The era of generic drugs is coming, will patent protection be weakened in China?

 

 

　　On May 8, 2015, the State Council officially issued "Made in China 2025", adhering to the basic policy of "innovation-driven, quality first, green development, structural optimization, and talent-oriented" and the basic principle of "market-led, government-guided, based on current situation, looking to the long term, overall promotion, key breakthroughs, independent development, and open cooperation". Biomedicine and advanced medical devices have become one of the ten key areas for development.

 

　　On July 22, 2015, clinical self-inspection began as China entered a reform zone in the pharmaceutical field. The introduction of a unified evaluation policy marked a deepening reform in drug research and development and production.

 

　　On April 3, 2018, the General Office of the State Council issued the "Opinions on Reforming and Improving Policies for Ensuring Supply and Use of Generic Drugs" (hereinafter referred to as "Opinions"). The release of this document signifies China's intention to transform from a major producer of generic drugs into a strong country in this field. The Opinions focus on three major breakthroughs: promoting generic drug research and development, improving the quality and efficacy of generic drugs, and perfecting support policies. I will interpret them one by one:

 

　　Clarifying the catalog of generic drugs marks the arrival of an era guided by 'patient-centered' principles. This is a significant benefit for pharmaceutical research and production enterprises in major infectious diseases areas, especially in orphan drug fields; it is also good news for many patients with rare diseases.

 

　　However, this raises higher requirements for medical personnel's diagnostic levels. Due to being rare diseases, it is expected that many doctors will be unable to make accurate diagnoses. For example, the diagnosis rate for pulmonary hypertension is only 0.01%. Is this true? It might even be higher than that.

 

　　The state addresses technical issues within the industry through major special projects. This greatly helps improve the overall level of the industry by forming an 'industry-university-research' chain while reducing burdens on enterprises and adding various incentive measures to achieve double stimulation.

 

　　Since the state aims to vigorously promote generic drugs, it will inevitably strengthen antitrust enforcement in intellectual property rights to prevent abuse.

 

　　Due to patents being territorial in nature, patent protection from foreign original manufacturers will inevitably be weakened within China.

 

　　Strengthening consistency evaluation work is not just a slogan from the state.

 

　　Currently, there are mandatory regulations regarding consistency evaluations for 289 drugs; however, capable enterprises are also selecting clinically valuable products from their thousands of product numbers to implement consistency evaluations independently.

 

　　This reflects companies' considerations regarding their own industrial layout while ensuring that many patients can access safe and effective medications.

 

　　Promoting consistency evaluation for generic drugs is not solely a task for formulation disciplines; it requires upgrades across all links in the pharmaceutical industry chain including raw materials packaging and formulation equipment.

 

　　These two points represent the state's determination regarding drug quality and regulation. Optimizing review processes is just one aspect of reform; its core purpose remains ensuring medication safety for people throughout drug life cycles while strengthening regulatory efforts.

 

　　This aspect promotes research and development as well as production from a procurement perspective for generic drugs entering markets.

 

　　"According to earlier documents released by the State Council titled 'Opinions on Conducting Consistency Evaluation on Quality and Efficacy of Generic Drugs', if there are more than three manufacturers producing identical varieties that pass consistency evaluations then those that do not pass will no longer be selected during centralized procurement."

 

　　"This indicates that not only through R&D or production but also through market mechanisms should we address current scattered market conditions."

 

　　"This promotes mutual substitution between generic drugs and original research drugs from patients' applicability perspectives."

 

　　"I believe there needs to be corresponding publicity directed at doctors (especially those at local county-level hospitals) rather than emphasizing it within pharmaceutical industries. Currently within pharmaceutical industries everyone recognizes national guidance striving towards having generics pass consistency evaluations. The mutual replacement between generics and original research medicines still relies heavily on prescriptions written by doctors."

 

　　"Many county-level doctors even chief physicians still hold onto misconceptions about domestic medicines having lower purity compared with imported ones; they have no concept whatsoever about consistency evaluations for generics. It’s quite concerning that doctors prescribe imported medications for patients with severe conditions or better economic situations while prescribing domestic medications for those with milder conditions or poorer economic situations."

 

　　"Reports indicate many provinces face pension crises; I believe national health insurance burdens are also heavy. China will transition into an aging society over next decade or two where medication characteristics may become more concentrated leading towards significant increases in medication quantities used; thus encouraging use equivalently effective generics aims at alleviating health insurance burdens through timely inclusion into health insurance catalogs."

 

　　Essentially speaking this creates a win-win situation between state enterprises where states can ensure public health levels while alleviating healthcare costs allowing companies stable profits.

 

　　This point requires little explanation although specific policies have yet been implemented when faced with severe threats posed by public health safety or public health emergencies knowledge property rights won’t be led by enterprises.

 

　　Of course states may also provide tax compensation.

 

　　This tax incentive policy has minimal impact on existing R&D firms whether they’re high-tech companies or subjecting themselves under normal taxation rates remains unchanged.

 

　　However after fully considering drug costs establishing scientifically reasonable procurement prices we expect era where buying one box medicine costs several yuan should come to an end though prices may not match originals they should see some increase.

 

　　Monopolistic behaviors surrounding raw material prices continue emerging which isn’t permissible within credit societies thus becoming key monitoring targets by states.

 

　　Currently many pharmaceutical companies are pursuing internationalization regarding formulations while state promotion towards internationalization among generics represents significant benefits.

 

　　第11条

 

　　据报道，很多省份的养老金告急，相信国家医保负担也是很重的。中国在未来的10-30年内会向老龄化社会转变，用药特征可能会更加集中，用药数量将会有较大增幅，国家为了减轻医保负担，鼓励使用疗效等价的仿制药，具体做法是及时将获批仿制药纳入医保目录。

 

　　本质上来讲，这对国家和企业是一个双赢的局面，国家可以保障人民健康水平的前提下，减轻医保负担，企业也可以保障稳定的收益。

 

　　第12条

 

　　这条不用过多解释，虽然一直没有具体政策落地，但是遇到公共卫生安全或公共健康造成严重威胁等非常情况时，不会由企业主导知识产权。

 

　　当然，国家也可能做出惠税补偿。

 

　　第13条

 

　　此项惠税政策对现有研发企业影响甚小，是高新企业还是15%税率，不是高新正常缴纳税款，一如既往而已。

 

　　但是在充分考虑药品成本，制定科学合理的采购价格后，预计买一盒药在几元钱的时代要结束了，药品价格虽比不上原研，但是价格应有所提升。

 

　　原料药价格垄断行为层出不穷，这也是信用社会所不允许的，是国家的重点监测对象。

 

　　第14条

 

　　现有很多制药企业正在做制剂国际化，并且国家推进仿制药国际化是大利好。

 

　　Currently, there are not many pharmaceutical companies that can truly achieve the internationalization of formulations, which is influenced by various factors. The domestic promotion of consistency evaluation is vigorous, and some formulation experts from abroad are returning to push for the wave of medical reform. It is believed that in the future, China's generic drug technology will improve rapidly, and technical issues will not hinder the internationalization of Chinese generic drugs.

 

　　What hinders the internationalization of Chinese generic drugs are market sales and other factors. If a company only has one or two varieties with ANDA approval, it faces huge R&D cost investments while achieving little in the U.S. market, as U.S. agents will not engage with companies that only have one or two varieties. In this case, obtaining an ANDA in the U.S. becomes just a gimmick, which is a concerning issue.

 

　　Article 15

 

　　This item is for effective publicity and guidance. Although the 'Opinions' clearly state that publicity should be directed at the public, I believe that the most important aspect is educating healthcare workers since many ordinary people have no concept of which medications to use.

 

 

　　>>>> Related Reading

 

　　The State Council General Office's Opinions on Reforming and Improving Policies for Ensuring Supply and Use of Generic Drugs (Guo Ban Fa [2018] No. 20) (Full Text)

 

　　People's governments of provinces, autonomous regions, and municipalities directly under the central government; ministries and commissions of the State Council; and affiliated institutions:

 

　　In order to implement the spirit of the 19th National Congress of the Communist Party and the work deployment by the Central Committee and State Council on promoting health in China and deepening medical reform, to promote R&D for generic drugs, enhance their quality and efficacy, improve drug supply assurance capabilities, better meet clinical medication needs and public health safety demands, accelerate China's transition from a major pharmaceutical country to a strong pharmaceutical country, with approval from the State Council, we now propose the following opinions.

 

　　1. Promote R&D for generic drugs

 

　　(1)Develop a catalog of drugs encouraged for replication. Establish an inter-departmental information sharing mechanism for drug production and use to strengthen monitoring of drug supply assurance and usage information; timely grasp and publish drug supply-demand situations to guide enterprises in R&D, registration, and production. Demand-oriented encouragement should be given to replicate clinically essential drugs with proven efficacy that are in short supply; encourage replication of drugs needed for major infectious disease prevention/treatment as well as rare disease treatment; drugs required for handling public health emergencies; pediatric medications; as well as those whose patents expire within one year without registration applications submitted yet. The catalog of encouraged replicated drugs will be formulated by the National Health Commission along with relevant departments; it will be published regularly on platforms such as national drug supply assurance comprehensive management information platform with dynamic adjustments implemented. Newly approved or those passing consistency evaluation regarding quality and efficacy will be included in China's listed drug catalog set which will be dynamically updated publicly.

 

　　(2)Strengthen technological breakthroughs in generic drugs. Key chemical medicines within encouraged replicated drug catalogs should be included in national relevant science technology plans for key common technology research on biological medicines. Improve collaborative innovation mechanisms among industry-university-research-medical applications; establish alliances focused on technological breakthroughs in generic drugs leveraging enterprises' leading roles along with foundational support from hospitals, research institutions, universities; strengthen collaboration on research into medicinal excipients/materials/packaging materials/formulations to promote organic connections between drug R&D chains and industrial chains. Actively introduce advanced international technologies for digestion absorption enhancement.

 

　　(3)Improve intellectual property protection for pharmaceuticals. Following principles balancing encouragements between new drug creation alongside encouraging R&D for generic drugs: study improvements compatible with our economic development level alongside industrial development stages regarding pharmaceutical intellectual property protection systems while fully balancing interests between patent holders versus society at large. Implement patent quality enhancement projects fostering more core pharmaceutical intellectual properties/original intellectual properties/high-value intellectual properties while strengthening anti-monopoly enforcement within intellectual property fields preventing abuse while promoting market entry for generics.

 

　　2. Enhance quality efficacy of generic drugs

 

　　(4)Accelerate consistency evaluation work regarding quality/effectiveness among generics. The National Medical Products Administration (NMPA), National Health Commission (NHC), Ministry of Science & Technology (MOST), Ministry of Industry & Information Technology (MIIT), National Healthcare Security Administration (NHSA) among others must detail policies encouraging enterprises conducting evaluations regarding generics' quality/effectiveness while accelerating progress on consistency evaluations further releasing resources supporting qualified medical institutions/universities/research institutions/social testing organizations participating therein taking effective measures enhancing enthusiasm among medical institutions/healthcare personnel conducting clinical trials especially focusing on high-volume/high-cost varieties speeding up processes related to essential low-cost clinical varieties through targeted measures like improving procurement policies etc.

 

　　(5)Improve quality standards concerning medicinal excipients/materials/packaging materials by organizing revisions/developments thereof pushing enterprises enhancing their R&D efforts utilizing new materials/new processes/new technologies improving overall quality levels through self-innovation capabilities actively introducing foreign advanced technologies driving technological upgrades breaking through key techniques like purification/quality control eliminating outdated techniques/capacities changing reliance upon imports fulfilling formulation quality requirements while strengthening regulatory oversight over these materials regularly publishing inspection/testing results concerning manufacturers.

 

　　(6)Enhance manufacturing process levels significantly boosting pharmaceutical equipment/intelligent manufacturing levels improving key equipment's research/manufacturing capabilities/performance promoting application/new technologies optimizing/improving process management reinforcing comprehensive quality control elevating critical process control levels addressing bottlenecks restricting product qualities advancing information-based construction around production quality controls enabling real-time online monitoring during production processes refining enterprise production process change management systems.

 

　　(7)[Strictly review approvals regarding pharmaceuticals.] Deepen reforms surrounding review/approval systems ensuring strict standards applied during reviews/approvals where generics undergo assessments based upon alignment with original research products' qualities/effectiveness enhancing overall safety levels associated with pharmaceuticals optimizing review/approval workflows increasing efficiency surrounding generics' market entry approvals prioritizing registrations linked towards compulsory licensing under national patent laws/cataloged encouraged replicable products supported via significant national science projects etc., NMPA must refine technical standards/guidelines surrounding registration applications pertaining generics.

 

　　(8)[Strengthen regulatory oversight over pharmaceutical qualities.] Accelerate establishment covering entire lifecycle management systems ensuring robust tracking mechanisms around qualities associated specifically targeting generics enhancing supervision/checking across developmental phases including production/distribution/use phases intensifying adverse reaction monitoring alongside random sampling checks rigorously investigating data falsification/cutting corners/adulteration violations enforcing accountability measures making inspection/punishment outcomes publicly available.

 

　　3. Improve supportive policies

 

　　(9)Timely inclusion in the procurement catalog. Drug centralized procurement agencies should compile procurement catalogs according to the generic names of drugs, promoting equal competition between generic drugs that are consistent in quality and efficacy with original research drugs. For newly approved generic drugs, relevant departments should promptly compile drug procurement codes for public medical and health institutions. If the corresponding generic name drug is already in the drug procurement catalog, the drug centralized procurement agency should promptly initiate the procurement process; if the corresponding generic name drug is not in the drug procurement catalog, from the date of approval for marketing, the drug centralized procurement agency should promptly evaluate and actively include it in the drug procurement catalog. Drugs subject to compulsory licensing by the state shall be unconditionally included in local drug procurement catalogs.

 

　　(10)Promote the substitution of generic drugs. Include generic drugs that are consistent in quality and efficacy with original research drugs in a directory of interchangeable drugs with original research drugs, clearly indicating this on labels and instructions, and timely publish relevant information to facilitate choices for medical personnel and patients. Departments such as health and wellness should strengthen pharmaceutical management, formulate policies and incentive measures to encourage the use of generic drugs, and increase supervision over clinical medication. Strictly implement requirements for prescribing by generic names; except for special circumstances, brand names must not appear on prescriptions as specified by health departments. Implement a prescription review system to strengthen assessments of reasonable use of medications in medical institutions, publicly disclose prescriptions from doctors that involve unreasonable medication use, and establish a consultation system. Strengthen pharmacists' roles in prescription review and medication dispensing. When providing medications to patients with AIDS or tuberculosis as required, prioritize purchasing and using generic drugs.

 

　　(11)Leverage basic medical insurance's incentive role. Accelerate the formulation of payment standards for insured medications so that both original research drugs and generics that are consistent in quality and efficacy are paid at the same standard. Establish a dynamic adjustment mechanism for basic medical insurance drug catalogs to timely include eligible medications. For medications listed in basic medical insurance catalogs, restrictions based on brand names or manufacturers are not allowed; timely update insurance information systems to ensure approved generics are equally included within insurance payment scopes. Encourage medical institutions to use generics through an incentive constraint mechanism linked to insurance payments.

 

　　(12)Clarify paths for implementing compulsory licensing of pharmaceutical patents. Classify implementation of compulsory licensing according to law to improve accessibility of medications. Encourage patent holders to implement voluntary licenses. Units or individuals meeting conditions for compulsory licensing may legally submit requests to the National Intellectual Property Administration (NIPA). In cases of major infectious disease outbreaks or other public health emergencies where there is a severe threat to public health due to shortages of essential medicines for prevention or treatment, evaluations will be conducted by relevant departments including NIPA upon recommendations from the National Health Commission along with other ministries regarding implementing compulsory licenses.

 

　　(13)Formulate budgetary incentives and pricing policies gradually improving preferential policies so that R&D expenses incurred by generic companies developing new technologies, products, or processes can be accounted as deductions before tax according to relevant regulations if they meet certain criteria. Generic companies recognized as emerging enterprises will be taxed at a reduced rate of 15%. The National Development and Reform Commission along with other departments will increase support efforts for process upgrades at generic companies while encouraging local governments to implement supportive policies aimed at transforming and upgrading the generic pharmaceutical industry further enhancing support levels.

 

　　(14)Promote internationalization of the generic pharmaceutical industry. In conjunction with significant breakthroughs under 'Belt and Road' initiatives strengthen exchanges with relevant international organizations and countries while accelerating internationalization steps related to R&D registration sales processes for pharmaceuticals support enterprises engaging in international capacity cooperation while establishing cross-border R&D collaboration platforms actively introducing advanced management experiences along with key technological processes encouraging foreign enterprises gradually establishing R&D centers along production bases.

 

　　(15)Conduct effective publicity guidance. Departments such as health care regulation must effectively communicate policy interpretations disseminating knowledge about pharmaceuticals alongside related information aimed at boosting public confidence towards domestically produced generics enhance educational outreach directed towards healthcare professionals altering unreasonable medication habits improving rational medication levels promoting substitution usage among generics timely responding societal changes reasonably guiding public opinion participation expectations forming favorable reform alternatives.

 

　　Reformulating comprehensive supply assurance policies alongside usage strategies concerning generics directly impacts public safety regarding medication significantly influencing healthy development within pharmaceutical sectors all regions departments must enhance organizational leadership tailoring practical work plans alongside supporting details refining mechanisms methods ensuring responsibilities are firmly established requiring practical assessments actively advancing ensuring reform measures yield tangible results.

 

　　General Office of The State Council

　　March 21, 2018