China Life Sciences: 2024 Year in Review

The life sciences industry remained a primary focus for Chinese regulators in 2024. Key developments such as China’s first draft law regulating the medical device industry, the Medical Device Administration Law (《中华人民共和国医疗器械管理法（草案征求意见稿）》), and the Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks (《医药企业防范商业贿赂风险合规指引》) marked milestones in the development of China’s regulatory framework for the industry. Corruption and fraud against China’s state-run medical insurance system remained primary areas of focus for enforcement actions.

In this Advisory, we summarize the major legislative, regulatory, and policy developments and the trends in regulatory enforcement from 2024.

Overseas MAHs Must Appoint Domestic Responsible Persons

On November 13, 2024, China’s National Medical Products Administration (NMPA) issued the Interim Provisions on the Administration of Domestic Responsible Persons Designated by Overseas Drug Marketing Authorization Holders (the Interim Provisions, 《境外药品上市许可持有人指定境内责任人管理暂行规定》), which will come into effect on July 1, 2025.

The Domestic Responsible Person (DRP) is defined as a domestic entity designated by the overseas marketing authorization holder (MAH) to fulfill the MAH’s obligations within Mainland China. The DRP bears joint and several liability with the overseas MAH for the quality and safety of imported drugs. An overseas MAH has the discretion to designate the same or different DRPs for different drugs marketed in China, but each imported drug must have a single designated DRP.

Under the Interim Provisions, the DRP must have an appropriate quality management system, personnel, and infrastructure to perform its responsibilities, including ensuring quality and safety, maintaining a traceability system, submitting annual reports, overseeing post-marketing changes, pharmacovigilance, initiating recalls, and interacting with Chinese regulators.

Beginning on July 1, 2025, an overseas MAH must designate a DRP and submit the relevant information to regulators prior to the first importation and sale of its drug in China. This filing must include the basic information of the overseas MAH and the DRP, a commitment letter signed by both parties outlining their obligations, and a notarized list of responsibilities to be undertaken by the DRP. Additionally, the package insert of any drug manufactured or released after July 1, 2025 must provide the DRP’s name, address, and contact information.

Overseas MAHs should leverage the grace period to appoint DRPs, file the required information with local regulators, and amend their package inserts.

New Regulations Simplify Localization of Drug Manufacturing

On April 23, 2024, the NMPA issued the Announcement on Optimizing the Application for Marketing Authorization of Approved Overseas-manufactured Drugs Transferring to Domestic Manufacturing (the Announcement, 《国家药监局关于优化已在境内上市的境外生产药品转移至境内生产的药品上市注册申请相关事项的公告》). This Announcement, along with separate guidelines published by the Center For Drug Evaluation, outlines the application procedures, dossier requirements, and incentives aimed at promoting the localization of drug manufacturing.

Under the current regulatory framework, domestic manufacturing by an overseas MAH is generally prohibited.¹ If the MAH is overseas, the products must be manufactured outside of China and then imported into China for sale. The pathway for relocating manufacturing to China is for a local Chinese entity to apply for marketing authorization for the product. Once approved, the local entity becomes the MAH for the domestically manufactured product. This local entity is typically a subsidiary, affiliate, or third-party partner (such as a licensee) of the overseas MAH.

The Announcement reaffirms that applications for marketing authorization of domestically manufactured drugs must be filed by a domestic applicant and sets forth several measures to simplify the process for localizing manufacturing, including: (1) permitting the applicant to submit the original dossiers previously filed for New Drug Applications or Biologics License Applications for the imported counterpart, along with the research dossiers supporting the transfer of the manufacturing site; (2) simplifying the application process for transfers within the same parent company under a unified quality management system; and (3) granting priority review for the marketing authorization applications of originator chemical drugs and biological products.

Multinational companies that serve as overseas MAHs for drugs marketed in China may want to assess their strategies for relocating manufacturing to China. This approach could help resolve some of the legal issues commonly faced by overseas MAHs while leveraging China’s manufacturing capacity.

New Pilot Program Relaxes Segmented Production of Biologics

On October 21, 2024, the NMPA released the Pilot Program for Segmented Production of Biological Products (the Pilot Program,《生物制品分段生产试点工作方案》), which permits non-end-to-end and segmented production of biological products at different facilities.

Historically, segmented production of biologics across multiple manufacturing sites was generally not permitted in China, although segmented production is allowed for imported biologics produced by overseas manufacturers. As a result, both the drug substance and drug product of domestically manufactured biologics must be produced at the same manufacturing facility in China.

The Pilot Program is applicable in selected cities and provinces with well-developed biopharma infrastructure, such as Shanghai, Beijing, Guangdong, and Jiangsu. Products eligible for the Pilot Program include innovative biologics, biologics that are urgently needed, and other biological products specified by the NMPA. This includes multi-valent and multi-component vaccines, antibody-based biologics, antibody-drug conjugates, glucagon-like peptide-1 receptor agonists, and insulin.

Applicants should demonstrate their ability to carry out independent research and development, quality management, risk prevention and control, and compensation of patients in the event of drug-related harm for the pilot biologics. For Contract Manufacturing Organizations (CMOs), a comprehensive drug quality assurance system and a minimum of three years of experience in the commercial production of biologics are required. Applicants must assign at least two experienced technical personnel to oversee the CMO’s manufacturing operations and ensure that the CMO’s quality management systems are aligned and integrated with the applicant’s.

Applicants must submit their applications to the provincial medical products administration by December 31, 2025. At the conclusion of the Pilot Program on December 31, 2026, the NMPA will decide whether to expand the program to allow the manufacturing of all biologics with a non-end-to-end process, i.e., to end the restriction of non-end-to-end processes to specific biologics manufactured by qualified applicants in selected regions.

This Pilot Program reflects international best practices and the government’s support for the manufacturing of biologics. Although the implementation of segmented production in a cross-border context remains unclear, these new regulations offer an opportunity for multinational biopharmaceutical companies to work with local partners and regulators to explore outsourcing opportunities in China.

China Lifts Ban on Foreign Investment in Human Stem Cell and Gene Therapies

Until now, China has prohibited foreign investment in the development and application of human stem cell and gene therapies (CGT). On September 7, 2024, the Ministry of Commerce, the National Health Commission, and the NMPA jointly issued the Notice on Conducting Pilot Work for Further Opening Up in the Medical Field (the Notice, 《关于在医疗领域开展扩大开放试点工作的通知》), which lifts the ban on foreign investment in CGT in selected free-trade zones.

Under the Notice, foreign-invested enterprises are allowed to engage in the development and application of CGT in four free-trade zones: Beijing, Shanghai, Guangdong, and Hainan. The CGT activities must be for the purpose of product registration and manufacturing in China. Once the products are approved by the NMPA, the products manufactured in the four free-trade zones can be sold throughout China.

Foreign-invested enterprises engaged in CGT must comply with the relevant Chinese laws and regulations related to human genetic resources, clinical trials, ethics review, registration, manufacturing, marketing, and other regulatory requirements.

China is likely to gradually expand this policy from the free-trade zones to other cities and regions. This new policy presents a fresh opportunity for foreign investors in CGT. CGT-related enterprises that had utilized a variable interest entity (VIE) structure to bypass foreign investment restrictions may now consider terminating their VIE structure and directly establishing wholly-owned enterprises or joint ventures in China.

China Unveils Draft Medical Device Law

On August 28, 2024, the NMPA issued the Draft Medical Device Administration Law (the Draft MDAL, 《中华人民共和国医疗器械管理法（草案征求意见稿）》) for public comment.² Although the final law has not been issued, the Draft MDAL provides insight into regulations that are likely to be implemented in the Medical Device and Medical Technology sector. When finalized, the Draft MDAL will elevate the current Regulation on the Supervision and Administration of Medical Devices (the Device Regulation, 《医疗器械监督管理条例》) from an administrative regulation to the level of a general law. The Draft MDAL is expected to introduce new regulatory requirements and compliance guidance. Some of the notable developments include:

1. Currently, applicants who wish to import medical devices into China must obtain marketing approval from the country of origin before the devices can be approved in China, unless the device is deemed innovative. The Draft MDAL removes the requirement for approval from the country of origin. With this change, imported medical devices would be able to undergo regulatory review and approval in China in parallel with other countries, leading to faster market entry in China.
2. At present, medical device registration certificates cannot be transferred between different entities. The Draft MDAL allows for the transfer of registration certificates to another registrant, provided the new entity has the capacity to ensure the device’s safety, effectiveness, and quality control.
3. Under the current Device Regulation, medical devices marketed in China must adhere to both mandatory national standards and Chinese industry standards. The Draft MDAL clarifies that Chinese industry standards are voluntary and allows companies to follow international standards if they impose more stringent requirements than industry standards.
4. The Draft MDAL increases the required credentials for domestic responsible persons. Specifically, the domestic responsible persons for overseas registrants would need to have either device distribution licenses or device manufacturing licenses, and would bear joint and several liability with the overseas registrants of the medical device.
5. The Draft MDAL enhances the legal responsibilities of entities operating in the medical device sector (e.g., manufacturers, distributors, hospitals), and covering potential civil, criminal, and administrative liabilities. The draft also introduces an additional penalty: five to 15 days of administrative detention for the management personnel responsible for violations such as the manufacturing, sale, or use of medical devices that do not meet mandatory standards.

Once enacted, the Draft MDAL will become China’s first comprehensive law specifically regulating the medical device and medical technology industry and will transform the regulatory landscape for medical devices in China. Medical device and medical technology companies operating in China should closely monitor the development of this law.

New Whistleblower Regulations for the Life Sciences Industry

On October 10, 2024, the NMPA issued the Draft Rule on Rewarding Internal Whistleblowers for Reporting on the Quality and Safety Issues of Drugs and Medical Devices (Draft Rule, 《关于对药品、医疗器械质量安全内部举报人举报实施奖励的公告》). The Draft Rule is the first whistleblower regulation in China to specifically target the life sciences industry, and focuses on reports related to “quality and safety.” Although this term is not specifically defined in the Draft Rule, the regulations are likely intended to refer to China’s existing regulatory scheme for quality and safety, including the quality and safety requirements stipulated in good practice regulations. The regulations require authorities to maintain the confidentiality of whistleblowers, and prohibit retaliation against whistleblowers.

Anti-Corruption Campaign — Legal & Regulatory Developments

The anti-corruption campaign targeting the healthcare industry that launched in 2023 continued in 2024. Last year saw not only increased enforcement actions, but a number of legal and regulatory developments focused on anti-corruption in the life sciences.

The 12th Amendment to the PRC Criminal Law, which took effect on March 1, 2024, put a significant emphasis on anti-corruption, and specified that misconduct in the life sciences industry will be considered an aggravating factor for bribery crimes. On December 25, 2024, Chinese regulators released proposed revisions to the PRC Anti-Unfair Competition Law, which, among other changes, introduced penalties for the legal representatives, key executives, and personnel directly responsible for the businesses involved in commercial bribery. These revisions could be viewed as similar to the trend in enforcement against individual employees under the U.S. Foreign Corrupt Practices Act.

The State Administration for Market Regulation (SAMR, 国家市场监督管理总局), one of China’s primary anti-corruption regulators, issued the Compliance Guidelines for Healthcare Companies to Prevent Commercial Bribery Risks (Guidelines, 《医药企业防范商业贿赂风险合规指引》), which were published as a draft for public comment on October 11, 2024 and in final form on January 14, 2025. The Guidelines provide the most current and comprehensive guidance on Chinese regulators’ views regarding life sciences industry practices, similar to the Foreign Corrupt Practices Act Resource Guide published by the U.S. Department of Justice and Securities and Exchange Commission.

On November 28, 2024, the NMPA issued the Draft Administrative Measures for Pharmaceutical Representatives (Draft Management Measures,《医药代表管理办法》). While these draft regulations focus on the conduct of medical representatives, i.e., sales representatives, they also impose new obligations on Marketing Authorization Holders (MAHs), healthcare institutions, and healthcare providers (HCPs), with a strong emphasis on anti-corruption compliance, for example by prohibiting MAHs from employing medical representatives who have a record of commercial bribery. Although these regulations are written to target pharmaceutical sales representatives, other regulations have been initially rolled out for pharmaceuticals and then extended to the medical device sector. All sectors of the life sciences industry would be well advised to view the Draft Management Measures as a preview of coming regulatory changes.

Anti-Corruption Campaign — Enforcement Actions

Anti-corruption enforcement actions in China’s life sciences industry remained a major focus for Chinese regulators.

On May 27, 2024, the National Health Commission (国家卫健委) and 13 other government authorities jointly issued the Notice on Promulgation of the Key Points for the Work of Correcting Malpractice in the Medicine Purchase and Sales Field and Medical Services in 2024 (the 2024 Notice, 2024《年纠正医药购销领域和医疗服务中不正之风工作要点》). The 2024 Notice provided guidance for government authorities regarding the key enforcement areas in the life sciences industry, and further demonstrated Chinese regulators’ commitment to the life sciences anti-corruption campaign. The 2024 Notice continued to focus on improper benefits channeled through sponsorships or grants for academic meetings, as well as the use of clinical studies as a method for providing improper benefits to HCPs. The 2024 Notice also contains new areas of regulatory emphasis, such as a new focus on punishing both bribe givers and bribe recipients, in contrast to traditional enforcement actions that focus on the recipients.

In line with the 2024 Notice, this past year saw increasingly stringent enforcement actions in all sectors of China’s life sciences industry.

On December 25, 2024, the National Supervisory Commission, a government authority primarily responsible for investigating and disciplining misconduct by government officials, reported that in 2024, more than 52,000 people were investigated for corruption-related issues in the life sciences industry, among whom 40,000 were disciplined and 2,634 were transferred for prosecution. Media reports and government announcements indicate that in 2024, numerous government officials, HCPs, and employees of pharmaceutical and medical device companies have been fined, detained, arrested, and/or convicted of bribery. The targets of these enforcement actions include high-level HCPs and government officials, senior directors of hospitals, and employees of large healthcare companies. An increasing number of criminal and administrative enforcement actions in the life sciences industry were announced by government authorities as model cases for guidance to both regulators and industry. We have also seen increasingly close collaboration among multiple government agencies in bringing anti-corruption enforcement actions, resulting in impact on multiple aspects of the targeted companies’ business operations, including limitations on eligibility for participation in public procurement of medical products. The high-risk activities noted in the Guidelines, such as speaker fees, sponsorships, and clinical trials, remained an enforcement focus as well.

We have provided a selected list of model cases for each high-risk area highlighted in the Guidelines in 2024 in the chart below.

Medical Insurance Fraud

Fraud against China’s state-run medical insurance program continued to be another area of focus for regulators in 2024. The Guiding Opinions on Several Issues Concerning the Handling of Criminal Cases Involving Healthcare Fraud (Guiding Opinions, 《关于办理医保骗保刑事案件若干问题的指导意见》), released on February 28, 2024, reiterated principles regarding medical insurance fraud set forth in previous laws and regulations, and also included issues identified in prior enforcement cases. In particular, the Guiding Opinions specified what actions would constitute medical insurance fraud by healthcare institutions, healthcare administrative departments, and individuals. The Guiding Opinions also analyze the potential consequences of falsifying testing reports, medical certificates, and accounting documents required to claim medical insurance reimbursement.

There were also multiple notable enforcement actions in 2024 targeting fraud against China’s state-run medical insurance program. Media reports indicate that in January 2024, two former government officials who had been responsible for the medical insurance system were detained by the Commission for Disciplinary Inspection due to potential corruption issues. Media also reported that in April 2024, a former government official who was in charge of the centralized procurement of drugs through volume-based purchasing was detained for investigation. Although the media reports did not disclose the details of the investigations, the investigations and detentions show regulators’ continued focus on cost controls and the government procurement of medical products.

The investigation and arrest of several current and former managers of a major global pharmaceutical company for medical insurance fraud also drew significant attention. Media reports indicate that to date, more than 100 sales representatives, approximately 10 Regional Sales Managers, and three Director-level employees of this company have been questioned as part of the investigation.

In addition, on October 15, 2024, the NHSA published a model medical insurance fraud case from Harbin, Heilongjiang Province that involved four pharmacies. The total amount of the fraud was reported to exceed $14,285,714 (RMB 100,000,000). The NHSA indicated that this case involved not only pharmacy personnel, but also sales representatives and HCPs. The fraud was reportedly carried out by purchasing blank prescriptions, falsifying hospitals’ seals, falsifying HCPs’ seals and signatures, and fabricating non-existent patients.

2024 was a year of significant progress and continued high regulatory scrutiny for China’s life sciences industry. We expect continued progress and regulatory focus in 2025. For questions on this or any other subject, please reach out to the authors or any of their colleagues in Arnold & Porter’s Life Sciences or White Collar Defense & Investigations practice group.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.