Outlook for China’s Patent Linkage System
Outlook for China’s patent linkage system: From “Phase 1 Economic and Trade Agreement’ to ‘Pharmaceutical Patent Information Declaration and Registration”
By Wang Haoqun, Miao Zheng from NTD LAW OFFICE
(This article is exclusively published by zhichanli. Reposting is only allowed with consent of the authors and credit should be displayed in a prominent manner)
On January 15, 2020, China and the United States signed the Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China (the “Agreement”), calling a truce in the nearly two-year-long U.S.-China trade frictions that negatively impacted the global economy. In the Agreement, the parties agreed on pharmaceutical-related intellectual property issues, as well as effective patent term extension.
With the widespread consistency evaluation of generic drugs, the full implementation of the “two-invoice system”, the successful conclusion of national medical insurance negotiations, and the launch of a series of bold pharmaceutical-related reforms, the pharmaceutical industry has undergone major changes. In the long term, the internal integration of the generic drugs industry is likely to further expand. The future generic drugs market will be more centralized, one that will be dominated by large pharmaceutical companies with the combined advantages of high production capacities and low costs. On the premise that the current pharmaceutical policies are maintained, to create a level playing field where generic-drug companies and their innovator-drug counterparts continue to provide high-quality and low-price pharmaceuticals, one prerequisite is to eliminate at the earliest any risk of patent infringement before the marketing of generic drugs.
In addition, Article 1.11 of the Agreement, “Effective Mechanism for Early Resolution of Patent Disputes”, is modeled on the current U.S. patent linkage system, while also leaving room for China’s adjustments on the basis of industry development situation and industry policy considerations. The table below shows the authors’ comparison of the said Article with the current U.S. patent linkage system.
In light of the above and to fully fulfill the obligations under the Agreement, the much-discussed but not yet formulated pharmaceutical patent linkage system has become almost a certainty in China. Therefore, the focus should shift to the outlook of China’s pharmaceutical patent linkage system and discuss the required merits of such a system, rather than continue to argue the necessity of a patent linkage system.
The creation of a new regime would have a profound impact on the interest of stakeholders. This is also true of the patent linkage system. To establish, improve and maintain the well-functioning of this system, a minimum requirement would be the coordination of new drug registration, generic drug approval, pharmaceutical patent license, and the judicial procedures for patent granting and affirmation. The details in the design of such a system shall be determined upon much deliberation by legislators, on basis of China’s actual situation and with consideration of the development and policies of the industry. While the authors lack the expertise to finalize the top-level design of China’s patent linkage system, they do hope to contribute, from the perspective of lawyers, to the discussion of relevant issues pertaining to the initial stage of the pharmaceutical patent linkage, i.e., pharmaceutical patent information declaration and registration system during new drug approval.
Pharmaceutical patent linkage system starts with the patent information registration system during new drug approval. Given the high costs, long period and high risks of pharmaceuticals research and development, in practice innovator-drug companies tend to abuse the patent information registration system during new drug approval by including, wherever possible, information of patents that are not yet granted, regardless of whether the claims of such patents cover the active ingredient, composition or method-of-use of the drug in question.
The Hatch-Waxman Act contains precautionary measures against the abuse of patent information declaration and registration system during new drug approval. However, as the FDA does not verify the patent information listed in the Orange Book, the precautionary effects of such requirements are limited. To avoid abuse of the patent information registration system for the purpose of unreasonably extending the patent protection of pharmaceuticals, while also reducing patent disputes caused by the application of marketing approval to the largest extent, countries (and regions) with pharmaceutical patent linkage system have designed various measures.
In term of China’s actual situation, even before the official launch of the patent linkage system, domestic pharmaceutical companies have been actively playing with the rules to the advantage of their own product portfolios and R&D strategies. Patents claiming impurities have long triggered a prolonged patent war heatedly discussed in the industry. Therefore, in an atmosphere where “evergreen patents” is the ultimate purpose of pharmaceutical patent portfolios, clear definition of the degree of relevancy required for patent information disclosure of newly approved drugs, supervision exercised by appropriate entities, and prompt resolution of disputes at an early stage, are consistent with the purposes of “Early Resolution of Patent Disputes” under the Agreement.
Whether it is from the perspective of performing treaty obligations and to provide the committed level of protection for pharmaceutical patents, or from the perspective to assist generic-drug companies and to clear risks for the marketing of generic drugs, a major factor in China’s future pharmaceutical patent linkage system is to seek prompt and early resolution of disputes arising from the generic-drug marketing approval applications filed before expiration of the innovator-drug patent. As such, the authors forward the following suggestions.
I. National pharmaceutical administrative department as the appropriate competent authority for patent information registration
Despite the steady operation of the pharmaceutical patent linkage system in the U.S., the U.S. model under which the FDA conducts no substantive examination of the submitted patent information will cause chaos, and is not suitable to China’s reality. Given the load of intellectual property-related judicial cases and the overall operation of intellectual property courts, and for the purpose of early and efficient dispute resolution, an administrative authority-led patent linkage system is a more viable choice. Certainly, the judiciary is always the last resort for remedy. The lead of an efficient and powerful administrative authority shall be supplemented by an appropriate judicial remedial mechanism, so as to ensure consistency of the patent information registration system with the basic requirements of the modern governance system.
In practice, administrative authorities, exemplified by the pharmaceutical administrative department, control more comprehensive information on pharmaceutical patents, and are therefore more suited to the eligibility examination of the patents submitted for registration. Patent information registration is part of the approval of the innovator drug, which naturally falls into the scope of the duties of the pharmaceutical administrative department, although the interpretation of patent claims, the determination of patent validity, and the establishment of technical facts may be beyond the scope of such an administration’s authority. Regarding this point, against the background of government information sharing, the pharmaceutical administrative department and the patent administrative department may share patent information, and where necessary, the patent administrative department may be asked to affirm the scope of the patent claims. If an intricate technical problem arises, the pharmaceutical evaluation body thereunder may formulate an expert group to identify the technical facts. Currently, China’s pharmaceutical administrative department and patent administrative department are both subordinates to the State Administration for Market Regulation. Such a governmental institutional arrangement is, to a certain extent, favorable to the formulation of a patent linkage system led by the pharmaceutical administrative department. In terms of function division, a joint department may be considered, or a new department under the State Administration for Market Regulation specifically for pharmaceutical patent linkage matters, such as patent information registration, compliant acceptance, documents reception and forwarding and dispute resolution.
In addition, according to Section 5(13) of the Explanatory Notes to the Provisions for Drug Registration (Draft Amendment for Comments), “the core purpose of this regime is to reduce the potential patent disputes arising from the approval of generic drugs. The patent linkage system is relevant to the interest of both pharmaceutical patentees and generic-drug companies, while also impacting drug availability and public health. The relevant principles shall be specified in an instrument of higher hierarchy. According to the requirements of legislation, the system is not provided for in the Provisions (Draft Amendment for Comments).” The future patent linkage system is most likely be formulated with an upper level law or a specialized law, which would be able to regulate more administrative departments, creating the possibility of joint-administration by the pharmaceutical administrative department (as the leading authority), the patent administrative department, and its subordinate pharmaceutical evaluation body.
II. Strict standards for time and eligible patent types for patent information registration
To reduce abuse of the patent information registration to the greatest extent possible, the authors identify with the Canadian model that sets strict standards for the time and eligible patent types for patent information registration, for purposes of reducing patent disputes arising from the initial step of the patent linkage system. In designing the system, the Canadian Patented Medicines (Notice of Compliance) Regulations may be used as a reference. In terms of the eligible patent types for patent information registration, establish a framework with positive (eligibility) requirements for the patents, and then carve out those that may not be registered with a negative (ineligibility) list. In terms of the time of patent information registration, not only timeframes for granted and not yet granted patents at the time of registration shall be specified, the legal consequence that inaction within such timeframes would amount to non-registration shall also be clarified. This is the only way to stop patents continuously added to the patent information register.
III. Public does not have to be a supervisory body of patent information registration
Taiwan region’s practice of allowing the general public to supervise patent information registration is not recommended. Pharmaceutical patent linkage is a system that directly impacts the interest of pharmaceutical companies. Although it also influences public interest, such influences are not directly generated by pharmaceutical patent information declaration and registration, but a comprehensive outcome of the operation of the patent linkage system.
Pharmaceutical patent information declaration and registration is a highly professional activity, to which the general public, as non-direct stakeholders, seldom participate. Should the public be introduced as a supervisory body, the “public supervision model” in patent invalidation system may be used as a reference to predict that outcome that the directly-interested pharmaceutical companies would exercise in the name of public interest. Such an outcome could result in pharmaceutical companies abusing the right to supervise patent information registration even for remote plans. This would go against the fundamental purpose of disputes reduction, and early and prompt resolution.
While looking up to the starry sky, one should not forget to also appreciate the ground one stands on. As the creator, advocate and promoter of the pharmaceutical patent linkage system, the U.S. has, through a series of trade agreements, successfully achieved the establishment of the system in Canada, Australia, Singapore, South Korea, Peru and Taiwan region. It has also been pushing for the establishment of the system in mainland China. The ultimate reason behind such efforts is none other than its status as the greatest power of the world, and its tremendous capacity of pharmaceuticals research and development. Now that the patent linkage system is unavoidable in China, how to formulate the system in a way that suits the local situation and protects the healthy and orderly development of the Chinese pharmaceutical industry, is an issue to be contemplated by legislators and practitioners alike.
(The opinions expressed in this article are the authors' own and do not reflect the view of zhichanli)