New Dispute Resolution Rules in China Suggest the Launch of Patent Linkage System

On September 11, the State Council promulgated a public comment draft for the “Implementation Rules for the Early Resolution of Patent and Drug Disputes” (“Implementation Rules”).[1] It serves as an attempt to construct an operative platform for the patent linkage system, which connects a new drug’s patent(s) with the market approval of a competing generic copy. The legislative proposition of the Implementation Rules aim both to encourage new drug research and to advance high-level generic drug development, as a concretization of the foregoing policies about pharmaceutical renovation and their associated IP protection in 2017[2] and 2019[3]. The Implementation Rules is comprised of 16 articles in total.

        The National Medical Products Administration (NMPA) is the highest agency governing pharmaceutical policy and is commissioned to establish a marketed drug patent information registry. Market approval holders may report and make public information about any core patents related to marketed drugs as the basis for which the generic drug applicants certify their patent status. However, it must be noted that any patent information that is not registered on this platform will not be subject to the patent linkage system.

        During the review of a patented drug for market approval, the applicant may upload relevant patent information within 30 days from the patent’s grant and during this period submit the relevant patent registration information to the NMPA via the NMPA's registration platform. For any changes in patent information, the approval applicant/holder may make a request to update in the register within 30 days from the incidence of change. (Article 4)

The patent information register will be available for pharmaceuticals including active compounds of chemical drugs, compositions having active ingredients, uses of pharmaceuticals; sequences of biologics; traditional medicine compositions, traditional medicine extracts, and uses of traditional medicine. (Article 5) Registration applicants or market approval holders must account for the credibility, accuracy, and integrity of any submitted patent information.

        As for the market approval application for generic copies of drugs, the generic competitor must provide a certification against each of the registered patents to which the generic drug may pertain. Similar to what is found in the US FDA’s Orange Book, the generic competitor shall certify any one of the following statement along with sufficient evidence in order to link the patent status. (Article 6)

Statement 1:       The registry does not have the patent(s) which the generic copy may involve;

Statement 2:       The patent(s) which the generic copy involves expired or been declared invalid;

Statement 3:       The registry has the patent(s) which the generic copy may involve but the generic drug maker commits a restriction of sales before the patent(s) expires; and

Statement 4:       The patent(s) which the generic copy involves in the registry is believed to be invalid or the generic copy does not infringe the registered patent(s).

        To counteract a generic competitor’s certification, the patentee or interested party may either file an infringement lawsuit in court or file a complaint to the CNIPA in pursuit of an administrative decision, within 45 days from the NMPA’s publication of the application for a generic copy. Then, the patentee or the party of interest must submit a copy of a case receipt to the NMPA in 10 days after the case is docketed at either one of the forums. Filing a case with the court or the CNIPA serves as a brake for NMPA’s generic approval review. In instances in which there is no case-filing or notification by the patentee within the above timeframes, the NMPA may exercise its discretion to issue a generic approval. (Article 7)

        Most importantly, the NMPA will have a stay of generic approval for a period of 9 months from the day to have docketed a case at a court or the CNIPA, though during this time the NMPA will not cease from its review of the scientific data and pharmacological effects of the generic copy. (Article 8) For Statements 1 and 2, the NMPA will decide whether or not to grant an approval according to its own findings upon the conclusion of its review. For Statement 3, the NMPA will issue a conditional approval that the generic copy will launch for sale only after patent(s) expiry. (Article 9)

        Statement 4 is the only statement that may lead to a patent challenge. The NMPA is more restrictive when it comes to its issuance of a generic approval. The NMPA will proceed to decide the issuance of a market approval only in integrative consideration of the court or the CNIPA decision under the following scenarios.

1.      If the patent read on a generic drug, within 20 days before patent expiry;

2.      Patent invalidated, not infringed, or otherwise both parties in dispute have settled;

3.      Beyond the 9-month period, the court has not made a binding judgement or the CNIPA has not made a decision or mediation agreement;

4.      The NMPA receives a court’s judgement or the CNIPA’s decision in an affirmative finding that the patent reads on the generic drug. (Article 10)

        Lastly, the Implementation Rules creates an economic incentive for stimulating pharmaceutical competition, which should create a much more beneficial environment for consumers. The first generic drug maker who successfully prevails in infringement action or administrative intervention will be granted an exclusive sales privilege for a period of 12-months precluding any other prospective sellers for the same drug.

Some highlights featuring China’s patent linkage system are organized in the table below. Analogous existing rules in Taiwan have been provided for comparison.

Comparison with Taiwan

        Taiwan’s patent linkage has a particular opposition mechanism affording any individual to report to the Taiwan FDA any erroneous patent listing. However, the opposition is not a mandate over the patentee to revise or take down the listing accordingly.

In August 2020, the first case of a report of this kind was made.[4]Exelon® by Novartis AG is a rivastigmine transdermal system for the treatment of dementia associated with Parkinson’s disease. Novartis listed Exelon Patch 10 on the Taiwan FDA’s platform in September of 2019, asserting it to be a “new drug” under the Pharmaceutical Act which is eligible for patent linkage. A third party, the Taiwan Patent Linkage Watch Network, submitted an opposition by alleging the Exelon Patch 10 was in fact not a new drug. Accompanied with a series of evidence, it was said that Exelon Patch 10 was the same as the previously listed Exelon Patch 5 in terms of its active substance, indication, dosage form, and administration route. The only difference between Exelon Patch 10 and Exelon Patch 5 was the dosage amount. In response, Novartis argued that what constitutes a new drug should be broadly interpreted to encompass a drug of any of new substance, new indication, new administration route, new dosage form, as well as “new unit mass.” Therefore, the patents to which Exelon Patch 10 related are eligible for patent linkage listing. Novartis refused to take down its listing.

Currently Novartis and the generic challenger Tehseng Pharmaceutical are engaged in a lawsuit disputing a Statement 4 certification. The Taiwan FDA stayed from issuing a generic approval. Given its profound impact on pharmaceutical patents, this case’s developments deserve a close eye.