Outsourcing Manufacture: Regulatory Considerations for Drug Marketing Authorization Holders (MAHs)

by Grace Wang Aug 17, 2023

On Aug. 4, 2023, the 2nd day of CMC China event, experts in the pharmaceutical industry gathered in eastern Suzhou, China, to shed light on the manufacturing compliance for drug marketing authorization holders (MAHs).

The MAH system has been in effect nationwide since the revised Drug Administration Law went into force in 2019. Under the system, MAHs are permitted to entrust other companies with the manufacturing activities. Thus, quite a few MAHs outsource manufacture to other companies, and save more resources for R&D or other areas.

However, outsourcing manufacture is a process which is mined with risks of regulatory violations and business pitfalls.

Even though outsourcing manufacture to others, the MAH is still the primary responsibility taker for drug quality.

Outsourcing manufacture does not mean the MAH is changed. Rather, only the manufacture activities are carried out by the entrusted manufacturer; the manufactured products are still held or owned by the MAH. 

Evidently, MAHs should supervise the entrusted manufacturer to ensure drug safety, effectiveness, and quality controllability.

For changes of product ownership, please refer to part 6 “Transfer of Marketing Authorization (MAH Change)” at BaiPharm Insight “China's Marketing Authorization Holder (MAH) System”. 

This article mainly addresses regulatory compliance for MAHs that outsource manufacture to others. 

1. MAH’s Definition

According to China's Drug Administration Law, an MAH is a company or drug research institution which has obtained a drug registration certificate from the National Medical Products Administration (NMPA). An individual is NOT permitted to be MAHs.

Foreign MAHs that have acquired China NMPA’s marketing authorization must appoint Chinese corporate entities, which will function as MAHs’ local agents.

2. Outsourcing Manufacture or Not, Chinese MAHs Must Obtain the Manufacturing License

Before getting to commercialized manufacture, a Chinese MAH have to obtain the Drug Manufacturing License from the local provincial-level medical products administration. The manufacturing licenses are categorized into four types:

  • License A is for an MAH that manufactures products by itself;

  • License B is for an MAH that entrusts manufacture to contract manufacturers;

  • License C is for a contract manufacturing organization (CMO) that manufactures products for MAHs.

  • License D is for active pharmaceutical ingredient (API) manufacturers.

Notes: APIs are assigned with filing numbers (not drug registration certificates) if their drug master files (DMFs) have been filed to Center for Drug Evaluation (CDE) and passed the technical review by CDE. DMF filing number holders are NOT permitted to outsource API manufacture to others.

To outsource manufacture to others, an MAH must at least have License B for the drug products. Meanwhile, the same MAH may also need to apply for License A, if it is going to manufacture other drug products by itself. 

Only after the MAH has got License B to outsource manufacture can the CMO apply for License C to take the outsourced work. 

Therefore, in terms of certificates required for outsourcing manufacture, the MAH must obtain License B while the CMO must have License C. The absence of either certificate will abort the outsourcing plan.

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Year 2020 to 2022 have witnessed growths in the issuance of License B and License C. In the same time range, License C was fewer than License B, partly because some companies, which plan to be entrusted manufacturers, are not qualified to get License C. 

Figure 1: License B and License C issued in China, 2020-2022


Source: The speech by Zhang Ziran, vice president of China Pharmaceutical Industry Association, at CMC China 2023 in Suzhou, China

As of March 2023, the total number of drug product manufacturing licenses—License A, B, and C, amounted to 8,840. A large portion—6,578 are License A, meaning most of the authorized domestic drug products are manufactured by MAHs themselves. 

Figure 2: Number of drug product manufacturing licenses in China as of March 2023


Source: The speech by Zhang Ziran, vice president of China Pharmaceutical Industry Association, at CMC China 2023 in Suzhou, China

3. Foreign MAHs’ Four Modes of Manufacture

License A, B, and C only apply to Chinese companies. For foreign MAHs, there are four modes of manufacture.

The first is to manufacture drug products in the original country/region, and export them to China.

The second approach is that the foreign MAH entrusts another foreign company to first manufacture the products outside China, and then sell them to China via international trade.

It is also viable to establish a subsidiary in China and have the affiliate to manufacture products. If the products have been authorized and previously manufactured outside China, changing the manufacturing site from overseas to China would require the foreign MAH’s Chinese agent to apply for the drug registration certificate from China NMPA. 

The last way is to entrust manufacture to a local Chinese CMO outside the MAH’s organization structure. This requires effective communication and solid technology transfer between the foreign MAH and the qualified Chinese CMO. Still, the change of manufacturing site from overseas to China requires drug registration certificate issued by China NMPA.

4. Draft Regulation on Outsourcing Manufacture

Apparently, Chinese authorities have noticed the increase in outsourced manufacture, and thus taking measures to regulate such activities. On May 24, 2023, China NMPA released the draft Notice of Enhancing the Supervision of Drug Marketing Authorization Holders (MAHs) That Outsource Manufacture.

In the draft, NMPA overtly says it would rein in the authorization of outsourced manufacture, ordering provincial-level medical products administration to scrutinize the MAH’s application dossier for obtaining License B, or for changing the previously authorized manufacture scope on License B, as well as the GMP inspection conclusion by the local regulator of the province where the CMO is situated.

MAHs of traditional Chinese medicine (TCM) injections and multi-component biochemical drugs shall have the capability to manufacture the products independently. This requirement is stricter than the Drug Administration Law which entitles all MAHs to choose outsource manufacture or not.

Biological product (excluding vaccines and blood products) MAHs are encouraged to have the capability to manufacture the products independently. If the MAH has insufficient production capacity and needs to outsource manufacture to another company’s site, the holder should manage the outsourcing activity according to the regulations on post-marketing changes of drugs. 

In short, the MAH system has brought flexibility to holders, allowing them to outsource manufacture. It has also injected vitality to the pharma industry, making transactions between MAHs and CMOs thrive. However, the outsourcing activities will be meticulously reviewed by regulators to prevent stakeholders from compromising drug quality for profits. 

Contact BaiPharm if you’d like to know more about China’s drug regulations.


Grace Wang
ChemLinked Regulatory Analyst & Editor
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