Chinese Ministry of Science and Technology releases draft rules on administration of human genetic resources

China’s Ministry of Science and Technology (MOST) released the Draft Implementing Rules of Human Genetic Resources Administrative Regulations for public comment (the “Draft Implementing Rules”) on March 22, 2022. MOST invites public comment until April 21, 2022. .

The Human Genetic Resources Administrative Rules (the “HGR Rules”) scrutinize all HGR-related activities, from the upstream collection of HGR Materials to the downstream exploitation and sharing of HGR Materials and the data derived therefrom. are derived (“HGR data”). The Draft Implementing Rules aim to provide operational details and clarify issues that have emerged over the past few years following the HRG regulations has become effective. Given the growing need to use biological materials and related data from Chinese patients in basic research and clinical development, we advise life science companies to carefully consider the draft implementation rules and examine their potential impact on their cross-border research initiatives.

Highlights of the draft Implementing Rules are summarized below.

1. Clarify the definition of “foreign entities”

Under the HGR Regulations, foreign entities are prohibited from collecting, keeping or transferring Chinese HGR outwards. HGR includes HGR Materials and HGR Data.

The HGR regulations define foreign entities as foreign organizations or PRC-domiciled entities that are established or controlled by a foreign organization or individual. In practice, there is controversy as to whether a VIE contractually controlled by a foreign organization or individual would be considered a foreign entity.

The draft implementing rules provide guidance on what constitutes control. In summary, a foreign organization that owns more than 50% of the shares, shares, voting rights or other similar rights and interests, directly or indirectly, in a PRC-domiciled entity will be deemed to have control. In addition, a foreign organization or person who can exercise control or decisive influence over the strategic matters of a PRC-domiciled entity, such as decision-making, operation and management, will also be deemed to have control, even if such control is obtained by contractual arrangement. This means that a PRC domiciled company adopting the VIE structure will be considered a foreign entity.

For the avoidance of doubt, foreign entities may also be interpreted to include a joint venture domiciled in the PRC whose registered shareholders include a foreign shareholder, regardless of his shareholding position.

2. Relaxation of control over the disclosure and sharing of “HGR data”

The draft implementing rules limit the definition of HGR data to human genes or genomic data derived from HGR materials, which include organs, tissues, cells or other genetic materials containing human genome or genes. Data related to clinical practices, patient demographics, laboratory tests, medical images, etc. that do not carry genetic attributes will not be regulated as HGR data.

HGR regulations require a Chinese entity to notify the Human Genetic Resources Administration of China (“HGRAC”) of its disclosure or sharing of any HGR data with a foreign entity. A security review by HGRAC is required if such disclosure or sharing may affect national security, public interests, or public health. HGRAC has the discretion to interpret circumstances that would be considered to “affect” those interests and prohibit the disclosure and sharing of HGR data. The draft implementing rules list situations where a security review is required for the disclosure or sharing of HGR data, such as the disclosure or sharing of HGR data regarding significant genetic pedigrees, HGR data from regions specific and information on the sequencing of the exome and the genome of more than 500 people. . Additionally, the HGRAC must engage experts in the security review process.

3. Clarification of Intellectual Property Ownership Requirements

In accordance with HGR regulations, foreign entities seeking access to Chinese HGRs can only do so through collaborations with Chinese partners, and prior approval from HGRAC is required for such collaborations. Any patents derived from such collaboration must be jointly owned by the Chinese partners and the foreign entities. The HGR regulations further emphasize that Chinese parties have the right to be substantially involved in the collaboration and must have access to all data generated by them.

The draft implementing rules provide clearer guidance on how to attribute intellectual property derived from Sino-foreign cooperative research using Chinese HGRs. While patents are to be jointly owned, the draft implementing rules allow foreign entities and their Chinese research partners to contractually agree ownership and benefit sharing of other intellectual property rights covering work products, data, standards or processes. In other words, the foreign entity is not prohibited from seeking exclusive ownership of these non-patentable intellectual properties, but must provide Chinese partners with access to all data generated by research collaborations.

4. Streamlined Regulatory Process for Registration Studies

Under the draft implementing rules, clinical studies conducted for the purpose of obtaining marketing authorization for medicines and medical devices in China, if they do not involve the export of HGR, will be eligible for a registration dossier (as opposed to pre-approval) if the HGR materials are collected by the sites and processed by the sites or a third-party onshore laboratory specified in the study protocol. This simplified regulatory process does not apply to exploratory studies or studies where samples will be exported for processing by an offshore third-party laboratory.

The implementing rules further specify that for clinical studies conducted for the purpose of obtaining marketing authorization for medicines and medical devices in China, the registration dossier must be made after receiving the clinical trial approval from the NMPA or provincial MPA, and a separate collection license from HGRAC. will no longer be necessary even if the biological samples to be collected exceed the size limit of 3000 samples previously set by the HGRAC.

5. Provide clearer standards for law enforcement

Various measures have been introduced in the draft implementing rules to strengthen enforcement against potential violations. The Ministry of Science and Technology and its local counterparts will carry out periodic inspections and reasoned investigations to ensure compliance. Entities that have been sanctioned within the last three-year period, failed to take timely corrective action, or were blacklisted will be subject to more frequent inspections.

The HGR regulations provide penalties for various infractions. For example, a foreign entity that violates HGR regulations could be subject to fines of up to 10 million RMB ($1.44 million), or five to ten times any illegal gain over 1 million RMB. Corporate officers responsible for these entities are subject to fines of up to 500,000 RMB and lifetime exclusion in severe cases.

The draft implementing rules specify factors that law enforcement authorities should consider when setting administrative penalties, including, but not limited to, whether the parties involved are at fault, whether the violation at issue is the first offense and whether corrective action has been taken to reduce adverse effects. The draft implementing rules further specify that illegal gains should be calculated on the basis of the value of the RHG collected and the funds invested in the relevant research projects.

A key outstanding issue that has not been fully addressed by the draft Implementing Rules is the scope of the HRG Regulation. The HGR Regulations exempt certain HGR collection and storage activities from its regulatory scrutiny, for example, clinical diagnosis and treatment, blood banks, criminal investigations, anti-doping and funeral services. However, companies may have legitimate needs to use HGR to perform QA/QC checks in order to manufacture their equipment or diagnostic instruments approved by regulatory authorities. This QA/QC-focused use is not clearly exempted in the HRG Regulations or the Draft Implementing Rules. It would be helpful if the draft implementing rules could clarify this issue and provide a possible solution to meet the legitimate needs of life science manufacturers.

Comments are closed.