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Taiwan reforms pharmaceutical patent law

Crystal J Chen and Kevin C W Feng of Tsai Lee Chen explain Taiwan’s new bill which will amend the Pharmaceutical Act, analysing the implications of the new patent linkage system and rules around data exclusivity

At the end of 2017, Taiwan's Legislative Yuan passed a bill amending the Pharmaceutical Act. The amendments created data exclusivity protection for an old drug's new indications and devised a patent linkage mechanism, systematically connecting the status of a new drug's patents with the market approval of a competing generic copy. The patent linkage scheme is believed to be largely inspired by regulations of Taiwan's foreign trade partners. After this reform, Taiwan hopes to join international agreements on trade collaboration, with the goal of avoiding economic marginalisation.

Concurrently, in October 2017, the General Office of State Council of the People's Republic of China also published an administrative document about policies aimed at creating an environment amenable to pharmaceutical innovation. The administrative document, entitled Opinions on Deepening the Reform of the Evaluation and Approval System and Inspiring Innovation of Drugs and Medical Devices (Opinions), orders the implementation of patent linkage between the China Food and Drug Administration (CFDA) and the State Intellectual Property Office (SIPO). The Opinions also formulate patent term extension and data exclusivity, in addition to other aspects such as clinical trials administration, expedited examination on market approval applications and product administration cycles.

Taiwan's amendment to the Pharmaceutical Act

Accession into free trade agreements (FTA) with the United States and into the Trans-Pacific Partnership (TPP) have long been one of Taiwan's foreign policy goals. These international trade pacts contain language which emphasises intellectual property protection for pharmaceutical products, protection which includes a patent linkage system and data exclusivity for new indications. The main points of this most recent amendment to the Pharmaceutical Act of Taiwan are summarised below.

Drug patent-approval linkage and pharmaceutical patent database

The new bill adds an obligation for the patented drug company or the patentee to file the new drug's patent status. It requires the patentee to list associated information about the new drug's patents regarding substance, composition or formulation, or medicinal use within 45 days from receiving Taiwan Food and Drug Administration's (TFDA) approval on the new drug's marketing (Article 48-3). Associated regulations governing the update of a patent's status have also been devised so as to respond to any changes that may occur over time. Furthermore, there is language in the amendments geared to maintaining the authenticity of patent information (Article 48-6 and Article 48-7).

According to the amendments, the generic competitor bears a duty to inform the TFDA of a new drug's patent information when filing for an application for the market approval of a generic copy. A patent infringement dispute between the TFDA-approved generic and a patented new drug can materially compromise patient accessibility to affordable medicinal alternatives. The bill imposes upon the generic drug applicant a duty to certify clearance of legal barriers from listed patents of the new drug upon its application for market approval (Article 48-9). Its declaration should include any of the following:

No patent information is listed for the new drug.

The new drug's corresponding patents have expired.

The TFDA may approve the generic's market approval after the expiration date of the listed patents.

The patents are invalid or the generic is not infringing the patents.

Should there be a declaration, pursuant to item 4 of Article 48-9, the generic applicant should notify the TFDA, the holder of the new drug approval, the listed patent owners and the exclusive licensee within 20 days upon receipt of the TFDA's notice of application completion. As a fundamental of the system, there will be a stay of generic approval should the generic competitor challenge listed patents. Where the generic applicant declares that the listed patents of new drugs are invalid, or when no infringement occurs, the patentee or the exclusive licensee may, if such an option is available, opt to file for a patent infringement action within 45 days upon receipt of the notice of non-infringement or patent invalidity from the generic applicant. The TFDA will then place a stay of 12 months on the generic's market approval, unless the patentee fails to raise an action within 45 days or the conflict is otherwise settled (Article 48-13). It is worth noting that should the patentee raise a patent infringement action by pointing to any patents not listed in the TFDA, this action will not prevent the TFDA from issuing a market approval to the generic drug (Article 48-13).

To create an economic incentive for stimulating pharmaceutical competition for the benefit of consumers, the first generic challenger who prevails in an infringement action will be granted sales privilege for a period of 12 months. In effect, this excludes other generic manufacturers from entering the market (Article 48-16).

Measures against potential pay-for-delay deals

Any parties of the new drug patentee, generic applicant, or generic marketing approval holder who engage in an agreement with respect to the drug's manufacture, sale, or term of marketing exclusivity shall report to the TFDA within 20 days. The TFDA has discretion to forward the agreement to the Fair Trade Commission for further investigation should there be any unfair competition issues (Article 48-19).

Data exclusivity on new indications of repurposed existing drugs

As an efficient way of extending the term of drug protection, the bill broadened data exclusivity to further include indications of an existing molecular entity. To this end, the Pharmaceutical Act added Article 40-3, granting a three-year term to a pharmaceutical company for newly invented indications of an existing drug developed by the company. Other applications for drug approval cannot cite the data for the same indication within two years from the approval of the addition or change of indications of the existing drug. The TFDA may issue other drug approvals citing the same data for the same indication only after a period of three years from the repurposed drug's approval for new indication.

Furthermore, where the clinical trials for new indication are conducted in Taiwan, the pharmaceutical company may enjoy an exclusivity term of five years. This extra period has been provided as an economic incentive aimed at encouraging the development of medicinal and clinical studies in Taiwan.

Background: statistical research and market survey

Given the level of sensitivity involved in patent linkage for the local industry, it is expected that there will be a series of administrative procedures in pharmaceutical patent registration regulations, reviews for market approval application and issuance of the same. In all likelihood, the formulation of the new system will influence the local market structure, especially insofar as it may serve to reduce the earnings of the local pharmaceutical industry. To better understand the possible market reaction, in 2015, the TFDA conducted research, also making a study report evaluating the possible impact on the local pharmaceutical manufacturing industry. This was done by interviewing local pharmaceutical companies.

The study chose drugs which represented five major indications according to the National Health Insurance Database. These were subject to an analysis on the changes of their market share before and after patent expiration. The five drugs were Irinotecan, Clopidogrel, Imipenem, Pantoprazole and Risperidone. Their sales in the market are shown in Figures 1-5. These figures demonstrated that the patented drug's sales share was not reduced after the launch of the first generic copy. Only the revenues of Irinotecan and Risperidone decreased in response to the emergence of generic competition after periods of three to five years. Contrary to presumptions, sales of the drug Clopidogrel increased despite the entrance of a generic competitor. The results of this study show that the introduction of a lower-cost generic alternative did not have the same replacement effect or patent cliff in Taiwan as it does in at least the United States and Canada, insofar as it did not decrease the sales revenue from existing drugs.

Based on the statistical data, we can deduce that the possible impact of patent linkage, namely the loss of the generic's anticipated earnings due to delay of market approval, may not reach devastating levels.

Figure 1: Irinotecan sales

Figure 2: Clopidogrel sales

Figure 3: Imipenem sales

Figure 4: Risperidone sales

Figure 5: Pantoprazole sales

Opposition remaining strong

The new bill invited strong criticism from some lobbying groups, especially those from the local pharmaceutical industry. Arguably, patent linkage is expected to serve the interests of international pharmaceutical giants at the expense of Taiwanese companies, as Taiwanese companies mostly profit from the sale of generic drugs. Data released by the IP Court reveals that the winning rate for Taiwanese generic manufacturers has been more than 85% for the past 10 years. However, this was the result of considerable spending to cope with frivolous legal actions initiated by patentees, according to Taiwan's three major drug guilds. The guilds are anticipating further challenges levied against generic competitors, should patent linkage become the norm, which signifies more expenses for Taiwan's generic competitors. Statistics show that the National Health Insurance Programme as well its patients have already been bearing great costs for patented drugs due to the delayed entrance of generic copies. The situation may be worse in the future. As per the new bill, once the patentee files for an action in due course, the TFDA shall place a 12-month stay on granting approval to generic drugs. Possibly one of only a few benefits from this new legislation is that the interested generic competitors may easily know and identify a new drug's patent information and status, as the patentees are required to disclose relevant information.

The amendments to the Pharmaceutical Act are regarded as a major step made by Taiwan in their efforts towards negotiating for the accession to the former Trans-Pacific Partnership (TPP) and the conclusion of the Trade and Investment Framework Agreement (TIFA). The bill has now officially passed, but meanwhile the TPP has come to an awkward halt and been renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). For the sake of reducing the possible impact on local industry, drug guilds are calling on the legislature to postpone the effectiveness of the amendments to at least a date after the implementation of TIFA or CPTPP, should the cancellation of this new bill not be possible.

China to institute new schemes on pharmaceutical innovation and generic copy's development

The General Office of State Council of the People's Republic of China released the Opinions as a guiding order for reform and improvement on the system for the review and approval of pharmaceutical products and medical devices. The Opinions are regarded as a significant milestone for innovation and development for China's pharmaceutical industry.

Creating a marketed drug catalogue

The Opinions order agencies supervising pharmaceutical affairs to create a Marketed Drug Catalogue (catalogue), modelling itself after the Orange Book, to include newly approved drugs and generic drug products with quality and therapeutic equivalence. Properties of novel drugs, enhanced new drugs, and bioequivalent generic drugs are noted in detail, providing clear information about items such as the active ingredients, dosage forms, specifications, market approval holders, associated patents and data exclusivity. On December 29 2017, the CFDA published the Catalogue accordingly, including 203 dosages of 131 drugs, of which 13 generic drugs' 17 dosages are collected. The Opinions will be renewed and updated from time to time.

Exploring the patent linkage system for pharmaceutical inventions

Upon filing for market approval of a generic copy, the competitor shall explain all patents concerned and their related legal status of ownership and then inform the patentee about the filing. Where there are patent disputes, the interested party may initiate a lawsuit in the court, and, during the court's trial the CFDA shall not place a stay on the drug review and evaluation on bioequivalence. As per the court's judgment, decision, or mediation agreement, the CFDA shall decide whether to approve a reviewed and evaluated generic copy. In the event of a period pending a judgment, decision, or mediation agreement, the CFDA may, at its discretion, approve the reviewed and evaluated generic copy.

Piloting pharmaceutical patent term extension

In the Opinions, the General Office of State Council specifically ordered the selection of some new drug candidates for a pilot programme which offers an appropriate extension on patent term in order to compensate for the delayed market entry of the drugs due to clinical trials or the administrative agency's review and evaluation.

Improving drug's data exclusivity protection

The clinical trial data and other related data of novel chemical entities, orphan drugs, paediatric drugs, and novel therapeutic biologics will be granted a specific period of exclusivity. From the day of market approval, no additional market application will be approved for an identical variety of the drug during the active term of data exclusivity, unless consent is granted by the data owner or if the data is self-generated by the later market applicant. The same data exclusivity protections also apply to undisclosed data that is self-generated and submitted by a generic competitor who succeeds in a patent invalidation action.

Crystal Chen
  Crystal Chen is a partner at Tsai Lee & Chen. She has practised for nearly 20 years and covers all areas of IP law. She advises on patent prosecution and enforcement and is involved in infringement litigation related to copyright, design, trade mark and unfair competition. Her clientele consists of a variety of domestic and multinational corporations.

Ms Chen has an LLB and an LLM degree in intellectual property from the University of New Hampshire School of Law. She is a member of the AIPLA, AIPPI, ABA, the New York State Bar Association, the Beijing Bar Association and the IPO Association. She is the incumbent chair of delegates for independent members of AIPPI.

Kevin C W Feng
  Kevin C W Feng is a registered patent attorney at Tsai Lee & Chen. He focuses on patent prosecution and IP research. He provides advice on IP law to clients. He has particular experience in software, financial technology and pharmaceutical related patents. Mr Feng received his MIP degree from the University of New Hampshire School of Law and a BSc degree in biochemical science and technology from the National Taiwan University.


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