Recently, the China National Intellectual Property Administration and the China National Healthcare Security Administration (hereinafter referred to as the “two departments”) jointly issued the “Opinions on Strengthening the Protection of Intellectual Property Rights in the Field of Centralized Pharmaceutical Procurement” (hereinafter referred to as the “Opinions”). The “Opinions” mainly includes three parts: establishing a coordination mechanism, strengthening work cooperation, and strengthening the safeguard on work.
If the patent linkage system pursuant to Article 76 of the newly effective Patent Law has linked the pharmaceutical market approval examination to relevant patent dispute resolution procedures, the current Opinions has linked the centralized procurement to the IP protection (primary on prevention of patent infringement), which to a certain extent fill in the blank regarding the pharmaceutical patent dispute resolution during centralized procurement for pharmaceuticals. By systems of self undertaking by enterprises, request from centralized pharmaceutical procurement organs to IP offices for consultation opinions on patent infringement objection on relevant products during centralized procurement, and efficient resolution by IP offices of patent infringement dispute related to products involved in centralized procurement, the Opinions has further enhance the IP protection in the field of centralized pharmaceutical procurement.
We are cautiously optimistic that the promulgation of the “Opinions” may have a significant impact on the practice of patent protection in centralized pharmaceutical procurement, and achieve a new balance between stimulating pharmaceutical innovation and improving drug accessibility. The present interpretation will be on the key points of the “Opinions” in order to bring certain benefits to relevant practices.
I. Background of the “Opinions”
The “Opinions” aims to implement the State Council’s request to further improve the intellectual property protection mechanism for centralized procurement of pharmaceutical products, and build a coordinated and unified information sharing mechanism. The intellectual property branch and the healthcare security branch summarize on the cooperation basis and work practices in intellectual property protection and centralized pharmaceutical procurement, with the hope to further link intellectual property protection with centralized pharmaceutical procurement, and jointly promote and guide local intellectual property administration departments and healthcare security departments to strengthen intellectual property protection in the field of centralized pharmaceutical procurement, so as to effectively prevent infringements, encourage innovation and development in the pharmaceutical field, and optimize the business environment. After full investigation and research, the two departments jointly completed the formulation of the “Opinions” on December 5, 2022, and issued the same on December 30, 2022.
II. Main Contents and Influence of the “Opinions”
The “Opinions” mainly includes three parts consisting of ten specific articles. Articles 1-3 actively establish a coordination mechanism through three aspects: establishing a consultation mechanism, specifying the organs for connection, and strengthening information sharing; Articles 4-7 strengthen the work cooperation through four aspects: establishing a system for self undertaking by enterprises, guiding the resolution of dispute, strengthening cooperation to stop infringement, and performing analysis and study on key products; Articles 8-10 put forward requirements for strengthening the safeguard on work in three aspects: carrying out joint research and survey, carrying out training on work, and strengthening publicity and guidance.
In view of the fact that the second part “strengthen work collaboration” has a direct impact on the behavioral norms of the pharmaceutical enterprises in the centralized pharmaceutical procurement, focuses are put on the said part as followings:
(I) Enterprises participating in centralized procurement must self undertake that there is no intellectual property infringement
Article 4 of the “Opinions” requires “establishing a system for self undertaking by enterprises”, that is, where an enterprise participates in centralized procurement or apply for listing of drugs and medical consumables on the centralized pharmaceutical procurement platform (hereinafter referred to as the “online procurement”), it must undertakes by itself that the relevant products do not violate the “Patent Law of the People’s Republic of China” and other relevant laws and regulations. In the event of occurrence of related patent infringement disputes after a result of included into the list or an online procurement transaction, the enterprise shall bear the corresponding responsibilities. The establishment of the “system for self-undertaking by enterprises” aims to strengthen the prevention of intellectual property rights infringements in advance through self-examination and undertaking by enterprises.
Prior to the promulgation of the “Opinions”, enterprises participating in the national centralized procurement also needed to make undertakings that the applied products would not violate laws and regulations such as those related to intellectual property rights. Taking the seventh national centralized pharmaceutical procurement documents as an example, the third part of the document “Undertaking Letter on National Centralized Pharmaceutical Procurement Application” clearly requires enterprises to make the following promises: “We undertake that the applied product does not violate the ‘Patent Law of the People’s Republic of China’, ‘Anti-Unfair Competition Law of the People’s Republic of China’, ‘Medicinal Product Administration Law of the People’s Republic of China’ and other relevant laws and regulations. In case of related disputes, the losses caused to the purchasers shall be borne by us”. It can be seen that the current intellectual property rights undertakings are only a small paragraph of the Undertaking Letter on National Centralized Pharmaceutical Procurement, which is relatively simple and general in nature, and judging from the content, it is similar to a declarative undertaking.
After the “Opinions” are issued, when the enterprises make self-undertakings, the following changes will occur: firstly, self-undertaking has become a necessary condition for enterprises to apply for centralized procurement. According to the requirements of the “Opinions”, when participating in the future centralized pharmaceutical procurement activities, enterprises need to make self-undertaking, which will become a necessary part of the application documents. If they fail to make corresponding undertakings, the application may fail because they do not meet the requirements on the centralized procurement documents. Secondly, the scope of applicability is further expanded. The “Opinions” pointed out that local healthcare security departments should guide centralized pharmaceutical procurement organs to establish and improve the self-undertaking system for enterprises. Therefore, whether it is the centralized procurement of pharmaceutical products organized by the nation, local authorities or local alliances, enterprises all need to self undertake that there is no intellectual property infringement by the relevant products. Thirdly, the content of the undertaking may be further refined. Compared with the declarative undertakings in the national drug centralized procurement documents, the future self-undertakings on intellectual property rights may become a separate part, and the content may be further refined, and the exact changes need to be further observed. Fourthly, the self-undertaking letter can promote the smooth participation of enterprises in the procedures of centralized procurement or online procurement. The “Opinions” propose that if a centralized pharmaceutical procurement organ receives objections based on patent infringement of relevant products, and the intellectual property administration department fails to provide reference opinions within the time limit, the enterprise can participate in centralized procurement or online procurement according to the procedure after making self undertaking.
(II) Centralized pharmaceutical procurement organ can request the intellectual property administration department to issue professional opinions on patent infringement objections
Article 4 of the “Opinions” stipulates that if a centralized pharmaceutical procurement organ receives objections based on patent infringement of relevant products, intellectual property administration departments can be requested to issue a consultation or infringement determination opinion within the designated time limit for enterprises to participate in centralized procurement or apply for online procurement, as a reference for whether to allow related products to participate in centralized procurement or online procurement.
Prior to the promulgation of the “Opinions”, it is often difficult for centralized pharmaceutical procurement organs to make professional assessments of patent infringement objections received during the procurement process due to the high degree of professionalism required and complexity involved in determination of patent infringement. Based on legality and prudency considerations, centralized pharmaceutical procurement organ usually wait until the people’s court or the intellectual property administration department has made a determination in the relevant infringement case, before taking corresponding measures based on the result of the adjudication/judgment. However, the trial of infringement cases usually takes a relatively long time, and it is difficult to give a determination result within the centralized pharmaceutical procurement cycle of less than 30 days. Therefore, it is difficult to prevent generic drug companies from participating in the centralized pharmaceutical procurement by raising patent infringement objections before the Opinions.
After the “Opinions” are issued, the intellectual property branch and the healthcare security branch have established a coordination and cooperation mechanism. Centralized pharmaceutical procurement organ can ask the intellectual property administration department to issue a consultation or infringement judgment opinions on the received patent infringement objections of relevant products within the prescribed time limit, to be used as a reference for whether to allow related products to participate in centralized procurement or online procurement. Therefore, as an innovative drug company, within the time period (usually within one week) of the public notification period of the application information, it is necessary to promptly file a patent infringement objection with sufficient grounds and detailed evidence, which will be very likely to assist the intellectual property administration department to make consultation and judgment as soon as possible, so as to stop the infringement conducts before the relevant generic drugs are listed for online procurement.
(III) IP offices would promptly resolve patent infringement dispute and work with centralized procurement organs to stop infringement
Article 5 of the “Opinions” stipulates that the two departments should guide the resolution of patent infringement disputes, and after receiving a request for resolving a relevant case, the intellectual property administration department must handle it efficiently in accordance with laws and regulations. Article 6 of the “Opinions” further stipulates that after the relevant patent infringement case involving pharmaceutical is concluded, the intellectual property administration department shall deliver the result of the case to the parties, and send a copy to the healthcare security department in a timely manner. Then, the healthcare security department should guide the centralized pharmaceutical procurement organ to make corresponding handling on the application for online procurement of the involved products, according to an administrative adjudication determined by the intellectual property administration department or an effective judgment of the people’s court. For the involved products applying for the online procurement, it should not be listed. For the involved products that have been listed for online procurement or have been selected in centralized procurement, it should assist in the enforcement of adjudications and judgments, and measures such as withdrawal from the online platform or cancellation of qualification of being selected should be promptly taken to stop infringements.
Prior to the promulgation of the “Opinions”, there have been cases where generic drug companies have been suspended of procurement qualifications due to patent infringement. On August 5, 2022, the CNIPA made an adjudication on Boehringer-Ingelheim’s request for an administrative adjudication on the manufacture and sale of HEC’s hypoglycemic generic drug linagliptin, which is suspected of being a major patent infringement dispute, and decided that HEC had infringed the patent of related compounds of Boehringer-Ingelheim, and ordered HEC to immediately withdraw the listing of the allegedly infringing drug Linagliptin Tablets from the online pharmaceutical procurement and immediately stop manufacturing, sale, and offer for sale of the infringing products. On November 2, 2022, the Shanghai Pharmaceutical Centralized Bidding and Purchasing Management Institute issued a notification to suspend the procurement qualification of Linagliptin tablets (specification 5mg×7 tablets/board×1 board/box) produced by Guangdong HEC Pharmaceutical Co., Ltd., and stated that this measure was to protect the intellectual property rights in the field of pharmaceutical bidding and procurement.
After the “Opinions” was issued, the IP offices would promptly resolve patent infringement dispute related to centralized pharmaceutical procurement, and send the results of resolution to healthcare security departments in a timely manner. This will further illustrate the advantage of IP offices in resolving patent infringement disputes, and the patentees might be more inclined to choose IP offices for patent dispute resolution, in order to quickly stop infringement by generic products in centralized procurement. However, it should be noted that the “Opinions” also “indirectly link” the court system with the health security branch, that is, the healthcare security departments take corresponding measures according to the effective judgment of the people’s court. The direct reason for the “indirect link” may be that the court system did not participate in the joint issuance of the present “Opinions”, and due to the complexity of the jurisdiction over patent infringement cases, it is objectively difficult to require the court system to copy the judgment documents to the corresponding healthcare security departments. In practice, the parties to the case usually actively perform the aforementioned “copy” behavior, so the protection of the rights and interests of the parties will not be substantially affected.
(IV) The two departments will analyze and determine the intellectual property risks of key products in advance for reference by the centralized procurement
Article 7 of the “Opinions” stipulates that, focus should be put on large-scale and high-profile pharmaceuticals and medical consumables in centralized procurement involving intellectual property risks. The two departments should conduct communication on information in advance, analyze the procurement needs of relevant products and the basic information of intellectual property rights, and perform analysis and study on relevant intellectual property risks in the procurement process, for reference in the procurement process.
The new mechanism for risk analysis, research and determination of intellectual property rights of key products, through the two departments “complementing with each other”, conducting joint research and survey on “key products”, exchanging intellectual property information in a timely manner, can help to prevent the occurrence of major intellectual property infringements and public opinion risks.
III. Responses and Measures by Enterprises
We believe that the promulgation of the “Opinions” will promote the further deepening of cooperation between the two departments, jointly strengthen the protection of intellectual property rights in the pharmaceutical field, and form a multi-level and efficient linkage mechanism for the prevention and resolution of intellectual property disputes. However, the centralized pharmaceutical procurement regulations in China have not yet been fully unified, and the procedures are cumbersome and time-sensitive, it is inevitable to encounter difficulties and challenges in cooperation. Based on this, we suggest that pharmaceutical companies maintain a cautiously optimistic attitude, actively seize policy opportunities, make overall plans, comprehensively make use of intellectual property laws and regulations, and “cooperate in stages” to achieve good outcomes in the protection of intellectual property rights in the field of centralized pharmaceutical procurement.
(I) Initiate the patent linkage procedure to block the marketing of infringing generic drugs
Article 76 of the Patent Law of the People’s Republic of China (hereinafter referred to as the Patent Law) empowers drug patentee and drug marketing authorization applicant to resolve patent disputes in advance during the drug marketing examination and approval process. This has also become the main legal channel for drug patentee to legally block the market approval of infringing generic drugs. If the drug patentee confirms that the technical solution related to the generic drug falls within the protection scope of the drug patent right by filing a patent linkage lawsuit or administrative adjudication, then, according to Article 9 of the “Implementation Measures for the Mechanism for Early Settlement of Drug Patent Disputes (for Trial Implementation)” (hereafter referred to as the Implementation Measures), the national drug evaluation institution shall only turn the application for registration of the relevant chemical generic drug into the administrative approval process until the expiration of the patent rights, so as to successfully block the marketing registration of the infringing chemical generic drug.
The current drug patent linkage procedure has a short trial period. Taking the first drug patent linkage litigation case as an example, the trials of the first and second instance is nearly 9 months. Compared with ordinary patent infringement cases, the trial cycle of patent linkage cases has been greatly shortened. Combined with Article 8 of the “Implementation Measures”, upon receipt of the copy of the notice of filing the case by the people’s court or of acceptance by the patent administrative department of the State Council, the drug products administration of the State Council shall set a nine-month waiting period for the application for registration of the chemical generic drug. The nine-month waiting period can solve the problem of generic drug infringement in advance for some drug patentees, and block the marketing registration of infringing generic drugs.
Moreover, the initiation of the patent linkage procedure will play a fundamental role in the maintenance of legitimate rights in future online centralized procurement. The reason is that only after the drug patent linkage procedure is initiated, drug patentee can legitimately provide clues or raise objections to centralized pharmaceutical procurement organ based on patent linkage disputes, so as to make infringement clues and objections more sufficient, and also to a certain extent make it easier to attract the attention of centralized pharmaceutical procurement organs. According to Article 5 of the “Opinions”, centralized pharmaceutical procurement organs shall verify the qualifications of online procurement products based on the relevant information released by relevant authorities (such as the judgment of the people’s court or the administrative adjudication of the CNIPA), and if it is found that there is an obvious infringement, the products must be withdrawn from the online platform in a timely manner in accordance with laws and regulations.
Therefore, we suggest that the drug patent linkage procedure should be initiated in time to lay the groundwork and block the centralized procurement and online procurement of generic drugs as soon as possible.
(II) Prudently make self undertaking to prevent product infringement in advance
Article 4 of the “Opinions” stipulates that, where an enterprise undertakes by itself on non-infringement, and in the event of occurrence of related patent infringement disputes after a result of inclusion into list or an online procurement transaction, the enterprise shall bear the corresponding responsibilities. We believe that the “corresponding responsibilities” herein include at least civil responsibilities for patent infringement and administrative responsibilities for being withdrawn from online procurement and disqualified from being selected, and may even face being included in the “violation list” of centralized procurement that cannot participate in relevant centralized procurement for a certain period of time.
Therefore, we suggest that in the process of applying for centralized procurement, pharmaceutical companies need to prudently make self undertakings, put emphasis on free to operation (FTO) for the pharmaceutical products that will participate in centralized procurement, and prevent patent infringement of their own products in advance.
(III) Provide clues of infringement in a properly manner to facilitate the analysis and determination of the two departments
Although in Article 7 of the “Opinions”, “perform analysis and study on key products” is an information exchange between the two departments, it does not prevent relevant pharmaceutical companies from actively providing infringement clues to the two departments, assisting the two departments in screening key products in advance, and providing detailed evidence for analysis and study.
Therefore, we suggest that the innovative drug companies should analyze the procurement documents in a timely manner, provide targeted analysis on possible infringing generic drugs, and submit corresponding clues through formal letters to centralized procurement organ about potential infringement matters likely involved in centralized procurement to “assist” centralized procurement organ to screen key products in advance, and promote their analysis and study with the intellectual property administration department, so as to lock in the “attention” of intellectual property rights of the two departments as soon as possible, which in fact lengthens the time period for subsequent consultation or infringement determination issued by intellectual property administration departments, and promote them to issue determination opinions as soon as possible.
(IV) Raise effective objections quickly and block the listing of the infringing generic drugs for online procurement
According to the practice of centralized pharmaceutical procurement, during the public notification period after the announcement of the “Centralized Procurement Proposed Selection Results”, relevant parties can file an objection with the Procurement Office and provide legal and valid evidence materials before the public notification deadline, and the objection will not be accepted after the deadline. If no corresponding evidence materials are provided, the Procurement Office will not accept the objection in principle.
In practice, the objection acceptance period is very short. Taking the seventh national centralized pharmaceutical procurement as an example, the acceptance period is from July 13, 2022 to July 15, 2022, which is only 3 days. This is a very limited time frame for effective objections to uncover clues, retrieve materials, perform professional analysis and provide evidence materials meeting legality requirement.
Therefore, we recommend that innovative drug companies track the release of relevant information on national and local procurement documents in a timely manner, and conduct targeted monitoring on potential infringing drugs and companies. Although in accordance with the requirements of the “Opinions”, centralized pharmaceutical procurement organs can ask the intellectual property administration departments to issue professional opinions on patent infringement objections, without detailed arguments and sufficient evidence materials, it will be difficult for the intellectual property administration departments to make a professional determination within the specified time limit. If no reference opinions are issued within the specified time limit, the enterprise can still participate in centralized procurement or online procurement according to the procedure after making self undertaking. Therefore, in order to effectively make use of the opportunity for objection, cope with the time constraints, and avoid legal risks for unfair competition such as commercial defamation caused by improper objections, we further recommend that innovative drug companies, with the assistance of professionals, conduct patent infringement analysis and determination in advance, prepare a complete set of objection materials, such as information on party initiating the action and evidence on basis of rights, so as to provide effective objections, and facilitate the examination by relevant departments, and do the best to successfully block the listing for online procurement of infringing generic drugs.
The difficulty in determining infringement for different patent types is different, and the legal risks brought about by the inclusion into centralized procurement are also different. According to legal practice, the national centralized procurement will arrange the competition of the original drug with reference preparation and generic drug that has passed the consistency evaluation in the same group. According to the Opinions of the State Council on Reform of the System of Evaluation, Review and Approval of Drugs and Medical Devices, a generic drug has the same active ingredient as the reference preparation. If the patent right of the original drug compound is still valid, the generic drug should constitute compound patent infringement. In the same way, it is also relatively easy to determine the infringement of a use patent. While comparing the indications within the valid period of the use patent with the indications listed in the instructions of the generic drug, if the indications listed in the instructions of the generic drug include indications protected by the patent, the generic drug may cause a use patent infringement dispute. The principle of literal infringement applies to both pharmaceutical compound and use patents, and the determination of infringement is less difficult. Therefore, there is a higher likelihood that the infringing objections would be raised on the basis of compound and use patents for delisting, and it is also easier to make a determination, which deserves the attention and full preparation of innovative drug companies.
(V) Give priority to administrative adjudication to efficiently resolve infringement disputes in accordance with the law
Article 5 of the “Opinions” clearly stipulates that, after receiving a request for resolving a relevant case, the intellectual property administration department must handle it efficiently in accordance with laws and regulations. At the same time, the second part of the “Opinions” requires the two departments to strengthen specific work cooperation in four aspects: establishing a system for self-undertaking by enterprises, guiding the resolution of dispute, strengthening cooperation to stop infringement, and performing analysis and study on key products. In this way, the two departments have formed a multi-level and efficient linkage mechanism for preventing and resolving intellectual property disputes.
It can be seen that after the release of the “Opinions”, with smooth communication channels and clear cooperation requirements, the intellectual property administration departments will have more advantages in terms of efficiency in the handling of patent infringement disputes in the field of centralized pharmaceutical procurement due to nearby location for collaboration thereof. Moreover, in practice, the adjudications of intellectual property administrative are often more efficient than court judgments that usually take effect after the first and second instances. With multiple advantages superimposed, it is reasonably foreseeable that the intellectual property administration departments may handle more and more patent infringement disputes in the field of centralized pharmaceutical procurement, and the efficiency will also be increasing. Therefore, it is suggested that innovative drug companies can give priority to administrative adjudications, efficiently resolve patent infringement disputes according to law, and cooperate with other rights protection measures to systematically protect legal rights.
(VI) Comprehensively use legal measures to actively protect legitimate rights and interests.
Firstly, actively prepare for response to invalidation, to maintain the validity of the patent. The Opinions links the patent dispute resolution to centralized procurement procedures, which means that for generic drug companies, after encountering “patent obstacle” put in place by the patent linkage system during the market approval examination, they would further encounter “patent obstacle” during the application for centralized procurement, which no doubt would further provide motives and pressure for generic drug companies to invalidate relevant patents for original drugs. For this reason, after the promulgation of Opinions, in order to solve the patent obstacle issue from the source, the generic drug companies may file more patent invalidation petitions, so the innovative drug companies should be prepared to meet the challenge of increased patent invalidation petitions.
Secondly, timely advocate “punitive damages” to fully safeguard legitimate rights and interests. The Interpretation of the Supreme People’s Court on the Application of Punitive Damages in the Trial of Intellectual Property Infringement Civil Cases (hereinafter referred to as the Interpretation on Punitive Damages) stipulates that, the application of punitive damages clauses should consider the two elements of subjective intention and serious objective circumstances. If the patentee files an objection and provides corresponding evidence, and the generic drug company still insists on participating in the centralized procurement, combined with the non-infringement self undertaking made by the generic drug company, it may constitute the circumstances under Article 3.2.1 that “the defendant still commits the IPR infringement after being notified or warned by the plaintiff or party of interest”, or Article 3.2.6 that “any other circumstance that may be determined as a serious circumstance”, which can be preliminarily determined that generic drug companies have the intention to infringe intellectual property rights. If the centralized pharmaceutical procurement is determined to constitute patent infringement by the intellectual property administration departments or the people’s court, and the drug for centralized pharmaceutical procurement has been listed for online procurement with huge sales, it may comply with Article 4.2.5 that “the defendant obtains huge benefits from the infringement or causes huge loss to the right holder due to the infringement”, or Article 4.2.7 that “any other circumstance that may be determined as a serious circumstance” of the Interpretation on Punitive Damages, which can be considered having serious circumstances. It can be seen that it is possible and necessary to apply punitive damages to drug patent infringement disputes in centralized procurement. Innovative drug companies can claim “punitive damages” in a timely manner according to the actual situation to comprehensively protect their legitimate rights and interests.
Thirdly, actively apply for a “preliminary injunction” to quickly stop the infringement. Before and after the listing for online procurement of generic drugs, in order to stop the infringement from the source or prevent the enlargement of damages, original drug companies can apply for a preliminary injunction in patent linkage disputes or patent infringement disputes to effectively prevent infringing generic drugs from being listed for online procurement, or do the best to have the drug withdrawn from online procurement as soon as possible and the qualifications for being selected cancelled, to prevent infringements from causing irreversible damages to the original drug market, and to prevent right holders from “winning the lawsuit but losing the market”.
The promulgation of the “Opinions” is an important symbol of further deepening cooperation between the China National Intellectual Property Administration and the China National Healthcare Security Administration, and jointly strengthening the protection of intellectual property rights in the pharmaceutical field. Proper implementation will effectively prevent infringements and promote innovation and development in the pharmaceutical field. Innovative drug companies should make overall plans and comprehensively use intellectual property laws and regulations according to the actual situation of different stages of centralized pharmaceutical procurement to systematically safeguard legitimate rights and interests.