On October 17, China’s National People’s Congress (NPC) formally adopted the revised patent law, which will take effect on June 1, 2021.  The formal passage of the new Chinese Patent Law marks the most significant change in the intellectual property legal framework of the world’s fastest growing consumer market over the past decade.  For readers of this blog, the most significant change is the Chinese “Hatch-Waxman” system that is designed to provide incentive to develop new, innovative drug products.  In particular, the regulatory scheme will allow reference product sponsors to assert their patents and at least temporarily block final approval of a generic competitor, and give generic companies exclusivity against other follow-on products, as an incentive to challenge reference product patents. Under the new 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.

Compared to the previous draft version, the final version continues to provide that an innovator can sue to protect their patents while a proposed generic product is undergoing review.  However, the final version has removed the specific timelines including the 30-day for a competitor’s challenge to be launched and the 9-month timeline for the dispute to the revolved in the draft.  Interestingly, while the final patent law has removed these timelines, in the proposed regulation published by China’s National Medical Products Administration (NMPA, formerly “China Food and Drug Administration”) on September 11, 2020, NMPA has proposed these specific timelines.  According to the NMPA proposal:

• Applicants seeking approval of a generic or biosimilar product would have to submit a statement regarding the listed patents. If the applicant asserts that the patent should be invalidated or that the applicant’s product is outside the scope of the patent, the reference product sponsor has the opportunity to challenge that assertion with 45 days.
  • For small molecule drugs, this starts a 9-month period during which NMPA cannot approve the proposed product, although the agency’s technical review will continue.
  • For biologics, NMPA can approve the drug even if there is a patent dispute. 
• The first applicant with a small molecule generic product who successfully challenges a reference drug patent receives a 12-month exclusivity period against approval of another generic version of the same drug.
  • There is no such exclusivity for the first biosimilar applicant successfully challenging a reference biologic patent.

The implications of the new Chinese Patent Law and the NMPA proposal are significant, and the Chinese “Hatch-Waxman” system will fundamentally change how to enter and retain market share in the world’s fastest growing consumer market for life science companies.  Comments to the NMPA proposal may be submitted through 25 October 2020 so there are still time to have your voiced heard, but you need to hurry.

After thirteen years since China’s Measures for the Administration of Drug Recalls first came into effect, China’s National Medical Products Administration (NMPA, formerly “China Food and Drug Administration”) just proposed an updated version of its drug recall regulation for comments on October 10th.  The regulation follows the release of the updated statute Drug Administration Law of the People’s Republic of China (DAL) in 2019 and contains new language on the market authorization holder’s obligations during drug recalls that are largely consistent with the new DAL.  The timing is also of interest as NMPA has become more assertive recently in requesting international drug companies to conduct recalls in China when violations with Chinese laws and regulations are identified. 

Of most interest to the readers of this blog is the new requirement that even when a drug recall is initiated outside of China and does not involve the drugs marketed in China, the market authorization holder is still required to notify the Chinese authorities within 5 working days of the recall initiation.  This new provision is clearly intended to address concerns by some Chinese patients who believe that international companies are not attaching the same concern to the safety of Chinese patients as they do to patients in other regions.    

I am also highlighting a few other provisions in the proposal below that are significant. Comments to the proposal are due October 30, 2020.

• Article 4: Definition of “defective drug product” subject to recall.  The new regulation defines the term “defective drug product” as drugs that have quality problems or present potential safety concerns due to research and development, manufacturing, marketing, storage and transportation, and labeling.  In comparison, the current definition for the same term in the existing regulation does not reference “marketing, storage and transportation, or labeling.” 
• Article 9: Requirements for establishing drug traceability.  Market authorization holder, drug manufacturer, distributors, and users are now required to establish a drug traceability program.  While the provision contains no details on what the program should look like, at a minimum, the regulation requires all the sales record be retained. 
• Article 11: Drug recall information disclosure.  For a market authorization holder based outside of China, drug recall announcement shall be published on its Chinese website.
• Articles 12& 13: Market authorization holder shall proactively investigate and evaluate the potential defects with drug products.  Investigation of defective drug products shall include:

1. The type, scope and root cause of adverse events
2. Whether the current formulation and manufacturing process is consistent with the Chinese registration and whether the change controls are in compliance with China’s DAL and corresponding Chinese guidance
3. Whether the manufacturing of the drug complies with Chinese cGMP
4. Whether the marketing of the drug complies with corresponding quality control measures
5. Whether the use of the drug complies with the label
6. The target patient population
7. The batches that may pose safety concern, the scope and distribution
8. Other factors that may impact drug safety

On 11 September 2020, China’s National Medical Products Administration (NMPA, formerly “China Food and Drug Administration”) published its proposed regulation on patent linkage, “Measures for the Implementation of the Early Settlement Mechanism for Drug Patent Disputes (Interim) (Draft for Comments).”  This proposal follows the National People’s Congress (NPC) July release of additional amendments to its draft patent law, which was first released in January 2019. The proposed rule provides details on how NMPA plans to implement its version of the “Hatch-Waxman.” I am highlighting a few provisions in the proposal below that are significant to manufacturers of innovative products. Comments to the proposal are due 25 October 2020.

• For chemical drugs, patent linkage applies to a new molecular moiety, new product formulation, or new indication. For biologics, the current proposal appears to limit the applicability to patents covering new sequence listings.
• From the date of the patent dispute case acceptance, NMPA will set a 9-month waiting period to approve the drug while the patent litigation is pending; however, this waiting period only applies to chemical drugs. For biologics, NMPA can approve the drug even if there is a patent dispute. 
• 12-month market exclusivity is offered to the first chemical generic that successfully challenged the patent. For biological products, no 12-month “monopoly period” is offered for the first successful generic challenger in the current proposal.

On July 6, China’s National People’s Congress (NPC) released additional amendments to the Chinese Patent Law following the Jan 2019 draft version.  As reported previously by this blog when the 2019 version first came out, the proposed Chinese Patent Law complement ongoing efforts to establish and strengthen incentives to develop new, innovative drug products, consistent with the Opinions on Deepening the Reform of the Examination and Approval System and Encouraging the Innovation of Pharmaceutical and Medical Devices, issued by the General Office of the State Council in October 2017.  The most significant change that’s targeted to drug products would be the possibility of extending the 20-year term of invention patents for new drugs.  Among the many significant changes in the current version, we would like to highlight two provisions that (once adopted) would serve the statutory legal framework for China’s “Hatch-Waxman” system that would significantly impact the considerations for drug developers when seeking new drug approvals in China.

• Article 42, in the 2019 version, the proposed patent term extension would appear to be limited to products that are first submitted for marketing approval to China and another country.  As we reported in the past, the highlighted language would limit the usefulness of the provision.  The current version has removed that limitation.
• Article 75, the current version adds new provisions to allow patent litigation to be initiated while the new drug application is still pending review at NMPA.  Patent holder can launch the legal challenge within 30 days of the publication of a new drug application by a competitor.  There is a nine-month timeline for the dispute to be resolved with a court or the patent office.

The proposed patent law changes could be significant, and the public comment period, which runs through August 16, offers companies an opportunity to voice support and/or suggest revisions to enhance the proposal.

2019 continues to be a milestone year for China’s drug regulatory and health care reform. Starting from December 1, 2019, the new Drug Administration Law (“DAL”) took effect. The DAL codified many of the reforms that had already been implemented, with the main objective of developing a modern and more welcoming regulatory environment for new drugs. For global pharmaceutical companies, the most encouraging change under the new DAL is the more streamlined drug registration process with NMPA. For example, the clinical trial in China no longer requires explicit approval, and sponsors can proceed after 60 working days of notification to NMPA unless they receive objections from NMPA (Article 19 of the DAL). NMPA will grant priority review for pediatric drugs, shortage drugs for urgent clinical needs, new drugs for severe infectious diseases and rare diseases. These changes would greatly shorten the drug review time. Other notable encouraging developments include the potential for expanded access to certain unapproved drugs during clinical investigation stage (Article 23 of the DAL) and leniency for importing a small amount of drugs approved outside of China but unapproved in China (Article 124 of the DAL).

Consistent with the initiative, the Center for Food and Drug Inspection or CFDI, the inspection arm of NMPA, has been strengthening its oversea inspection program. Under the program, NMPA will not only target facilities outside of China for drugs that are already marketed in China, but also drugs that are pending NMPA’s approval. In the event of inspection violations identified by NMPA during these inspections, NMPA can request the manufacturer to attend a regulatory meeting, impose timelines for corrective actions, issue warning letters, suspend drug importation, or suspend sale and use. For the most serious cGMP violations, NMPA can even ask the manufacturer to conduct product recalls or event revoke the product’s approvals. The inspection findings published by NMPA so far show that many overseas manufacturers are unfamiliar with the Chinese laws and regulations. For example, it is required that all drugs sold in China must comply with the specifications of the 2015 Chinese Pharmacopeia (ChP), which can be different from prevailing international standards such as USP or EP.

With the opportunity for global pharmaceutical companies to gain new access to the Chinese innovative drug market presenting itself like never before, generic drug manufacturers is facing fierce pricing pressure in China. The pilot centralized drug procurement program (the “4+7 city centralized procurement program”) has already been rolled out nationwide. For the third round of centralized drug procurement, which likely will take place in early 2020, 35 generic drugs are involved. Based on the bidding results from the previous rounds, we expect their prices to be reduced by at least 50%，which hopefully will be in exchange for the 70% of the market share in China. Stay Tuned!