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An Empirical Study on the Role of Patents in Fostering Local Pharmaceutical Innovation in China

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An Empirical Study on the Role of Patents in Fostering Local Pharmaceutical Innovation in China An empirical study on the role of patents in fostering local pharmaceutical innovation in China by Rong He A thesis submitted for the Degree of Doctor of Philosophy Centre for Commercial Law Studies, School of Law Queen Mary, University of London 1 Declaration I declare that the work presented in this thesis is the result of my own research, undertaken at the Centre for Commercial Law Studies, School of Law, Queen Mary, University of London Rong He May 23, 2012 2 Abstract International analysts tend to view China as a major beneficiary of the TRIPS Agreement, particularly concerning the effects of the stronger patents of TRIPS on local innovation. Chinese policymakers were also motivated to adopt TRIPS IP reforms by the expectation that stronger patents would stimulate China’s development and improve its ability to match the performance of developed countries more rapidly. Yet, due to the lack of empirical studies, these assumptions remain theoretical. This research investigates empirical evidence to test these assumptions and determine actual impacts on China’s pharmaceutical innovation. It seeks to answer two main questions: (1) how has the TRIPS legal framework affected China’s ability to formulate a pro-development patent policy for pharmaceuticals? (2) how has China’s patent policy affected domestic pharmaceutical innovation? The investigation adopts a public health perspective, through comparative legal analysis and statistical study. The empirical assessment was built on country-level data collection. The legal evaluation has revealed that China has adopted a pro-patent policy for pharmaceuticals, in implementing TRIPS, Chinese policy-makers did not balance intrinsic industry interests in strong patent protection against wider socio-economic interests and issues under Chinese law and legal practices. This research has found that China’s pro-patent policy has had multifaceted economic effects on innovation. Whereas, positive effects of patent strengthening were indentified empirically through innovation indicators, including patent applications and grants, R&D expenditure and ITT inflow, the study also revealed various problems and challenges. Local innovation remains imitation-oriented, little R&D is devoted to researching cures for major 3 diseases, more MNC patents control leading and upstream technologies, and patent litigation has greatly increased. These developments do not augur well for China’s ability to approach developed countries in pharmaceutical innovation. The Chinese experience revealed in this thesis contrasts with conventional expectations of the effects of TRIPS, at least in the Chinese pharmaceutical industry. 4 Contents Declaration ........................................................................................................................2 Abstract .............................................................................................................................3 Contents ............................................................................................................................5 Acknowledgement.............................................................................................................8 Abbreviations:.................................................................................................................11 Table of cases..................................................................................................................13 Table of legislation..........................................................................................................14 Major sources of empirical research data........................................................................17 List of interviewee...........................................................................................................18 List of tables, Charts and Appendices.............................................................................20 Chapter 1 Introduction ....................................................................................................22 1.1 Research themes....................................................................................................22 1.2 Research scope and background ...........................................................................24 1.3 The significance of a case study on China............................................................28 1.4 The existing research and knowledge gap ............................................................30 1.5 Research objectives, questions and method..........................................................32 1.6 Limitations of the research....................................................................................34 1.7 Structure of the thesis............................................................................................35 Chapter 2 Advent of the TRIPS Agreement ...................................................................38 2.1 The north-south conflict in pharmaceutical patents in the era of the Paris Convention..................................................................................................................39 2.1.1 The influence of Dependence Theory............................................................39 2.1.2 Developed countries: motives for the internationalisation of patent protection .................................................................................................................................43 2.1.3 Conflicting interests on international patent governance...............................46 2.1.4 Attempts to revise the Paris Convention........................................................49 2.2 The advent of the TRIPS Agreement....................................................................53 2.2.1 MNCs’ defining role in the making of the TRIPS agreement .......................53 2.2.2 Structural vulnerability of developing countries............................................59 2.3 Concluding remarks ..............................................................................................67 Chapter 3 TRIPS and pharmaceutical innovations in developing countries: existing knowledge and gaps ........................................................................................................70 3.1 Policy effects of TRIPS implementation...............................................................70 3.1.1 Pharmaceutical patent policy making prior to TRIPS....................................71 3.1.2 New legal framework for pharmaceutical patents after TRIPS .....................79 3.1.3 Institutional challenges for the use of TRIPS flexibility................................98 3.1.4 Summary: the known and unknown.............................................................103 3.2 Economic effects of TRIPS implementation.......................................................104 3.2.1 Theory: a trade-off between static loss and dynamic gains .............................104 3.2.2 Empirical analyses ...........................................................................................108 3.2.3 Summary: the known and unknown.................................................................116 3.3 Concluding remarks ............................................................................................116 Chapter 4 Evolution of pharmaceutical patent rules.....................................................119 in China.........................................................................................................................119 4.1 The establishment of the 1984 Chinese patent law.............................................119 4.1.1 Background ..................................................................................................120 4.1.2 Bifurcated adaptive efforts under the 1984 Chinese patent law ..................123 4.1.3 Policy effect .................................................................................................125 5 4.2 The 1992 reform of Chinese patent law..............................................................127 4.2.1 Sino-US bilateral agreement on IPRs ..........................................................127 4.2.2 Major changes to China’ patent law in 1992: a pioneering move towards the TRIPS pharmaceutical patent regime....................................................................130 4.2.3 Chinese administrative protection for pharmaceuticals: TRIPS-plus standards ...............................................................................................................................131 4.3 The 2000 amendment of Chinese patent law ......................................................134 4.3.1 WTO entry and the 2000 amendment of Chinese patent law ......................135 4.3.2 Comparison of the 2000 Chinese patent law and TRIPS.............................137 4.4 Concluding remarks ............................................................................................142 Chapter 5 Evaluation of pharmaceutical patent standards in China from a public health perspective.....................................................................................................................144 5.1 The relevant legislative framework.....................................................................144 5.2 The patentability of pharmaceutical inventions in China: laws and practices....146 5.2.1 Patentability criteria for pharmaceuticals.....................................................146 5.2.2
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