern over shortages of commonly used and emergency medications, the newly revised Drug Administration Law includes a dedicated chapter on drug reserves and supply, proposing requirements for addressing both root causes and symptoms through multi-departmental coordination.
Policy Changes in GMP and GSP Regulation (Compiled by VCBeat)
In the chapter on drug production under the new regulations, the requirement to “comply with the Good Manufacturing Practice (GMP) for Drugs formulated by the drug regulatory department of the State Council in accordance with this Law” has been included as a prerequisite for establishing a drug manufacturing enterprise. The provisions regarding GMP certification in the previous regulations have been deleted. A similar change has been made to the sections concerning the Good Supply Practice (GSP) for Drugs.
Abolishing certification does not mean eliminating GMP and GSP standards; rather, it integrates the mandatory requirements of these standards into the inspection processes for drug manufacturing and distribution licenses. This means that if a company fails to meet GMP or GSP standards, it will directly lose its drug manufacturing or distribution license, effectively raising the regulatory bar for pharmaceutical enterprises.
Furthermore, the regulatory amendments also stipulate the establishment of a specialized and professionalized workforce of drug inspectors. Moreover, according to relevant statistical data, the National Medical Products Administration (NMPA) has continuously increased the frequency of unannounced drug inspections over the past two years. The combination of more frequent unannounced inspections and an enhanced quality of inspection personnel will further constrain non-compliant practices by pharmaceutical enterprises, thereby strengthening the supervision and oversight of drug safety.
Abolishing GMP and GSP certifications follows the same rationale as the filing system for clinical trial institutions, namely, to reduce pre-approval certifications and rely more on post-market surveillance to oversee the industry. “The primary challenge for national regulators lies in building a pharmacovigilance system, particularly in its implementation; determining how to keep regulatory oversight within an appropriate scope will be the most worthy topic of discussion,” said Wang Yongzhong, CEO of Suqiao Bio.
Regarding the impact of the final implementation of the Drug Administration Law on the industry, Wang Yongzhong believes that significant changes are unlikely in the fields of drug research and development and manufacturing: “During the regulatory reforms in recent years, China’s entire pharmaceutical industry has made adequate forecasts and prepared to embrace change. The revision of the Drug Administration Law primarily provides legal and regulatory support for industry development and is unlikely to trigger major upheavals within the sector.”