Supply of generic drugs and their interaction with the patent system, like standards essential patents, present one of the international frontiers of patent protection. This is illustrated in Warner Lambert v Actavis (see January  CIPA 13), which also highlights the interaction between the "business models" (i.e. how people do business with the patented product in practice), policy and the patent system. On 21 March 2018, the Chinese State Council issued an Opinion on Reforming and Perfecting Policies Supply and Use of Generic Drugs. Toby Mak (Overseas Member) discusses the reforms, providing an illustration of some of the approaches being taken to manage this "business model", which could greatly affect the generic drug landscape in China.
The Office of the State Council issued an Opinion on Reforming and Perfecting Policies Supply and Use of Generic Drugs on 21 March 2018. This is a policy paper, and therefore no concrete implementations were mentioned. However, there are certain articles in this Opinion that could raise eyebrows with pharmaceutical multinationals, as follows:
- Cross-departmental sharing mechanism for drug production and usage information shall be established. This is for publishing drug supply and demand situation to guide enterprises for research and development, registration and production.
- Generics of drugs with short supply, for the prevention and treatment of major infectious diseases and rare diseases, for public health emergencies, drugs for children, and drugs within one year prior to its patent expiration date but no application for drug registration shall be encouraged.
- Anti-monopoly law enforcement in the IPRs field shall be strengthened to prevent abuse of IPRs to promote generic drugs. The Opinion also stated at the same time drug innovation should receive sufficient protection.
- An early warning mechanism shall be established to reduce patent infringement risk of generic drug enterprises.
- Research and development on pharmaceutical raw excipient materials and packaging materials shall be improved.
- Efficiency of launching, examination and approval of generic drugs shall be improved. Applications for registration of generic drugs compulsorily licensed by the State, drugs listed in the catalogue of encouraged generic drugs, generic drugs supported by Major National Science and Technology Projects shall be given priority for examination and approval.
- Illegal activities such as faking data, cheating on materials, adulterating and so on shall be seriously investigated and punished, accountability shall be strengthened, investigation and punishment results shall be revealed to the public.
- The centralized drug purchasing
- Draft procurement catalogue based on drug generic name.
- Promote fair competition between generic drugs having the same quality and efficacy with those of original drugs.
- Prepare procurement codes for public medical hygiene institutes for newly approved generic drugs in good time.
- Start purchasing procedures of drugs with generic names already listed in the drug procurement catalogue in good time.
- Start discussions on drugs with generic names not listed in the drug procurement catalogue in good time to initiate inclusion into the drug procurement catalogue from the date of approval.
- Unconditionally include drugs with compulsorily licences by the China National Intellectual Property Administration (CNIPA, formerly SIPO) in all local drug procurement catalogues.
- Generic drugs having the same quality and efficacy as those of original drugs shall be included in the catalogue of mutually replaceable drugs.
- Only in special circumstances can commercial product names be used on prescriptions.
- Payments to generic drugs having the same quality and efficacy with those of original drugs and original drugs shall be the same.
- Drugs in the basic medical insurance drug catalogue shall not be limited according to commercial product name or manufacturer. Medical insurance information system shall be updated in good time to ensure approved generic drugs to be equally included within scope of medical insurance payment.
- Research and development expenses of generic drugs enterprises for developing new technologies, new products, new processes, if eligible, may be additionally deducted prior to corporate income tax deduction in accordance with relevant provisions. Where a generic drugs enterprise is identified as high-tech enterprise, its corporate income tax is reduced to 15%.
We will have to wait and see how and when the above would be implemented. However, the following points are interesting to me:
- Raw excipient materials and packaging materials are specifically encouraged. I am not sure of the reason, but maybe because Chinese manufacturers are good at these?
- Issues of faking data, cheating on materials, adulterating and so on are real issues recognised by the Chinese government and will be taken seriously.
- Unconditional inclusion of drugs with compulsory license from CNIPA in all local drug procurement catalogues may raise interest for generics to obtain compulsory license, even though there is no grant of compulsory license by CNIPA. Would this change the landscape, making China more like India in this respect?
- The Opinion has various specific measures to discourage the use of commercial product name, including those in (8), (10), and (12). It appears that the Chinese government wishes to dissociate a drug from a commercial product name. Would this affect the trade mark strategy of pharmaceutical companies1?
1. Editor: Readers will be aware that the UK has adopted this policy for a considerable period. Under the 1949 Patents Act, the name of a drug became open to all after the expiry of the applicable patent. The effect of this was avoided by the use of generic names (INN, or International Non-proprietary Name) so that a drug could become known and be referred to using a non-proprietary name. The NHS policy is generally to have prescriptions made out using the generic name – hence some of the issues arising in the Warner Lambert v Actavis litigation, because typically, until guidance was issued, pregabalin would be prescribed using the generic name – see Lord Sumption in Warner Lambert v Actavis (SC)  UKSC 56, para 65 – https://www.bailii.org/uk/cases/UKSC/2018/56.html
Originally published by CIPA Journal, Volume 48, number 2.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.