Tracking China’s Structural Reform of Food and Drug Agencies

Overview


The 13th National People’s Congress and the 13th National Committee meeting of the Chinese People’s Political Consultative Conference were held from 3 to 20 March 2018, and on March 21, the Communist Party of China Central Committee released the Plan on Deepening Reform of Party and State Institutions. This Plan initiated a new round of institutional reform to China’s Food and Drug Administration, leading to historic structural changes.

Combining Three Key Entities

Under the Plan, the State Administration for Market Regulation will assume all responsibilities previously held by the State Administration for Industry and Commerce (SAIC); the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ); and the State Administration of Food and Drug Administration (CFDA). The latter three agencies will cease to exist (see Figure 1).

New agencies have been established under the State Administration for Market Regulation to handle the legacy agencies’ responsibilities. The new State Administration of Drug Supervision will handle matters related to pharmaceutical drugs, cosmetics and medical devices, and the National Health Commission combines functions formerly conducted by the National Health and Family Planning Commission, the Medical Reform Office of the State Council, the National Office for the Aging, and the Ministry of Science and Technology (the latter with regard to its duties under the Framework Convention on Tobacco Control) (see Figure 2).

Other reform measures specifically related to food regulation include the following:

  • AQSIQ’s Entry-Exit Inspection and Quarantine management responsibilities and staff have been reassigned to the General Administration of Customs.
  • The Ministry of Agriculture and Rural Affairs will replace the original Ministry of Agriculture.

Similarly, drug supervision reform measures aim to integrate the resources of various agencies. The newly created State Medical Insurance Administration is responsible for the following:

  • Basic medical insurance and maternity insurance for urban workers and residents (previously the responsibility of the Ministry of Human Resources and Social Security)
  • The new rural cooperative medical system (previously the responsibility of the National Health and Family Planning Commission)
  • Drug and medical services pricing management (previously the responsibility of the National Development and Reform Commission)
  • Medical rescue and assistance (previously the responsibility of the Ministry of Civil Affairs)

On 31 March 2018, Han Zheng, vice premier of the State Council, spoke at the Structural Reform Advancement Meeting. He emphasised that the restructured departments should become operative when amenities are furnished by the middle of April 2018, and the designation of responsibilities, internal institutions and personnel should be completed within each department by the end of June 2018.

Figure 1 State Administration for Market Regulation

Figure 2 National Health Comission

The merging of the three general administrations into the single State Administration for Market Regulation is a significant milestone. Local governments in Shanghai and Shenzhen have explored the possibility of establishing comprehensive departments with legal authority for market supervision and management since the beginning of 2014. The structural reform in the central government is modelled after practices implemented in various regions as the opportunity for comprehensive nationwide market supervision reform gradually becomes possible.

Upon the completion of the reform, administrative efficiency will be improved, and the timeline for food and drug inspection will be shortened as the required materials are simplified. The Plan also incorporates numerous responsibilities regarding manufacturing, commerce, quality inspection, food, pricing, trademarks, patents and relevant personnel, and will advance reforms by building a plenary supervisory team with high efficiency. Specifically, the new China Drug Administration was created to assume the responsibilities of drug management and supervision with increased resources and power.

In contrast, the formation of the National Health Commission does not have much effect on food administration, because its functions to create food safety standards and inspect the safety of new materials are similar to those of the outdated National Health and Family Planning Commission. For drug supervision, however, the Commission is tasked with promoting prevention as opposed to treatment only, and grassroots medical institutions will play a greater role in this regard. The Commission also will shoulder the responsibilities of the National Office for the Aging, signifying the government’s increased concern with leveraging both prevention and treatment in the care of an aging population.

Food Safety Administration

The Integration of the Inspection and Quarantine Bureau and Customs

Since 2017, many local customs and inspection bureaus have tested sharing methods, platforms and joint examination information, with favourable results. The integration of the two entities at the national level is expected to substantially facilitate trade and improve administrative efficiency.

Specifically, Customs now has additional authority to inspect and quarantine commodities beyond the scope of its original duties. It also is responsible for both customs and inspection applications. This change not only streamlines and expedites the application process, but should also reduce related paperwork. Starting from the end of April 2018, all front-line Customs sites and intermediary units began performing inspection and quarantine responsibilities in the name of China’s General Administration of Customs.

Day-to-Day Supervision by Government Agencies 

Prior to the structural reform, several agencies’ duties overlapped. For example, the CFDA supervised the specialised area of food and drugs, the AQSIQ performed overall quality control of general products, and the SAIC acted as a catchall regulatory department. Following the reform, the State Administration for Market Regulation is expected to seamlessly coordinate various stages of food safety control and emergency response. While day-to-day supervision used to take the combined effort of three agencies, those duties are now handled within one agency.

Drug Safety Administration

The general principle underlying the structural reform is clear division and assignment of responsibilities among departments. Each department uses due diligence in carrying out its clearly defined authority without duplication or interference with others’ work.

Concept of “Easy Entry, Close Supervision”

The State Administration for Market Regulation consolidated the antimonopoly enforcement power previously distributed among the National Development and Reform Commission, the Ministry of Commerce, and the State Administration for Industry and Commerce. This reform is a significant step towards greater departmental efficiency. In practice, the new agency is expected to more effectively combat commercial bribery and bundled sales in medical device transactions. Meanwhile, the three legacy agencies remain relatively independent within the State Administration, and therefore there will be few actual changes in policy making or the supervision of the registration approval of drugs and medical devices.

Changes After the Formation of State Medical Insurance Administration

Figure 3 State Medical Insurance Administration

The State Medical Insurance Administration will be solely responsible for the medical insurance management and medical assistance functions previously held by SAIC, AQSIQ and CFDA. It is also authorised to regulate and adjust the prices of drug and medical services and establish payment standards. The National Health Commission is no longer in charge of medical insurance, reflecting the separation of supervision power from operational duties. The Administration’s authority to set prices puts it in a better position to regulate and control expenses, not merely as the paying party.

Medical insurance funds from different sources will be integrated and managed exclusively by the Administration. The funds, consisting of workers medical insurance, resident medical insurance, maternity insurance and medical assistance accounts, were previously handled by several departments, including the Ministry of Human Resources and Social Security, the National Health and Family Planning Committee, and the Ministry of Civil Affairs. The changes integrated these administrative powers.

The Administration is capable of categorising pharmaceuticals, medical services and examinations; managing prices and purchases; contracting with designated medical institutions; and supervising expense settlement and services. These powers used to be shared among the National Development and Reform Commission, the Health and Family Planning Committee, and the Ministry of Human Resources and Social Security of the People’s Republic of China. The reform is expected to solve the problem of overlapping and obscure distribution of powers among multiple departments by establishing a centralised entity with well-defined internal organisations.

The Progress of the Changes to Law and Regulations 

As of June 2018, China had published 53 new laws and regulatory documents relating to the supervision of food and drug safety: 21 in March, 14 in April and 18 in May. These laws and regulations repeal some rules and renew others, and direct the turnover or transfer of responsibilities. They also cover the day-to-day oversight of drug and food safety, and the supervision of international trade (import and export), entry-exit inspection and quarantine, and health products and foods for special purposes.

Conclusion

The structural reforms for food and drug administration have yet to be completed. Many administrative functions, laws, regulations and normative documents are in the transition stage. Various existing instructions, certificates and paperwork will continue to be used in their original format, and the business seal, text format and corresponding procedures will remain the same. Further notice will be provided as the reforms progress.

Overall, this structural reform is expected to facilitate more efficient supervision of the food and pharmaceutical industries, alleviating some of the burden for stakeholder enterprises. However, in this transitional period, there will inevitably be uncertainty in terms of institutional responsibilities and frequent changes in applicable laws and regulations. Food and pharmaceutical enterprises should continue to monitor the status of the reforms to allow for timely adjustments.