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State Council of China Issues Policy Regarding Innovation in Drugs and Medical Equipment - Patent Linkage and Data Exclusivity

The State Council of the People's Republic of China issued a policy regarding innovation in drugs and medical equipment on 8 October 2017. China proposes to encourage innovation in drugs and medical equipment by expanding the reform of the review and approval system in the medical sector, according to guidelines recently issued by the General Office of the Communist Party of the China Central Committee, and the General Office of the State Council ("Guidelines").
The Guidelines indicate that management of clinical trials will be reformed through record-filing management of clinical trial institutes, encouraging social forces to invest in clinical trial institutes, and supporting medical organizations, research institutes and colleges to conduct clinical trials. China requires the clinical trial institutes to conduct clinical trials in compliance with ethical standards to protect subjects’ safety, health, rights and interests. Moreover, according to the Guidelines, the China Food and Drug Administration (hereafter referred to as "CFDA") should accelerate the review and approval for urgently needed drugs and medical equipment.
In addition, the Guidelines indicate that measures will be introduced to promote drug innovation, including setting up a catalog of marketed drugs, building a system linking the review and approval of drugs with their patents (i.e., patent linkage), and improving the protection of drug trial data (data exclusivity).
Regarding the patent linkage and data exclusivity, the CFDA issued an announcement for public comment on the "Policy of Encouraging Drug and Medical Device Innovation and Protection of Innovators' Rights" (hereafter referred to as "Policy") on 12 May 2017, proposing to establish patent linkage and a data exclusivity system for drugs. 
I.       Patent Linkage
Originating from the Hatch-Waxman Act, the patent linkage system in the USA regulates patent listings, patent declarations certified by an applicant filing an Abbreviated New Drug Application (ANDA), notification of the ANDA filing to the New Drug Application (NDA) holder, a 30-month stay of issuing market approval to the generics by the CFDA, and a 180-day marketing exclusivity conferred to the first ANDA applicant who successfully defends a patent infringement suit. 
The patent linkage system proposed by the CFDA is similar to that in the USA, but lacks substantial explanations on patent listings and the marketing exclusivity conferred to the first ANDA applicant. There are also differences in the filing of a patent infringement suit and stay period of issuing market approval to generics, as follows:
1.     The ANDA applicant should make a declaration for a patent right indicating that the ANDA applicant knows or should know that  the applicant has submitted an ANDA application. If the ANDA applicant intends to challenge the patent, the ANDA applicant should declare non-infringement of a patent relating to the drug, and notify the patentee within 20 days after submitting the ANDA application.
2.     If the patentee assumes that the ANDA applicant infringes on the patent, the patentee should file patent infringement litigation with the court within 20 days after receiving the ANDA applicant's notification, and notify the CFDA of the filing of the litigation.
3.     After the CFDA receives the document issued by the court proving that the litigation has been filed, the CFDA can set a 24-month stay of approving the market approval to generics. During the stay period, the regulatory review continues unstopped. If the patentee and the generics reach a settlement or the court issues an infringement or non-infringement decision during the stay period, the CFDA should issue a decision to approve or not approve the market approval to generics based on the settlement or the court decision. If the court has not made a decision after the stay period, the CFDA can approve the market approval to generics.
4.     If the ANDA applicant does not declare a patent for an ANDA application and then the patentee files patent infringement litigation, the CFDA will stay the market approval to generic based on the progress of the litigation.    
II.     Data Exclusivity
An application for data exclusivity can be submitted with an NDA application. The CDTA's proposal on data exclusivity is summarized as follows.
1.     Six-year data exclusivity for an approved new drug.
2.     Ten-year data exclusivity for a new orphan drug or new pediatric drug.
3.     Three-year data exclusivity for an improved orphan drug or improved pediatric drug.
4.     Ten-year data exclusivity for a new biological drug.
5.     One-and-a-half-year data exclusivity for a generic drug that successfully challenges a patent or a drug that has been launched in a foreign country before first launch in the domestic market.
6.     For a new drug that is approved by the European Medicines Agency (EMEA) or the U.S. Food and Drug Administration (US FDA), if an NDA application is filed in China within one year after the EMEA or the US FDA issues the market approval, a type of data exclusivity identical to that given in Europe, the USA or Japan will be given in China. If the NDA application is filed in China after one year of issuance of the market approval by the EMEA or the US FDA, the time after the one-year period will be deducted from the data exclusivity period given in Europe or the USA. After the deduction, if the time is less than 1.5 years, 1.5 years of data exclusivity will be given. 

7.     The data exclusivity period starts from the date of approving the market approval.  During the data exclusivity period, the CFDA will not issue a market approval for the same to other applicants. 

Passage of the Policy would benefit new drug development and encourage generics to challenge patents to reduce drug prices.  The Policy would also create new rules on patent litigation.