As part of the Phase One US/China trade agreement (Agreement) signed on Jan 15, 2020, China has agreed to establish pharmaceutical patent linkage and restoration, which, once implemented, would give innovative drug companies the ability to: (1) prevent infringing products from obtaining market approvals from China’s drug regulator the National Medical Products Administration (NMPA) through patent litigation and (2) obtain extended patent terms to make up for the time spent waiting for NMPA approval. [1]/ As global drug companies continue to develop their own positioning strategies in the world’s second largest market for pharmaceuticals, how to leverage these significant changes would be the key for future growth in China.

 

Regarding patent linkage, specifically, under Article 1.11 of the Agreement, China will “give a cause of action to allow the patent holder, licensee, or holder of marketing approval to seek, prior to the marketing approval of an allegedly infringing product, civil judicial proceedings and expeditious remedies for the resolution of disputes concerning the validity or infringement of an applicable patent.” The langue in the Agreement does not contain any details for the promised patent linkage system. However, an NMPA policy document titled “Policies Regarding the Promotion and Protection of Innovators’ Rights in Drugs and Medical Devices (draft for public comments)” issued in 2017 would shed some light on what the system may look like once implemented. [2]/  According to this 2017 policy document by NMPA, the drug applicant is required to disclose whether the product infringes others’ patents. In the event the applicant decides to challenge the patent, a notification is required to be sent to the patent holders within 20 days of the application submission. If the patent holder views the applicant’s product as an infringing product, a complaint should be filed with the courts within 20 days of receiving the notice from the drug applicant. Patent holders can also inform NMPA of any infringing drug application. NMPA, in turn, can decide whether it should set up a 24-month wait period, during which the drug application cannot be approved pending the resolution of the dispute. However, if no settlement or decision is made after 24 months, NMPA can approve the product.

 

For patent term restoration, under Article 1.12 of the Agreement, China “shall make available an adjustment of the patent term or the term of the patent rights of a patent covering a new product … to compensate the patent owner for unreasonable curtailment of the effective patent term as a result of the marketing approval process related to the first commercial use of that product in China… China may limit such adjustments to no more than five years and may limit the resulting effective patent term to no more than 14 years from the date of marketing approval in China.” Notably, the language is almost identical to the draft amendments to the Chinese Patent Law released in early 2019. [3]/ As proposed in the amended Chinese Patent law, companies would be able to add up to five years to the patent term to make up for the time spent waiting for approval, when the drug product couldn’t be commercialized.  The extended patent term could not go beyond 14 years after the drug’s approval.

 

While both the NMPA policy document and the amended Chinese Patent Law need to be finalized before the system can be implemented, the proposed changes could be significant, and a close read of these two documents is highly recommended to assess the likely impact. Please let us know if we can be of any assistance by contacting any of the authors of this blog or the Hogan Lovells attorney with whom you regularly work.

[1]/         See “Economic and Trade Agreement Between the Government of the United States of America and the Govern of the People’s Republic of China”, available at: https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf.

[2]/         总局关于征求《关于鼓励药品医疗器械创新保护创新者权益的相关政策（征求意见稿）》（2017年第55号）.

[3]/         中华人民共和国专利法修正案（草案）, available at: https://npcobserver.files.wordpress.com/2019/01/patent-law-draft-amendment.pdf.