China Moves Toward a U.S.-Style Patent‑Linkage System for Drugs

On October 8, 2017, the Chinese Communist Party and the State Council jointly issued the “Innovation Opinion,” a landmark reform of China’s drug and medical device approval system. Together with the May 2017 Circular No. 55 from the China Food and Drug Administration (CFDA), the Opinion calls for a U.S.-style patent‑linkage framework that ties generic drug approval to the patent status of brand‑name products.

I. The U.S. and EU Patent‑Linkage Models

In the United States, the Hatch‑Waxman Act creates a tight link between generic approvals and the patents held by brand‑name manufacturers. Key mechanisms include:

• Orange Book: The FDA compiles a monthly‑updated register of active ingredient patents and expiration dates for each approved drug.
• Patent Certifications: Under the Abbreviated New Drug Application (ANDA), generic applicants must make one of four certifications for each Orange Book patent—no patent listed, patent expired, market entry delayed until expiration, or patent invalid/unenforced.
• Paragraph IV Certification: If a generic asserts a patent is invalid or non‑infringing, it must notify the patentee within 20 days, prompting a potential infringement suit. A 45‑day window follows for the patentee to file; failure to sue allows FDA approval, whereas a lawsuit triggers a 30‑month stay until a court decision.
• 180‑Day Market Exclusivity: The first successful generic challenger gains a 180‑day exclusivity period during which no other generic for that drug can be approved.

The European Union, by contrast, does not adopt a formal patent‑linkage system because patent holders can obtain swift injunctions to block infringing products, reducing the need for such a mechanism.

II. China’s Existing Framework

China’s current generic approval process relies on a patent clearance requirement, but its execution is uneven:

• No central registry comparable to the Orange Book means generic applicants lack a definitive list of potential blocking patents, and CFDA struggles to assess infringement risk efficiently.
• While the CFDA requires a non‑infringement statement, it does not mandate identification of specific patents or provide a basis for the claim. Generic applicants often issue blanket declarations, and the CFDA rarely scrutinizes them, publishing the statements online without verification.
• Because China does not recognize artificial infringement, brand‑name companies cannot sue generic applicants until the generic product reaches the market, delaying enforcement.

As a result, generics can enter the market before patent expiration, but they face heightened infringement risks.

III. Proposed Patent‑Linkage System

China is unlikely to adopt the EU model, given the courts’ reluctance to grant preliminary injunctions. Instead, the proposed system mirrors the U.S. model by introducing:

• Chinese “Orange Book”: On December 28, 2017, CFDA launched the Catalogue of Approved Drug Products, covering 131 drugs and including active ingredient, applicant, dosage, and associated patent and exclusivity data.
• Patent Infringement Action and 24‑Month Stay: Generic applicants must declare non‑infringement against patents listed in the Chinese Orange Book and notify the innovator within 20 days of filing. The patentee then has 20 days to initiate infringement litigation, triggering a 24‑month stay of generic approval. The stay ends when the court rules in favor of the generic, the parties settle, the patent expires, or no court decision emerges after 24 months.
• 18‑Month Data Exclusivity: The first generic for an unapproved originator drug that successfully challenges the patent gains 18 months of data exclusivity, preventing other generics from entering the market without new clinical trials or bioequivalence studies.

Should a generic fail to declare relevant patents and later face a lawsuit, the CFDA may impose a stay to penalize the false declaration, with the duration depending on case specifics.

IV. Critical Observations

• Limited Incentive for Generics: The 18‑month exclusivity applies only to generics whose originator is not approved in China, a narrow subset. Most generics for approved originators lack this incentive, and data exclusivity is weaker than U.S. market exclusivity, which outright blocks competitors.
• Absence of Artificial Infringement: China may need to amend its Patent Law to treat the filing of a generic application claiming a patent is invalid or non‑infringing as an artificial act of infringement, aligning with U.S. practice.
• Definition of “Prevailing Patent Challenge”: Clarity is needed on whether this refers to a Patent Re‑examination Board (PRB) decision invalidating the patent or a court ruling of non‑infringement. PRB decisions typically arrive within 6–10 months, faster than a full court trial.
• Short Notice Period: The 20‑day window for initiating litigation is impractical, especially for foreign patentees who must complete notarization and legalization procedures. A longer period would be more realistic.

V. Conclusion

The introduction of a patent‑linkage system marks a pivotal step in China’s regulatory reform, aiming to balance the interests of brand manufacturers and generic entrants while fostering pharmaceutical innovation. We will continue monitoring the implementation and its impact on the market.