On 18 September 2023, the PRC National Health Commission and five other government agencies issued the Second Catalogue of Rare Diseases (the “Second Catalogue"), which comprises of 86 rare diseases of 17 medical specialties, including hematology, dermatology, pediatrics, rheumatology & immunology, neurology and endocrinology. Together with the First Catalogue of Rare Diseases released in May of 2018, the total number of rare diseases designated or recognized in China has increased to 207. Notably, the Second Catalogue includes about 18 rare diseases (such as Bardet-Biedl syndrome, Merkel cell carcinoma and Giant cell arteritis, etc.) for which new drugs or new indications have been approved for marketing outside of China but have not yet entered the clinical trial stage in China.

Although 84.5% of rare diseases have a prevalence of less than one in a million, the total number of rare disease patients in China has reached approximately 20 million, with a growth rate exceeding 200,000 new patients per year. Given China's 1.4 billion population, many rare diseases in China are no longer “rare" compared to other countries and regions. [1]For a long time, China's rare disease drug market has been dominated by MNCs. From 2018 to 2022, a total of 27 rare disease drugs (except for new indications) were on the market, of which only 15% were introduced or genericized by domestic companies while 85% were from MNCs. One of the biggest MNCs alone has 4 drugs marketed in two rare disease areas. Noticeably, MNCs have launched Patient Assistance Programs (PAPs) for a series of rare diseases in China, including Hemophilia, ATTR-PN, ATTR-CM as above mentioned, and Gaucher disease, Pompe disease, Fabry, etc.[2]

Developers of designated orphan drugs are entitled to various preferential policies including exemption from clinical trials, priority review, marketing exclusivity and tax reduction in China as discussed in detail below:

Exemption from Clinical Trials[3]

For orphan drugs that have already obtained marketing approval outside of China, (i) if their global clinical data have already included PK and/or PD, safety and efficacy data for Chinese patients, and can prove that the orphan drugs bring more benefits than risks to Chinese patients, then the foreign applicant may be granted an exemption of clinical trials in China by the Center for Drug Evaluation (CDE) of the NMPA; and (ii) if their global clinical data do not include Chinese patients related data, but include sufficiently detailed race-based study and analytical data without showing of any apparent racial disparity, then in the case where there is no other effective treatment for the relevant rare disease, the orphan drug may be granted an exemption of clinical trial and approved for marketing in China, provided that stringent risk control measures are put in place in advance and the MA holder shall perform post-market safety and efficacy clinical trials. 

Priority Review

Orphan drugs included on the first and second Catalogues could qualify for priority review during applications for marketing authorization. In a priority review for orphan drugs categorized as innovative drugs (i.e., any chemical drugs, biological drugs and Chinese herbs that have not been approved for marketing in China or any foreign country), the technical review timeline can be reduced from 200 working days to 130 working days.[4]In a priority review for orphan drugs that have been approved overseas but not in China and are contained on the List of Overseas New Drugs Urgently Needed in China's Clinical Settings as released by NMPA, the technical review timeline can be reduced from 200 working days to 70 working days.[5]

Market Exclusivity

Currently, orphan drugs are entitled to the same market exclusivity protection as any other types of drugs.  Protection is available to undisclosed drug study data and other data independently obtained and submitted by drug developers to obtain production or marketing authorization of any drug containing new chemical entity. The term of the data exclusivity is six years from the date a drug developer obtains the approval for producing or marketing of a drug containing new chemical entity.   

In May 2022, NMPA issued the draft Regulations for the Implementation of the Drug Administration Law for public comments (the “Draft Amended Implementation Regulations"), pursuant to which the orphan drugs approved for marketing could be granted a market exclusivity up to 7 years, during which period no application for marketing authorization will be approved for the same drug (presumably meaning drug with the same molecule but not defined), provided that the MA holder shall commit to secure the supply of relevant drugs.  The market exclusivity could be terminated if the MA holder cannot ensure the drug supply.[6]As of the date hereof, there is still no specific timeline as to when the Draft Amended Implementing Regulations would be enacted, and so is the draft Measures for the Protection of Trial Data of Drugs issued by NMPA in April 2018. 

Tax Incentives

For orphan drugs that are on the lists of drugs and APIs qualified for preferential VAT tax treatment, as released by the Ministry of Finance, the General Administration of Customs, the State Administration of Tax and the NMPA in 2019, 2020 and 2022, respectively, their manufacturers, distributors and importer are entitled to a reduced VAT tax of 3%, down from the standard tax rate of 16%.[7]Additionally, in December 2020, the Ministry of Finance announced a zero-tariff policy for 4 APIs used in the production of orphan drugs.[8]

As China continues to expand its policy support for development, registration review and commercializing of orphan drugs, China might become a more desirable market for orphan drugs.  

[Note] 

[1] The 2023 China Rare Disease Observation Report issued by Frost & Sullivan on April 27, 2023.

[2] Id.

[3] Section 5.1.1 of the Clinical Technical Requirements for Pharmaceuticals Marketed Overseas but Not Yet Marketed Domestically issued by the CDE of NMPA on October 9, 2020.

[4] Article 1.1 of the Working Procedures for Accelerating the Review and Approval for Marketing of Innovative Drugs (for Trial) issued by the Center for Drug Evaluation of NMPA on March 31, 2023.

[5] Article 3.6 of the Working Procedures for Priority Review and Approval for Drug Marketing (for Trial) issued by NMPA on July 7, 2020.

[6] Article 29 of draft Regulations for the Implementation of the Drug Administration Law for public comments issued on May 9, 2022.

[7] Articles 2 and 3 of the Circular on VAT Policies of Orphan Drugs issued on February 20, 2019.

[8] PRC Tax Regulations on Import and Export Tariffs (2021).