Taiwan’s Patent Linkage System May Decrease Access to Generics, Raise NHI Costs
【Stephane Ku／Attending Physician】
Taiwan’s patent linkage system was introduced when the Legislative Yuan passed the amendment to the Pharmaceutical Affairs Act on December 29, 2017. Although the exact date of implementation has yet to be decided, similarly to the Drug Price and Competition Restoration Act of 1984 (Hatch-Waxman Act) in the US, this system will allow new drug marketing approval holders to list patents covering their products and force generic drug applicants into infringement litigation at the first instance.
The stated intention of the patent linkage system is to balance the interests between innovator drug manufacturers and their generic version competitors, by means of listing the expiration date of any patent and exclusivity information relating to pioneer drugs in the publication of “Approved Drug Products with Therapeutic Equivalence Evaluations”, also known as the Orange Book, after being approved by the Food and Drug Administration (FDA). One of the major benefits of such a system is to allow generic drug manufacturers to review patent information so as to determine when the patent expires and what specific content of the patent expires. This may help manufacturers to see where there might be opportunities to launch new products onto the market where there is limited competition and where the FDA could immediately accept a new generic drug application.
However, it also places the obligation on the generic drug manufacturers to prove that the original brand name drug is no longer protected by any patent. In order to prove invalidation or non-infringement of the patent, the applicant and brand name patent owner are frequently brought into an infringement lawsuit, which may be costly and time-consuming to the generic drug manufacturers. In a previous report by the US Federal Trade Commission in 2002, it was stated that the patent linkage system had resulted in 75% of new generic drug applications facing legal action from the original brand name patent owner in the US, which has led to generic versions being kept off the market.
Historically, Taiwan has not recognized the US-based patent linkage system. The approval of new drugs by the Taiwan Food and Drug Administration (TFDA) has not always gone hand in hand with the patent status registered and regulated by the Taiwan intellectual Property Office (TIPO). While it’s not uncommon for new drugs from local generic drug manufacturers to be issued a license by the TFDA and to enter the market even before the patent of the brand name drugs has expired, it’s customary for pharmaceutical brand name manufacturers to extend the intellectual property rights of certain highly-profitable brand name drugs by means of “evergreening”, or applying for patents over uses, delivery system and packaging instead of an active product ingredient to restrict the sale of generic versions.
The issue of patent linkage in Taiwan first appeared in the AmCham Taipei’s annual White Paper back in 2006 and later became critical during the negotiations for the Trans-Pacific Partnership (TPP) between Taiwan and the United States. The legislation introducing a patent linkage system to Taiwan is regarded as “a commitment to high standards of intellectual property rights protection” and may help the development of an innovative biomedical industry in Taiwan. Not surprisingly, it has been welcomed and celebrated by international pharmaceutical companies, who account for the majority of brand name drug patent owners and share more than three quarters of the annual drug market in Taiwan.
Nevertheless, it’s not difficult to foresee that the patent linkage system is going to have an immediate and momentous impact on local generic drug manufacturers. In order to avoid lengthy and costly infringement lawsuits, most of them would rather wait passively until the original brand name drug patents expire. Even if the generic drug applicants go for infringement litigation, there will be a 12-month stay of approval triggered according to the amendment. In either scenario, the time to drug license approval by the TFDA and further manufacture and sale of the product will be prolonged. In addition, under the new system, while the TFDA will be held responsible for reviewing the patents submitted by the original brand name drug manufacturers and thus will grant drug licenses and confer the related exclusivity, the administration’s readiness to exercise such authority and to examine the enormous, meticulous and complex information in a timely and accurate fashion remains dubious.
Taiwan has always taken pride in implementing an affordable, efficient and sustainable National Health Insurance (NHI) scheme since 1995. The cost of the medication from outpatients alone was approximately NT$136 billion (US$4.6 billion), accounting for 36% of the total expenses from outpatients in 2016, and has increased by 179% from 1998. As Taiwan faces the dawn of a super-aged society, we must anticipate a fast increase in expenditure on medication for chronic diseases such as diabetes, hypertension and coronary heart disease. The competition from generic drugs will play an important, strategic role in driving drug prices down. In a less favorable environment for generic drug manufacturers under the patent linkage system, it might be more difficult for the administration of the NHI to negotiate better deals on pricing in the future.
Bridging from the old existing system to the new patent linkage system could be problematic too. Take Gilead Science’s Truvada for example. This is the brand name for a fixed-dose combination drug made of two antiretroviral medications: tenofovir disoproxil fumarate and emtricitabine. Truvada, along with a third agent to constitute a standard three-drug antiretroviral therapy, has been widely used as the first-line treatment for HIV infection around the world since its approval in 2004. More recently, daily doses of Truvada for people without HIV infection has been proven to reduce the chance of contracting the virus, known as pre-exposure prophylaxis, or PrEP. Not surprisingly, the drug price soon became one of the major barriers for PrEP scale-up, and access to much less expensive generic versions has been the priority for advocacy in many developed countries. The European patent for Truvada expired in July 2017, and European countries such as France and Ireland have been using generic formulations since. The US FDA approved a generic version from Teva Pharmaceuticals in June 2017; however, it will not be available to the market immediately. In Taiwan, there are several patents related to Truvada, and the last one is due to expire in November, 2019. Nevertheless, the patent regarding compositions has been extended until November 2031 and registered with TIPO. This only reflects the complexity of patent and exclusivity status in different countries and will only become even more complex for generic drug manufacturers, policy makers, who develop nationwide PrEP scale-up program, and potential PrEP users after the patent linkage system is implemented.
While the introduction of the patent linkage system will ensure the protection of intellectual property rights and help Taiwan in terms of regional integration, how the administrative infrastructure for its implementation can be established remains critical and unresolved. To find the delicate balance between innovation and competition, intellectual property rights and the right to health and affordable treatment, private profits and public benefits, or the economy and public health policies, it’s imperative for the government to have a comprehensive scope that incorporates the different viewpoints of stakeholders as well as a realistic and insightful attitude for further planning, execution and monitoring.
For an update on the progress of the amendment to the Pharmaceutical Affairs Act, along with amendments to other IP Legislation, please see IP News in Brief.