March 24, 2022

Draft Implementing Rules of China’s Human Genetic Resources Regulations as Applied to Foreign Persons

The Administrative Regulations of the People’s Republic of China on Human Genetic Resources (the “Regulations”), promulgated by China’s State Council, have been in effect for almost three years. As the administrative department under the State Council with the primary responsibility for the administration and enforcement of the Regulations, China’s Ministry of Science and Technology (“MOST”) is also responsible for promulgating rules implementing the Regulations. On March 21, 2022, MOST published Draft Implementing Rules for the Regulations (the “Draft Rules”) for public comment, which must be submitted to MOST by April 21, 2022.

This article is not a comprehensive review of the Draft Rules, but rather focuses on those provisions of the Draft Rules that are specifically related to “foreign organizations and individuals and the entities formed or actually controlled by them” under the Regulations (collectively, “Foreign Persons”), with the exception of the first part on the definition of “human genetic resources information.” For a high level analysis of the application of the Regulations on Foreign Persons, please refer to the author’s previous article on the matter.

Definition of “Human Genetic Resources Information”

Under the Regulations, human genetic resources (“HGR”) include HGR materials and HGR information. HGR materials are “genetic materials such as organs, tissues and cells which contain human genomes, genes and other genetic substances,” and HGR information is defined in the Regulations as “information materials such as data generated from the utilization of human genetic resources materials.”

MOST has interpreted HGR information very broadly. According to guidelines published by MOST, there are six categories of HGR information: (1) clinical data, such as demographic information, general laboratory test information, etc.; (2) imaging data, such as ultrasound, CT, PET-CT, MRI, X-ray, etc.; (3) biomarker data, such as diagnostic biomarkers, surveillance biomarkers, pharmacodynamics/reactive biomarkers, predictive biomarkers, prognostic biomarkers, safety biomarkers, and susceptibility/risk biomarkers; (4) gene data, such as whole genome sequencing, exome sequencing, target region sequencing, human mitochondria sequencing, whole genome methylation sequencing, IncRNA sequencing, transcriptome sequencing, single-cell transcriptome sequencing, small RNA sequencing, etc.; (5) protein data; and (6) metabolic data.

The Draft Rules maintained the definitions of HGR and HGR materials, but significantly narrowed the scope of HGR information by limiting the “information materials” to human gene and genome data. This apparently is co-extensive with the fourth category of HGR information in MOST’s guidelines. It remains to be seen whether the other categories of HGR information in MOST’s guidelines will still be considered HGR information under the final Implementing Rules.

Scope of “Foreign Persons” Clarified

The Regulations prohibit Foreign Persons from collecting or preserving China HGR in China, or providing China HGR abroad, and impose a series of prohibitions or restrictions on the provision of China HGR to Foreign Persons. The Regulations do permit Foreign Persons’ limited use of China HGR “to carry out scientific research activities,” which must be conducted through collaboration with Chinese scientific research institutions, higher education institutions, medical institutions, or enterprises (collectively, “Chinese Entities”). 

Foreign Persons include both foreign individuals and foreign entities, where foreign entities are (i) foreign organizations or (ii) entities, whether foreign or domestic, formed or actually controlled by foreign organizations or individuals, according to the Draft Rules. There have been various interpretations of what constitutes “actual control” in the context of the Regulations, and the Draft Rules provided a more definitive but open-ended scope. According to the Draft Rules, “actual control” includes the following scenarios: (A) foreign organizations or individuals hold or indirectly hold more than 50% of the shares, equity, voting rights, property shares or other similar rights or interests of an entity;[1] (B) even though foreign organizations or individuals hold or indirectly hold less than 50% of the shares, equity, voting rights, property shares or other similar rights or interests of an entity, they enjoy voting rights in the decision-making body or other rights or interests sufficient to have a material impact on the entity’s resolution, decision-making and internal management; (C) foreign organizations or individuals are able to exert material impact on major matters of the entity such as its decision-making and operation and management through agreements or other arrangements; and (D) other scenarios where MOST has determined that there is actual control.

Scenarios (A) through (C) collectively resemble a typical definition for “control” in many cross-border technology transaction agreements, while scenario (D) gives MOST wide latitude in finding actual control. Interestingly, based on a literal reading of the Regulations and the Draft Rules, an entity formed by a foreign organization or individual, regardless of whether it is actually controlled by them, would still be considered a foreign entity. This may require further clarification from MOST in the final Implementing Rules.

Benefit-Sharing from International Collaborations

The Regulations dictate that any patent rights based on scientific research results obtained in permitted international collaborations between a Foreign Person and a Chinese Entity (each, a “Collaborator”) using China HGR (“International Collaborations”) must be jointly owned by the Collaborators. Ownership and use rights of, and benefit-sharing methods with respect to, “other scientific and technological achievements” arising from International Collaborations may be contractually agreed upon by the Collaborators.

The Draft Rules clarified that the “other scientific and technological achievements” referenced in the Regulations include works, data, standards and technological processes. The Draft Rules emphasized the importance of expressly providing for the ownership, use rights and methods of benefit-sharing in the collaboration agreement, because in the absence of such provisions, or in the event the agreement is unclear on these issues, the default rules set forth in the Regulations and the Draft Rules will apply, i.e., both the Chinese and the foreign Collaborators will have the right to use these scientific and technological achievements, but any transfer to a third party shall be subject to consent of both Collaborators, and the benefits obtained shall be shared according to the contribution made by the Collaborators. The Draft Rules further clarified that, in the event the Collaborators’ respective contribution cannot be determined, they shall share the benefits equally.

Waiver of Foreign Ethics Review

One of the conditions that an International Collaboration must satisfy under the Regulations is that it must have passed ethics review by the respective jurisdictions of both Collaborators. In practice, however, for various reasons, many Foreign Persons have found it difficult, if not impossible, to obtain ethics review of an International Collaboration by their jurisdictions.

The Draft Rules attempted to address this dilemma by providing a mechanism to waive the foreign ethics review. The waiver may be available if, upon review by the Ethics Committee of the Chinese Collaborator, it is found that the International Collaboration does not involve material ethics issues, and it is truly impossible to provide a foreign ethics review. Several conditions must be met before a waiver application may be approved: (A) the entire International Collaboration must be completed within China; (B) the International Collaboration is in accordance with ethics principles and does not involve material ethics issues; and (C) the waiver imposes no risk or very little risk to the subjects in the International Collaboration. The Chinese Collaborator’s Ethics Committee (or, in the event of multiple Chinese Collaborators, the Ethics Committee of the leading institute) is responsible for reviewing the reasons for the waiver and potential risks, and the applicable Chinese Collaborator will submit the waiver application together with a power of attorney from the applicable foreign Collaborator and conclusions from the review of the reasons and the potential risks.

Filing of International Clinical Trials

International Collaborations are generally subject to MOST’s approval. However, under the Regulations, international clinical trials “using” China HGR “at clinical institutions” and which do not involve the transfer abroad of China HGR materials do not need MOST’s approval but are required to make a filing with MOST.

Consistent with prior MOST guidelines, the Draft Rules clarified that “using ... at clinical institutions” referenced in the Regulations includes the following scenarios: (A) the collection, testing and analysis of China HGR and the processing of remaining samples are all conducted at clinical institutions; or (B) the collection of China HGR is conducted at clinical institutions, but the analysis, testing and processing of remaining samples are conducted at Chinese entities designated in the applicable clinical trial protocol. The Draft Rules also clarified that “clinical institutions” refer to “medical institutions and disease prevention and control institutions that have been filed with relevant departments and can carry out clinical research.” Importantly, according to the Draft Rules, any part of an international clinical trial that involves “exploratory research” is still subject to separate MOST approval. It remains to be clarified what constitutes “exploratory research” in a clinical trial so that the Collaborators can comply with the approval requirement and not inadvertently fail to seek approval.

The Draft Rules also clarified the timing and the content of the filings for international clinical trials. Specifically, the filing with MOST may be submitted after the applicable clinical trial has been approved or filed with China’s National Medical Products Administration, and the filings should include the following information: (A) the various entities in the clinical trial and the types, quantity and use of China HGR to be used in the clinical trial; (B) the clinical trial protocol; and (C) the leading Chinese Entity’s ethics review approval.

Report on International Collaborations

The Regulations require that the Collaborators shall jointly submit a report on the applicable International Collaboration to MOST within six months after completion of the collaborative activities, but do not specify what must be included in the report.

The Draft Rules clarified that the report must include the following contents: (1) changes in such matters as the purpose and content of the research; (2) implementation of the research plan; (3) completion of the research content; (4) use of China HGR; (5) disposition of China HGR; (6) the recording, storage, and use, etc. of research data; (7) participation of both Collaborators in the research, focusing on the substantive participation of the Chinese Entity in the whole process; (8) research results; (9) changes in the attribution and distribution of research results; and (10) ethics review involved in the research.

Filing of Outbound Provision of China HGR Information

The Regulations permit the provision of, or open access to, China HGR information to Foreign Persons, subject only to filing with MOST and submission of backup copies of such information, but do not specify what the filing materials must include.

The Draft Rules clarified that the filing materials must include the following contents: (A) the purpose and use of the outbound provision of or open access to the gene and genome information of China HGR; (B) the gene and genome information being provided or subject to open access; (C) information on the Foreign Entity that receives the China HGR information; and (D) assessment of the risks to the protection of China HGR. Note, again, the narrowing of HGR information to gene and genome information, consistent with the HGR information definition discussed above.

Despite the general filing requirements as described above, under the Regulations, in the event the outbound provision or open access could endanger China’s public health, national security or public interests, MOST’s security review will be required. However, the Regulations do not provide any guidance on what circumstances may “endanger China’s public health, national security or public interests.”

The Draft Rules clarified that the outbound provision of, or open access to, the following China HGR information must be subject to the security review by MOST: (A) HGR information of significant hereditary families; (B) HGR information from specific regions;[2] (C) information resources on exome sequencing and genome sequencing of a population greater than 500 people; and (D) other information that may endanger China’s public health, national security or public interests. MOST, together with relevant departments, will formulate the security review principles, organize experts in relevant fields to conduct the security review and assessment, and make decisions based on expert security review and assessment opinions. The security reviews are generally conducted by means of online review, and, if necessary, may hold meetings or conduct site surveys, etc. The Draft Rules do not provide any time limit to the security reviews.

Material Changes to International Collaborations and Outbound Provision of HGR Information

The Regulations require that any changes to material aspects of an International Collaboration, such as changes to the Collaborators or the purpose, contents or term of the International Collaboration, must be subject to MOST’s approval. This left several questions open. First, when should an application for the change be filed? Second, what would be considered a material change that must be approved? Third, what about international clinical trials that are only subject to filing and not approval in the first place?

The Draft Rules have attempted to answer all of these questions. Application for any material changes to an International Collaboration that is subject to approval must be filed at least one month prior to the implementation of the applicable changes. Instead of specifying what material changes are subject to approval, the Draft Rules have identified several scenarios where approval is not required but the Collaborators should still submit relevant materials to MOST for filing: (A) the research protocol remains unchanged, and there is only a 10% or less change to the cumulative number of cases compared to the approved quantity; (B) the applicant, leading Chinese Entity, contract research organizations and third-party laboratories all remain unchanged, and the change is limited to other participating entities, or to the name of any of the foregoing; and (C) the research protocol has been changed, but the change does not involve any change to the types, quantity or use of China HGR or the change does not exceed the approved scope.

With respect to International Collaborations that require filings only, if any material aspects, such as the types, quantity or use of China HGR, have changed, the Collaborators should promptly submit filing for such change. If the change does not involve any of the above or is limited to the term of the collaboration, no filing is required, but the Collaborators should still notify MOST of such changes prior to the commencement of the changes.

The Draft Rules additionally attempted to address material changes to outbound provision of, or open access to, China HGR information, but the relevant draft provisions lack clarity. It appears that only changes to the use of the HGR provided or subject to open access require filing with MOST, but the Draft Rules also appear to require that, in such circumstances, the “Collaborators,” which is apparently a misnomer because there is no Collaborator in the context of outbound provision or open access, cease the record filing and submit a “summary report.” Further clarification is needed in the final Implementing Rules.

Enforcement and Penalties

The Draft Rules have detailed provisions on the enforcement procedures and administrative penalties, jurisdiction and hearings, all of which presumably have general applicability that covers Foreign Persons. One notable clarification is the method of calculating “illegal gains” from the illegal collection or preservation of China HGR, or the illegal use of China HGR in International Collaborations, or the illegal outbound provision of China HGR: they can be measured by the value of the collected China HGR or the amount of funds invested in the applicable illegal activities.

The rule-making progress of the much anticipated Implementing Rules of the Regulations undoubtedly warrants close monitoring and careful analysis. 

[1]It appears that scenario (A) should be “no less than” rather than “more than” 50%. This will need to be clarified in the final Implementing Rules.
[2]Both “significant hereditary families” and “specific regions” have clear definitions in prior MOST guidelines.