Key Definitions

It is known that the HGR defined under the China regime includes HGR resources and HGR information. The authority has been refining the regulated scope of HGR throughout the years through administrative guidelines and official Q&As. The Implementing Rules further clarify that HGR information includes information generated from HGR resources, including human genes and genome data, which however excludes clinical data, image data, protein data and metabolic data. This approach is in line with the attitudes of the  authority, as reflected in their previous Q&As and administration practices.

Same as the HGR Rules, the Implementing Rules reiterate that foreign individuals, foreign entities or organizations, and organizations or entities that are established or “actually controlled” by a foreign individual, entity or organization are all prohibited from collecting, preserving and exporting HGR, including the inclusion of variable interest entity arrangement.  Except for some minor tweaks, the definition of “actual control” is almost identical to that was provided in the previous draft rules for public comments issued on 21 March 2022 (Draft Rules), with the following three circumstances and one catch-all clause:

• a foreign individual/entity/organization is holding or indirectly holding more than 50% of the shares, equity, voting rights, shares of property or other similar interests in the particular entity;
• although the holding of the shares, equity, voting rights, shares of property or other similar interests does not reach 50%, the voting rights or other interests enjoyed by such foreign individual/entity/organization will allow it to control or impose a significant impact on the resolutions or management of the particular entity;
• a foreign individual/entity/organization can control or exert significant impacts on the particular entity’s decision-making, management and other major matters via investment relationships, agreements or other arrangements; or
• other circumstances as provided in laws and regulations.

As is also discussed in our article regarding the Draft Rules, the aforesaid definition echoes the current attitudes of the authority in determining the regulated scope, parties and activities.

Approval, record-filing, and prior-reporting scheme

In accordance with the HGR Rules, different HGR-related activities, including collection, preservation, international collaborative scientific research, and exportation, are subject to different administrative formalities. Depending on the complexity of the research program, sometimes more than one application shall be completed to ensure compliance in a particular step. As a practical guideline for the HGR Rules, the Implementing Rules further adjust the administrative formality scheme, which, to some extent, makes it more practical and forward looking.

1. Further definitive regulatory scope of HGR collection activities

Under certain circumstances, the collection of HGR is subject to approval granted by the  authority. The definition of the scope has long relied on the  authority administrative guideline, being the collection of (i) HGR of important genetic families; (ii) HGR in specific regions; and (iii) HGR of populations with rare diseases, or significantly different physical or physiological characteristics, or HGR of over 500 cases.

As a practical guideline, the Implementing Rules exclude high blood pressure, diabetes, red-green color blindness and hemophilia from important genetic families, delete the approval requirement imposed on subjects with rare diseases, or significantly different physical or physiological characteristics, and lift the threshold number from 500 to 3,000. More importantly, the Implementing Rules explicitly exempt clinical trials purposing for market authorization from the requirement of HGR collection approval (except for HGR of important genetic families and HGR in specific regions), even if the HGR of over 3,000 cases is involved.

2. More “friendly” scope of clinical trials for drug and medical device market authorization

Same as the Draft Rules, the Implementing Rules expand the scope of international collaborative scientific research projects that can be carried out with only a record-filing with the  authority, rather than an approval, by specifying that such benefit could apply to international clinical trials carried out for the purpose of obtaining the marketing authorization of relevant drugs/medical devices in China and not involving exportation of HGR materials, on the condition that (i) the collection, testing, analysis and residual sample processing of the HGR involved are performed within the PRC clinical institutions; or (ii) the HGR involved are collected within PRC the clinical institutions, with the detection, analysis and residual sample disposal carried out within domestic lab(s) specified in the clinical trial protocol. In accordance with this clause, it is then not necessary to enjoy the benefits by urging the medical institutions to engage third-party lab(s) in order to go through the record-filing rather than the approval procedures, which is previously required by the  authority and sometimes is troublesome for sponsors.

3. Implications on the administration on HGR information exportation and open use

It is worth noting that for the first time, the Implementing Rules introduce a “prior-reporting” regime for the exportation and open use of HGR information. 

Furthermore, the Implementing Rules add more color to the security review procedures for the exportation and open use of HGR information under the following circumstances:

• there involves HGR information of important genetic families;
• there involves HGR in specific regions;
• there involves exome sequencing and genome sequencing information resources for more than 500 cases; and
• other circumstances that may impact public health, national security and social public interests.

However, the Implementing Rules only provide high-level directions (e.g., an expert pool will be established) regarding the security review procedures, without specifying the timelines or the reviewing scope thereof. It is also not clear how the HGR security review procedures will interact with other administrative regimes, for example, the cross-border transfer of personal information. Given such mist, it is anticipated that more detailed and practical guidelines will be released by the authority in the near future.

Other Takeaways

One more notable change brought by the Implementing Rules is the signal that the authority will start to delegate certain of its powers to provincial governments or even “other relevant organizations”. Such power will include the review of HGR-related administrative applications, HGR-related investigations, and even penalty decisions in the same regard.

The Implementing Rules also provide rules regarding the supervision and inspection procedures of the authority and its local counterparts, including the compiling of annual supervision and inspection plan, and more frequent inspections on entities that have been penalized in the recent three years.  

Next Steps

On the one hand, the Implementing Rules provide market participants with benefits in certain administrative procedures, for example, clarifications regarding the approval of HGR collection, and potential delegation to more regulatory bodies to facilitate the administrative process. On the other hand, it  signals that China is strengthening its supervision of HGR-related activities, since more regulatory bodies will be empowered to monitor the practice.

Hogan Lovells has been closely monitoring the government regulatory development and the enforcement actions. Please reach out to the authors or the Hogan Lovells attorneys with whom you regularly work for specific questions regarding your HGR-related activities in China and beyond.

Authored by Lu Zhou and Jessie Xie.