Lead Author: Ping Jia
Additional Authors: Xiaomeo Zhai, and Renzong Qiu
Organization: Center for Human Rights Law, Sichuan University
*China Public Health Ethics, Law and Public Policy Research Group (C-HELP) is a Think-Tank and Do-Tank Non-For -Profit Research Initiative co-founded by School of the Humanities & Social Science, Peking Union Medical College, Center for Applied Ethics, Chinese Academy of Social Science (CASS), Center for Human Rights Law, Sichuan University and Health Governance Initiative, a civic Think-tank and NGO focus on Public Health and Law. Regarding access to medicine in China being an important research area and long time collaborating together, the team of C-HELP organized its first seminar on access to medicine in CASS in 2007 with its key members involved into access to medicine issue in China.
Although China is already most influential country in some respects such as GDP and value of foreign trade, the dark-side of the extensive development in the past decades also phenomenon. The fast-growing disease burden, both due to chronic diseases and infectious ones left Chinese people a vulnerable situation. But still weak and in its preliminary development stage, China’s local pharmaceutical industry not only lack of scale advantage, the poor innovation capacity also play a key barrier for access to essential medicines in the country. The insufficient drug administration and needs to be improved regulatory system also can’t provide enough local incentives, while the intellectual property law and regulations does not fully utilize the TRIPS flexibility. Further, the tightening international IP protection system, particularly FTAs and TPP, make China facing with even fewer policy options to solve the domestic health challenges. The authors suggest that the Chinese government should take advantage of TRIPS flexibility, reform domestic drug administrative and regulatory system, fostering a user friendly and needs driven domestic IP-Patent legal system, and take measures to alleviate impact to health system from the TPP. Promote global collaboration on public research and to create new models to balance between profit-driven market needs and health needs from the general public.
Access to Affordable Essential Medicine in China
—How China deal with a rising up disease burden and
a tightening global IP protection system
Jia Ping Zhai Xiaomei Qiu Renzong
The world witnessed a “China Miracle” in the past three decades: being a country of extreme poverty in late 70’s, China became the second largest economy since 2011 and the biggest trading nation in 2013. But as many writers pointed out, the dark side of the development heavily weakened the glory of the economic achievements. Health challenge, among others, pose a particular increasing threat to the future of the society.
The health challenge in China, although long time out of radar and never attract enough attention during the triumphant days when people immersed with frenzy of development, seems heading to a severe bad scenario in the recent years. While the ferociously rising cases of cancer nowadays indicates a gloomy reality, other chronic diseases such as diabetes and angiocardiopathy, along with infectious diseases include HIV/AIDS and HCV, pose a growing burden and threat for the still fragile national social security system. The most recent research, Cancer Statistics in China, published in CA: A Cancer Journal for Clinicians in December 2015, estimates there were 4.3 million new cancer cases and more than 2.8 million cancer deaths in China this year [the number was 3 million (and 14.1 million globally) and 2.2 million(8.2 million globally) respectively three years ago in 2012), which means more than 7500 people died of cancer per day in China. The New York time most recent report disclosed that according to data from Hebei provincial tumor hospital, the cancer mortality increased 306% from 1973 to 2012, much worse than other provinces. Hebei is the biggest steel production province with the worst air quality in China. Besides reasons of aging and growing of population, the pollution of air, soil and water which expose average people to environmental carcinogens obviously contribute to the cases of cancer increasing substantially: the data shows that lung cancer is the most common one for men and the second for women. The five leading causes of cancer death among both men and women in China are cancers of the lung and bronchus, stomach, liver, esophagus, and colorectum, accounting for about three-quarters of all cancer deaths. But this is not a astonishing fresh news, a report by Pfizer points that China alone already contributes to more than half of the world’s newly diagnosed liver and esophageal cancer cases, and 42% of newly diagnosed stomach cancer cases in 2002.
Although Chinese government seems take it serious to the rising up disease burden, seldom could people feel any substantial changes been made in dealing with the access to medicine issue in China. In 2014, a Chinese patient Lu Yong with chronic myelogenous leukemia, who helped other Chinese patients to organize online purchase of generic version of Gliver from India which originally patented by Novartis since early 2001 but processed since 1993, was arrested and alleged crime of “selling fake medicine” by a local Procuratorate in Hunan province. Lu Yong was set free in early 2015 due to social pressure but only in nominal cause that he only “buy” but not “re-sell” the drug. The price of imported Gliver is near USD 4000 each carton (for one month use), twice expensive than the price in South Korea and more than 130 times expensive than India’s generic version, which only sell for around USD 30 per carton.
The Gliver story disclosed a tough situation for average Chinese that matters: how Chinese Government provide its citizens enough qualified health and medical products with reasonable and affordable price? Or, if we go further, is a GDP oriented development model also an innovative one on the basis of which can be built a healthy society? For Chinese Government, this is truly a dilemma.
Although Chinese government try hard to build China a “Socialism Innovative Country”, With their low budget for research and development, China’s pharmaceutical makers are relatively small and often lack of capital compare with multinationals.They are not large enough to compete effectively and numerous small
enterprises present serious problems. During the past years, some Chinese pharmaceutical companies began to establish R&D infrastructures largely due to internal growth needs or even go to NASDAQ for more funding, but their primary focus is directed toward improving existing technologies or developing generic version of new drugs. According to People's Daily, a state-owned party control media, there are less than 5 drugs that China own “Completely independent intellectual property rights” before 2013. China did make some progress in the recent years but still 95% of chemical drugs in domestic market are generic versions. Actually from global perspective, except artemisinin, China never contribute a new drug to the world in the past 60 years.
The lack of R & D capacity and scale competition advantage only tells one side of the story. The long standing mismanagement and bad governance, including non-transparent process of administrative review and approval for new drugs creates another barrier. The period for application of clinic trials is 60-90 days in general but many enterprise can only get approval for about 12-24 months. The complexity of the clinic trials process application also prevent international new drugs to enter into China, some report complaints that it even provide incentives to “steal” the technology from overseas and get rich in domestic market. For under the situation, local enterprise and government tend to reduce the patent protection period while produce generic versions if they can. While multinationals tend to do build a more rigid protection mechanism for the new drugs, the Chinese FDA’s drug approval and review process thus provide more incentives for less qualified generic rather than innovative drugs manufacture.
But what make it more interesting is that China actually established a quite good IP protection mechanism at least on paper. Scholars pointed out that the Chinese IP system experienced leapfrog development in the past 20 years, with its standards approaching the global criteria. The Patent Law of the People’s Republic of China was adopted on 12 March 1984 and put into effect on 1 April 1985. It was then revised in 1992, 2000 and 2008 respectively. As the biggest developing country in the world, the Chinese government understand that over protection of IP may lead to negative impact to their infant domestic pharmaceutical industry and public health. The 2008 Patent law thus integrated SIPO (State Intellectual Property Office) Order No. 31 and 37, the TRIPS Protocol agreement on compulsory license and added an anti-monopoly clause. Article 49 of the law stipulates that when there is a national emergency, or for the purposes of public interests, SIPO can issue compulsory licenses on inventions or utility models. Article 49 covers both situations of “national emergency or other circumstances of extreme urgency” as well as “public non-commercial use” (Government Use) under the TRIPS Agreement. One break-through in recent years has been the Measures for Compulsory License of China issued in May 2012. The Measures finally detailed the process and requirements for a department under the State Council to ask for a compulsory license under Article 49 of the Patent Law.
But the government has not shown any willingness to issue a compulsory license (CL), partially due to lack of knowledge and poor understanding of the international system on trade and health issues at the decision-making level in China. But there must exits deeper reasons, as it was implied in the case of Lu Yong and Gliver.
According to Deloitte report, the pharmaceutical sales in China market will reach USD 100 billion in 2015. Domestic and international players operate in an extreme “crowded and competitive environment”. There are more than 1000 international enterprises enter into Chinese market, the world’s top 20 multinational Pharmaceutical companies have “have extensive operations in the country”. Regarding China as cost haven and profit pool, international Pharmas all take expansion a common strategy in Chinese market. In 2011, the top ten multinationals occupied more than 50% market share and the average growth reached 30%.
The huge market, aging society, limited innovative capacity, clumsy administrative governance and regulation, with vicious competition among Chinese local industries, make China owns promising potentiality as a cash cow in the coming decades for multinational Pharmas. That is also why international Pharmas always push hard for IP protection in China.
The non-transparent drug regulatory and review system, together with the unsuccessful health reform, lead to rents-seeking activities. Among which known as “drug agency pattern（DAP, “Yao Dai” in Chinese）”. The DAP in general refers to drug agency from Pharmas make deals with doctors with price make-up return commission. The drugs thus were sold to the hospitals with higher price and re-sell to patients. The DAs and doctors will share the profit (while most were flow into Pharmas’ pocket) as bonus while hospitals rely on this drug price addition to compensate their financial shortage due to lack of government budget support after the marketization of medical reform since 1980s. This at least partially explained why Gliver’s price is more than twice as expensive as it was in South Korea. Why there were strong motivation to block hundreds of dying patients to purchase cheap India generic version Gliver and even try sentence Lu Yong in jail. As a Shanxi province health officer pointed out, the reason why Gliver is ridiculously expensive in mainland China is because of “Chinese character institutional costs: first is high tax rate for drugs which pull up the price of the drug, second is the price was raised in each single layer, from marketing to distribution process. And all costs will be shifted to the patients in the end of the day”.
That also explains why the government never initiate the compulsory license process. The “pressure” from international Pharmas is to a large extent an excuse. To strengthening of domestic IP protection system and respect IPR become a “protective umbrella” to defend any request for use TRIPS flexibility clauses. Even at costs of rising up disease burden and patients’ life. For example, there are long time debate in AIDS area in China in terms of CL, the main-stream opinion inside the Chinese government till now is still “to use CL as a threat to request for lower the price on the multinational Pharma side”. But as Dr. Zhang Fujie pointed out in his presentation on the 2nd China HIV/AIDS Academy Congress, China never introduce new ARV drugs approved after the year of 2001. Leaving Chinese doctors only have very limited options on ARV treatment combination. What makes it even worse is that the shortcomings of TRIPS flexibility thus was perfectly reserved and copied directly into Chinese laws and regulations. Any single try of CL by local enterprise or NGOs will automatically facing pressure from multinational Pharmas and dilemma of lacking institutional support domestically. This model thus promotes a vicious circle being established: China is suffering rising up disease burden and financial resources loss while provides negative incentives to local innovation.
Besides the domestic turmoil of the pharmaceutical industry and stunning increasing disease burden, the tightening of global IP protection system will give another heavy blow to the efforts of establishing a “Socialist Innovative Society”, and possibly make it a pipe dream if Chinese government can’t take proper measures in response to those challenges.
On 4 February 2016 in Auckland, New Zealand, after 7 years of negotiations, twelve Pacific Rim countries include US, Japan and Australia signed the Trans-Pacific Partnership (TPP). As a historic new type of Free Trade Agreement (FTA), TPP represents more than 40% global GDP with a quite a few countries express their interest to join in. Many critics believe that TPP largely aims to balance the rising China who still in the process of overcoming difficulties of integrating into global world and try to get use of international norms. TPP’s Intellectual Property Chapter (hereafter IP Chapter) try to promote and establish a U.S style “TRIPS Plus” mechanism and thus build a “technology control regime” in Asia Pacific. The IP Chapter expand the scope of patentability to “any invention, whether a product or process”, although a Party may exclude some subject matters such as animals or essential biological process for production of plants from patentability. IP Chapter pushes a streamlined international patent application system among TPP Parties, provide patent term adjustment for patent office “unreasonable” delays or curtailment, particularly for pharmaceutical product subject to a patent. It also stipulate “data exclusivity” in details and requires each party provide at least 5 years market protection from the date of marketing approval of the new pharmaceutical product in the territory of the Party. For new pharmaceutical products that is or contains a biologic, the IP Chapter will provide an “effective market protection” (similar with Data exclusivity protection) for a period of at least 8 years, both aims to weaken the generic industry in developing countries. Article 18.52 stipulates that due to market circumstance may “evolve over time”, the parties shall consult after 10 years of entry into force of the TPP Agreement or otherwise decided by a Commission. This means after 8 years’ protection, TPP Parties can extent the effective protection period through the so called consultation process if “necessary”. The IP Chapter also designs a series of very strict board measures, ask parties to suspend the release or detain any suspected “counterfeit or confusingly similar trade mark….that are imported into the territory of the Party”. Which greatly enhanced the power to block generic pharmaceutical products from being exporting from manufactory countries to other developing countries (especially the least developed ones) through implementation of trademark regulations. Finally, the TPP IP Chapter also stipulates rigorous criminal procedures and penalties to ensure the execution of the rules.
Advocated by TPP IP Chapter and other FTAs, the TRIPS plus will definitely a barrier for China in using TRIPS flexibility to solve its domestic health challenges. The data exclusivity and effective protection period will play as containment strategy against country such as India and China’s generic and bio-similar industry, while the board measures can weaken the distribution channel and increase its costs if China and India want export their cheaper pharmaceutical products globally. In the worst scenario, China’s less innovative pharmaceutical industry with poor public policy and strategy response capacity, will probably even rely on API manufacture and “me too” generic production without establishing a strong local innovative industry and vivid generic one in the coming predictable future.
So what China should do to break the curse? Is there a way out of “Inferno”? There might be no magic antidote once for all. But concrete steps should be stridden out if we do want some positive changes.
To Utilize TRIPS Flexibility to solve the health challenges in emergency In summary, China already has a Patent Law with examination criteria and compulsory license clause to take advantage of TRIPS flexibility. Therefore there are no legal barriers to implementing the TRIPS agreement or issuing a CL. But the challenge in practice is how to implement Article 12 of 2012 Measures and Article 49 of the Patent law. Local manufacturers are mostly geared to export production and still lack incentives for the development of local generic pharmaceuticals in China. China can develop its Competitive Law system and provide a more supportive social environment for those who want initiate a CL application.
To Move out Institutional Barriers to Innovation China should distinguish “innovation” with “invention”. For the past decade, China regard number of patents (key part of invention) as a key indicator of building a successful innovative society. This lead to “patent trash” and even widespread corruption due to misunderstanding of patentability and power abuse. China should reform its science and technology governance structure, reduce the influence of politics on science and provide more incentives to encourage real innovation and scientific research, which means more good governance on the government side and more free competition in “ideas market”. The market oriented mechanism is important but making money should not be the single objective and the fundamental researches should not be manipulated by capital power. And of course, China should also reform its dysfunctional drug regulatory system.
A Right-Based Approach The tremendous fast growing disease burden, without proper response, will lead to a humanitarian disaster in the coming decades in China. The Chinese government should take responsibility, as promised, to provide support for its people including affordable qualified medicine and other pharmaceutical products, so as to maintain a dignity life. China should also build a more high efficient and capable local pharmaceutical industry, commensurate with its economic power and talent of its people. Only then can China fulfill its MDG obligation and guarantee Chinese people’s right to health. Thus human rights protection should always a fundamental guideline for China’s health policy making and related activities and options. As Chinese President Xi jinping committed most recently during a visit to local drug enterprise, China should take concrete steps to “Ensure the citizens’ right to life and health”.
Ethical principles as Bottom Line in Global Trade System Provide incentives to invention and S&T development, the IP system greatly enhanced the health of human beings by enjoying longer life expectation with better dignity. But the expanding of capital power globally not necessarily increase human welfare, it can also block the average from enjoy the right to life. Further, driven by the greedy desire as instinct, the capital can also “conspire with” local powers, to increase exploitation to the community and aggravate the local institutional defects, as Lu Yong case already told us. That is why TPP agreement, although will greatly promote economic integration in Pacific Rim and bring prosperity to the people in the region, can also be a tool to subordinate developing member countries and south nations politically and economically via technology control rather than technology transference, particularly under the background of global aging and disease spreading as part of the consequence of global industrialization. Ethical principles as bottom line thus a necessary option for development and global trade system to which China should always pay attention.
Joint Effort to Combat with Diseases Globally Besides pushing a global IP regime, Western countries should collaborate with south emerging countries more frequently in terms of health and pharmaceutical technology transference and knowledge exchange. China could collaborate with U.S in a more innovative way, seeking opportunities and solutions to compensate social costs for R&D, promote public innovation and a possible substitute way for IP system in the pharmaceutical and biologics area. Thus to reduce the vicious competition and conflict of interests between big powers, increase the welfare of human beings globally and save millions of lives who deserved a decent and better life.
Bibliography and References
China Xinhua News Agency reported in 2015 that that the number of persons with HCV infection in China could reach 40million. See:http://news.xinhuanet.com/health/2015-02/08/c_1114296352.htm
See: https://www.iarc.fr/en/media-centre/pr/2013/pdfs/pr223_E.pdf and http://www.wcrf.org/int/cancer-facts-figures/worldwide-data
纽约时报中文网，“河北肺癌死亡率激增，工业污染疑是主因”.2015年2月19日.(New York Times Chinese Website report).
The Burden of Cancer in Asia, Pfizer Facts,P3.
See China Southern Weekly report, http://www.infzm.com/content/107938
According to China FDA website information, there are currently around 5000 local pharmaceutical companies in China (4875 in 2013).
Measures on the Compulsory License for Exploitation of a Patent, SIPO Order No. 31（2003） and Measures to Implement Public Health-Related Compulsory Licensing, SIPO Order No. 37 （2005）.
See Article 48 of China Patent Law: “Under any of the following circumstances, the patent administration department under the State Council (i.e. SIPO) may, upon application made by any unit or individual that possesses the conditions for exploitation, grant a compulsory license for exploitation of an invention patent or utility model patent:
(1) When it has been three years since the date the patent right is granted and four years since the date the patent application is submitted, the patentee, without legitimate reasons, fails to have the patent exploited or fully exploited; or
(2) The patentee's exercise of the patent right is in accordance with law, confirmed as monopoly and its negative impact on competition needs to be eliminated or reduced.”
See Article 49 of China Patent Law, “Where a national emergency or any extraordinary state of affairs occurs, or public interests so require, the Patent Administration Department under the State Council (SIPO) may grant a compulsory license for exploitation of an invention patent or utility model patent.”
Deloitte, The next phase: Opportunities in China's pharmaceuticals market.P4.
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Yangcheng Evening Paper(羊城晚报)Feb.14,2015. See: http://money.163.com/15/0214/16/AIE659UD00253B0H.html.
Those countries(Region) include Columbia, South Korea, Philippines, Thailand, Indonesia and Taiwan.
Article 18.37.1 of the IP Chapter.
Article 18.37.3(b) of the IP Chapter.
Article 18.44-Article 18.45 of the IP Chapter.
Article 18.46 and Article 18.48 of the IP Chapter.
Article 18.50 of the IP Chapter.
Article 18.52 of the IP Chapter.
Article 18.76 of the IP Chapter.
Article 18.77 of the IP Chapter.
For one of the most troubling features of the TRIPS C.L. regime is Article 31(f) which requires that compulsory licenses be authorized “predominantly for the supply of the domestic market of the Member authorizing such use.” Although a C.L. for import is perfectly lawful, there may well be Article 31(f) restrictions on exporters that limit that right. China can develop its Competitive Law system to avoid the 31(f) restriction: the patent subject matter can be public used if it convict “market monopoly” by court or government anti-trust entities.
According to Chinese media report, Wang lijun, former Police Chief of Chongqing, and Wu changshun who was former Police Chief of Tianjin city, both own 254 and 35 patent respectively. All of which are trash ones.
Xinhua News Agency, http://news.xinhuanet.com/politics/2016-02/03/c_1117985476.htm.