Draft Amendment to Pharmaceutical Affairs
Act Introduces Patent Linkage System and
Revised Data Exclusivity

published on 31 Oct 2016

Taiwan’s Administrative Yuan passed a draft amendment to the Pharmaceutical Affairs Act (Amendment) proposed by the Ministry of Health and Welfare. This Amendment was drafted in response to Taiwan’s negotiations for joining the Trade and Investment Framework Agreement (TIFA) and the Trans-Pacific Partnership Agreement (TPP). In order to comply with Chapter 18 of the TPP for Intellectual Property, Taiwan needed to revise the provisions for data exclusivity and introduce a patent linkage system. The Amendment may potentially create impact on the domestic pharmaceutical industry, therefore there are some doubts and skepticism which has arisen regarding the Amendment.

Data Exclusivity for Drug of New Active Ingredient

The Amendment clarifies that the Taiwan Food and Drug Administration (TFDA) will not accept or process, within three (3) years from the approval of a new ingredient drug, any applications for market approvals from competitors who cite the data for the same drug. In addition, market approval will only be granted after five (5) years from the approval of the drug which has a new ingredient, meaning the holder of a new drug approval enjoys essentially a five-year duration of market exclusivity.

On the other hand, the duration of data exclusivity for a new therapeutic indication will be three (3) years, or five (5) years if the clinical trials are performed in Taiwan, from the approval.

For new drugs or new indications granted with market approval from a foreign authority, the aforementioned exclusivity shall be applicable only when their application for Taiwanese marketing is submitted within a specified time period from their foreign approval, namely three (3) years for new drugs, or two (2) years for new indications.

New Chapter for Drug Patent-Approval Linkage

The Amendment includes a new Chapter 4-1 in the Pharmaceutical Affairs Act which specifically provides patent linkage to connect a drug’s IP protection and regulatory approval for marketing. According to the provisions of the patent linkage system, the new drug holder, usually being a patentee, shall list the patents and submit required information within 45 days from receiving the market approval. In another scenario where the market approval is granted prior to patent issuance, the new drug holder may submit patent information within 45 days.¹ Eligible subject matter for listing these patents are pharmaceutical substances, composition or formulation, and medicinal use. For some circumstances of changes to patent status, they shall be reported within 45 days of the occurrence.²

To file for an Abbreviated New Drug Application (ANDA).³, the generic competitor must indicate that the drug has no patents, that each listed corresponding patent is expired, that a new approval may be granted to the competitor until all corresponding patents expire, or that each listed corresponding patent is invalid or not infringed..⁴ By challenging patents being either invalid or not infringed, the generic competitor shall notify the patentee and TFDA of such. In a situation where a patentee may initiate an infringement action, it must be within 45 days from competitor’s notification, and the TFDA shall stay 15 months from granting any approvals.⁵

Furthermore, to encourage competition in the pharmaceutical market, the first challenger successfully invalidating patents or pursuing no infringement will enjoy a 12-month exclusivity for sale, which shall start within six (6) months from approval.⁶

Lastly, a blockade has been installed to prevent anti-competition activities such as pay-for-delays. Any agreements between patentees and the generic competitor shall be reported to the TFDA. In response to any foul play compromising the interests of public health and trading order, the Fair Trade Commission will involve.

Debates and Doubts

Despite the foregoing draft Amendment is a reorientation of policy, some interest groups lobby and argue that grafting such a comprehensive set of foreign rules onto Taiwan’s own patent system will not lead to a benign and positive cycle for Taiwan’s economy. Taiwan’s drug manufacturing industry is consists mostly of comparatively small- or medium-size generic makers while patents are mostly held by internationally leading enterprises. Due to patent linkage, the generic drug’s marketing as well as its exportation will inevitably be postponed, which signifies a commercial impact on the domestic industry.

What may in fact occur, is patent linkage delaying the schedule of a generic’s marketing approval, and Taiwan’s national health insurance program may deal with increased costs for the time period using patented drugs. The result is that the general public will not benefit from financially sustainable and affordable insurance protection.

Furthermore, by reviewing the numbers and terms drafted, some wonder what the rationale behind these figures were, such as the 12-month generic exclusivity. Why 12 months would more economically incentivize a generic competitor to challenge than, for instance, a 180-day period? Currently the TFDA does not seem to integrate a set of compelling arguments supporting the technical issues of the Amendment.

Short Conclusion

The Amendment was drafted for Taiwan’s negotiation entering TIFA and TPP. It largely adopts a version of the system from a single country and therefore invites some critics that negative impact on the domestic pharmaceutical industry may be foreseeable. To be more economically justifiable, the Administration is advised to propose a comprehensive analysis on drug price, public insurance, industrial development, and so on before submitting the draft for legislative approval.

For any questions relating to this topic, please contact us at cjchen@tsailee.com.tw