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The U.S. Food and Drug Administration’s plans to post employees in the People’s Republic of China presages both a new spirit of regulatory cooperation between the two countries and a new growth area for law firms with a foothold in China. The FDA announced plans to post eight full-time, permanent FDA employees in China within the next 18 months, plus five local Chinese nationals to work with FDA staff. Although the FDA needs Chinese government approval to bring the plan to fruition, lawyers say two memorandums of agreement signed by the Chinese government and the U.S. Department of Health and Human Services in December 2007 concerning the safety of food, feed, drugs and medical devices makes the FDA’s plan all but inevitable. The agreements call for Chinese producers of affected products to register with Chinese authorities. They also require Chinese regulators to certify that products covered by the agreement adhere to U.S. standards and to verify compliance. The FDA plans to conduct more inspections in China with the new employees and to train Chinese regulators. Enter, law firms The FDA’s move into China also opens the door for U.S. law firms to expand their training and advisory role with U.S. companies buying drugs or components in China, as well as Chinese drug and device makers. Sidley Austin, for example, is in the early stages of an agreement to bring its expertise in European Union and U.S. food, drug and device laws to the Shanghai Institute of Food and Drug Safety, a think tank formed to develop new food and drug laws for China, said Scott Bass, a partner in the Washington office who heads Sidley Austin’s global life sciences team. Unlike many other law firms whose Chinese offices focus primarily on corporate work, Sidley Austin’s Beijing office has a specialty in life sciences regulatory work that’s also supported by the Shanghai office, Bass said. Since the December memorandums of agreement, which were signed by two Chinese governmental agencies, including the State Food and Drug Administration, the amount and quality of export surveillance has increased, along with cooperation with U.S. FDA and E.U. authorities, Bass said. “[The U.S. FDA's expansion in China] will certainly mean expansion of regulatory work into audit and enforcement defense roles as we do in the U.S. and E.U.,” Bass said. There’s a real short-term opportunity for lawyers, U.S. FDA consultants and large U.S. pharmaceutical companies to help Chinese companies grapple with, and conform to, the upcoming regulatory changes, said Carol Pratt, a partner in the Portland, Ore., office of Kirkpatrick & Lockhart Preston Gates Ellis who specializes in regulatory issues related to new medical technologies. That’s particularly true for the numerous small mom-and-pop outfits making drug components in China, because they’re unaccustomed to strict oversight, she said. “We’re going to see a transition period where a lot of teaching needs to take place,” Pratt said. “Law firms that have offices in Asia are going to be better positioned to try to meet this need than law firms that do not.” The problems of the past year have created a sense of urgency in both countries, Pratt said. “This is a huge market,” she noted. “China wants to sell its products [to U.S. companies] and they understand they need to meet our quality control standards.” Understanding consequences A shift in China’s regulatory regime for drugs, medical devices and foods isn’t going to happen overnight, but its creation and development will create opportunities for lawyers working with U.S. and Chinese manufacturers in China for many years to come, said Robert Nicholas, a partner in the Washington office who heads McDermott, Will & Emery’s FDA practice. Lawyers usually step into the breach wherever and whenever there are substantial health and safety requirements that are not well implemented, Nicholas said. “It takes knowledge, experience and training to get people to understand the consequences of how they prepare documents for contracts and for submission to various regulatory agencies,” Nicholas said. “Lawyers are involved in many of those practices.” Private sector companies realize that they must take responsibility for a secure supply chain, and they’re turning to lawyers for help, said Dan Troy, an FDA lawyer in Sidley Austin’s Washington office. “Many companies are stepping up their own efforts,” Troy said. “The FDA is never going to be able to inspect the entire world into compliance.” Companies are taking it upon themselves to do prequalification inspections of suppliers and unannounced inspections of existing suppliers, said Rick Silverman, a partner at Washington’s Hogan & Hartson who specializes in regulatory matters. Hogan & Hartson’s FDA work includes advising international food companies exporting from China into the United States. Although some lawyers caution that China needs new legislation, Bass said the Chinese central government’s commitment to change should clear many obstacles to change. “People shouldn’t underestimate the speed at which China is coming around to increased enforcement,” Bass said. “It’s a cultural change as well as a business change.” Rebuilding confidence Jim Chapman, a partner in the Palo Alto, Calif., office of Nixon Peabody who heads the Shanghai office that Nixon opened last month, said his clients working on drug development and clinical trials in China welcome more U.S. FDA involvement in China. “Having the FDA there is a good thing,” Chapman said. “[It will help] rebuild some of the confidence lost in the heparin situation. The Chinese FDA is learning as fast as they can.” The need for regulatory harmonization is urgent, lawyers say. Concerns about manufacturing-quality problems in China have heightened this year with reports that Baxter Healthcare Corp.’s heparin injectable blood-thinning product is linked to 19 deaths and hundreds of allergic reactions. FDA spokeswoman Karen Riley said the agency has traced a contaminant in heparin to China but it is unclear whether the contaminant caused the adverse reactions. Baxter, which has stopped making heparin sodium in multiple-dose vials, has recalled various formats of heparin products. The company is investigating how and why the contaminant entered the supply chain and whether there’s any causality between the contaminant and adverse reactions, said Baxter spokeswoman Erin M. Gardiner. “We will continue to collaborate with the FDA as we work to determine the cause of the increased rate of adverse reactions and resolve this issue,” said Peter J. Arduini, president of Baxter’s medication delivery business in a February announcement about the recall.

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