Hogan Lovells’ Andrew Cobden takes a long, hard look at China’s new patent linkage system and its nascent Patent Term Extension ("PTE") regime, to work out the best path forward for non-Chinese pharmaceuticals businesses and originator companies.
In June 2021, China implemented several significant revisions to its patent laws designed to encourage pharmaceutical companies to develop and seek approval in the country for new, innovative drugs and to encourage generic companies to challenge originators’ reference product patents. Two of the more important revisions involve the introduction of a new patent linkage system and a patent-term extension (PTE) for certain types of pharmaceutical patents. Patent linkage has been in operation for almost two years, but PTEs have not yet been fully implemented.
As well as this, higher damages are now available in infringement cases, while changes have been made to the Patent Examination Guidelines that allow applicants to more easily rely on post-filing supplementary experimental data during prosecution and invalidation proceedings. A new system for providing regulatory data exclusivity for originator companies is still under consideration, with a draft amendment to the Drug Administration Law Implementation Regulations having been published for public comments in May 2022 – if this is finally approved and implemented, both applicable chemical drugs and biological drugs will receive data exclusivity for six years. New orphan drugs will be given up to seven years of marketing exclusivity, while new pediatric drugs and first-approved generic drugs will each receive up to 12 months.
Given these changes, the time is ripe for assessing the impact on pharmaceutical companies’ marketing strategies in China and the protection of their rights against competitors’ products and activities in the Chinese market.
China’s new ‘Orange Book’
China’s new drug patent linkage system provides a fresh mechanism to link a Chinese patent covering an originator’s drug to the marketing approval system. In some respects, it is analogous to the US FDA’s Orange Book.
For an originator to use the patent linkage system, drug marketing approval holders in China must register their relevant patent information on the Patent Information Registration Platform for Drugs Marketed in China of the Chinese National Medical Products Administration (NMPA). Registration must occur both within 30 days of the drug marketing registration certificate grant and also where there is a change to the registered patent information.
Only limited types of drugs are eligible for registration. For chemical drugs these include patents on active ingredients, medical compositions containing active ingredients and medical use patents; while for biological products, these include patents to sequence structure and medical use. Patents to intermediates, metabolites, crystal forms, preparation methods and detection methods are ineligible – although, in practice, certain process patents with composition or medical use claims have been successfully registered. So far, a significant number of pharmas are using the system and have succeeded in registering their most important Chinese patents.
When a generic applicant applies for marketing approval, it must make one of four declarations to the NMPA regarding the originator’s patent information:
- no patent information about the originator drug is registered on the platform;
- the patents of the originator drug on the platform are invalid or terminated, or the generic applicant has been granted a license;
- the patents of the originator drug are on the platform but the generic drug will not be marketed until the expiration of the corresponding patent term; and
- the patents of the originator drug on the platform shall be declared invalid (Category 4.1) or do not cover the generic drug (Category 4.2)
The major players
The Beijing IP Court and the Chinese National IP Administration (CNIPA) have joint authority for resolving patent linkage proceedings. The interplay among the various players is shown schematically in Figure 1.
Figure 1: The main players in the China’s patent linkage scheme
A tight timeline
If the patent owner or a stakeholder objects to a generic drug applicant’s declaration, they must act within 45 days of the NMPA disclosing the generic drug’s marketing approval application – a narrow window in which to prepare court or administrative proceedings. Therefore, parties should prepare as much as possible in advance of the NMPA’s disclosure and ensure that they have the required authorisation documents, legal team, claim charts, experts and possible witnesses in place. Patent owners should also be prepared for a generic company to launch invalidation proceedings at the CNIPA.
Upon filing a case (whether at the Beijing IP Court or with the CNIPA), there is a nine-month waiting period for generic drugs. During this time, the application for generic drug registration will be suspended – temporarily blocking the possibility for approval. There is no corresponding waiting period for biological products or Chinese herbal drugs.
There are specific nuances regarding the timing of filings. For example, there is no automatic suspension or stay at the Beijing IP Court if a parallel CNIPA case is pending. However, the CNIPA will not accept a patent linkage action if a court action has already been filed. In considering the choice between the Beijing IP Court and CNIPA, patentees and stakeholders should note that the court permits an application for an interim injunction if the case cannot be decided within nine months, which the CNIPA does not. However, the CNIPA is more likely to provide a quicker process, along with technically trained examiners. Only effective decisions from the Beijing IP Court will result in a suspension of the generic drug’s marketing approval – in China, a first-instance court decision that is under appeal is not considered to be effective.
Originators should also note that the generic drug dossier must be provided to the patent owner/stakeholder in a patent linkage action, subject to certain limited confidentiality obligations. Patent linkage cases are decided primarily based on the application materials submitted by the generic applicant to the Centre for Drug Evaluation (CDE). A successful challenger whose generic drug obtains market approval is entitled to one year’s exclusivity.
Takeaways from recent patent linkage cases
A review of cases filed since the new system went live uncovers several trends. Since implementation, the Beijing IP Court has published no fewer than six decisions concerning at least 11 patents in patent linkage cases. A recent case, concerning generic idecalcitol soft capsules, was appealed to the IP division of the Supreme People’s Court, with the court listing the case as one of the top 10 IP cases in Chinese courts in 2022. Further, more than 28 patent linkage adjudication cases have been completed by the CNIPA, among which eight petitions were upheld in favour of the patent owner, five were rejected in favour of the generic drug applicant and 10 actions were withdrawn. Therefore – at least within these early published patent linkage cases – both the Beijing IP Court and CNIPA appear to be making efforts to keep within the recommended nine-month period for resolution.
The tight window for filing proceedings and obtaining a decision has been a concern for patent owners. However, so far cases appear to have been dealt with in a timely manner – and often faster at the CNIPA. Filing a case involving the same patent and generic product in both tribunals appears to be allowed, provided that the court action is filed after the CNIPA action. Patent owners should consider this route, particularly if they have several patents that may cover the generic drug.
Due to the centralised jurisdiction, cases are handled by experienced patent judges or examiners who are familiar with the requirements for showing whether the claims of a patent and defences in patent cases (e.g., the doctrine of equivalents, the prior art defence, estoppel and the principle of donation) cover a product. However, each case will be focused on the products or processes described in the documents submitted by the generic drug manufacturer to the CDE in its application for marketing approval; whether the actual generic product may be different is not considered.
Based on recent cases, stakeholders would do well to bear the following issues in mind.
If the patentee applies for an administrative decision, the time from the CNIPA’s receipt of the application to the issuing of the administrative decision is approximately six to nine months.
If the patentee files court proceedings at the Beijing IP Court, the time between filing to the issuance of a first-instance judgment is between eight and 10 months. If any of the parties appeal, this may further be extended by another three to six months.
So far, there do not appear to be cases where a party has filed an administrative appeal in court against a CNIPA decision.
Choosing a route
The patentee or stakeholder can initiate court proceedings at the Beijing IP Court after applying to the CNIPA for an administrative decision, but it appears that a decision on whether the generic drug falls within the scope of the patent will only be issued in one of the available pathways.
According to Article 4 of the Measures for Administrative Ruling of Early Settlement Mechanism of Pharmaceutical Patent Disputes, parties cannot apply for a CNIPA administrative decision in a patent linkage case if a civil lawsuit has already been filed with the Beijing IP Court. However, there is no clear guidelines on whether a party can file a civil lawsuit at the court for the same patent dispute after applying to the CNIPA for an administrative ruling.
According to patent linkage decisions disclosed so far, a number of major international pharma companies have filed civil lawsuits with the Beijing IP Court after requesting an administrative decision from the CNIPA. Among these, some withdrew their suits after the CNIPA issued the administrative ruling; one of them, on the other hand, withdrew its request for administrative ruling before the Beijing IP Court heard the civil lawsuit.
Since some of those international pharma companies withdrew their civil lawsuits, the patents and drugs involved in these are not identified in publicly available court documents. However, in the civil lawsuit filed by the company that withdrew its request for administrative ruling before the Beijing IP Court heard the civil lawsuit, the patent was identifiable in publicly available documents. On that basis, it appears that the cases related to the same patent and the same drug. An application for an administrative ruling and a civil lawsuit can be therefore filed at the same time, but ultimately only one of these routes can determine whether the drug falls within the scope of patent protection.
Generic drugs that pass CNIPA adjudication may swiftly obtain CDE marketing approval
According to Article 9 of the Implementation Measures, if an effective court decision or a CNIPA decision confirms that the generic drug falls within the claims of the patent, the generic can only enter the marketing approval process after the patent’s expiry. If such actions confirm that the generic drug does not fall within the claims of the relevant patent or the relevant patent is invalidated, the generic drug will no longer be prevented from obtaining marketing approval.
Therefore, if the CNIPA or the court decides that the generic drug falls within the claims of the patent, the CDE does not declare that the generic drug has not passed the administrative marketing approval review but instead freezes the review and waits until the patent’s expiry before completing the marketing approval review.
For generic drugs that the court or the CNIPA decide are not covered by the patent, the time for then obtaining marketing approval varies according to the cases disclosed so far.
Among these, cases with a longer approval time include a generic drug one, which was accepted for marketing approval review by the CDE in September 2021. In October 2021 an international pharmaceutical company applied for a CNIPA administrative patent linkage decision and in May 2022 the CNIPA issued its decision that the generic drug did not fall within the scope of the international company's patent. However, as of today, the generic drug has not yet received marketing approval. (The first generic of the same drug was approved for marketing in March 2021, and therefore the market exclusivity period expired in March 2022.)
Cases with shorter approval times include another generic drug one, which was accepted for marketing approval review by the CDE in September 2021. An international pharmaceutical company filed patent linkage court proceedings in January 2022 and the Beijing IP Court decided that the generic drug did not fall under the claims of the patent in November 2022. The generic drug received marketing approval in December 2022 – there was only 50days between court decision and the drug being approved by the CDE for marketing.
PTES: where things currently stand
Article 42.3 of the amended Patent Law also came into force on 1 June 2021, providing new PTE provisions for pharmaceutical patents. Similar to the legal regimes in the European Union and the United States, these are designed to compensate for time spent during the regulatory approval process and allow patentees of innovative pharmaceuticals to apply for PTEs of up to five years, if the effective term of the patent after obtaining marketing approval is less than 14 years.
Although the law is now in effect, the implementation rules (issued 25 November 2020) are still in draft form and therefore there is still uncertainty as to which patents and/or drugs will be eligible for PTE. For example, the draft rules state that PTE applies to those patents related to active ingredients of new drugs approved for marketing for the first time in China, which are related to a product, preparation process, or medical uses, for chemical, biological and Chinese herbal drugs. However, it remains to be seen in practice how the terms ‘new drug’ approved for marketing ‘for the first time in China’ will be interpreted by the authorities.
According to the draft implementation rules, PTE protection is limited to one patent if the drug is protected by multiple eligible patents, and one drug if the patent covers multiple eligible drugs. In addition, the PTE application must be filed within three months of the drug’s marketing approval date. Patent owners can currently file PTE applications at the CNIPA, although these cannot be processed until the implementing regulations come into force. There is the possibility of an appeal to the Beijing IP Court if the patent owner is not satisfied by the CNIPA’s decision. Third parties wishing to invalidate a PTE can also apply to the CNIPA.
To address some areas of uncertainty, the CNIPA has issued two draft amendments to the Patent Examination Guidelines, with some small changes between the first (issued 3 August 2021) and second (issued 31 October 2022) drafts. Both drafts specify that PTE eligibility is applicable to patents directed to chemical, biological and Chinese herbal drugs. Notably, a PTE-eligible patent is only available for certain drugs using the same classification system applicable to drug marketing approval applications. These are:
- innovative drugs (Class 1) and certain new modified drugs (Class 2), including esters or salts of a known active agent (Class2.1);
- improvements to vaccine strains of preventive biologics (Class 2.2);
- new indications of therapeutic biologics (Class 2.2);
- new compound preparations of known active ingredients having significant clinical advantages (Class 2.3); and
- new indications of chemical drugs (Class 2.4).
This effectively requires that the originator’s marketing authorisation was applied for in China before being obtained anywhere else in the world.
A strategic shift?
By contrast, most overseas drugs currently registered in China are in Class 5 (having been previously marketed overseas). Companies interested in the possibility of PTEs in China may therefore need to file their marketing approval applications earlier than they would have done in the past. In addition, while pre-clinical trials and product registration testing can generally be carried out abroad, sponsors should consider conducting their clinical trials in China at a fairly early stage in order to support their Chinese marketing approval application.
Pharmaceutical originators need to continue to monitor developments regarding the final version of the implementation regulations. As noted, under the current drafts, only Class 1 and some Class 2 drugs will be eligible for PTEs in China, which, for many multinationals, would require a shift in the cadence of their market authorisation filings. It will also be important to take a multidisciplinary approach: originators should be prepared to align their IP, regulatory, marketing and sales teams to ensure PTE eligibility for those drugs that are most important for the Chinese market.
Finally, originators should carefully consider which patent(s) to consider applying for PTE because any one patent can be used only once and any drug/marketing authorisation can only be covered by one patent. A robust Chinese divisional application filing strategy, balanced with new priority filings directed to different medical indications will help support flexibility in making these choices in the future.
This article first appeared in an IAM Special Report, available at IAM media What China’s new patent linkage and PTE systems mean for foreign pharma.