On October 19, 2023, China’s National Medical Products Administration (“NMPA”) published the Rules for Applicable Discretion of Administrative Penalties in Drug Supervision and Administration (the “Proposed Rules”) for public comment. The Proposed Rules largely retain the overall structure of the 2012 Rules for the Applicable Discretion of Administrative Penalties in Drugs and Medical Devices (the “Current Rules”), while implementing several significant amendments. Most notably, the scope of the Proposed Rules has been extended to include cosmetics.
The Proposed Rules provide guidance on the exercise of discretion by medical products regulatory authorities when imposing administrative penalties. This includes decisions regarding whether to impose an administrative penalty at all, as well as the severity and scope of the penalty. Similar to the Current Rules, the Proposed Rules categorize decisions into four levels (the “permissible range” being the range between the minimum and maximum fine amount stipulated in relevant laws and regulations):
- severe penalty (exceeding 70% of the permissible range);
- general penalty (within 30% to 70% of the permissible range);
- light or reduced penalty (within the lower 30% of the permissible range or below the minimum threshold); and
- no penalty.
The Proposed Rules set forth important procedural requirements applicable to drug, device, and cosmetics companies when answering inquiries from officials. For example, the Proposed Rules instruct the regulatory authority to collect not only evidence of the violation, but also evidence relevant to mitigating circumstances and the reasoning for applying no penalty, a light or reduced penalty, or a severe penalty. The Proposed Rules also require that the drug regulatory authority keep a comprehensive and impartial record of the reasoning for the penalty proposed and the company’s defenses.
The Proposed Rules introduce several new provisions:
- The Proposed Rules classify special use cosmetics as high-risk products subject to intensified scrutiny.
- The Proposed Rules provide that the production, distribution, or use of the following products will result in a severe penalty: counterfeit or substandard drugs intended for pregnant women, children, and the critically ill; counterfeit or substandard biological products; medical devices that do not meet mandatory standards or product technical requirements submitted during registrations and filings that cause severe consequences; and cosmetics that fail to meet mandatory technical standards or the specifications declared during marketing applications that cause severe consequences.
- Under the Proposed Rules, no penalty will apply to minor violations that are corrected promptly without causing personal injury or death, nor to violations that remain undetected for two years (this period is extended to five years if the violations result in harmful consequences to people’s life and safety). Officials may waive penalties for first-time instances of non-compliance that have minimal impact and are corrected promptly.
- The Proposed Rules specify that no penalties will be applied to holders of licenses for drugs, devices, or cosmetics if their products—if legally approved and meeting post-market research and evaluation obligations—have defects that could not be detected based on then-existing scientific and technological standards.
- The Proposed Rules encourage, but do not appear to immediately establish, a guiding case system to normalize the discretionary application of administrative penalties. These guiding cases will serve as non-binding precedents, offering referential insight for similar future cases.
While the feedback period for rules is often 20-30 days, the feedback period for the Proposed Rules was only seven days. The Proposed Rules are subject to change, and stakeholders are encouraged to monitor their development to assess their potential impact.
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Contributors for the China & APAC Food, Drug, Device, and Cosmetics blog:
John Balzano, Julia Post, Muyun Hu, Kaixin Fan, and Kexin Yang.