13 June 2018

The Policies of Hainan's Pharmaceutical and Healthcare Industry

This article was written by Huang Jianwen(Partner).

With multiple authoritative statements drawing wide attention, Hainan’s pharmaceutical and healthcare industry is seeking comprehensive development

The year of 2018 is a remarkable year in Hainan’s pharmaceutical and healthcare industry. The mission of medial development is noted conspicuously in President Xi Jinping's remarks celebrating the 30th anniversary of the founding of the Hainan Province and the Hainan Special Economic Zone, and the “Guiding Opinions of the CPC Central Committee and the State Council on Supporting Hainan in Comprehensively Deepening Reform and Opening-up” (“Guiding Opinions”). Furthermore, the “Decision of the State Council on Suspending the Implementation of the ‘Regulations on the Supervision and Administration of Medical Devices’ in the Boao Lecheng International Medical Tourism Pilot Zone, Hainan Province” (“Decision”), issued on April 2, has officially handed over to the Hainan Provincial Government the approval power associated with medical institutions’ using unregistered medical devices that are urgently needed for clinical use. The top-level strategy disclosed in President Xi’s remarks, the “Guiding Opinions”, and the “Decision” shed light on China’s central authority’s determination to accelerate the development of Hainan’s pharmaceutical and healthcare industry, and on the industry’s enormous potential. 

The rapid development of Hainan’s medical care started with the establishment of the Boao Lecheng International Medical Tourism Pilot Zone, which was approved by the State Council in 2013. The Pilot Zone is located on the banks of Wanquan River between Jiaji, a town area of Qionghai and the core area of Boao Forum for Asia.  The Pilot Zone is planned to cover 20.14 square kilometers, within which the construction land will encompass 9.96 square kilometers. The Pilot Zone began to take shape since 2017. More than 100 projects have been launched and about 5.7 of the 21-billion-yuan total investment is now completed in the Pilot Zone. Accommodating dozens of Sino-foreign cooperative medical institutions, including those from the US, the UK, Germany, Hong Kong, Macaw, Taiwan and other countries and regions, the Pilot Zone provides medical services ranging from assisted reproduction and pregnancy, plastic surgery, tumor therapy to applications of stem cells and anti-aging medical cosmetology. In March of this year, with the opening of Boao Super Hospital, a cluster of specialized clinical medical centres consisting of “one shared hospital and numbers of clinical centers,” has been formed. 

What specific preferential policies is the Pilot Zone entitled to? The “Reply of the State Council on the Approval to Establish the Boao Lecheng International Medical Tourism Pilot Zone in Hainan” (“Reply”) by the State Council issued in 2013 has offered the Pilot Zone a total of 9 exceptionally preferential policies, featuring imported medical devices and medicines, clinical research of stem cells, large-scale medical devices and foreign investment in medical institutions, and more. The most crucial one among the above 9 policies is the special approval procedures with respect to the importation of medical devices and medicines that are urgently needed for clinical use in the Pilot Zone, which can considerably improve the efficiency of importing medical devices and medicines. As reaffirmed by the “Decision”, the importation of unregistered medical devices within the Pilot Zone can be approved by the Hainan Provincial Government. Also, currently the application of medicine importation in the Pilot Zone can be approved by CFDA via a distinctive yet convenient avenue. By contrast to the normal period of medical devices and medicines importation approvals, the period of medical devices and medicines importation approvals in the Pilot Zone has been considerably shortened. The benefits of the special polices are evident and growing.

Preferential policies cover the Pilot Zone and the entire Hainan Province, and the development prospects of Hainan’s pharmaceutical and healthcare industry

Following the promulgation of the “Reply”, the Hainan Provincial Government and other relevant authorities have successively formulated multiple complementary documents, including “Provisional Measures for Further Deepening and Detailing the Preferential Policies of the Pilot Zone”, and “Notice on Simplifying the Operation Procedures of the Preferential Policies for the Boao Lecheng International Medical Tourism Pilot Zone”, to implement the preferential policies given to the Pilot Zone. At present, preferential policies in the Pilot Zone have gradually constituted a comparatively applicable system.

1. Preferential Policies within the Pilot Zone

Matter  Preferential Policies 
Importation of Medical Devices   To shorten the period of medical devices importation approval: for Category II and Category III medical devices, decrease the period from 80 and 110 working days to 50 and 90 working days respectively (excluding the period for examination test and clinical trial).
 To hand over to the Hainan Provincial Government the authority of approving the importation of unregistered medical devices that do not have similar products in China and are urgently needed for clinical use in the medical institutions within the Pilot Zone.
 To appropriately reduce the duty rates for some medical devices which are regarded as truly necessary for importation but with comparatively high duty rates. 
Importation of Medicines   To shorten the period of medicines importation approval: for the importation of medicines with drug marketing licenses approved by foreign authorities but unregistered in China, implements the special approval process with registration requirements same as the requirements for new medicine, and shorten the approval period from 370 working days to 150 working days (excluding the period for clinical trial).
 To permit the medical institutions within the Pilot Zone to directly apply to CFDA for importation of small amounts of medicines that are urgently needed for clinical use, and the Hainan FDA to ask CFDA to extend the application scope from “importation of small amounts that are urgently needed” to “importation as needed”.
 To appropriately reduce the duty rates for some medicines which are regarded as truly necessary for importation but with comparatively high duty rates. 
Clinical Research of Stem Cells    To shorten the review period of stem cells clinical research projects filed by clinical research institutions within the Pilot Zone.
 To strive for easing the qualification restrictions on stem cells clinical research institutions and to gradually implement localized filing system. The above would be led by the Health and Family Planning Commission of Hainan. 
The Approval of Medical Institution’s Using Large-scale Medical Devices   To simplify the approval procedures of large-scale medical devices: when applying for establishment of non-public medical institutions within the Pilot Zone, the applicant may simultaneously apply for the certificate of large-scale medical devices that it needs within the scope of its medical treatment subjects. 
Foreign Investment in Medical Institutions   To gradually ease the restrictions on the foreign capital equity ratio in equity joint ventures or cooperative medical institutions, and progressively allow foreign capital to establish wholly-owned medical institutions. 
Foreign Physicians Practice   To extend the practicing period for foreign physicians to 3 years.
 To simplify entry procedures for medical technicians and experts.
 To facilitate the application for working permits and foreign expert certificates in China by foreign middle to high level management and medical professionals, and to issue permits and certificates on the same day on which the applications are accepted, and to provide on-site service when necessary.
 To extend the effective period of Foreign Expert Certificate for high-level medical experts to 3-5 years when necessary. 

In addition to the preferential policies listed in the table above, the Pilot Zone offers various benefits in terms of land, insurance, customs clearance, bonded warehouse for medicines and medical devices, introducing international organizations and convening international conferences. These benefits will further spur the development of international medical tourism industry within the Pilot Zone.

2. Preferential Policies Covering the Entire Hainan Province

Outside the Pilot Zone, Hainan also promulgated a series of other measures to attract foreign investment and overseas patients. These measures will boost Hainan’s pharmaceutical and healthcare industry as well.

(a) Headquarters Economy

On May 19, 2018, the General Office of the Hainan Provincial Government released the “Opinions of the General Office of the People’s Government of the Hainan Province on Promoting the Development of Headquarters Economy”, which indicates that the Hainan Provincial Government shall actively inviting headquarters, such as that of multinational corporations and large domestic group enterprises, to settle in the province. The Hainan Provincial Government has enacted accreditation criteria of headquarters. According to the principles stated in the “Measures for the Accreditation and Management of Hainan Headquarters”, headquarters are divided into four categories: (1) multinational corporation headquarters (2) comprehensive (regional) headquarters (3) high-growth headquarters (4) international organization headquarters. The Hainan Provincial Government is working with related authorities to formulate relevant supporting preferential policies, which would be public soon.

(b) Foreign Investment

In order to attract foreign investment, the Hainan Provincial Government issued “Implementation Opinions of the People’s Government of Hainan on Expanding Opening-up and Actively Using Foreign Investment” (“Implementation Opinions”) on December 6, 2017. The “Implementation Opinions” addresses six measures to attract foreign investment, including: (1) Increase the strength of fiscal support, for example, if an overseas Fortune 500 company sets up a first-level subsidiary or a second-level subsidiary in the province, and promise not to move out within five years, the Hainan Provincial Government will grant a one-time reward of 20 million and 15 million yuan respectively as supporting funds; (2) Increase support for wholly foreign-owned enterprises, such as actively encourage wholly foreign-owned enterprises to list on domestic and overseas capital markets, support equity financing, and facilitate eligible foreign enterprises to issue bonds to raise funds; (3) Implement preferential tax policies; (4) Support the use of land for foreign investment projects; (5) Support high-level overseas talent to start a business in the province; and (6) Encourage municipal and county governments to formulate measures and policies to attract foreign investment.

(c) Visa-free Tourism

According to the announcement made by the State Immigration Administration on April 4, 2018, citizens from 59 countries are privileged visa-free travel in Hainan for up to 30 days. The announcement states that citizens of the 59 countries can enter Hainan through the open ports with their ordinary passports, be received by travel agencies set up in Hainan, and stay for up to 30 days. The policies mentioned above in this announcement are likely to boom Hainan’s medical tourism industry.

Based on the preferential policies and other favorable measures, the Pilot Zone, and the entire Hainan Island may become a popular destination for medical investment in China and even in East Asia. Hainan’s pharmaceutical and healthcare industry is expected to enter a new era of tremendous development.

The KWM Healthcare group has been scouring the legal and commercial developments in Hainan’s pharmaceutical and healthcare industry, and has extensive experience related to China’s pharmaceuticals and medicine, especially foreign investment projects. Hainan is developing into an international medical tourism island, and the KWM Healthcare group continues to strive in providing professional legal services for domestic and oversea enterprises interested in expanding their business in the Hainan Province.

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