Under the microscope

A comparison of evolving legal frameworks that are helping to shape the massive life sciences industries in China and India

Navigating China’s new protections for life science patents

China’s 2021 Patent Law brought significant changes to life sciences patent protection, including a patent linkage system akin to the US model, patent term extension (PTE) and patent term adjustment (PTA). Additionally, the law introduced a unique enforcement mechanism – the Major Patent Infringement Dispute Adjudication (Major Case) – empowering China’s national intellectual property office to handle patent infringement disputes.

These reforms aim to strengthen life sciences patent protection in China, aligning with the country’s increasing focus on drug innovation. As we approach the three-year mark since enactment, this article provides updates and practical insights into these legislative components.

PATENT LINKAGE

Although largely mirroring the framework of the US Hatch-Waxman Act, the Chinese patent linkage system differs in several key aspects. These include dual forums, shorter regulatory stays, longer exclusivity for a first generic version, and limited protection for biologics. Early cases have shed light on how these issues have unfolded in practice.

Dual forums. In a similar fashion to regular patent infringement cases, China offers two dispute resolution forums for linkage cases: judicial proceedings before the Beijing Intellectual Property (IP) Court; and administrative proceedings before the China National Intellectual Property Administration (CNIPA). Given shorter duration of administrative actions (three to six months) compared to court cases, many anticipate the CNIPA becoming the preferred forum for linkage cases.

Shorter regulatory stays. In the Chinese system, a linkage case will trigger a nine-month stay of regulatory approval, significantly shorter than the 30-month stay in the US system. As CNIPA actions typically conclude within nine months and court cases often take longer, this further encourages the choice of the CNIPA over the Beijing IP Court.

Issues. Under the Chinese system, a linkage case addresses whether or not an abbreviated new drug application (ANDA) falls within the scope of a patent claim. The CNIPA has construed this narrowly and refused to address non-infringement defences, as decided in Daiichi Sankyo v Yangzijiang (2022). However, according to Supreme People’s Court judicial interpretations, defendants are allowed to raise these issues in court cases. This may also lead patentees to favour the CNIPA over the court.

Statistics on choice. Statistics confirm the CNIPA being preferred over Beijing IP Court. By 15 March 2024, the CNIPA had disclosed 76 linkage case decisions with an average trial period of 6.1 months. In contrast, the Beijing IP Court published 43 rulings on linkage lawsuits with an average trial period of 7.7 months.While not all decisions are published, these numbers align with the predicted choice of forum. Notably, the average trial period of 7.7 months for court cases is already faster than regular patent infringement cases, but only an effective decision can trigger a stay.

It is important to note that China operates on a two-instance system, where the first-instance court decision is not final. Therefore, most court cases are unlikely to reach an effective decision within nine months, resulting in patentees being unable to block generic marketing even if favourable findings are obtained in a linkage case in a court proceeding.

First-generic exclusivity. First-generic exclusivity serves as a crucial incentive for generics, balancing interests within the system. In China, the system provides a 12-month market exclusivity period, twice the duration of the 180-day exclusivity in the US.

However, China has elevated the standards for obtaining this benefit: only the first generic to have received regulatory approval and challenged the patent successfully will enjoy the 12-month market exclusivity. The rules specify that to successfully challenge patents, generics need to invalidate the patents. Generics that have been successfully designed around the patents do not qualify for exclusivity.

This essentially means that, to receive this benefit, the first generic must clear the way for all other generics. On 2 January 2024, Chia Tai Tian Qing’s everolimus obtained approval with a 12-month market exclusivity, making it the first and, to date, the only generic to have received this benefit.

Some believe this high burden may discourage generics from challenging patents, thus preventing the system from fully functioning. To 15 March 2024, a total of 7,991 patent certifications were filed: 7,923 for chemical drugs; 67 for biologics; and one for a traditional Chinese medicine. Only 408 certifications are type IV certifications, accounting for 5.1% of all certifications.

Biologics. Unlike the US system, China’s linkage covers both chemical drugs and biologics, but with limited protection for biologics.

For biologics, brand names can register patents and biosimilar applicants must file patent certifications. However, a linkage case does not stay biosimilars’ regulatory review, and biosimilars do not receive market exclusivity.

In addition, patent registration is more limited for biologics. For chemical drugs, eligible patents include active pharmaceutical ingredient (API), medical use and formulation patents, while only sequence and medical use patents are allowed for biologics.

Given these restrictions, it remains unclear how effectively biologics are being protected under the current system.

Patent notification. Unlike the US system, where generics have clear notification requirements, the situation is less clear in the Chinese system. Regulations mandate generics notify the branded drug of their type IV certification within 10 days of an ANDA’s acceptance, but there is no clear guidance on the consequences for non-compliance or remedies for branded drugs in the event of non-compliance. Early decisions have addressed this issue, but failed to provide any remedy.

In Chugai v Wenzhou Haihe (2022), the generic failed to notify the branded drug or provide the appropriate technical documents until after a linkage case had commenced. The Supreme People’s Court criticised Wenzhou Haihe but imposed no sanctions. Consequently, branded drugs must actively monitor the linkage system rather than relying solely on generic notifications. Failure to do so may result in missed opportunities to commence linkage cases on time.

Published cases. Looking at the published decisions in patent linkage cases, formulation and medical use patents are the most litigated. However, branded drugs face low success rates, with less than one-third winning in CNIPA cases and even fewer in court. Challenges faced by branded drugs include invalidity claims, design around, and legal barriers such as construing Swiss-style use patents. Crafting careful strategies tailored to China’s unique issues is crucial for winning cases in China.

PTA AND PTE

China’s 2021 Patent Law introduced provisions for PTE and PTA. However, detailed implementation measures were not enacted until 20 January 2024, with the release of the 2023 Implementation Rules of the Patent Law and the 2023 Patent Examination Guidelines.

These measures outline specific requirements and calculations for PTA and PTE. To the disappointment of many international drug companies, the rules stipulate that PTE only applies to new drugs, defined as those not launched anywhere in world, when applying for marketing approval in China. This would exclude many innovative drugs already launched in other countries.

MAJOR CASE

The 2021 Patent Law enables the CNIPA to handle patent infringement cases with significant influence across the country. Compared to court decisions, the main advantage of a major case is its short duration. The CNIPA should issue a final decision within four months of docketing the case. This decision is enforceable on issuance, even if appealed. In contrast, a court proceeding takes much longer, with the first-instance proceedings lasting six to 12 months and not enforceable until the second-instance decision, which could take another six to nine months.

The remedy in a major case is a nationwide injunction, while damages are not available. The major case has attracted significant attention from drug companies, where securing a quick injunction is the primary goal in patent infringement cases.

The rules provide threshold conditions for matters to qualify as a major case:

1. A large amount of economic benefit is involved;
2. The development of an entire industry is impacted;
3. The case involved multiple jurisdictions at the provincial level; and
4. There may be other potential important influences.

These conditions are generally defined, with No. 3 on the list offering more specific guidance.

So far there has been only one decision handed down by the CNIPA, in a case handled by the authors’ team. The team filed the first batch of cases before the CNIPA on behalf of a pharmaceutical client for an important drug that was copied and offered for sale in more than 20 provinces across China. Within months of filing, the CNIPA issued an infringement decision, effectively halting nationwide sale of the generics.

This success marks an important milestone in patent litigation in China, demonstrating the CNIPA as a viable mechanism for preventing generics from eroding market share. Pursuing a major case before the CNIPA for a swift injunction, then seeking damages in civil court, could be an effective tactic for drug companies to safeguard their interests in the Chinese market.

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Delicate balance of life sciences laws in India

Life sciences laws in India govern medicines, medical devices, biotechnology and healthcare, safeguarding patients and consumers while ensuring product quality, efficacy and safety. These regulations govern marketing and advertising, intellectual property rights, price and payment, and clinical trial compliance to avoid legal issues and retain public trust.

They present unique legal and business challenges to building or buying pharmaceutical manufacturing facilities, importing specialty ingredients for health and beauty products, selling health foods, supplements and nutraceuticals, and running bioavailability, bioequivalence and nutraceutical clinical trials.

In 2022, Indian healthcare was worth about USD370 billion, with the consulting firm Nexdigm predicting USD610 billion in healthcare revenue by 2026.

The Ministry of Health and Family Welfare (MoHFW) received USD10.76 billion in the 2023–2024 Union Budget. The government is also introducing a USD6 billion credit incentive programme to boost hospital infrastructure.

India also extensively regulates pharmaceutical pricing, marketing, clinical trials, biosimilar approval, import-export of medications and materials, safety and efficacy, and price. These rules enable economical worldwide drug distribution and healthcare advancements for almost 1.45 billion Indians.

POLICY AND REGULATIONS

The 1940 Drugs and Cosmetics Act (D&C Act) regulates India’s life sciences industry, ensuring the quality of medications imported, manufactured, distributed and sold.

The Drugs (Prices Control) Order of 2013 regulates pharmaceutical pricing, whereas the Drugs and Magic Remedies (Objectionable Advertisements) Act of 1954 oversees therapeutic claims.

The 2002 Competition Act governs supplier, manufacturer and stakeholder anti-competition behaviour. The Consumer Protection Act (CPA) prohibits discriminatory commercial practices and product liability for manufacturing flaws. The 1970 Patents Act prohibits ever-greening, while the 1999 Trade Marks Act safeguards trade names.

Environmental statutes require environmental impact evaluations, limit industry expansion, and regulate solid and hazardous waste management.

OPPORTUNITY

Medical devices, digital healthcare and hospital infrastructure intertwine with life sciences. Medical tourism imports are on the rise, bringing USD9 billion to the healthcare industry. The government recently introduced a medical device manufacturing production-linked incentive system (PLI) to boost investment, domestic manufacturing, and minimise the sector’s imports.

Primary, secondary and tertiary hospitals in India are government-supported or privately operated. Private healthcare contributions are expected to increase by 15% annually. Experts expect the healthcare sector to grow by at least 5.75% by 2032, reaching USD155 billion.

Foreign companies have several opportunities in biotechnology and biopharmaceuticals, which are growing rapidly. With more than 800 enterprises, the Indian biotechnology sector is worth USD80 billion globally.

India is a leading contract research, clinical trial and manufacturing hub. Refurbished laboratory and medical instrument vendors have good potential in the medical equipment sector, which needs a lot of money. Advanced medical facilities use these gadgets as auxiliary systems. However, district hospitals and less specialised medical facilities view refurbished laboratory and medical equipment as of greater quality due to their lower cost.

Strict and strong consumer protection holding makers, retailers and providers accountable for defective products and services that harm consumers was upgraded addressing product liability by the CPA of 2019. It replaces former product liability laws including the Indian Contract Act of 1872, the D&C Act of 1945, and the previous CPA of 1986.

Notable changes include a shift towards electronic commerce, stiffer fines for false advertising, and celebrity endorsement limits. Organisations must comply to avoid medical malpractice claims. The insurance coverage that organisations need to maintain will undergo changes.

In response to unregulated medical devices circulating, the Medical Device Rules (MDR) implemented in 2018 empowers the government to issue a “warning” for some medical devices, classifying them as “drugs”. The MoHFW added section IIIA to the MDR requiring online registration of all medical devices with the Drugs Controller General of India by 1 October 2021.

Since the pandemic, digital healthcare and telemedicine have grown rapidly. Smart patient-hospital barrier reduction methods, as well as modern health technologies, are popular. Scholars and stakeholders think telemedicine and AI are promising.

The MoHFW and Niti Aayog, the Indian government’s public policy think tank, recently released telemedicine guidelines. The National Medical Commission (formerly the Medical Council of India) regulates remote consultations by qualified medical practitioners.

RECENT LEGISLATION

In July 2022, the MoHFW introduced the New Medication, Medical Devices and Cosmetics Bill, replacing the Drugs & Cosmetics Act of 1940, governing the surveillance of medical device administration, which includes software, implants and instruments. The classification for these devices is “drugs”. The main goal of this legislation is to improve the safety, efficacy and international benchmarks of medical devices, medications and cosmetics.

On receiving parliamentary approval, the new legislation will establish regulations pertaining to pharmaceuticals, medical apparatus and cosmetics.

In May 2023, India began implementation of the National Medical Device Policy, which aims to:

• Guarantee universal accessibility to superior medical devices;
• Augment domestic manufacturing capabilities to ensure affordability;
• Improve product quality and
  international competitiveness;
• Foster a healthier lifestyle via extensive device utilisation;
• Facilitate innovation within the sector; and
• Enhance clinical outcomes by means of timely detection and precise treatment.

These simplified regulations stimulate sector growth through investments in infrastructure, research and development, and innovation.

The Medical Device Rules (MDR) govern the clinical investigation, manufacturing, import, sale and distribution of medical devices in the country. The MDR 2017 governed a wide range of implanted device categories. In January 2022, the government issued a directive requiring all medical device manufacturers to acquire ISO 13485 certification and formally register their products with the Central Drugs Standard Control Organisation.

Strict adherence to these standards is required for the production and oversight of medical equipment and invitro diagnostics. Registration of medical devices was previously voluntary. Medical device registration is required for class A and B devices since October 2021, and class C and D devices since September 2022.

In June 2021, the Indian Medical Device Industry Association and Quality Council of India extended the 2016 Indian Certification for Medical Devices Scheme to include the Indian Certification Plus (2021) methodology.

This novel technology examines medical device quality, safety and benefits, helping government agencies uncover counterfeit products and bogus certificates. The revised rules removed reapproval of import and production licences.

Cardiac stent and knee implant prices were restricted by up to 70% in 2017. A 5% ad-valorem health tax was introduced on medical, dental, surgical and veterinary devices in 2020.

The Department of Pharmaceuticals revised India’s Procurement Order 2017 in February 2022 to improve patient access to critical medical technologies that are not produced domestically.

The NPA imposed price caps on six medical products in June 2021. This included oxygen concentrators, blood glucose monitors, blood pressure monitors, pulse oximeters, nebulisers, and digital thermometers. To justify price limits, the NPA used trade margin rationalisation (TMR) by exploiting the price gap between producers and patients.

To increase patient access to affordable and accessible healthcare, the NPA established the TMR policy for medical equipment and drugs in 2018.

The government is reducing trade margins for important medications, including patented ones, to cut costs and boost patient access. This TMR-based project starts with 139 drugs including antibiotics, oncology, and chronic renal disease treatments.

In June 2020, the Department for Promotion of Industry and Internal Trade updated the 2017 Public Procurement Order to favour Indian companies with 50% local content. Government tenders exclude “non-local suppliers” with less than 20% local content.

The Union Budget for 2023–24 allocated an additional 15% for intellectual property, raising the budget from USD38.4 million to USD40.1 million.

TAKEAWAYS

Regulatory policies and laws profoundly and intricately affect the life sciences sector in India. Although conducive to fostering innovation and attracting foreign investment, the implementation of flexible regulations and the ease of doing business strategies can present barriers concerning the accessibility and affordability of pharmaceuticals.

Constantly striving to strike a balance that fosters innovation, guarantees provisions for vital medications, and adheres to international trade commitments is a persistent challenge that policymakers must confront.

In order to remain competitive in the global market for pharmaceuticals, biosimilars and biopharmaceuticals, India must modify its policies to accommodate the ever-changing life sciences landscape and innovation.

This is particularly crucial as the population’s requirements continue to evolve. Determining the trajectory of the life sciences industry in India will require an exact balance between public health policies, innovation regulations, monitoring and protection via intellectual property rights, and government-industry collaboration.