1.China pushes generics over brands with another round of new pharma policies. The General Office of the State Council on April 3rd, 2018 issued “The Opinion on Reforming and Improving Supply and Use of Generic Drugs” (国务院办公厅关于改革完善仿制药供应保障及使用政策的意见 国办发〔2018〕20号), to promote China’s generic pharmaceutical industry. The State Council said it would draw up new incentives aimed at encouraging the development and production of generic drugs, a move it said would help safeguard public health, reduce medical bills and spur innovation.

According to the document, CFDA and the National Health Commission will compile and actively update a drug list that encourages companies to produce generic versions. That list will include medications for rare diseases, major infectious diseases and pediatric treatments, as well as important drugs that are short in supply. Certain qualified generics makers are allowed to be designated as High and New Technology Enterprises (HNTE) with commensurate income tax reductions (see more about China’s practice of providing tax incentives to high tech enterprises here).

The State Council also said that with regard to IP protections, China will “strike a balance between the interests of patent holders and the public,” and would strengthen anti-monopoly enforcement. (Note that the recent combination of agencies involved with antitrust enforcement, IP with CFDA may offer increased opportunities for such antitrust enforcement). An “early warning” mechanism to prevent generic drug producers from infringing patents will be established. The policy also restates that China considers compulsory patent licensing (CPL) a bona fide option during public health emergencies or shortages of key drugs; however China has not explicitly implemented a CPL to date.

China is a major branded generics market and innovative pharma companies are heavily dependent on this market in the absence of a robust market and incentives for innovative pharmaceuticals. The Opinion also states that when there is a bioequivalence determination, the generic drug should be marked as a substitute for the innovative drug and release such information to the public. In the absence of special circumstances, no brand name could be written on the prescription.

With regard to intellectual property, the Opinion further states:

“…In accordance with the principle of encouraging the creation of new drugs and the development of generic drugs, research and enhance a system of pharmaceutical intellectual property protection that is compatible with China’s economic and social development level and industrial development stage, and fully balance the interests of drug patent holder and the public. Implement the patent quality improvement project and cultivate more core, original and high-value intellectual property. Strengthen the enforcement of anti-monopoly law in the field of intellectual property rights, prevent the abuse of intellectual property rights and promote the listing of generic drugs while fully protecting innovations in the pharmaceutical field. Establish and improve the patent early-warning mechanism in the pharmaceutical field to reduce the risks of patent infringement of generic pharmaceutical companies.”

“按照鼓励新药创制和鼓励仿制药研发并重的原则，研究完善与我国经济社会发展水平和产业发展阶段相适应的药品知识产权保护制度，充分平衡药品专利权人与社会公众的利益。实施专利质量提升工程，培育更多的药品核心知识产权、原始知识产权、高价值知识产权。加强知识产权领域反垄断执法，在充分保护药品创新的同时，防止知识产权滥用，促进仿制药上市。建立完善药品领域专利预警机制，降低仿制药企业专利侵权风险.”

2. SIPO releases the 2017 China Patent Survey Report.  The State Intellectual Property Office (SIPO) recently released the 2017 China Patent Survey Report, which is the third time that the national patent-related survey results are publicized.

In 2017, the patent survey covered 23 provinces nationwide and was carried out concerning the valid patents and the patent holders who owned such valid patents at the end of 2016. The survey was launched in March 2017 and was completed at the end of 2017. 15,000 questionnaires about patent holders and 43,000 questionnaires about patent information were released. Over 85% of the questionnaires were returned.

According to the report, China’s overall environment of patent protection has been significantly enhanced, but still not to a level that is satisfied. More than 88% of patent holders believe that patent protection needs to be further improved in China. The report also notes that the emerging industries with strategic significance rely more on patents to gain their competitive edge and have better utilization of patents. Chinese universities have strong innovation capabilities, but their utilization rate of patents in 2016 (12.7%) was much lower than enterprises (59%). The lack of professional technology transfer team was considered to be the biggest obstacle for Chinese universities. The continuing focus on Chinese universities is odd, since universities should have a primary goal of information dissemination, not patent acquisition, but this is not necessarily a bad thing.

3. Chinese national convicted in US for stealing a valuable U.S. trade secret: Kansas rice seeds.  A scientist from China has been sentenced to 10 years in prison in the United States for stealing seeds of genetically modified American rice, the Department of Justice announced Wednesday.  The Chinese scientist Weiqiang Zhang is a U.S. legal permanent resident residing in Manhattan, Kansas. Zhang was convicted on Feb. 15, 2017 of one count of conspiracy to steal trade secrets, one count of conspiracy to commit interstate transportation of stolen property and one count of interstate transportation of stolen property. Zhang was working as a rice breeder at Ventria Bioscience, a biopharmaceutical company that creates genetically modified rice. According to trial evidence, Zhang stole hundreds of rice seeds from the company that had cost millions of dollars and taken years of research to develop and kept at home. In the summer of 2013, personnel from a crop research institute in China visited Zhang at his home in Manhattan.  On Aug. 7, 2013, U.S. Customs and Border Protection officers found seeds belonging to Ventria in the luggage of Zhang’s visitors as they prepared to leave the United States for China.