FACULTY OF LAWLund University

Jingtian Chen

Medical Patent Protection Impacts on Access to Medicine in China

JAMM05 Master Thesis

International Human Rights Law and Intellectual Property Rights30 higher education credits

Supervisor: Peter Gottschalk

Term: Fall 2013

ContentsSummary.....................................................................................................................1Preface........................................................................................................................3Abbreviations..............................................................................................................41. Introduction..........................................................................................................5

1.1 Background.......................................................................................................51.1.1 International background...........................................................................61.1.2 Access to medicines in China...................................................................8

1.2 Research questions.........................................................................................10

1.3 Methodologies.................................................................................................10

1.4 Delimitations....................................................................................................112. Access to Medicines as a Human Right.............................................................12

2.1 Access to medicines........................................................................................12

2.2 Right to health.................................................................................................142.2.1 Development of the right to health............................................................142.2.2 Right to health as a human right...............................................................152.2.3 Access to medicine as right to health........................................................15

2.3 Other human rights relating to access to medicines........................................162.3.1 Access to medicines as right to life...........................................................162.3.2 Right to enjoyment the benefits of scientific progress and its application. 17

2.4 Relationship between the medical patent right and access to medicines........182.4.1 The barriers to access to medicines.........................................................182.4.2 Medical patent’s impacts on the medicine price........................................192.4.3 The debate on the impacts of patent protection to the access to medicine...........................................................................................................................21

2.5 States obligations on balance the rights..........................................................223. Overview of Medical Patent in China.................................................................24

3.1 Medical patent legislation................................................................................253.1.1 Patent Law................................................................................................25

3.1.1.1 The restriction of using genetic resources..........................................263.1.1.2 Heightened patentability standard......................................................273.1.1.3 Compulsory licensing.........................................................................273.1.1.4 Bolar Exemption.................................................................................283.1.1.5 International exhaustion of rights........................................................29

3.1.2 Measures on Compulsory License for Patent Exploitation (2012) (the new Measures on CL)...............................................................................................31

3.1.2.1 The changes in the new Measures on CL..........................................323.1.2.2 CL issued to promoting public health by other countries....................34

3.2 Enforcement of the TRIPS flexibilities.............................................................363.2.1 Transition periods.....................................................................................363.2.2 The difficulties on issuing CL....................................................................37

3.2.2.1 Local medical manufactures...............................................................383.2.2.2 Foreign medical patent owners..........................................................383.2.2.3 The Chinese government...................................................................39

3.2.3 Public non-commercial use of patents and Government use....................393.2.3.1 Public non-commercial use................................................................403.2.3.2 Government use.................................................................................40

3.2.4 Parallel importation...................................................................................413.2.5 Bolar exemption........................................................................................42

3.3 Beware of the TRIPS-plus introduced through FTAs.......................................433.3.1 Patent linkage system...............................................................................443.3.2 Data exclusivity.........................................................................................46

4. Other Factors Impeding Access to Medicines in China......................................51

4.1 Government responsibility...............................................................................514.1.1 Finance expense on public health.............................................................524.1.2 Pricing privilege of the original drugs........................................................544.1.3 Combination of prescribing and dispensing policy adopted by public hospitals.............................................................................................................554.1.4 Other policies issues.................................................................................56

4.2 Pharmaceutical industry..................................................................................574.2.1 Foreign pharmaceutical companies..........................................................594.2.2 Domestic pharmaceutical companies.......................................................61

4.3 Impact of other actors......................................................................................625. How can China Improve Accessing to Medicines?............................................64

5.1 Improve access to medicines under the medical patent system......................645.1.1 Issuing medicine compulsory licenses......................................................655.1.2 Revise and be aware of TRIPS-plus provisions........................................66

5.2 Improve access to medicines through public hospital reform..........................675.2.1 Separate prescription and dispensing function of public hospitals............675.2.2 Attack drug kickbacks by legal means......................................................685.2.3 Open the healthcare service market.........................................................70

5.3 Lessons learnt from India................................................................................70

5.4 Protect Chinese traditional medicines by IPRs tools.......................................726. Conclusion.........................................................................................................747. Bibliography......................................................................................................76

SummaryAlong with the interrelation between medical patent right, the generics’

impacts and the right to access to medicines, which as one of intersection issues between Intellectual Property Rights (IPRs) and Human Rights (HR), has drawn more and more attention under the international society, the Doha Declaration on TRIPS and Public Health has reaffirmed the flexibilities of the Agreement on the Trade Related Aspects of Intellectual Property Rights (TRIPS) member states in circumventing patent rights for better access to essential medicines in 2001. Considering the TRIPS flexibilities importance on promoting access to medicines in the most developing and the least developed countries, the thesis basically checks how medical patent rights impact on the access to medicines in China and how China has utilized the TRIPS flexibilities in recent years.

The thesis starts with defining the access to medicines and through interpreting its interrelationships with right to health and other relevant human rights, confirming the right to access to medicines is a human right. Then considering its conflict with the recently popular development of patent right, it clarifies the over-protection of medical patent right actually is limiting the access to medicines and mentions there are other non-IP actors which also hinders the access to medicines. Following focus on the balance of IPR and HR protection, the both internal and extraterritorial of states’ obligations would also be acknowledged in the chapter 2.

In the chapter 3, the overview of Chinese medical patent legislation can be found. It begins with the introduction and comments of the important provisions within the two most important laws, Patent Law (2008) and Measures on Compulsory License for Patent Exploitation (2012), by following checks how the TRIPS flexibilities, such as compulsory licensing, parallel importation, Bolar exemption etc, have been implemented and practiced by the government. After the legislation review and the enforcement examination, the thesis concludes that the fact of lacking enforcement on making use flexibilities and analyzes the reasons behind of the phenomenon. This chapter also reviews the TRIP-plus provisions that adopted by the domestic legislation, by comparing their implantation and impacts in the US, Japan and other developing countries, it is noted that the TRIPS-plus’ potential dangers to limit the generic entry into market and its necessity of revising the current laws to avoid its reverse impact on access to medicines.

The chapter 4 introduces and analyzes other factors, such as the government’s limited financial allocation, inappropriate administrative policies, pharmaceutical companies’ reluctance and the business chains corruption that impeding the access to medicine in China. Those factors are complex while are as severe obstacles on promoting the right to health. As access to medicines is human right, governments have the responsibility to

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guarantee people can access to medicines especially must prevent the violations from the third parties. In such case, China should take its obligation to fully utilize the flexibilities in order to restrict the overwhelming medical patent protection, by which way to increase the accessibility to medicines. Taking account of the problems within the patent legal framework and other areas, the advices on how to improve the access to medicines in China are presented in the end.

Key words: access to medicines in China, medical patent protection, right to health, TRIPS flexibilities, TRIPS-plus, compulsory license, generics.

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Preface The previous working experience in a pharmaceutical consulting

company arose my interesting on this topic. I noticed that on one hand the Chinese patients thanks to the foreign patented medicines because they bring them health. While on the other hand, the high cost leaves them a big economic burden and it as an obstacle for them accessing to medicines and health. The willing of knowing what reasons cause this problem drives me working on this thesis. Within the Chinese national context, undoubtedly the issue was complicated and sometimes even made me frustrated when I was trying to make the phenomenon a sense. However, I appreciate the time of working on it, because after researched on the questions finally I did found some answers to them and my willingness of working for human rights became much more!

I would like to thank my supervisor Mr. Peter Gottschalk’s valuable suggestions which helped me to finish the thesis. And I am grateful for the work and the support from the program coordinator Mr. Anders Trojer that helped me to overcome all the difficulties during my study. And also thanks for my classmate Sergiy Kondratyuk’s comments on the thesis, which brought me more ideas of the topic. Last but not least thanks to my dear parents, without their love and support I can never be here today!

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AbbreviationsWHO World Health Organization ExplanationOECD The Organization for Economic Co-

operation and DevelopmentSIPO The State Intellectual Property OfficeSFDA State Food and Drug AdministrationMOH Ministry of HealthTRIPS Agreement on Trade-related Aspects on

Intellectual Property RightIPR Intellectual Property RightsWTO World Trade OrganizationThe Doha Declaration The Doha Ministerial Declaration on Public

Health and TradeARV AntiretroviralGSK GlaxoSmithKlineWIPO World Intellectual Property OrganizationICESCR The International Covenant on Economic,

Social and Cultural RightsUDHR Universal Declaration of Human RightsICCPR International Covenant on Civil and Political

RightsANDAs Abbreviated New Drug ApplicationsNGO Non-governmental OrganizationsR&D Research and DevelopmentFTAs Free Trade AgreementsDSB WTO Dispute Settlement BodyLDCs Least Developed CountriesCL Compulsory licensing3TC LamivudineAPIs Active pharmaceutical ingredientsNCE New chemical entityPMS Post-Marketing SurveillanceFYP Five-Year plan (2011-2015)NDRC National Development and Reform

CommissionMDGs Millennium Development Goals

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1. Introduction

1.1 BackgroundHealth is one of human being’s most important personal assets. It is

essential to our welfare and sustained economic and social development. This was recognized more than 30 years ago by the Alma-Ata Declaration signatories, who noted that “Health for All” would contribute both to a better quality of life also to global peace and security.1 The World Health Organization (WHO) World Health Assembly has agreed to use the legal recognition of the right to health as an indication for a government to improve access to essential medicine.2 Yet around the world, although the percentage of the world’s population without access to medicines had fallen from an estimated 37% of 1987 to around 30% of 1999, today at least one third of the world’s population, approximately two billion people, has no regular access to medicines.3 In some countries, up to 11% of the population suffers a severe financial hardship each year, and up to 5% is force into poverty. Globally, about 150 million people suffer financial catastrophe annually while 100 million are pushed below the poverty line.4 People living with HIV, cancer patients, those suffering from tuberculosis or malaria, and other populations in desperate need of life-saving medicines are increasingly unable to access the existing preventative, curative, and life-prolonging treatments. In many cases, treatment maybe unavailable or inaccessible for even some of the most common and readily treatable health concerns, such as hypertension. The reasons of the global lacking of access to medicines are numerous and basically they broadly fall into these three categories: (1) infrastructure, (2) research and development, and (3) the costs of medications.5

Within the above reasons, most analysis points out two of those factors that dramatically limit the accessibility to medicines: First, the research and development is driven by market forces, limiting the incentives for research into diseases mainly affecting the less developed countries. The second factor is that high prices of patented drugs often make them unaffordable to 1 The world health report: Health Systems Financing: The path to Universal Coverage, p.ix, available at: http://whqlibdoc.who.int/whr/2010/9789241564021_eng.pdf. (Search date: 11/08/2013).

2 Hans V. Hogerzeil, Zafar Mirza, The World Medicines Situation 2011, Access to essential medicines as part of the right to health, WHO/EMP/MIE/2011/2/10, p.1, available at: http://apps.who.int/medicinedocs/documents/s18772en/s18772en.pdf (Search date: 11/08/2013).

3 The World Medicines Situation, Access to essential medicines, WHO/EDM/PAR/2004/5, Chapter 7, 2004, available at: http://apps.who.int/medicinedocs/pdf/s6160e/s6160e.pdf. (Search date: 11/08/2013)

4 Supra 1, p.x, 5 Anand Grover, Brian Citro, Mihir Mankad, Fiona Lander, Pharmaceutical Companies and Global Lack of Access to Medicines: Strengthening Accountability under the Right to Health, Pharmaceutical Firms and the Right to Health, Journal of Law, Medicine & Ethics. Summer 2012, para1-5.

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the people and governments in the developing world due to the income inequity.6 So the high cost of medicines has become the biggest obstacle for people accessing to medicines. Many medicines are currently available in the market but are simply too expensive for millions around the world to afford. According to the WHO report, generics competition and differential pricing can contribute substantially to the affordability of medicines in low-income countries.7 However, the medical patent right as one of Intellectual Property Rights (IPRs), which has been asked for respect and protection for decades, is severe restricting the generic manufacture and reversing the accessibility to medicines. Consequently the interrelationship between the access to medicines and medical patent right protection has drawn the international society’s attention.

Take accessing to medicines from Human Right perspective on one hand while the medical patent right from Intellectual Property Right perspective on the other hand which is emphasized to be protected under the 21st century information era by both public and private actors, the question of how to balance those two expanding rights has been discussed over years. This thesis is going to check the impact of both The Agreement on Trade-Related Aspects of Intellectual Property (TRIPS) and the following TRIPS-plus provisions to the Chinese medical patent legislation and what the influence of their enforcement to the Chinese citizens’ fulfillment of their right to health is.

1.1.1 International background

A number of international documents, declarations, and working groups over the last decades have tried to examine and address the human rights and public health regarding lacking of access to medicines. Under the trade globalization background, the linkage of international trade and intellectual property rights (IPRs) has aggravated the conflicts between IPRs and right to health.

The TRIPS Agreement, as a part of trade agreements package created by the World Trade Organization (WTO), explicitly bounds the intellectual property with the global trade for the first time. The “all or nothing” nature of the WTO’s accession means that all states that seek the membership to the WTO must agree its satellite agreements, including the TRIPS Agreement. As a result, the TRIPS Agreement has effectively globalized the intellectual property laws: All WTO members must subscribe to the minimum international standards of protection for IPRs which established by the Agreement within their domestic legal regimes. Prior to the TRIPS, most countries, particularly in the developing world, did not have TRIPS-compliant intellectual property laws. The Agreement also provides for the enforcement procedures, remedies, and dispute resolution mechanisms, backed by the possibility of trade sanctions, in relation to its mandate.

6 Josh Greenstein, Access to patented medicines, the right to health, and the case of Thailand, p2, available at: http://www.gpia.info/files/u647/Access_to_medicines.pdf. (Search date: 11/08/2013).

7 Supra 3, Chapter 7.

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Under the TRIPS Agreement, patenting affords pharmaceutical companies the right to exclude competitors from the market. As a result, they may charge higher prices than the competitions of generic drug manufacturers were exiting. Unlike many other forms of IPRs, such like Copy Right and Trademark Right, the drugs that constituted by the chemical compounds are vital to protect the billions of people’s lives and health as their human rights. So since the TRIPS Agreement came into force it has been receiving a growing criticism from developing countries, academics society , and non-governmental organizations for patents’ overprotection brings no benefits for improving the health situation in the developing world. Some of these criticisms points that the TRIPS's wealth redistribution’s effect is actually moving money from people in the developing countries to the IPR holders in the developed countries.8

By design, the TRIPS Agreement was established as minimum standards agreement. Article 1.1 states that “members may, but shall not be obliged to, implement in their law more extensive protection than is required by this Agreement”.9 Concerns over the effect of patent protection on the accessibility of medicines have been acknowledged by the WTO through the adoption of The Doha Ministerial Declaration on Public Health and Trade (The Doha Declaration) in 2001,10 which explicitly recognized that medical patents in deed affect the drug prices. The paragraph 5 of the Doha Declaration reaffirms the WTO member states’ right to make use of the flexibilities provisions within the TRIPS.11 The so called TRIPS flexibilities are to provide the WTO members a certain degree of legislation freedom to establish some mechanisms within their national intellectual property regimes, with the aim to assist states adapting to their own different domestic social and economic contexts. The flexible provisions are such as transition periods, compulsory licensing, parallel importation, the limitation on data protection, etc. Using of those approaches to ensure medicines being equitable available and accessible is very necessary. However, the assurances of the Doha Declaration had not been successful by noting paragraph 11 of the General Council Decision of 30 August 2003 on the Implementation of Paragraph 6 of the Doha Declaration, which regarding the difficulty for the WTO members, who are with insufficient or no manufacturing capacities in the pharmaceutical sector, to make effective use of compulsory licensing under the TRIPS Agreement. Following in 2005 the WTO members reached an agreement on an amendment to the TRIPS Agreement to make allow the WTO members to issue compulsory licenses to export generic versions of patented medicines to the countries without sufficient and manufacturing drugs capacities. After years this “cross-boundary compulsory licensing” mechanism has not been effectively implemented by states due to its burdensome time and financial consumed

8 G. Westkamp, TRIPS Principles, Reciprocity and the Creation of Sui-Generis-type Intellectual Property Rights for New Forms of Technology, 2003, 6(6), The Journal of World Intellectual Property, p827-859.

9 Article 1.1, TRIPS Agreement.10 The Doha Ministerial Declaration on Public Health and Trade, WT/MIN(01)/DEC/2,

Adopted on 14 November 2001, para1-4. 11 Id, para5.

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application procedure. Another important reason causing the failure of the Doha Declaration is that most countries actually are not in the position of could make extensive use of the flexibilities with various reasons. Even in countries of India, who is called as “poor countries pharmacy” due to its cheap generic provision to the other less-developed world countries, the use of the TRIPS flexibilities is also being systematically eroded.12 Meanwhile, China is one of the countries where the medical patent legislation endows overprotection to the medical patent rights. It is maladaptive to its domestic developing situation has been severely hindering the citizens’ access to medicines and their right to health.

1.1.2 Access to medicines in China

Since became the world’s second biggest economy in 2010 China has being drawn the world’s attention to its impressive economic growth, however we should not forget that the benefits of growth have never been shared equally across the geographic regions, the rich and poor households, the urban and rural residents, and the migrants and resident population within the cities. Basically the Gini coefficient between 0.47- 0.49 shows that the gap in income distribution is relatively large, while China’s official Gini coefficient stood at 0.474 in 2012. Meanwhile according to the unofficial study the Gini was up 0.61% already. 13 The small amount of rich people are extremely rich while most people however do not get benefit from the economic fast growth as it is supposed to be. Besides, China’s 8, 387 USD per capita GDP is below the world average level of 10,700 USD, which ranks the number 96rd among 185 countries in 2012.14 Many people, especially from the remote and resource-poor areas in the western and interior regions, their consumption levels are even below 1 USD/day. People in those areas are often without access to clean water, arable land. The health and educational services are not available or adequate. To a great extent illness treatment continues to be a big contributor to the poverty, and out-of- pocket medical expenses remain too high to bear. According to a report from the WHO, Chinese total health expenditure per capita was 264 USD/ year and the total health expenditure took only 4.3 % of the GDP in 2008, which ranked number 116th in the world.15 This proportion was far behind to the developed countries and the most developing countries. Besides the payment for the pharmaceutical products constitutes nearly 40% of China’s total health expenditures, which sharply contrasted to 17% average level in The Organization for Economic Co-operation and Development (OECD) countries.16 Under this context, in 2009 a new round Chinese healthcare reform was started seeking to lower

12 Supra 5, para.11.13 Kevin Yao, Aileen Wang, China lets Gini out of the bottle; wide wealth gap, para11-12,

available at: http://www.reuters.com/article/2013/01/18/us-china-economy-income-gap-idUSBRE90H06L20130118 (Search date: 15/08/2013).

14 See statistics from IMF, “List of countries by GDP (PPP) per capita” available at: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita (Search date: 11/08/2013).

15 WHO Department of Health Statistics and Informatics (May 13, 2011), available at : http://www.who.int/whosis/whostat/2011/en/index.html (Search date: 23/10/2012).

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the pharmaceutical expenditures while increasing the affordability of drugs. However along with the reform the dilemma comes out. The problems of which would be also discussed by this thesis later.

In addition, the government sponsoring HIV/AIDS free treatment programs have been hindered by an inadequate drug supply. Until the end of 2011, there were 780,000 people affected by HIV/AIDS and 28,000 patients died in 2011.17 As China has provided medical patent protection since 1993, most antiretroviral (ARVs) drugs patents are under the protection. GlaxoSmithKline’s (GSK) exclusive patent right on Lamivudine (3TC), for example, which costs 1,672 $ per patient per year is unaffordable to the Chinese patients.18 Along with the increasing burden of non-communicable diseases in many developing countries, the availability of affordable cancer drugs has become a big challenge. Every year China has more than two millions new cancer cases and the number is continue growing which makes cancer being a leading disease causing death now.19 Some cancer drugs are available only in branded versions under the patent protection and their prices are really high. In such situation, the average per patient’s expenditure of Gleevic (imatinib mesylate), a relatively new drug for several cancers, amounts to about 20,000 RMB/month in China. In the contrast, a generic version in India costs about 1,300 RMB/month.20 The high cost of medicines both increases the government’s healthcare finance burden and difficulties for individuals to access to treatments.

On the other hand, although the Chinese government has devoted substantial effort to enacting IP protection laws and regulations, there is always criticism decrying the lack of effective law enforcement. In 2007, the United States sued China for the IP infringement in the WHO and brought the dispute to the Dispute Settlement Body. For years, the US Trade Representative Offices and its multinational pharmaceutical companies keep demanding stronger pharmaceutical IP protection from the Chinese government. Therefore, China chose to add TRIPS-plus provisions within its IP laws while updating its drug regulatory framework, which led more challenges to the generic industry.

More than the difficulties of housing, education and pension, the difficulty of seeing a doctor has become one of these four biggest social issues to Chinese people. The unequal distribution of healthcare services and the unreliability of small community hospitals make many people have 16 A Generic Drug Policy as Cornerstone to Essential medicines in China, World Bank,

China Health policy Notes No 4, 2010. 17 Statistics from the report by Ministry of Health of China, UNAIDS AND WHO,

available at http://news.china.com.cn/txt/2012-01/21/content_24464935.htm (In Chinese) (Search date: 23/10/2012).

18 Jing Chen, Xioayan Nie, Peng Yao, Luwen Shi, TRIPS-plus and Access to Medicines in China, Journal of Public Health Policy, April 4, 2013.

19 China Health Statistic Yearbook 2010, Ministry of Health of China, 2010. 20 Responses from Hu Yuanqiong, China Access to Medicines Research Group, Speech to

Informal Interactive Hearings of the General Assembly with Non-government organizations, Civil society organizations and the Private Sector, New York, June 14-15, 2010 .

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to travel far for seeing a doctor in the bigger specialized hospitals which are reputable for curing the certain diseases. Some big hospitals just focus on the amount of patients while neglects the quality of their medical services provided. The news of the patients lost their lives which caused by the medical accidents with difficulties of getting the compensation are not rare today, which terribly increases the tension between the patients and their doctors and hospitals. The expensive medicines and check-up fees leave more financial burden to the most patients. The causes behind of this high cost of medicines are multi-factor, surely not only because of the medical patent protection. However regarding the thesis will analyze the issue from the legal perspective, it would mainly focus on the medical patent provisions while the medical administration provisions and the healthcare system and relevant health policies would be also referred.

1.2 Research questions With the background of the global trading expansion, the TRIPS

Agreement imposes the WTO member states obligations of complying with the international standard on patent protection while provides some flexibilities for the less-developed world countries to make use in order to promote their national public health situation. The research questions are: whether China has adopted any flexibility into the national legal framework? If so on what extent China enforces them? The questions are followed by asking what other reasons, besides of the patent protection, cause the barriers to the access to medicines? And are there any advices could be provided within the judicial and administrative regimes regarding improving the accessibility to medicines?

To assist answering the above main research questions, the thesis would start with asking is the right of access to medicines a human right as the ground to impose the obligations on governments first. The questions of how about the TRIP-plus provisions’ implementation situations in China and what actions can be taken to prevent their reverse impact on limiting the access to medicines will be also raised.

1.3 Methodologies In order to answer the research questions, I applied the relevant

international and regional human rights instruments to support the argument of the right to access to medicines has been confirmed as a human right and the legal doctrines are also used to impose the states and pharmaceutical companies’ respective responsibilities on this issue. Through checking the relevant international organizations such as WHO and World Intellectual Property Organization’s (WIPO) reports and other research papers I would clarify the medical patent protection’s impact on the medicines’ price and its effect on limiting the access to medicines.

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To analyze the patent impact on access to medicines in China, I reviewed the Chinese patent legislation and relevant administrative legislation to see the TRIPS flexibilities and the TRIPS-plus provisions implementation situation under the national context. Through collecting and sorting the relevant information from scholar papers, industry report and news, the factual enforcement and the problems of the above provisions will be identified. The thesis would also compare China with other countries, such as India, Sweden, Japan etc, with the comparison of the certain provisions’ implemented and enforced situation in those countries it will underline the TRIPS-flexibilities’ significant function on encouraging the generics entry into market, reducing the medicines price and improve the accessibility to medicines. Regarding to the TRIPS-plus impact to access to medicines, the thesis would take US Hatch-Waxman Act as a contrast, to show the importance of establishing rational and expertise judicial and administration systems on practicing the provisions and to induce what China should react.

1.4 Delimitations With the consideration of medicines affordability and healthcare

safeguard environment, the thesis would from economical accessibility perspective to talk about the access to medicines in China. Other accessibility actors, such as the distance between patients and hospitals, facilities and healthcare services, are also very important. However taking account of the topic is focus on the IPRs impacts on human right, the thesis would not go further on those actors.

In addition, the issue of whether IPR is a human right would not be the essential argument on this topic. So the thesis is not going to discuss the matter in-depth. The thesis is mainly focus on the examining the reasons that hinder the access to medicines, both patent right and other factors. Considering the level of the author’s academics and research competency, the recommendations that suggested in the end would with certain extent of limitations which could not cover all the potential measures.

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2. Access to Medicines as a Human Right

The legal right of access to medicine is not mentioned explicitly in any agreement, but commonly based on some basic human rights, which are protected under the international human rights instruments and is confirmed in Doha Declaration on TRIPS and Public Health, where “that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Member’s right to protect public health and, in particular, to promote access to medicines for all” is affirmed.21

This chapter would apply human rights based doctrine to interpret right to access to medicines, through the clarification of its relationship between right to access to medicines and right to health, right to life and right to enjoyment the benefits of scientific progress and its application, elaborate that right to access to medicine should be and must be respected as a human right. Then regarding the debate on the interrelation between the patent right protection and access to medicines, the thesis introduces the analysis about the impacts that medical patent right brings to the access to medicines in different develop level countries. The discussion of this chapter is aiming to point out that states should take the main corresponding obligation to respect, protect and fulfill these human rights through different ways according to the international and regional human rights agreements. If states simply offer the excessive medical patent right protection under the pressure given by the foreign pharmaceutical industry which is sacrificing the right to access to medicines for meeting the business interesting, it can deem as a breach of states’ obligation on protecting their public’s right to health. The price of undermining the domestic public health development for realizing the promise on patent right protection is already too heavy and the issue must be aware of and to be controlled by many developing countries, such as China and India. The case of India cautiously not introducing the TRIPS-plus provisions imposed in the FTAs and its granting medical compulsory licenses, which is supported by the local court regardless the foreign pharmaceutical company’s blame, are the examples of a state complying its state obligation on respect, protect and fulfill human rights, and the same obligation should be imposed to the Chinese government.

2.1 Access to medicinesThe United Nations Development Group defines “access” as “having

medicines continuously available and affordable at public or private health facilities or medicine outlets that are within one hour’s walk from the homes of the population.”22 It is should be noted that the “medicines” we talk here is in a broad sense, which includes all the essential and available medicine. 21 The Doha Declaration on TRIPS and Public Health, para4.

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However when we talk about the governments’ obligation on the access to medicines, it only refers the “essential drugs” since the General Comment No. 14 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) which in detail explains the scope and meaning of the right to health and interprets “safe and potable drinking water and adequate sanitation facilities…and essential drugs” as the underlying determinants to the right to health, where places an obligation on member states to provide only “essential drugs”.23 The “essential drugs” as those “satisfy the priority health care needs of a population” that defined and listed by the WHO.24 Considering states have their flexibility to constitute their own “essential drugs list” by the WHO list as the reference, the thesis use “medicines” to avoid different range of “essential medicines”.

Access to medicines depends on four factors, which are availability, accessibility, affordability and quality/acceptability. Availability is ensuring that new products are developed or the existing products are adopted for local use; Accessibility means that people can receive the product and understand how to use it; Affordability is to ensure patients, healthcare providers and governments can afford the product; Quality/Acceptability needs the product can be worked as intended, efficacious and safe.25

In 2002, the UN Human Rights Council established a mandate for a

Special Rapporteur on the right to health to prepare its independent reports, part of these reports dealing with access to essential medicines and the IP issues. In 2011, the Human Rights Council requested the Special Rapporteur to work a study by 2013 on the existing challenges with regard to the access to medicines within the context of the right to health, recognizing methods to overcome these challenges and attain the good practices. The intersection issues between these sectors have become the focus of several reports and resolutions of UN Commission on Human Rights. With respect to the HIV/AIDS epidemic, the UN General Assembly has also passed several resolutions pertaining to protect the human rights of those people who live with the HIV, and improve their accessibility to the treatment. In fact, access to essential medicines as an indicator for the fulfillment of right to health was created by the UN High Commission for Human Rights. Ensuring access to medicine as one significant human right obligation to the governments is also always reaffirmed in the study by the cooperated work of WTO, WIPO and WTO.26 The thesis would clarify the opinion that right to access to medicines is a human right through its interrelationships with right to health and other fundamental human rights.22 Stephen P. Marks, Health: A human Access to Essential Medicines as a Component of

the Right to Health, Swiss Human Rights Book VOL.3, p80. 23 Committee on Economic, Social and Cultural Rights, General Comment No. 14 on the

right to the highest attainable standard of health, 11 August 2000, UN Doc. E/C. 12/2002/11, para4.

24 WHO, Medicines: Essential Medicines [online], fact sheet no. 325, available at : http://www.who.int/mediacentre/factsheets/fs325/en/index.html (Search date: 11/08/2013)

25 The Access to Medicine Index 2012, Access to Medicine Foundation, p11. 26 Promoting Access to Medical Technologies and Innovation, Intersections between

public health, intellectual property and trade, p40-42.

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2.2 Right to health The right to health is an indispensable right of human rights and of our

understanding of a life in dignity. Internationally, it was first articulated in the 1946 Constitution of the WHO as “the enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without the distinction of race, religion, politically belief, economic or social condition.”27

2.2.1 Development of the right to health

Traditionally health was seen as falling within the private, rather than public, realm. The early laws containing health-related provisions can be perused back to the era of industrialization. The Moral Apprentices Act (1802) and Public Health Act (1848) were adopted by the United Kingdom as a way to relieve the social pressure arising under the poor labor conditions. And the 1843 Mexican Constitution also included references to the state’s responsibilities for preserving public health.

With the establishment of the WHO, for the first time the right to health was recognized internationally, and the concept of health was changed to be a public issue. The WHO developed the understanding of health as “a state of complete physical, mental, social well-being and not merely the absence of disease or infirmity” as before and also defined an integrated approach linking together all the factors related to human well-being, including physical and social surroundings conducive to good health.28

Universal recognition of the right to health was further confirmed by the 1978 Declaration of Alma-Ata on Primary Health Care, which reiterated the government’s responsibility to guarantee the health of their populations. In the context of the Alma-Ata Conference the WHO designed the plan, Health for All by the Year 2000, which consists of a series of goals and programs to achieve the minimum levels of health. Nonetheless, in a context of which health problems associated with poverty and inequity continue to pose the main obstacles to attain the minimal levels of well-being for most of the world’s population.29

27 The Right to Health, Fact Sheet No.31, Office of the United Nations High Commissioner for Human Rights, World Health Organization, p1.

28 The right to health, Circle of Rights Economics, Social & Cultural Rights Activism: A Training Resource, available at: http://www1.umn.edu/humanrts/edumat/IHRIP/circle/modules/module14.htm (Search date: 11/08/2013).

29 Alma Ata Declaration, Wikipedia, available at: http://en.wikipedia.org/wiki/Alma_Ata_Declaration (Search date: 11/08/2013).

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2.2.2 Right to health as a human right

Right to health then further developed as a human right and adopted by many human rights instruments. Article 25 of the Universal Declaration of Human Rights (UDHR) of 1948 states that “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including freedom clothing housing and medical care and necessary social services”30 In the ICESCR, Article 12 also recognizes the “right of everyone to the enjoyment of the highest attainable standard of physical and mental health,” and continues to explain that the signatory states must take steps to ensure “the prevention, treatment and control of epidemic, endemic, occupational and other diseases,” and “the creation of conditions which would assure to all medicines service and medical attention in the event of sickness.”31

Right to health is also widely recognized in other regional human rights instruments, such as in the Article 33 of American Declaration on the Rights and Duties of Man (1948), Article 11 of European Social Charter (1961, revised in 1996) and Article 16 of African Charter on Human and People’s Rights (1981).32 These instruments represent a further commitment on the part of states in respect of the right to health, and established the framework for an integrated policy aimed at securing its enjoyment.

2.2.3 Access to medicine as right to health

Pursuant to Article 12.2 (c) (d) of ICESCR, the right to health care includes the right to emergency care, health facilities, goods and services. Access to medicines is the core content of the right to health, both as the treatment for epidemic and endemic diseases and as part of the medical attention in the event of any kind of sickness. Besides, the General Comment No.14, which provides that the “availability, accessibility (affordability), acceptability (medical ethics) and quality” as four minimum elements to fulfill the right to health, also embodied the right to essential medicines and established that the provision of essential medicines as one of the state’s minimum core duties.33

The 12/24 Resolution adopted by the Human Rights Council in 2009 also recognized that “access to medicines is one of the fundamental elements in achieving progressively the full realization of the right of everyone to the enjoyment of the highest attainable standard of physical and

30 Universal Declaration of Human Rights, United Nations General Assembly, December 1948.

31 International Covenant on Economic Social and Cultural Rights, United Nations General Assembly, January 1976.

32 The right to health, Circle of Rights, Section 5- Understanding Specific ESC Rights, available at: http://www1.umn.edu/humanrts/edumat/IHRIP/circle/modules/module14.htm (Search date: 11/08/2013).

33 General Comment No.14, The right to the highest attainable standard of health, UN Economic and Social Council, E/C. 12/2000/4, 11 August 2000, para12.

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mental health” and stressed “the responsibility of States to ensure access to all, without discrimination, of medicines, in particular essential medicines, that are affordable, safe, effective and of good quality”.34 The resolution was continuing updated as the 15/22 and the 17/14 Resolutions by the Human Rights Council in 2010 and 2011 respectively.35

2.3 Other human rights relating to access to medicines

Besides right to health, the interpretation of accessing to medicine from human right approach also interrelates to other human rights, such as right to life and right to enjoyment the benefits of scientific progress and its application.

2.3.1 Access to medicines as right to life

Traditionally, the right to life is viewed as a negative right to prevent intentional loss of lives. It did not guarantee an appropriate standard for living, food, housing and medical care. However, recent developments consider the right as a positive right, which has been extended to the basic conditions of life, the component necessary for survival, and part of right is coexistent with economic, social and culture rights, which includes accessing to life saving medicines.

Right to life as one of the fundamental human rights is included in the UDHR, International Covenant on Civil and Political Rights (ICCPR), European, African and Inter-American human rights conventions.36 The UN General Assembly affirms that the safeguarding of right to life is an essential condition for the enjoyment of entire range of economic, social and culture, as well as civil and political rights. Therefore right to health and its essential measure, access to medicine, lies at the basis of full realization of the right to life. Given the lack of accessibility to such medicines will ultimately deprive people’s right to life, so accessing to essential drugs as a mean to survival falls into the realm of right to life. And the State’s duty of assuring access to essential medicines is clearly could be originated from the expanded notions of obligations on the right to life.37

34 Resolution on access to medicine in the context of the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, UN Human Rights Council, A/HRC/RES/12/24, 12 October, 2009.

35 Resolution on the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, A/HRC/RES/15/22, 6 October 2010; Resolution on the right of everyone to the enjoyment of the highest attainable standard of physical and mental health in the context of development and access to medicines, UN Human Rights Council, A/HRC/RES/17/14, 14 July 2011.

36 See Article 3 of UDHR, Article 6 of ICCPR, Article 2 of European Human Rights Convention, Article 3 of African Charter on Human and People’s Rights, Article 24 of American Convention on Human Rights.

37 Caidan Cao, Patent Right and Access to Medicine, Mater thesis, Lund University, Fall 2010, p47-48.

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2.3.2 Right to enjoyment the benefits of scientific progress and its application

Comparing with the right to health and the right to life, access to medicines’ legal basis on the right to enjoyment of benefits of science, which was proclaimed in the Article 27 of UDHR and Article 15.1(b) of ICESCR, is easily ignored within the human right framework. In fact “the States Parties recognized the right of everyone to enjoy the benefits of scientific progress and its applications”38 implies that the progress made by medical research and development should be shared by public, which especially can be measured by the accessibility to medicines.

Considering IPRs are protected under the Article 15.1 (c) of ICESCR while the benefits deriving from the science and technology progress are not shared equally because of the existence of poverty, the General Comment No.17 articulates that “states parties have a duty to prevent unreasonable high costs for access to essential medicines…from undermining the rights of large segments of the population to health”.39 So access to medicines as an indispensable component to the right to health and the right to life, which are the fundamental human rights deriving the inherent human dignity, also need to be promoted by realizing the right to the enjoyment of scientific progress. The right to the enjoyment of scientific progress is one legal basis to the access to medicines while accessibility to medicines is an indicator on the practice of right to the enjoyment of scientific progress.

Over in all, the right of everyone’s enjoyment of the highest attainable standard of physical and mental health which as a human right is one of the fundamental goals to the state’s policies and programs, and access to medicines is also recognized as one of the fundamental elements for progressively achieving the full realization of the right to health by the UN Human Rights Council.40 However due to the obstacles to accessing to medicines of good quality, affordable and in a timely fashion, the full enjoyment remains an illusive goal to millions of people around the world. Where the medications are expensive, non-existent, inaccessible and low qualities are mostly in the developing countries. In this regard, the states are definitely the main duty holder to ensure the access to medicines under the human rights regime while should provide sufficient legal protection to the IPRs in corresponding to International Agreements.

38 Article 15.1(b), International Covenant on Economic Social and Cultural Rights, United Nations General Assembly, January 1976.

39 General Comment No.17 ( 2005), The right of everyone to benefit from the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he or she is the author, Economic and Social Council, E/C.12/GC/17, 12 January 2006, para.35.

40 Promotion and Protection of All Human Rights, Civil, Political, Economic, Social and Culture Rights, Including the Right to Development, UN Human Rights Council, A/HRC/10/24,17 November, 2008.

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2.4 Relationship between the medical patent right and access to medicines

When talking about the relationship between the medical patent right and access to medicines, the first thought is to place them into their corresponding legal frameworks. There should be no dispute on that medical patent right belonging to the IPRs. Regarding the access to medicines, the question of whether which is considered as a human right that from the above part of human rights instruments statement we have reached the conclusion of access to medicines is indeed a human right. Then the question of the relationship between the IPR and human right comes to us. The World Intellectual Property Organization (WIPO) agrees the opinion that IPRs are recognized as human rights backed by the UDHR and other international and regional human rights legal instruments.41 However the relationship between them is complex. So a full understanding of the nature and purposes of the IPR system is important to be clarified in order to ease the conflicts happens between the implementation of current IP systems and other human rights, such as the right to adequate health care, the right to free expression and access to information, the right to share the benefits of scientific progress, and to participation in cultural life, etc.42 To away from that theoretically analysis the thesis prefer discuss the issue of IP and access to medicines from the factual and practical way.

2.4.1 The barriers to access to medicines

In 1975, half of the world’s population was without accessing to life-saving drugs and other essential medicines. Although the proportion has decreased to about one-third of the world population now, the absolute number has remained constant at approximately two billion people. According to the WHO, expanding access to existing interventions, including medicines, for infectious diseases, maternal and child health, and non-communicable diseases would save more than 10.5 million lives a year by 2015.43 There are numerous barriers hamper the access to medicines so that the challenge is multi-faceted.

Lacking of research investment and scientific knowledge could make that medicines for their condition do not exist. In the case of the medicine does exist, it may be too expensive for the patients to afford. Or it is not available in the country where patients cannot receive them in time even at all, due to the ineffective supply chains. It also may be without the high, safe or effective quality, or may be formulated in the way making it difficult to take appropriately. The packaging may make it difficult to understand

41 Willem Grosheide, Intellectual Property and Human Rights: A Paradox, Vol. 21 No.3, March, 2011, p128-131.

42 WIPO, Human Rights and Intellectual Property: An Overview, available at: http://www.wipo.int/tk/en/hr/ (Search date: 23/10/2012)

43 Stephen P. Marks, Health: A human Access to Essential Medicines as a Component of the Right to Health, Swiss Human Rights Book, VOL.3, 2009, p84.

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how to use the medicines as well.44 The Working Group on Access to Essential Medicines of the United Nations Millennium project has identified six barriers of accessing the medicines: Inadequate national commitment, inadequate human resources, failure of the international community to keep its promises to developing countries, lacking of coordination of international aid, obstacles created by the TRIPS Agreement, and the current incentive structure for the R&D of medicines and vaccines to address priority health needs of developing countries.45

Among those factors, pricing remains a fundamental obstacle issue, putting medicines out of reach for millions of people in the developing world where the treatments are available but only are simply unaffordable. Most people in the developing countries pay put-of-pocket money for medicines, and often in those countries the costs of the needed drugs are higher than the affluent countries, not only in relation to the income levels but also sometimes in absolute terms.46 IPRs as one reason, under the TRIPS Agreement protection, which is in name of as return for the costs of R&D and incentives to innovation actually cause the monopoly high price of medicines.

2.4.2 Medical patent’s impacts on the medicine price

Patent exclusive right provides short-term marketing monopolization through restricting competition behavior. And such IPR incentives bring the different development level countries different impacts on their medical prices.

A study showed that to the developed countries, the impact of the patent protection to their medical prices increasing is the least remarkable. That is because with the existence of efficient competitions the drug price can be reduced reasonably. The price competitions are mainly brought by the replaceable medicines and the generics, which thanks to the advanced technology and sufficient financial support in the pharmaceutical industry. And governments also encourage the generics coming into the market as soon as possible after the patent expiring by offering financial and policy favorable measures supports. Such as the US, it issued the Hatch-Waxman Act (Bolar Exemption) in 1984, which provided the Abbreviated New Drug Applications (ANDAs) to encourage seeking the FDA approval of the generics. This action made the generics taking part in the medical prescriptions was increased from 19% in1984 to 47% in 2000.47

And in other developed countries such as UK, the percentage that generic takes is even much higher. The statistics also shows that the 44 The Access to Medicine Index 2012, Access to Medicine Foundation, p12.45 The Access to Medicine Index 2008, Access to Medicine Foundation, p29-31.46 MDG Gap Task Force Report 2012, Millennium development goal 8, The Global

Partnership for Development: making Rhetoric a Reality, pxvi.47 Commission on Intellectual Property Rights, Integrating Intellectual Property Rights and

Development Policy, Report of the Commission on Intellectual Property Rights, London September 2002, p 29-56.

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existence of the generic competitors would cause the price immediately dropped as soon as the drug patent going expire. The more generic producers coming to the market, the prices would be more reduced. In spite of the medical patent protection brings the high price, the extent can be restricted by the severe competition in the market. Besides, these governments strictly control the drug price when it is necessary, which even sometimes the price is restricted below the level of other comparable less developed countries. So the rational market competition and properly medical administrative policies actually can control the negative impact that the medical patent on the drug price.

To the developing countries, medical patent right protection brings the high price of drugs and the extent of which is different by different medicines in different countries, which can be ranged from 12% to 200%.48 It depends on the marketing structures and the demands, especially the degrees of the competition. In some countries with the well established generics industries, the increase extent is not so big that actually can keep the price being comparatively affordable, some of which can be cheaper than some developed countries. However to other countries where are without big market and lacking of manufacturing and managing capacities, the drug price is always very high. According to an US research, the drug price will be decreased when generics enter into the market and it needs at least five competitors until the price dropping to the lowest.49 The number and the speed of the generic producers entering into the market depends on how expected profits big it is. And the profit can be realized only when the market scale is big enough, otherwise generic producers are reluctant to produce and the drug price usually still keep very high in these developing countries.

Besides, many developing countries are with the centered or monopoly drug sale system. Under the system, lots of patented medicines are imported and sold by only a few distributors, who prefer to pursue the monopoly high price through providing limited supplement, which suppresses the competition dramatically. The different demand elasticity also hinders the patent holders reducing prices, because the price decrease does not cause the consumers who are with the strong purchasing capacity to buy more. Rich people can always get the expensive drugs even if the price is high and they are always the main customers to many pharmaceutical companies. The poor people with the weak purchasing capacity cannot buy as much as before the price increased. So the drug providers prefer the patented medicines with more profits deriving from the rich customers. All those above factors finally make many developing countries’ drug prices are even higher than developed countries.

According to the TRIPS Agreement to the least developed countries they are not required to provide medical patent protection until 2016. Those countries with insufficient manufacturing capacity used to depend on the

48 Id.49 Id.

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importation of the cheap drugs from the non-patent protection developing countries such as South Africa, India and Brazil. However after 2005 along with the TRIPS taken effect to more and more developing WTO member states hence they must provide medical patent protection, there were less unpatented medicines could be imported by these least developed countries. What they can do is importing the high cost patented medicines to solve their health issues, with limited amount of free drugs provided by the Non-governmental Organizations (NGOs), international aids program and a few pharmaceuticals donation. So even those least developed countries do not have to provide the medical patent protection, it has already caused the drug price increasing by importing the patented medicines, no more to say when the TRIPS taken into effect after 2016.50

2.4.3 The debate on the impacts of patent protection to the access to medicine

From the above part with the comparison of different market structures, demand scales and the different degrees of competitions from economical perspective, the outcome shows us that the medical patent right actually brings the high price of drugs to the developing countries. At the same time, some people are arguing that the IPRs protection are as the indispensable elements to stimulate the Research and Development (R&D) of the medical technologies, which assists to improve the health situation in the less developed areas from the long term perspective.

To respond that argument, after checking all the evidences a study 51 shows that actually only less than 5% of the profit are invested worldwide into the R&D of the diseases which predominantly affecting the developing countries. The Commission on IPR concluded that IP protection plays hardly any role at all on stimulating R&D of diseases that prevalent in the developing countries, except for the diseases that also have a big market in the developed world.52 Pharmaceutical research by the private sectors is totally driven by the expected profits. The businessmen usually do not consider that devoting significant resources to address even such common sicknesses, like tuberculosis and malaria, is commercially worthwhile. So the heart of the problem is the lacking of market sufficient demand to motivate the private sectors to commit resources to the R&D of the diseases. In the report the Commission believes that the presence or absence of the IP protection in the developing countries is of at best secondary importance in generating incentives for research directed to diseases prevalent in developing countries. The report shows that patents play a limited role on

50 Yang Li, Li Ye, Yue Chenyan, Patent System and Drug Price under Trade Related Intellectual Property System, College of Business Administration, Shenyang Pharmaceutical University, Shenyang 110016, China.

51 G-Finder, Neglected Diseases Research & Development: How Much Are We Really Spending? 2008, p48.

52 Joint NGO response to US proposal on Intellectual Property Rights, Innovation and Public Health at the 56th World Health Assembly, para3, available at: http://www.msfaccess.org/resources/press-releases/498 (Search date: 23/10/2012).

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providing incentives to develop new medicines for the “neglected diseases” or “disease of the poor” in regions where they own small markets.53

Another argument standing for the medical patent right believes that the most important constraints to access to medicines in the developing countries are not the patent protection but the lack of spending on healthcare. There usually have the absence of a suitable health infrastructure to administer the medicines’ safety and efficiency, the improper national tax system and tariffs system.54 All of those factors are truly important to the access to medicines. Here it is not denying the existence of those factors and would like to discuss them later under the national context. The standpoint of the thesis is that the acceptance of those factors does not mean that their effects naturally override the impacts of the patent protections. There is no doubt of IP is not the only reason causing the lack of access to medicines. IP as the incentive to innovation and legal interests granted to the right holders deserves the respect and protection. It’s not only well practice its good functions in the developed countries but also will assist the development of the middle and low income countries. To the most developed countries with the well structured IP protection regime and welfare social system, IPRs do not bring such harmful influence. However to the less-developed world countries, the over-extent IP protection is not fit to their economic development level. Lacking experience of establishing an appropriate extent of IP protection within different industries can result in the reverse impact to the human right, such as access to medicines. The point is that countries especially the developing countries need to adopt appropriate IP legal protection to improve access to medicines but not harm it, those IP policies and rules must be in harmony with fulfilling the right to health as the objective. The IP regimes should not run to counter their public health policies and they should be consistent with and supportive of such policies. Find out the balance point of the two rights are the key to solve the conflict.

2.5 States obligations on balance the rights

Regarding how for a state to balance the protection extent on those two rights, the statement by the Committee on Economic, Social and Cultural Rights on HR & IP (2001) observes “International rules concerning intellectual property should not necessarily be uniformed if this might lead to forms of intellectual property protection inappropriate for development goals”55. It also notes fundamental importance of integration HR norms into enactment and interpretation IP law. In paragraph 12 it emphasizes “that 53 Supra 47, p34-64.54 Supra 47, p34-64.55 Substantive Issues Arising the Implementation of The International Covenant of

Economic, Social and Cultural Rights, Human rights and intellectual property Statement by the Committee on Economic Social and Cultural Rights, E/C.12/2001/15,14 December 2001, para15.

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any intellectual property regime that makes it more difficult for a State party to comply with its core obligations in relation to health, food, education, especially, or any other right set out in the Covenant, is inconsistent with the legally obligations of the State party”56 So it is important for state to make official statement indicating need for IP standards it conforms with be consistent with its HR obligations, to review and amend all national patent laws to make them consistent with a human rights approach.

Besides of those states internal obligations, other concerning obligations for other countries are also should not be overlooked. Maastricht Principles on Extra-Territorial Obligations was drafted 2011 by group experts in international law & HR convened by Maastricht centre for Human Rights & International Commission of Jurists. The Central provision of which is that all states must take action separately and jointly through international cooperation to refrain from conduct which nullifies or impairs enjoyment and exercise of economic, social and cultural rights. Obligation for states is that take necessary measures ensure non-state actors in position regulate, including transnational companies and business enterprises not nullify or impair enjoyment economic, social and cultural rights in other states.57 Given the TRIPS-plus provisions are with the danger of potentially restricting the generics entry into markets for the developing countries, developed countries have the obligation of refraining from imposing those provisions in Free Trade Agreements (FTAs) or multilateral agreements to other countries, such as China.

56 Id,s para12.57 Maastricht Principles on Extraterritorial Obligations of States in the area of Economic,

Social and Cultural Rights, 28 September 2011, article 19-24.

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3. Overview of Medical Patent in China

Since China joined WTO in 2001, on one hand the country has made an amazing progress in developing the intellectual property system at both the domestic and international levels. As China prepared to join the WTO in the late 1990s and early 2000s, it undertook a complete overhaul of its intellectual property system, amending its copy right, patent and trademark laws for conforming to TRIPS Agreement.58 The amendments achieved two different goals. Internationally, they addressed the concern of the WTO and many of its members, in particular the United States, over inconsistent standards for the protection and enforcement of IPRs. Domestically, they provide timely and much-needed updates to the Chinese IP system. They enabled the country to make legislative and policy adjustments that directly responded to the rapidly-changing economy while providing a platform for enhancing technological and innovative capabilities. Today, the country is already among the tops five countries filing patent applicants through the Patent Cooperation Treaty. In 2011, the number of these applicants increased by 33.4% to 16,406, earning China the fourth spot, behind the US, Japan and Germany. On the other hand, China continues to struggle with the protection and enforcement of IPRs. Every year, the country finds its way onto either the Watch List or Priority Watch List in the Section 301 Report released by the United States Trade Representative. Given the massive piracy and counterfeiting problems in China, in 2007 the US filed its complaints against China on its measures affecting the protection and enforcement of IPRs before the WTO Dispute Settlement Body (DSB). Finally China prevailed on the first claim concerning the threshold for criminal procedures and penalties, the US won the last claim concerning the denial of copyright protection to works that have not been authorized for publication or dissemination within China. It is worth noting that China was able to defend its position admirably before the DSB and following the WTO panel decision it quickly amended both its Copyright Law and Customs Regulations to bring them into conformity with the TRIPS. Even though the WTO panel ultimately found some of Chinese laws inconsistent with the TRIPS, it was important for China was able to score some important points in the panel report, where underscored both the importance of having minimum standards and flexibilities in the TRIPS and rejected the use of bilateral, plurilateral or regional trade agreements to divine meaning in the TRIPS language.59

In recent years, an increasing number of developing countries have successful used the flexibilities, which provided by the TRIPS Agreement, to lower the drug costs in order to improve the accessibility to essential medicines by facilitating the local production or importing the generic 58 Peter K. Yu, From Pirated to Partners: Protecting Intellectual Property in Post WTO

China, American University Law Review, 55, p901-1000. 59 Peter K. Yu, The First Decades of TRIPS in China, p1-8.

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medicines. However, many countries have not yet amended their national laws to fully incorporate the TRIPS flexibilities provisions. Furthermore, an increasing number of bilateral and regional FTAs include intellectual property protection demands that exceed the minimum standards of the TRIPS Agreement, which can hamper the performance of the flexibilities. This chapter would review the legislation of Chinese patent laws and check if they have adopted the TRIPS flexibilities already? The main aim of this part is to see how the laws are provided and enforced by the authorities and how much of the TRIPS flexibilities actually being practiced for improve the Chinese public health situation.

3.1 Medical patent legislation This part would focus on the legislation review of two patent-relevant

laws. They are Patent Law of People’s Republic of China60 and Measures on Compulsory License for Patent Exploitation in China.61 The most common TRIPS flexibilities provisions and the significant changes of the new versions would be presented in this part.

3.1.1 Patent Law

China has established a comparatively comprehensive intellectual property rights laws system to protect the pharmaceutical industry, including granting patent, trademark protection and trade secret etc. Within those measures, the most effective way is by granting the patent protection.

Patent law in the modern mainland China began with the promulgation of the Patent Law of the People’s Republic of China in 1984. Since then China has amended its Patent Law for three times: first time was in 1992, then again in 2000, and the most recently was in 2008.62 The 1984 Patent Law amendment started granting patent protection on medical manufacture process and the 1992 amendment started granting patent protection on the medical products. The 2000 Patent Law amendment affected little on it. Since China joined the WTO in 2001, it started to be a member of the TRIPS agreement. To comply with its international obligation and adapt to the changes brought by the Doha Declaration, along with the effects of TRIPS Amendment brought to the member states and international pharmaceutical industry, the 2008 Chinese Patent Law amendment adds new provisions in order to carefully striking a balance between the interests of patent holders and the public health. Concerning the medical patent the main changes of these stipulations in the latest amendment can be found

60 Patent Law of the People’s Republic of China, Adopted at the 4 th Meeting of the Standing Committee of the Sixth National People’s Congress on March 12, 1984, amended on December 27, 2008.

61 Measures on Compulsory Licensing for Patent Exploitation, promulgated on 15 March 2012 and implemented on 1 May 2012.

62 See “Patent law of the People’s Republic of China”, Wikipedia Website, available at http://en.wikipedia.org/wiki/Patent_law_of_the_People's_Republic_of_China(Search date: 23/10/2012).

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below. And the problems or the flaws of the provisions would be also discussed.

3.1.1.1 The restriction of using genetic resourcesWith the increasing number of patent applications of genetic

technologies, the 2008 Patent Law tries to regulate the patent right relating using genetic resources to prevent the abuse of such rights. Article 5 of the 2008 Patent Law provides that no patent right shall be granted if an invention is based on genetic resources obtained or used in violation of any laws or administrative regulations.63 That provision is responding to Article 27.2 of the TRIPS Agreement, where provides that "Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect public order or morality…”. We can find that the 2008 Patent Law sets out a general reference of "laws and regulations" instead of “public order and morality” in the TRIPS, regarding which specific laws and regulations the further clarification is in need for avoiding the misunderstandings.

Besides, Article 26 of the Patent Law requires the applicant to disclose and to explain the direct and original source of the genetic resource. If the applicant is not able to disclose the original source, the applicant must provide the reasons.64 This obligation is in line with international trend of introducing such disclosure obligations. For example, the Swiss Patent law of 2008 includes such a disclosure obligation. In addition, 110 WTO members, including China, had proposed in the Doha negotiations in July 2008, to consider including a disclosure obligation in the TRIPS Agreement. The disclosure obligation is welcome at the same time for a better transparency in the access and benefit sharing of genetic resources, according to the Convention on Biological Diversity and the Bonn Guidelines on Access and Benefit Sharing. It is also believed that this disclosure obligation will improve the patent examiners' work performance. However, Article 26 triggers many questions on its implementation. How will the “direct source" and "original source" be defined? Which reasons would be acceptable for not disclosing the original source? Such questions may cause the implementation uncertainties and life sciences companies need to keep a close eye on this issue to ensure these requirements are complied with when they apply for a patent.65

63 Article 5, para2, Patent Law of People’s Republic of China (2008 Revision), Amended for the third time in accordance with the Decision of the Standing Committee of the Eleventh National People's Congress on Amending the Patent Law of the People's Republic of China, adopted at its 6th Meeting on December 27, 2008, and shall enter into force on October 1, 2009.

64 Id, Article 26. 65 Shruti Bhat, New Chinese Patent Law: What Does It Mean For Life Sciences

Companies? February 6, 2011, available at: http://pharmaceutical-patents.blogspot.se/2011/02/new-chinese-patent-law-what-does-it.html (Search date: 26/10/2012).

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3.1.1.2 Heightened patentability standardUnder the 2000 Patent Law, the novelty was not considered to be

destroyed if an invention had already been used in foreign countries, as long as it had not been used in China or published anywhere in the world before its filing in China. However according to Article 22 of 2008 Patent Law, “novelty” means that the invention or utility model is not belong to the prior art, which is also called “absolute novelty”. Meanwhile, prior to the date of filing, there shall no other person filed an application for the identical invention or utility model with the patent administration department under the State Council, which was recorded in patent application documents published after the said date of filing or in patent documents announced.66

This provision no doubt requires a higher pharmaceutical research and development capability. When we see the issue in India, we can find that its national patent law makes it is tougher to get a patent on new forms of existing medicines. The famous Article 3 (d) of Indian Patents Act is aims at fighting the “evergreen” of patents.67 The law was designed with the social objective of stopping drug giants from a common abusive patenting practice in the pharmaceutical industry aimed at filing and then obtaining separate patents relating to different aspects of the same medicine. The requirement needs that the new version of the patented medicine must have a big improvement on the curative effect. Otherwise the new version drug cannot be granted by patent protection. Compare to India, Chinese medical patentability is still not strictly enough which causes the foreign medical patent right can keep longer time than it is supposed to be and hinders the generics coming to the market.68 So China should raise the medical patentability standard to stop some medicines that are only with small changes to be granted of patent protection, by which way to encourage the generic drugs being produced and reduce the expenditure on patented medicines.69

3.1.1.3 Compulsory licensing According to Article 48 of the 2008 Patent Law, the State Intellectual

Property Office of the People’s Republic of China (SIPO) may, upon the request of the entity or the individual which is qualified for exploitation, grant a compulsory license to exploit a patent for an invention or utility model, when the patentee has not or not sufficiently exploited the same, without any justified reason, within three years from the grant of the patent right or four years from the date of filing such patent. A compulsory license can also be granted in order to avoid or eliminate the adverse effects caused to the competition in cases that has been legally determined that the 66 Supra 63, Article 22.67 The Patents Act, 1970, as amended 2005 (15 of 2005), dt 4-4-2005,

availableat:http://nbaindia.org/uploaded/Biodiversityindia/Legal/14.%20The%20Patents%20Act,%201970.pdf (Search date: 26/10/2012).

68 Hu Yuanqiong, Responses from China Access to Medicines Research Group, Informal Interactive Hearing of the General Assembly with Non-June 14-15,2010, New York, p3.

69 Elliot Hannon, How an India Patent Case COULD Shape the Future of Generic Drugs, Time World, August 21,2012, available at: http://world.time.com/2012/08/21/how-an-indian-patent-case-could-shape-the-future-of-generic-drugs/ (Search date: 26/10/2012).

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enforcement of the patent right by the patentee constitutes a monopolistic act.70 Besides, Article 50 for the first time allows the grant of a compulsory license to manufacture medicine that has been granted patent rights in China and export it to countries or regions that conform with the relevant treaties which China is a signatory, with the aim to protect public health.71 It is the application of the TRIPS flexibility to ease the conflict between the IPRs and public health crisis. However there has no one compulsory license case issued yet. And the thesis would discuss the reasons in detail later.

3.1.1.4 Bolar ExemptionIn order to market a medicine product a manufacturer must first obtain

the regulatory approval by conducting clinical tests and trials to prove that the product is safe and effective. Producers of generic medicines are able to use the original manufacturer’s approval if they can demonstrate that the generic version is bioequivalent to the approved medicine. However, the generic producer runs the risk of patent infringement if they conduct clinical trials on a patented drug. With the “Bolar” exemption these necessary studies, tests and trials will not amount to patent infringement.72 So basically it is an exemption to a patent right that allows a third party to undertake, without the authorization of the patentee, acts in respect of a patented product that are necessary for the purpose of obtaining regulatory approval for a product.

Bolar exemption is also called “FDA Exception” and originated in the American case of Roche Products Inc. v. Bolar Pharmaceuticals. In that case, carrying out activities for the purpose of obtaining regulatory approval for the generic version of a patented drug was held as an act of patent infringement. After that, the US patent law was amended to include the so-called “Bolar Amendment” as part of the Hatch Waxman Act, exempting such activities from infringement. Following the US, the EU introduced a similar provision in 2004 in Directive 2004/27/EC. It also introduced a eight-year period of data protection plus a two-year period of marketing protection, which means that a generic drug cannot be placed on the market until 10 or more years have elapsed from the initial authorization of the patented drug. This abridged procedures and the Bolar exemption provision are established for compromising each other’s interests between pharmaceutical industry and generic manufacturers.73

In Chinese Patent Law, “where for the purposes of providing information needed for the regulatory examination and approval, any person makes, uses or imports a patented medicine or a patented medical apparatus, and where any person makes, imports the patented medicine or the patented medical apparatus exclusively for such person”, which as the Bolar 70 Supra 63, Article 48 (1)(2)71 Id, Article 50.72 The Bolar Exemption, Intellectual Property Office, available at:

http://www.ipo.gov.uk/pro-types/pro-patent/p-policy/p-policy-pharmaceutical.htm (Search date: 26/10/2012).

73 Dr Gwyn Cole, Exemption from Infringement: the EU Bolar Directive, IP Europe Quarterly, June 2012.

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exemption, is excluded from the infringement of patent right under the Article 69 (5) of the Patent Law. Unlike the EU Bolar exemption clause, which literally limits the purpose of the Bolar exemption to an abridged application process for generics, the Chinese Bolar exemption is more likely to be applicable for new drugs.74 And it is also interesting to note that the Bolar Exemption in the new patent law is not combined with possibility of extending the term for patent protection as it is usually provided for in the patent legislation of other countries in order to balance the different interests involved.75

This provision is also consistent with the Article 19 of the Drug Registration Regulations (2007), which says that “for a drug patented in China, applicants other than the patentee may submit the application for registration two years prior to the expiry date of the patent. The State Food and Drug Administration (SFDA) shall review the drug application in accordance with the provisions, and after the expiry date of the patent, check and issue the drug approval number, Import Drug License or a Pharmaceutical Product License if the application conforms to the provisions.”76 Before the establishment of the Bolar exemption by the 2008 Patent Law, when genetic producers was trying to utilize the Article 19 of the Regulations (2007) handing the applications, the infringement lawsuits were always brought up by the patentees. And the clearly legal basis can be found and applied in such cases today. With shorting the application time spent on clinical trial, the provision of the Bolar exemption can be seen as encouraging the production of generics in order to reduce the price of the patented medicines and improve the accessibility of medicines.77

3.1.1.5 International exhaustion of rightsThe exhaustion doctrine, also referred as the first sale doctrine, means

once a patented product has been marketed either by the patentee or his consent, the IP rights of commercial exploitation over this given product can no longer be exercised by the patentee, as they are exhausted. International exhaustion of rights means that the patent owners’ patent rights had exhausted internationally once the product has been sold by the IP owner or with his consent in any part of the world. The international exhaustion of rights principle is the prerequisite of parallel importation. On the contrary, domestically exhaustion principle as against the parallel importation does not allow the IP owner to control the commercial exploitation of goods put on the domestic market by the IPR owner or with his consent after the first sale, but the IP owner (or his authorized licensee) could still oppose the

74 Id, Bolar Exception. 75 Third Revision of China’s Patent Law, Legal texts and documents on drafting process,

EU-China IPR2 Project, p5-6,available at: http://www.lexisnexis.com/documents/pdf/20100211022732_large.pdf (Search date: 26/10/2012).

76 Article 19, Provisions for Drug Registration, available at: http://www.shfda.gov.cn/gb/node2/node3/node2045/node2050/userobject1ai21290.html(Search date: 26/10/2012).

77 Yafei Gao, The Conflict And Coordination Between Biological Pharmacy’s Intellectual Property Protection And Public Health (In Chinese), Oct 2011, p20-30.

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importation of original goods marketed abroad based on the right of importation.78 Accordingly, under the domestically exhaustion principle parallel importers’ importation of patented products conduct constitutes an infringement to the patent owners’ patent rights in the imported countries.

The doctrine of “international exhaustion” can be interpreted by both theories of jurisprudence and economics. From the former perspective, international exhaustion principle aims to balance the public and private right in terms of the intellectual property right protection. Since the IPR is with exclusivity and territoriality features, the private privilege right should not overrule the public right development; from the latter perspective, international exhaustion can be seen as a restriction of IPR to suppress the negative side of IPR such as monopoly, which believes the principle is to dissolve the conflict between IPR’s exclusivity and commodity’s free circulation. While some interpretations of the interests reward perspective that they consider the interest reward of the IPR has been realized after the first manufacture of selling. The function of the IPR has been fulfilled so the patentee could not continue controlling the intellectual product. Otherwise it would hinder the commodity circulation and danger the public interest.79

In China, Article 63(1) of the old Patent Law allowed “after the sale of a patented product that was made or imported by the patentee or the authorization of the patentee, or of a product that was directly obtained by using that patented process, any other person uses, offers to sell or sells the product”.80 Nevertheless people hold different understandings on this provision. Some believed this provision actually admitted the international exhaustion while others argued that hereby “sell” meant within the country and it adopts the domestically exhaustion. So at that time the old Patent Law did not provide the certainty legal basis for international exhaustion and parallel importation.

According to Article 69 of the new 2008 Patent Law which provides a series of exemption of circumstances that shall not be considered as infringing upon a patent right. Hereby parallel importation will not constitute patent infringement after the product first entered into the international market with the authorization or consent from the patent owner, which can be found in Article 69(1). Such international exhaustion will reduce the scope of the patent law protection in China because patent holders’ rights will be exhausted once the product is sold in another country.78 International Exhaustion and Parallel Importation, World Intellectual Property

Organization, available at: http://www.wipo.int/sme/en/ip_business/export/international_exhaustion.htm (Search date: 26/10/2012).

79 Principles of Right Exhaustion (权利用尽原则), available at : http://wiki.mbalib.com/zh-tw/%E6%9D%83%E5%88%A9%E7%A9%B7%E7%AB%AD%E5%8E%9F%E5%88%99 (Search date: 26/10/2012) (In Chinese).

80 Article 63(1), Patent Law of People’s Republic of China (2000 Revision), adapted at the17th Session of the Standing Committee of the Ninth National People’s Congress on August 25,2000, and announced by Order No.36 of the President of the People’s Republic of China.

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Regarding to the exportation, complying to the confirmation of cross-boundary compulsory licenses provided in the TRIPS Amendment, Articles 50 and 53 of the 2008 Patent Law stipulates that for the purpose of promoting public health where without a manufacture capacity, patented medicines can be manufactured and exported with the compulsory license granted by the patent administration department to the Least Developed Countries (LDCs) and other WTO member states who express the need to import the medicines according to the relevant provisions of the international treaties.81 The concerning compulsory license regulations can be found under Articles 13 and 23 of the Measures on Compulsory License for Patent Exploitation.82 But the legislation is lacking of the provisions regards how to regulate the parallel importation and exportation to avoid that the imported medicines to be re-imported into other countries because it would affect the interests of the patients who needs cheaper medicine in the imported counties.

So we can conclude that 2008 Patent Law by legislation actually confirms the international exhaustion of rights and provides the legal basis of parallel importation.

3.1.2 Measures on Compulsory License for Patent Exploitation (2012) (the new Measures on CL)

Compulsory licensing (CL) is when a government allows a third party to produce the patented product or process without the consent of the patent owner. It is one of the flexibilities to the patent protection included in the TRIPS Agreement.83

The new Measures on CL issued by the SIPO on March 15, 2012 and came into force from May 1, 2012. Meanwhile the previous Measures on Compulsory Licenses for Patent Exploitation were promulgated in 2003 and Measures for Compulsory License on Patent Implementation concerning Public Health Problems promulgated in 2005, both of which were expired since then.84 With the higher and higher voice from the patients and NGOs on asking for cheaper drugs, especially on the case of the unaffordable expensive ARV second line drugs for curing HIV/AIDS of which the patent rights are held by foreign pharmaceutical companies, the purpose of this new Measures on CL is to promote the compulsory licensing in pharmaceutical industry and trying to benefit the public health.

In the 2003 Measures, the circumstances where a person could apply for a compulsory license were: (1) it had been unable to obtain a license

81 Supra 63, Article 50 and 53.82 Supra 64, Article 13 and 23. 83 Compulsory Licensing of Pharmaceutical and TRIPS, World Trade Organization,

available at: http://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm (Search date: 26/10/2012).

84 Supra 64, Article 43.

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after a reasonable period of negotiation based on fair and reasonable terms, if the implementation of an invention or utility model which constitutes a significant progress had to rely on the implementation of a patent previously granted; (2) in situation where public health is concerned; (3) in a states of emergency.85 The 2012 Measures creates two more grounds : (1) the patent has not been used for three years from the time of grant, or four years from the time of application and (2) the act of claiming the patent right is considered as a violation of anti-monopoly law. And regarding the public health, the field is significantly widened.86 In the 2005 Measures, it was limited to contagious diseases. Under the new Measures on CL, the contagious-disease restriction is gone.87

3.1.2.1 The changes in the new Measures on CLComparing to the old version, there are some important changes can be

found in the new Measures.

1) New Measures on CL cancels the charges of compulsory license application fee and verdict fee for the compulsory license royalty. That means there is no fee to be charged when applying compulsory licenses and to some extent the cost for the requesters is reduced.

2) The SIPO should notify the requester and the patentee of its intention to grant the compulsory licenses or not and the grounds for it before it makes a decision, which is stipulated under the Articles 21 and 39 of the new Measures on CL.88 These new provisions give the two parties a second chance to state their opinions and need SIPO to make the decisions with the consideration of the parties’ adequately through cross-examining the evidences.

3) Article 11 in accordance with Articles 48 and 51 of the Patent Law, requiring the requester shall provide evidence to prove that or the effective judgment or decision issued by a judicial organ or anti-monopoly law enforcement agency determining that act of exercising the patent right by the patentee is monopolistic behavior.89 This provision to some extent burdens the requester’s responsibility on providing evidences. But on the other hand it shows the necessity, rationality and legality when SIPO issue the compulsory licenses.

4) Under the Article 26 (3) the SIPO shall not accept the request for the adjudication of royalties on compulsory licensing if the two parties have not conducted any negation or they have reached an agreement

85 Article 4, Measures on Compulsory Licensing for Patent Exploitation, Oder No.31 of the State Intellectual Property Office (Implemented on 15 July 2003).

86 Supra 64, Article 5.87 Zhang Yan, New measures for compulsory licensing of patent, effective since

May1,2012, June 25 2012, available at: http://www.lexology.com/library/detail.aspx?g=bef0d960-d8ae-4849-8750-2303eb70d982 (Search date: 23/10/2012).

88 Supra 64, Articles 21 and 29. 89 Id, Article 11.

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through negotiation.90 This provision highlights the private law’s autonomy principle.

5) Respect to dismissing the request for compulsory licensing, the new Measures adds the circumstance under Article 20 (5) that when the reasons, information or the relevant supporting documents provided by the requester are inadequate or untrue.91 It seems help requesters to understand the standards of qualified application documents. But meanwhile the requirement of “adequate” should be further clarified by the SIPO to avoid the situation that application is refused by any ambiguous interpretations.

6) The Articles 7, 23 and 24 add the regulations on patent compulsory licenses concerning about the public health in accordance with the Article 50 of the Patent Law. These provisions provide the detailed description, such as the importing countries and areas, the quantity, package and shipping of these compulsory licensed medicines and the competent department under the State Council shall inform these to the WTO.92 These provisions are pursuant the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health. The relevant definitions and procedures are mostly complying with the decisions made by the General Council, which indicates China’s willingness to practicing the international obligations requested by the WTO.

7) Compared to the previous version of Measures on CL, the provisions concerning about the requesters and terms in the new Measures is more detailed clarified and with better enforceability. Such as pursuant the Article 4 a foreigner or a foreign enterprise or any other foreign organization having no habitual residence or place of business in China shall entrust the matters to a legally established patent agency when handling the compulsory licensing related matters.93 Article 9 clearly states the matters that should be contained in filing a request for compulsory license by the entrusted agency, which instead of the nationality or headquarter location standard in the old Measures. The terms for requesters and patentees to state their opinions can be found under the Articles 16, 27 and 35.94

Over all the new Measures on CL is more appropriate on the provisions’ structure arrangement and logicality. It also clarifies some questions existed in the old version and is in line with the 2008 Patent Law, which can be seen as the enforcement instruction on the compulsory licensing with providing a better operability.

90 Id, Article 26 (3).91 Id, Article 20 (5).92 Id, Articles 7, 23, 24.93 Id, Article 4.94 Id, Articles 9, 16, 27, 35.

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3.1.2.2 CL issued to promoting public health by other countries

Compulsory licenses have previously been issued in the region by Malaysia, Indonesia, Thailand and India.  It has also been issued on multiple occasions by the developed countries including the U.S. and EU member countries.95

To battle the AIDS, Thailand government pursuant the Article 51 of the National Patent Law promulgated the first order on compulsory license in November 2006, which granted the governmental medical organization right to produce Efavirenz (EFV, Merck patented medicine) generic and it made the cost of AIDS treatment dropped by half. Following in January 2007, the government continue issued two more compulsory licenses, one is the 2nd line drug to anti-AIDS and the other is for anti-heart disease, both of whose patent rights were belonged to foreign pharmaceutical companies. In the same year, the government signed four ministerial announcements to compulsory license of Letrozole, a breast cancer medicine produced by Novartis, the breast and lung cancer drug which is called Docetaxel by Sanofi-Aventis and Roche's Erlotinib, which is used for treating lung, pancreatic and ovarian cancer.96 In March 2008, three more compulsory licenses on cancer drugs were approved again by the government.

The similar cases are also easily found earlier in other Asian countries. Facing the challenges of HIV/AIDS in terms of the provision of ARV drugs, in 2003 Malaysia became the first country of applying the TRIPS flexibilities, following the adoption of the Doha Declaration, to issue the compulsory licenses and succeeded to import ARV generic from an Indian producer Cipla and being used in governmental hospitals. The cheaper generic drugs enabled the government to treat many more patients within the same budget. Following this, Indonesia in 2004 also issued a Presidential decree enabling the production of some HIV/AIDS drugs. The news came out on 12, March 2012 and said that India generic produced company Netco got the compulsory licensing on anti-cancer drug Nexavar, patented right owned by Bayer. The price is decreased by 97%, from 5,500 USD for 120 tablets to 175 USD.97

With the big HIV/AIDS patient’s population in Brazil, the government was attempting to negotiate a price reduction with Merck since November 2006. It warned Merck that unless Brazil could buy Efavirenz at the same 95 Para3, China Revises Law to Facilitate Compulsory Licenses for Generic Medicines,

June 11, 2012, available at: http://infojustice.org/archives/26344 (Search date: 26/10/2012).

96 Compulsory licensing of cancer drugs in Thailand, TWN info Service on Health issues (Feb 8, 2010) available at: http://www.twnside.org.sg/title2/health.info/2008/twnhealthinfo20080201.htm (Search date: 26/10/2012).

97 Indian Company Acquires Rights To Copy Generic Cancer Drug, FOLKS HEALTH, Mar 14th,2012, available at http://www.folkshealth.com/blog/2012/03/14/indian-company-acquires-rights-to-copy-generic-cancer-drug-indian-company-acquires-rights-to-copy-generic-cancer-drug/(Search date: 26/10/2012).

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price offered to the Thai government, otherwise it would issue a compulsory license. Then in 2007 the Brazilian government rejected Merck’s offer of a 30% price reduction, and proceeded to issue a compulsory license allowing the import of generic version of Efavirenz after the drug’s patent holder failed to match the 60% price reduction requested. By reducing the price from 1.56$ per day to 0.45$ by buying Indian generic products prequalified by the WHO, the Brazilian government expected to save 30 million USD in 2007 and 237 million until 2012. Thanks for the generic the deaths of AIDS has been reduced by half and the patients time in hospital has been shortened by 75% due to the cheaper generic.98

From the above we can see, with the background of pharmaceutical field monopolized by the developed countries’ pharmaceutical corporations making use of the medical patent rights, their objectives of pursuing the huge profits drives the medicines’ prices go much higher than the people can afford, which is more obviously in developing countries. The way to counter the disadvantageous effect of the patent right is that governments should apply the compulsory licenses as adopted by the TRIPS and that was also confirmed in Doha declaration. Raising that as a strategy can reach a negotiated discount on the drugs in need. That can ease the negative impact that the patent protection brings to the access to medicine. We can see the results of a great improvement on promoting public health has been achieved in the above countries.

In addition we should never forget the compulsory licensing actually can not only be applied by the developing countries and LDCs. When epidemics occurred in the developed countries, the governments also threatened the foreign medical patent holders with issuing CL for the cheaper and continuing provision. We can know that from the cases of Canada and the US.

After the 911 in 2001, Canada found the terrorism event by disseminating anthrax through mails. Under that circumstance, the demand of drugs for anti anthrax virus-Cipro was greatly increasing. However the patent of Cipro in northern America was hold by a German company Bayer. Facing the high price and the big demand of Cipro, Canada government decided to grant the compulsory license and commissioned a local drug company to make Cipro. Bayer responded by donating a large amount of Cipro to Canada, and promised to offer more in the case of an emergency, which led the Canadian government to agree to acquire ciprofloxacin exclusively from Bayer for the duration of the patent agreement. Sparked by the Canadian case, the US government also threatened to override the Bayer’s patent on Cipro. And finally the agreement of reducing price by half, from 1.77 $ to 0.95$ per tablet, was reached between the government and Bayer.99

98 Keith Alcom, Brazil Issues Compulsory License on Efavirenz, May 07, 2007, available at: http://www.aidsmap.com/Brazil-issues-compulsory-license-on-efavirenz/page/1427206/ (Search date: 26/10/2012).

99 Patent protection versus public health, The Lancet, Vol 358, p1563, 10 November 2001, available at: http://www.lancet.com/journals/lancet/article/PIIS0140-6736(01)06633-8/

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In fact some experts believed the reason of the US’s compromise on giving up issuing CL in the above case was because it was reluctant this precedent to make other countries using CL to restrict IPRs. And it is not hard to find that the US government’s action on Cipro is in stark contrast to US trade pressure on asking the less-developed countries to limit their exercises on CL and parallel importation. For example, in 1998, under the US threat of increasing tariffs on imports of wood products and jewellery, the Thai government limited its attempt to issue the compulsory licenses on the pharmaceuticals.100 The US action of overprotecting IPR in the world with the measures of trade sanction has been criticized by less-developed countries, international and regional NGOs for long time.

3.2 Enforcement of the TRIPS flexibilities The study from Commission on Intellectual Property Rights Innovation

and Public Health in 2005 found that the use of TRIPS flexibilities can promote access to medicines in developing countries and most of the developing countries their laws and practice actually had incorporated one or more of the TRIPS flexibilities. There has been an increasing adoption of the flexibilities such as CL for the public health purposes by the countries. However the study also found there remain the big gaps in terms of legislation and enforcement of the flexibilities, which need to be addressed so that the TRIPS flexibilities could be used effectively across the developing world.101 After exam the enforcement of the flexibilities we can find that China is one of those countries without the efficient usage of the flexibilities.

3.2.1 Transition periods

The TRIPS Agreement took effect in January 1st, 1995 and provides 10 years transition period on medical patent right protection to the developing countries until January 1st, 2005.102 The 2001 Doha Declaration extended the period for the least developed countries until January 1st, 2016 for the pharmaceutical patents.103

Take an example of India, before 2005 India only provides protection on medical produce methods. Hence many Indian pharmaceuticals could produce a number of foreign patented medicines. Although since 2005 India started providing patent protection on medicines, the approval requirement was still very strict and many patent applications from the US and the EU companies were being rejected. The generic price of only 1/10

fulltext (Search date: 26/10/2012).100 Id.101 Sisule F. Musungu, Cecilia OH, The Use of Flexibilities in TRIPS By Developing

Countries: Can They Promote, Access to Medicines?, CIPIH, study 4c, August 2005102 Article 65.2 and 65.4 of the TRIPS Agreement.103 Frequently asked questions about TRIPS in the WTO, available at:

http://www.wto.org/english/tratop_e/trips_e/tripfq_e.htm (Search date: 26/10/2012).

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of the original patented medicine in Indian was attributed by this measure. And thanks for that, many developing countries’ governments, the United Nations Children’s Fund and many other international organizations could order the cheap efficient generic from India. Because of that India is given a name as “the pharmacy of the developing countries”.

When we talk about this issue in China, same as a big developing country China was also entitled with the 10 years transition period granted by the WTO. However, the non-patentability of medicine provision was cancelled as early as in 1992 Patent Law Amendment. That means China started providing medical patent protection many years before its join of the WTO in 2001 and it had satisfied the requirements set out by the TRIPS. Because of this, Chinese generic producers could not manufacture the generics and China lost the chance of enjoying the benefits granted by the transition period on the medicines patent.

It is not hard to imagine that in order to join the WTO that China had waited for 15 years since the first time application in 1986. So when facing the potential economic development opportunity brought by joining the WTO while the public health might be restricted through offering higher medical patent protection, the Chinese government was reluctant to lose the opportunity of joining WTO.

3.2.2 The difficulties on issuing CL

Regarding the CL provision in China, we have found the existence of the specific legislation and the legal instruments concerning CL as reviewed in the above part. The provision of compulsory licensing on patent was promulgated as early as 2003, but until today there has not one successful case of compulsory licensing issued by the Chinese government.

In March, 2008, 1,843 patients with HIV/AIDS and Hepatitis B together with the AIDS and Hepatitis health organization sent a letter to the State Health Ministry, the SIPO, the National Center for Disease Control and Prevention, the SFDA and other sectors appeal for issuing the compulsory license on Lamivudine (3TC), which is a drug recommended by the WHO to use for 1st and 2nd line HIV/AIDS and HBV treatment. But it did not raise the relevant departments’ sufficient attention on this issue and the patients’ expectation for accessing cheaper drugs was in vain. In November 2009, Guangzhou Bai Yun Shan Pharmaceutical General Factory submitted an application to SFDA for an acceptance of registering in advance and hoped to start the compulsory licensing procedure and produce generic Tamiflu (patent right owned by Gilead Sciences, a Swiss company), but they did not succeed in the end neither.104

Regarding the hurdles on compulsory licensing implement in China, the thesis finds the below reasons can be summarized:

104 Hongzhou Lu, Filling the gap, China’s fight against HIV/AIDS, 09 Sep 2012, available at: http://www.equilibri.net/nuovo/es/node/2253 (Search date: 26/10/2012).

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3.2.2.1 Local medical manufactures In China, in order to legally produce generic, domestic manufacturers

should first submit the application of compulsory licensing to the SFDA and the Ministry of Health (MOH), and then the MOH need to apply the license from the SIPO with the advocacy of promoting public health. The motivations of the domestic manufacturers to do so are inadequate. This unwillingness is because they believe the application procedure would be complex and the approval is time consuming. It might take a few years until get it at the time of the patent expired date also coming soon.

The other reason is that the margin profit of producing generic is smaller than exporting active pharmaceutical ingredients (APIs) to the multinational pharmaceutical companies, even though afterward the patented finished products are sold back to China with the prices that the average Chinese citizen often cannot afford. Besides, as known that China has a big market and the producers are so many so the cost of copying is comparatively low while the cost of defending rights by the right holders is too high. So some producers prefer to make illegal generics without any licenses since they have the producing capacity than paying the royalty to the patentees.105

3.2.2.2 Foreign medical patent ownersIn 2011, Gilead Sciences has joined the Medicine Patent Pool which

allows pharmaceutical companies to produce the drugs at much lower prices, and signed up for an agreement allowing for the production of generic versions of Viread (tenofovir/TDF) on a small payment of royalty in 111 countries, which is the medicine used in combination with other ARV medicines in 1st and 2nd line for HIV and HBV. However China was in the excluding list which meant it had to continue paying high prices for TDF.106 The reason is because Gilead considered the big market of needing TDF for lots of HIV/AIDS patients in China and it also excluded some other developing counties who are with both a big number of patients living with HIV and sufficient generic manufacturing capacity. Gilead also limits the production of medicines to Indian generic firms in the agreement in order to restrict the competition for avoiding the price of drugs getting reduced. By excluding these countries, total five million people living with HIV would be excluded from the Patent Pool.107 The above case shows that the profit orientated multinational companies reluctant to give up their exclusive rights especially for the country like China with a huge market.

105 Compulsory in china has no precedent (药品强制许可在中国无先例，有待测试),available at: http://www.bioon.com/industry/mdnews/520253.shtml (In Chinese) (Search date: 26/10/2012).

106 Yan Ee Lyn, China changes patent law in fight for cheaper drugs, Jun 8,2012, available at: http://www.reuters.com/article/2012/06/08/us-china-medicines-patents-idUSBRE8570TY20120608 (Search date: 26/10/2012).

107 Gilead granted license to medicines pool, devil is in details, SUNS No.7195, July 21, 2011, available at: http://www.twnside.org.sg/title2/intellectual_property/info.service/2011/ipr.info.11070 . htm (Search date: 26/10/2012).

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3.2.2.3 The Chinese governmentChina is the same as India and other emerging economies who have

found compulsory licenses necessary. But surprisingly, so far China has not officially used the flexibility in the TRIPS regime to produce low cost generic version of patented drugs for the benefit of its people. It even prohibits the Indian’s generic drugs marketing in China. In June of 2012, a Chinese newspaper accused the government of pursuing a series of policy measures in pricing, procurement, and reimbursement that had the effect of ‘protecting foreign firms and suppressing domestic firms’. One senior Chinese government official said that the MOH did not have strong incentives to push for issuing compulsory licenses because it did not want to scare off the direct foreign investment concerning the pharmaceuticals in China. Instead, the Ministry likely prefers directly and quietly negotiating with them for the price discounts.

With the eager of attracting foreign investment into its life and science industry which as one national economic development goal, Beijing is going to be very careful and not sending the message to the big multinational pharmaceutical companies that it intends to create market access issues, mandatory technology transfer, or compulsory licenses. Given the slowdown of Chinese economic growth and growing social political stability concerns, the incentives to encourage foreign pharmaceutical investment continue to be strong and granting compulsory licenses does not seem the government first concern regards public health issues.108

3.2.3 Public non-commercial use of patents and Government use

Although the TRIPS Agreement does not refer specifically to the government use of patents, it recognizes such use in its references to the concept of public, non-commercial use and of patents “used by or for the government”.109 From the negotiating history of the TRIPS Agreement we could find that Article 31 is intended to cover the non-voluntary use of patents in the form of both CL and government use provisions. The distinction between the government-use provision and CL would primarily lie in the nature and purpose of the use of the patent. In the case of government use, it would be limited to “public, non-commercial purpose”, whereas CL would also cover private and commercial use. The TRIPS also leaves the developing countries the policy space to interpret the term of “public, non-commercial use”. And many patent regimes provide for government use of patents without the need to grant a CL. In such cases, a determination by a government agency or minister is generally required to attest that the government use is justified and is within the terms of the

108 Benjamin, Why China’s Compulsory Licensing Might Not Be That Bad, October 3, 2012, available at: http://www.asiahealthcareblog.com/2012/10/03/why-chinas-compulsory-licensing-might-not-be-that-bad/ (Search date: 26/10/2012).

109 Article 31 of the TRIPS.

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national law. These government rights are usually framed in broad terms and are often subject to less procedural requirements than are CL.110

3.2.3.1 Public non-commercial use To China, Article 11 of the 2008 Patent Law grants patent right holders

the right to prohibit others from implementing their inventions or creations for production on business purposes. However, manufacturing, using, offering to sell, selling, or importing the patented products, which are not for production or business purposes, does not constitute infringement of the patent, nor does it require to acquire authorization by the patent right holders. Besides no definitions have been given by the Chinese Patent Law or Regulations to the “non-commercial”, “commercial” or “private”, nor to “for production or business purposes” under Article 11 of the Patent Law. It is generally understood that “for production on business purposes” means for the purposes of industry or agriculture protection, or for commercial purposes. It has a wide connotation, and has nothing to do with being profitable or not, nor with the nature of the actor.111

3.2.3.2 Government use Article 14 of the 2008 Patent Law provides that if an invention patent

of a State-owned enterprise or institution is of great significance to the national or public interests, upon approval by the State Council, the relevant competent departments under the State Council or the people’s government of the provinces, autonomous regions, or municipalities directly under the Central Government may decide to have the patent widely applied within an approved scope and allow the designated units to exploit the patent, and the said units shall pay royalties to the patentee in accordance with the regulations of the State.112 This provision had already been expressed in the Patent Law since 1985, however until today China has not issued it once at all.

What should be noted is that in the applicable law, the grounds of granting the government use do not include “national emergency” or “circumstances of extreme urgency”. Besides the objective of government use is only for an invention patent of a State-owned enterprise or institution, which means that China gives up the right of issuing foreign patented medicines through the government use.

3.2.4 Parallel importation

Parallel imports are imports of a patented or trademarked product from a country where it is already marked. For example, in Mozambique 100 units of Bayer's ciprofloxacin (500mg) costs 740 $, but in India Bayer sells 110 Sisule F. Musugn, Cecilia Oh, The Use of Flexibilities in TRIPS by Developing

Countries: Can They Promote Access to Medicines? p20.111 WIPO Program Activities, Exceptions and Limitations, State Intellectual Property

Office of the People’s Republic of China (SIPO), para4- 10, available: http://www.wipo.int/scp/en/exceptions/replies/china.html (search date: 26/10/2012).

112 Article 14, Patent Law of PRC, Revision 2008.

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the same drug for 15 $ owing to the local generic competition. Mozambique can import the product from India without Bayer's consent. So the practice often takes place when there is differential pricing of the same product-either brand name or generic drugs- in different markets. The TRIPS Agreement explicitly states that this practice cannot be challenged under the WTO dispute settlement system and so it is in fact a matter of national discretion.113

As one another important TRIPS flexibility, besides of CL, parallel importation is also welcome to be applied by the states to restrain the negative impact of medical patent on their public health. For example, Sweden started practicing drugs parallel importation in 1995, when it formally joined EU, which allowed the parallel importation within the European Economy Area. A research showed that parallel importation case application numbers was increasing from 1 in 1996 to 1,674 in 2005. The drug’s price index was 175.5 in 1995 and went down to 171.7 in 2004, the annual growth rate of which wasn’t been raised up but reduced by 0.24%. Before the adoption of parallel importation, from 1980 to 1995, the annual drugs price index was 3.8%. This case study of Sweden can reach such conclusions: that parallel importation can always make a drug price reduction; the market share rate and approval numbers of parallel imported drugs makes little effect on the pricing by local producers; there is no evidence showing that parallel importation can cause negative effect to the R&D in pharmaceutical industry; and the drugs importation does could dramatically reduce the individual medical expense growth rate.114

In Chapter 3.1 which is concerning the Chinese patent law legislations we have found that, principle of international exhaustion of rights as the legal prerequisite of parallel importation has been adopted. However, the new Patent Law (2008) does not clarify how exhaustion will apply to imported products sold outside of China under contractual restrictions. New issues will require judicial interpretation. The relevant departments are expected to clarify implementation of parallel importation, as it can be another important toll to improve access to medicines in China.115 It should be also noted that the legality of parallel importation is not only decided by the existence of international exhaustion principle. Whether a county allows parallel importation finally depends on its economical trade policies and their relevant legislations.116

113 Parallel imports, World Health Organization, available at: http://www.who.int/trade/glossary/story070/en/index.html (Search date: 26/10/2012).

114 Yu Xiang, Wu Lanfen, The Study of Drug’s Parallel Importation in Sweden and its inspiration to China, Science Research management, Vol.28, No.1 January 2007, available at: http://file.lw23.com/8/87/87b/87bfccdd-ec40-4cc7-9d28-ac4c4564742e.pdf (in Chinese) (Search date: 26/10/2012).

115 Supra15, P8.116 Principles of Right Exhaustion (权利用尽原则), available at: http://wiki.mbalib.com/zh -

tw/%E6%9D%83%E5%88%A9%E7%A9%B7%E7%AB%AD%E5%8E%9F%E5%88%99 (In Chinese) (Search date: 26/10/2012) .

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3.2.5 Bolar exemption

Prior to the enactment of the 2008 amendment, the Chinese Patent Law had not clearly stipulated whether using patented product or method for the SFDA approval constitutes patent infringement. However, in practice, Chinese courts had already established some Bolar exemption cases. The first case was Sangong & Shanghai Sangong Pharmaceutical, Ltd. v. Beijing Wansheng Pharmaceutical, Ltd, which was trialed by the Beijing No.2 Intermediate People’s Court. 117

In that case, the defendant Wanshang used the plaintiff’s patented technology in an application for SFDA approval of a new drug. The court found that Wanshang used the patented technology only to make the drug for the purpose of the clinical trials and the application for regulatory approval, so Wanshang did not make the drug in dispute directly for the purpose of selling the product. Thus, the court held that such activities were not an infringement act of “exploitation of the production or business purpose” under the Article 11of the Chinese patent law.

After the Sangong case, the same court trialed another five cases involving similar fact patterns, two of which the Bolar Exception has been affirmed. Nevertheless, because China is not a common law country, later courts are not bound by these decisions. Furthermore, commentators have expressed the concern that there is no legal basis for reading into Article 11 a distinction between direct and indirect exploitation for the purpose of production and business, and that such distinction could create undesired consequences if taken into other contexts. With the provision of the Bolar Exemption in Article 69(5) of the 2008 Patent Law, there is now a clear legal basis for applying it in China. However, the scope and reach of the Bolar exemption remains to be determined.118 Its scope has not been interpreted in any cases.119 For example, the provision in the new Patent Law does not explicitly exempt parties that “offer to sell” or “sell” patented drugs or patented apparatus. This raises the question of whether an offer to sell a patented drug to the approval would be exempt under the Chinese Bolar provision. Furthermore, it is unclear which activities would be considered as being conducted “in order to acquire information necessary approval.” For example, would the Bolar Provision exempt preclinical activities? Would post-approval activities be outside of the scope of the exemption? Would stockpiling products prior to the SFDA approval be exempt?120

117 The Bolar Exception in China and the Latest legislative Developments, Sharon Qiao, China Law and Practice.

118 Janet Xiao, Insider Analysis from Morrison & Foerster LLP: China’s Bolar Exemption Beware of the Uncertainties of Its Reach and Scope, March 09, 2009.

119 Yan Hong, Qinghong Xu, Use the Right Patent Strategy, September 21, 2011, MIP China IP Focus 2011.

120 Janet Xiao, Insider Analysis from Morrison & Foerster LLP: China’s Bolar Exemption.Beware of the Uncertainties of Its Reach And Scope (Part 2 of 2), Pharm Asia News, March 9, 2009.

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At the moment, the SFDA as the governmental agency dealing with the examination and approval of the medical application is lacking of the relevant legislation to guide them to work on it. So the provision of Bolar exemption should be further clarified and the governments need to issue relevant administrative regulations in order to assist and monitor the implementation of the Bolar Exemption.

3.3 Beware of the TRIPS-plus introduced through FTAs

The TRIPS-plus health-related provisions have a direct impact on public health, pharmaceutical production and the availability of and prices of medicines. These provisions include the elimination and reduction of transitional periods, data exclusivity protection, extension of patent protection terms, restrictions on parallel importation, patentability of new use of known medical substances, restrictions on compulsory licensing, patenting of life forms, limitations on patentability criteria and accession to a number of international TRIPS-plus agreements.121

In recent years, the US and the EU developed countries utilize the flexibility clauses to introduce many TRIPS-plus provisions through the FTAs. Although China does not have any TRIPS-plus issues since there has no FTAs reached between China and the US or the EU so far, the potential pressure from developed countries introducing TRIPS-plus is very possible being confronted when signing the FTAs in the future. Even if there are no FTAs with the TRIPS-plus yet, we can find that the Chinese domestic patent laws have already incorporated some TRIPS-plus provisions under the pressure from the Office of the US Trade Representative and multinational pharmaceutical companies asking for stronger pharmaceutical IP protection.122 Once China takes part in such bilateral or multilateral FTAs, the freedom of choosing policies and amending relevant laws would be very limited and hard. That is why China shall seriously beware of the TRIPS-plus provisions incorporated in the FTAs.

3.3.1 Patent linkage system

Patent linkage is the practice of linking marketing approval for generic medicines to the patent status of the original product, in case of patent infringement cases happens. Because the patent office has the jurisdiction of deciding the patentability by checking the originality and innovation, while the drug administration agency works only on the assessment of whether the drug can be manufactured and marketing by examining its quality, safety and effectiveness. In this case, sometimes even after a drug gets the approval from the administration agency, the patent infringement

121 Mohammed K El Said, Public Health Related TRIPS-plus Provisions in Bilateral Trade Agreements, A Policy Guide for Negotiators and Implementers in the WHO Eastern Mediterranean Region, p128.

122 Supra15, P4.

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disputes could also happen. The patent linkage refers to the communication process between the national drug regulatory agency and patent office to prevent the patent infringement after the approval and marketing of generic drugs. This system has two implications. One of them is the linkage between the drugs registration application approval process and its patentability examining procedure. The other one is the responsibility linkage between the drug’s administration agency and patent office.

In the US, patent linkage system was first established in Drug Price Competitions and Patent Term Restoration Act (Hatch –Waxman Act, 1984). The system is created through several mechanisms – the Orange Book,123 the certification process, notice to the patent holder of a generic filing, and automatic stay of drug approval, the patent holder reports patent information and enforces its patent, the generic company certifies the reason the patent (or patent status) is not applicable, the US FDA publishes information and automatically stays the approval process once notified that the patent holder has initiated an infringement lawsuit against the generic company. This creates a set of overlapping mechanisms that reinforce one another and prevent an accidental approval. More importantly, it does not rely solely on the patent holder to enforce its rights, but presumes that the patent holders’ rights are valid until proven otherwise by the generic. So Hatch –Waxman Act through its transparency, presumption and automatic stay mechanisms provides business planning clarity and incentives for the patent holders, and through an expeditious rout for approval of generic drugs, benefits the consumer.

The patent linkage can be well practiced in the US where the good communication between the national agencies with the integrated legislation and enforcement mechanisms. But in the case of without the sufficient mechanisms supporting, the situation and the effect of the patent linkage can display a different picture in China.

China has adopted medical patent linkage in the absence of any treaty obligations and became the first country to adopt this regulatory regime outside of North America, despite with the presence of flourishing generics pharmaceutical industry and its developing country status.124 The system was established by the Drug registration Regulation in 2002, which was subsequently revised twice in 2005 and 2007 respectively. There are two articles relating to the patent linkage system under the latest version. First one is Article 18, as the public announcement provision, states that “regarding the drug or its formula, production process, indication etc., the applicant shall submit documents explaining the China patent status and ownership rights. If other party holds patent in China, the applicant shall submit a letter stating that the drug will not infringe on the patent rights of others. Upon acceptance of the application, drug administration authorities 123 Approved Drug Products with Therapeutic Evaluation Equivalents, available at:

http://www.fda.gov/cder/ob/ (Search date: 26/10/2012).124 Benjamin P. Liu, Fighting Poison with Poison? The Chinese Experience with

Pharmaceutical Patent Linkage, 11 J.MARSHALL REV. INTELL. PROP. L. 623 (2012), p623.

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should publicly disclose the statement submitted by applicant. If an infringement dispute occurs during registration application, the parties shall resolve the matter according the relevant laws for patent administration.”125 The second relevant provision is about the generic, which is under the Article 19 and also known as Bolar exemption, stating as “for a drug that has obtained patent protection in China, another applicant may apply for registration within two years prior to the patent expiration. SFDA shall review the application according to this Regulation and, after expiration of the patent, issue a drug approval number, imported Drug License or Drug Product License for an application that meets requirements.”126

The problem and flaw within the above Chinese patent linkage system appears when it is enforced. First is the reliability of the applicant’s announcement is hard to guarantee. Although it requires the applicant to submit about the patent status and non-infringement announcement, the patent’s searching report which provides the patent’s explicit information is not requested to be provided here. Besides, there is no specific functional department to assess the announcement either. So the patent status and non-infringement announcement’s reliability could be doubtable if the applicant does provide the patent related information sufficiently before applying the registration. Secondly, the patent dispute resolution mechanism regarding the drug registration needs to be improved. Even though under the Article 18 where states that “If an infringement dispute occurs during registration application, the parties shall resolve the matter according the relevant laws for patent administration”, the “relevant laws” is not clear enough regarding what the responsibilities and obligations should be taken so it brings some difficulties to the patent holders when they assert their rights.

The US patent linkage system provides explicit information of the relevant patent that needs to be clarified by the applicant. And the generic’s cataloged announcements are substantial and concrete with which the operability is high. The system is in fact encouraging the patent disputes can be solved before the generic registration getting approved. That can both improve the patent protection to the patentees and reduce the possibilities of the infringement sues coming after the generics marketing. On the contrary, the Chinese patent linkage system is lacking of certainty regarding the announcement content which is always misused by the drug manufactures to hamper the generics marketing through reporting varies patent rights and it actually cause the patent’s over-protection. That’s why there are scholars criticize the patent linkage as one TRIPS-plus provision involved in the medical registration procedures is a practice by the national regulatory authorities of denying approval of generic drugs that are ‘linked’ to an existing patent. The similar viewpoint claims that the US-style patent linkage provisions may provide excessive protection for foreign medicine patents, encourage ‘evergreen’ patents through repeated small modification to extend patent term, and delay entry of generic drugs.127

125 Article 18, Drug Registration Regulation (2007), Order of SFDA of the PRC (No.28). 126 Id, Article 19.

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We can see that a professional administration and a practical legal regime are indispensable for making good use of the system. With those prerequisites are absent currently in China the patent linkage system can neither reduce infringement litigation nor the risks of infringement and it has exceed the scope of the SFDA’s competence, as criticisms being heard.128 Regarding how to deal with the patent linkage in China, on one hand we must aware of its disadvantages that hinders generics accessing to market, on the other hand revise the legislation and improve its enforceability while learning from the US to establish a well-functioned mechanism to balance the patent rights and generic manufactures interests. As scholars suggested it must revise the current rules towards greater administrative feasibility.129 Firstly, the applicant shall submit the relevant patent’s search report when applying for the registration, since the patent’s searching report is an efficient method to avoid the patent infringement dispute. The law should also provide explicit description of the searching report’s format and content, which can keep the right holder to be informed by a public and transparent way at the same time it can facilitate to establish the drugs patent data base. The second suggestion is improving the dispute resolution mechanism, which as the supplement to the public announcement system. It can provide substantial protection to the right holders. And currently the administration agency’s capacity should be improved regarding checking whether the applicant’s drug is violating the patent rights or not and it needs the cooperation with the national patent office.

3.3.2 Data exclusivity

Data exclusivity refers to protection of clinical test data that must be submitted to a regulatory agency to prove the safety and efficacy of a new drug, and prevention of generic drug manufacturers from relying on this data in their own applications. Because testing data is so time and cost consuming to produce, without relying on these data the generic cannot enter into the market even long time after the patent expired. So countries grant different years of data exclusivity periods for the patentees, and after the period the drug regulatory authorities can rely on this data to approve subsequent applications on generics. Generic manufacturers only need to prove their product is chemically identical with the original product and they are bioequivalent by using of the originators’ test data. Pharmaceutical companies argue that since those data is so expensive to produce, it is an unfair advantage to let other companies rely on that data without cost, while critics charge that it can act as a restriction on producing a generic which would prevent prices from falling due to lack of generic competitions. Some academics allege that data exclusivity protection unfairly restricts the rapid public dispersal of knowledge that is supposed to be the trade-off for a grant of a patent or intellectual monopoly privilege.130 They allege that is really a form of evergreen pharmaceutical patent protection that may even 127 Thomas, A.F and Joel, L. ‘Linkage’ pharmaceutical evergreening in Canada and

Australia, Australia and New Zealand Health Policy 4(6) (2007), p22. 128 Zhang, L., Song, R. and Chen, C. Solving patent problem in the registration and

approval of drugs, China Pharmacy 17(9) (2006), p644-650.129 Supra 124, p 672.

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restrict the capacity of governments to benefit from the granting of a CL on the patents of a medicine, since the data monopoly will still prevent the marketing of generics, even though the patent licenses have been granted by the government or a court.131

Article 39.3 of the TRIPS requires WTO members to protect the test and clinical trial data submitted by innovative companies against unfair commercial use,132 but does not explicit the scope of the obligation placed on countries so it makes a dispute. For the proponents of the higher standards of protection argue the originators of the data deserves a return on the significant investment in conducting tests. Such as the US and the EU grant data exclusivity period of 5 years and 10 years respectively.133

While the other side argues that WTO members have considerable discretion to define the “unfair commercial use” in the context of national laws. The grant of the marketing approval to second entrant, based on the second product’s similarity to a previously approved first product, is not a proscribed “use” under Article 39.3. They also argue the analysis of the negotiating history of Article 39.3 provides the supporting evidence that the TRIPS negotiators had rejected proposed language requiring provision of data exclusivity.134 So countries have no need to protect test data, except the cases of where a competitor derives a commercial advantage by use of data through fraud, breach of confidence, or other dishonest practices or uses.135 Furthermore, the rule of interpretation on Paragraph 4 of Doha Declaration dictates that the provision should be “interpreted and implemented in a manner supportive of WTO Members’ right to protect public health and, in particular to promote access to medicines for all”. Thus, it is clear that the TRIPS Agreement does not require of data exclusivity, the obligation is only to protect data against the unfair commercial use. Developing countries should allow drug regulatory authorities to approve equivalent generic substitutes in the basis of reliance on the originator data. They should implement data protection legislation that is consistent with public health objectives to facilitate the entry of generic competitors.136 So data exclusivity is seen as a TRIPS-plus provision for many countries refusing to incorporate it into the national legislation when it is introduced by signing the FTAs with the US and EU countries. Like India did not adopt the

130 Faunce TA, Vines T, Gibbons H. New Forms of Evergreening in Australia: Misleading Advertising, Enantiomers and Data Exclusivity (2008) 16 Journal of Law and Medicine, p220-232.

131 Id. 132 Article 39.3, Agreement on Trade-related Aspects of Intellectual Property Rights,

available at: http://www.wto.org/english/tratop_e/trips_e/t_agm3d_e.htm (Search date: 02/11/2012).

133 EU Directive 2004/27/EC on the Community Code Relating to Medicinal Products for Human Use in 2004, Official Journal of the European Union No. L. 136/34.

134 Watal, J, Intellectual Property Rights in the WTO and Developing Countries, Kluwer Law International, The Hague/London/Boston, 2001, p204.

135 World Bank, HIV/AIDS Medicines and Related Supplies: Contemporary Context and procurement –Technical Guide, 2004.

136 Sisule F. Musugn, Cecilia OH, The Use of Flexibilities in TRIPS by Developing Countries: Can They Promote Access to Medicines? p38-39.

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provision into its national patent law after a fierce argument on this issue.137 That was because they worry that data exclusivity would bring a big negative effect to the Indian local generic manufacturers.

China, as a developing country, already promised a 6 years period of data exclusivity protection for pharmaceutical drugs containing a new chemical entity (NCE) under The Provisions for Drug Registration in order to join the WTO in 2001.138 The protection can be excluded under the two situations. One is for the need of pubic interests and the other is where steps are taken to ensure the data are protected against the unfair commercial use.139 In order to evaluate the provision’s effect in China, we can the US and Japan as the examples of how do they design and implement this system.

Take a look of US, where the administrative exclusivity system is consisted by the marketplace exclusivity and data exclusivity. Marketplace exclusivity means when the new drugs get the approval by the FDA, within the certain period the FDA would not approve any generics referencing from that new drug. Data exclusivity is the protection of the undisclosed test data provided by the new drug applicant, through which within the certain time FDA would not accept the generic applications referencing those data. Under such period the generic cannot access to the examination and approval procedure. Under the system, different kind of drugs is granted different period of exclusivity, such as 5 years exclusivity to the NECs, the application or a supplement to a new drug application can receive 3 years of exclusivity, 7 years protection to the orphan drugs and 6 months after the patent expired to the pediatric drugs. Besides, the 180 days of exclusivity granted to the first generic applicant is encouraging the generic manufacturers to enter into the market. So this system can balance the interests between the drugs’ originators and generic manufacturers, facilitating the R&D on the new drugs and the generics’ initiative in the US.140

As the member state of WTO, Japan also grants the data exclusivity to the new drugs. However Japan does not totally copy the system from the US and EU but according to TRIPS and its national context creatively established the system which incorporates the data exclusivity into the Post-Marketing Surveillance (PMS) process. By using with a set of the medical insurance and the drug pricing mechanism, Japanese government has both complying the obligation under the TRIPS and successfully encourages the

137 FTA: India fights back over its generics, published: 04.01.2012, available at: http://www.alliancesud.ch/en/policy/trade/fta-india-fights-back-over-its-generics (Search date: 02/11/2012).

138 Article 20, Provisions for Drug Registration (SFDA Order No.28). 139 Article 35, Regulations for Implementation of the Drug Administration Law of the

People’s Republic of China, Decree of the State Council of the PRC No.36. 140 Small Business Assistance; Frequently Asked Questions for New Drug Product

Exclusivity, US Food and Drug Administration, available at: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/SmallBusinessAssistance/ucm069962.htm (Search date: 02/11/2012).

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innovation of the pharmaceutical companies, ensuring the new drugs’ securities and accessibilities while providing a great extent suppression to the side effects on its generics entering into. Basically, Japan has PMS system that practically affects the timing of generic entry. The PMS period is set for most of new drug approvals, and until this period is over, generic companies cannot submit their applications for drug approvals. It is primarily intended to monitor efficacy and safety after commercialization of patented drugs and not to protect data. During the PSM period the new drug’s applicant can enjoy the data exclusivity.141 So the data exclusivity is imposed with the responsibility to the drug’s applicant on ensuring its safety and efficacy. And the data exclusivity period varies from 4 years (for medicinal products with new indications, formulations, dosages, or compositions with related prescriptions) to 6 years (for drugs containing a NCE or medicinal composition, or requiring a new route of administration) to 10 years (for orphan drugs or new drugs requiring pharmaco-epidemiological study).142

Now let’s turn our eyes back to China, an estimated suggest that data exclusivity increased China’s health expenditure by 45.55% on average per year from 2007 to 2009, while reducing the accessibility to 267 types of medicines by 27.14%- a great negative impact on public health in China.143 The 6 years of data exclusivity for all the drugs and relevant policies are too simplicity and some points need to be revised and clarified. Regarding the Article 20 of the Provisions for Drug Regulation and Article 35 of the Regulations for Implementation of the Drug Administration Law, the term of “NCEs” need to be defined clearly in case of the divergence of opinions between China and developed countries; there needs a more detailed requirements of the experiment data otherwise the protection scope on the objective of data exclusivity is hard to perceived. Furthermore, the 6 years exclusivity is too general and need a differential protection period to the different kind of drugs, like the US and Japan. The Provisions should add corresponding terms to NCEs, orphan drugs and pediatric drugs etc, separately.

Overall, the TRIPS Agreement leaves a considerable flexibility to interpret the extent on protecting data, which only requests providing protection on the data “which involves a considerable effort”. There was some Latin America countries were forced to accept the TRIPS-plus when signing FTAs with the US, however they set up the limitations on data exclusivity protection. China shall also utilize the flexibility to limit the data exclusivity’s potential impact on harm the public health and access to

141 Japanese Drug Regulations Related to Data Exclusivity (Excerpts), Kitamural Law, available at: http://kitamuralaw.com/publications/J_data_exclusivity_provisions.pdf (Search date: 02/11/2012).

142 Jonathan de Ridder, Data Exclusivity; Further Protection for Pharmaceuticals, Find Law Australia, available at: http://www.findlaw.com.au/articles/1576/data-exclusivity-further-protection-for-pharmaceut.aspx (Search date: 02/11/2012).

143 Wu, S., Hang, S., Chen, J. and Shi, L. (2012) Impact of medical data protection on drugExpenditure and accessibility in China, Chinese Journal of New Drugs 21(20), p2353-2355.

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medicines; making full use of the exceptional situations to promote the public health;144 setting different exclusivity periods to different drugs in order to both protect the patent rights and encourage the generic’s entry into markets; also beware of the unfair patent extending protection by misusing the data exclusivity which need the effective legislation and administrative tools to monitor and regulated.

144 Article 35, Regulations for Implementation of the Drug Administration Law of the People’s Republic of China, Decree of the State Council of the PRC No.36, available at http://former.sfda.gov.cn/cmsweb/webportal/W45649038/A48335997.html(Search date: 02/11/2012).

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4. Other Factors Impeding Access to Medicines in China

The above parts mainly analyzed that the access to medicines, in terms of the high prices of drugs, from the IP perspective. It focused on reviewing the compliance of the domestic patent legislation to the TRIPS flexibilities to check whether China has adopted those flexibilities for limiting the reverse impact on accessing to medicines brought by the patent right protection. This part would from other perspectives to analyze what other reasons, except patent right, can be the barriers to the access to medicines in China. Through looking in to the governments, which as the public actor, pharmaceutical industry both domestic and foreign, NGOs and civil societies as the private actors, those three primary actors’ responsibilities to see what and how their influence on access to medicines in China.

4.1 Government responsibility As a contracted member of the ICESR, the government is under the

obligation of respect, protect and fulfill the people’s right to health. The modern Chinese legal system has not been constructed since the new Chinese government established in 1949. In the recent decades, Chinese government always emphasizes ruling the country in accordance with laws. As the legal construction steps coming into the right path, the citizen's the right to health is gradually drawing the attention, and at present, China has already tentatively set up the comprehensive legal security system for the right to life and health, including the Constitution, Civil Law, Criminal Law and Administrative Law and etc.145 Besides the legislations established complying with the international human rights obligations, Chinese government also takes other policies approaches to promote right to health.

China’s the 12th Five-Year plan (2011-2015) (FYP) as the guideline to direct the government current economic and social development, the key topic of the Plan is located in the quality rather than the quantity of the economic growth and investment. The directives for the healthcare sector focus on reinforcing the realization of the objectives that establishing an affordable and accessible healthcare system and infrastructure for the entire population. The plan’s outline covers six main goals and they include: strengthen public healthcare infrastructure; strengthen healthcare service network, develop a comprehensive medical insurance system, improve drug supply system, reform the public hospital system, support the development of Chinese medicine.146 With the publish of the 12th FYP, for enhancing human rights and ensuring rapid development of the human rights cause, on 145 Zhang Yue, Legal Guarantees to the Right to Health in China.146 China’s 12th Five Year Plan: Healthcare sector, May 2011, KPMG.

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the basis of earnestly summing up past experience, the Chinese government has worked out the National Human Rights Action Plan of China (2012-2015) (NHRAP) to specify its aims on tasks in promoting and protecting human rights. Regards to the right to health, China would establish initially a basic medical and health system that covers the entire nation, improve the medical insurance system, public health service system and medical care system to protect the citizen’s right to health.147 However meanwhile many people believe that the main purpose of enacting NHRAP is to show the international society that China is a country that does respect and protect human rights and the function of the plan is not so optimistic.

The Health Care Reform Leading Group was established in 2006 and after three years of deliberation, in 2008 the Chinese government announced its national healthcare reform plan. The main objective is to provide universal healthcare coverage by 2012.148 The initial three-year implementation plan for 2009-2011 emphasizes several programs, including improving the social health security system (urban employees, urban residents, rural cooperative medical services, and medical assistance programs); establishing an essential medicines system; strengthening primary level healthcare facilities; reducing disparities in public healthcare between regions; and piloting reforms in public hospital financing by reducing the reliance on drug sales for operational costs and salaries. An earlier effort at health sector reform enacted in 1997 was seen as largely ineffective due to a lack of financial and political support. The bureaucratic politics associated with the multiplicity of agencies involved in planning healthcare reform has also hampered the situation improvement. Most of the budget allocations are dedicated to the costs on the infrastructure of building medical cooperatives and refurbishing existing facilities, while less dedicated to medical workers’ financial needs and compensation. The healthcare reform still has a long way to go.

Although the above recent national plans literally do give a bright side of China’s dedication on improving the public’s right to health, when we look into the details it is not hard to find out there are many defected polices established and implemented within the healthcare system.

4.1.1 Finance expense on public health

There are many flaws on the finance input to the healthcare sector. The first problem is the central government financial support is so limited. In 2010 and 2011, the share of central government annual expenditure on the sector of public healthcare took only 3.1% and 3.2% respectively of the total expenditure. While in the contrast Chinese government spend more than 10% of the finance expenditure every year on the national security defense.149 Secondly, the high increasing healthcare spending in recent

147 National Human Rights Action Plan of China (2012-2015), Information Office of the State Council.

148 Supra 146, p67.149 Statistics from Chinese Government website, available at:

http://www.gov.cn/2011lh/content_1817775.htm (2010) and

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decades mainly came from private out of pocket payment. Private parties actually took the most part of the health spending while the government only shared a small part of it. The Government financial share on health spending was dramatically decreased from 25% in 1990 to 14.9% in 2000 while the private spending as a share increased reaching almost two thirds of spending (64.43%) in 2001. Since 2002, with the beginning of government-subsidized health insurance for rural Chinese, the private share of health spending started to have a gradually decline, reaching 45.94% by 2010.150 Given the relatively small market for commercial insurance in China, private spending is overwhelmingly “out-of-pocket” directly paid by patients. Out-of-pocket spending increased from 20.43% in 1978 to a peak of 59.97% in 2001 and then declined to 35.52% in 2010.151 Thus, public spending now constitutes a little over half of China’s total health spending, much higher than many low and middle income countries which close to the proportion in the US and South Korea, but significantly lower than the average of 72% for OECD countries.152

Furthermore, China’s public health finance mainly come from the local financial budget, the central government takes small part of it. It is not hard to see that the local financial ability on the public health sector crucially depends on the local economic capability, so the poorer the areas have the less healthcare expenditure allocated by the local government. Since China is a big and diverse country, with regions varying significantly on the economic developments and social-demographic profiles, plus China’s health financing system is quite decentralizes, such as the financing of many public services, the regional and urban-rural disparities is exacerbating rather than mitigating. So that is why lots of people, especially in the remote and resource-poor areas in the western and interior regions, still have consumption levels below a dollar a day, often without access to clean water, arable land, or adequate health and educational services. Illness treatment continues to be a contributor to poverty, and out-of-pocket medical expenses remain high. Poor economy provinces receive some financial support from central government, but such the amount of redistribution is rather limited. For example, the ratio of urban to rural per capita health spending was less than 2 in the early 1990s, then continually increased to 3.63 in 2000, then declined to 2.67 in 2010 contributed by the implementation of New Rural Cooperative Medical System (NCMS) and the recent reforms. This big urban-rural gap is not caused by the health spending in rural areas stagnated, in fact in rural per capital health spending increased 17 times over the last two decades. The gap is because urban spending increased even faster.153

http://www.gov.cn/2011lh/content_1817835.htm (2011).150 China National Health Development Research Center, 2011, Table 5, p9.151 Id, Table 3, p6. 152 Karen Eggleston, Health Care for 1.3 Billion, An Overview of China’s Health System,

Stanford University, Asia Health Policy Program working paper #28, January 9, 2012, p4-5.

153 Karen Eggleston, Health Care for 1.3 Billion, An Overview of China’s Health System, Stanford University, Asia Health Policy Program working paper #28, January 9, 2012, p5.

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The above paragraphs generally pointed out the problems existing in the public healthcare financial system, which are the insufficient financial allocation on the healthcare sector, the unreasonable distributing structure of the health spending and recourses between the public and private sectors, central and local governments. Besides, the efficiency of financial allocation should also be improved. According to a WHO evaluation report of the overall performance on healthcare sector in 2000, among 191 member states China only took the place of 144. Scholars pointed out that the problem is that even thought the health spending is dramatically increasing, the equality of healthcare service and the using efficiency of resources are still at a very low level. The next part will focus on the medial regulation institutions, healthcare system and relevant policies and their impacts on the access to medicines.

4.1.2 Pricing privilege of the original drugs

The conception of original drugs cannot be found in other countries, where usually have only patented medicines and generic medicines. But in China, original drugs are defined as the imported medicines that their patents are expired. While in other countries after the patented drugs expired, the price of which would be reduced in order to compete with the cheap generic medicines and some companies even choose to stop producing with the worry of failure in the coming pricing war. But these off-patent medicines in China can enjoy the privilege of separately pricing and their prices can be sold even as ten times higher than the domestic generic medicines. As an administrative protection measure, this retroactive policy was introduced and applied on the medicines that entered into China before 1993, when China did not provide legal patent protection on the medicines. This privilege works as a financial compensation to encourage foreign companies brought new drugs to China

The legal ground of this privilege can be found in the Governmental Pricing Measures on Drugs issued by the former State Planning and Development Commission in November, 2000, which allows for off-patent original drugs pricing higher than domestically produced equivalent generic drugs. Noting that the Measures actually explicitly stimulates the maximum price difference should not be over 35% for the injection and 30% for other forms, however it is found that in reality the difference is far beyond than this limitation. Taking the Ciprofloxacin injection as an example, the original drug of it produced by Bayer is sold of 80 RMB while the local generic’s price is only 4-5 RMB, where the price is twenty times than the generic indeed.

Statistics shows the off-patent original drugs take 30% of the medicine market in China and they do not compete with the generic medicines in the same path under the local medicine purchasing tender provisions. Besides, the National Development and Reform Commission (NDRC) has issued nearly 30 times drug price reduction adjustments, but the original drugs

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have been seldom included in the list. They are given the privilege of not competing with the generics and it makes the patients spend much more on medicines than they are supposed to do. This national medical regulation measure is unequal and has received many criticisms. Since 2010 the NDRC drafted the Measures on Drug Price Regulation and tried to cancel the original drugs’ privilege of pricing. But there is no updated news came out yet.154 When China joined the WTO it promised to provide national treatment to the foreigners’ economic and trade activities in China. But we can see from the policies offered actually are beyond the national treatment in the pharmaceutical industry. The price should be dominated by the market. The better quality and safety drugs of course can be marketed with higher prices, if the original medicines do have, for the customers to freely choose. But it should not be reflected and controlled by the authority’s pricing policies.

4.1.3 Combination of prescriping and dispensing policy adopted by public hospitals

The NDRC issued the list of reducing drugs prices for many times in the past decades, but we find the benefits of the price reduction in fact do not reach to the patients. One of the important reasons is within the healthcare system. Unlike the most developed states, in China, doctors both prescribe and dispense drugs in hospitals, and hospitals are permitted to earn revenue from selling drugs.

The service fee charged by the public hospitals cannot afford the hospitals’ daily expenditures and the employees’ salaries. So in China public hospitals relying on their owned pharmacy selling drugs is a very important income source. Prescribing expensive drugs to the patients can increase the public hospitals’ and doctors’ income. The reason patients do not go to other pharmacies to buy the medicines is because some medicines that cannot be found there and only hospitals can sell them. And another important reason is the medical reimbursement system that motivates the patients to buy them directly from hospitals even the price is higher than it should be. Because under the current healthcare insurance system, some private pharmacies are qualified for people to get the reimbursement while some are not. So for the people who are enjoying the reimbursement right if the medicine is in the reimbursable medicines list, the higher price of medicines do not matter them so much because they need only to pay the little part of the price.

The combination of prescription and selling drugs by hospitals is serious increasing the drugs’ expenditure and it is also the root of many drawbacks existing within the medical distribution and sales system. For example, pharmaceutical representatives provide the commissions to the

154 The price privilege of foreign original drugs makes it is expensive to accessing medicine, China Youth News, Aug,13, 2012 (In Chinese), available at: http://zqb.cyol.com/html/2012-08/13/nw.D110000zgqnb_20120813_1-05.htm ( Search date: 03/11/2012).

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hospitals and doctors as a return for their prescribing the medicines, which is seen as a way of sharing the profits. The commissions actually existing within the whole distribution procedure that makes the drugs’ final price are much higher than they should be. So in this case some pharmaceutical company also cannot away from its accused business misconducts which would be talked about in the next part. And all of those unreasonable costs are ultimately paid by the common patients.

The necessity of separation the medical services and pharmaceutical sales within the public hospitals is confirmed by the healthcare reform plan and public hospitals reform plan with the aim to promote public health. The central government selected 16 cities as the pilot cities, where they attempt to work on separating medical services and pharmaceutical sales and some places have implemented this reform for a while. The main actions of this reform include the delegation of pharmacies and establishing independent drug distribution organizations. But the cost of medical services are still comparatively very low, brutally separating the services and the pharmaceutical sale while abolishing the drug price markup policy will exert a great financial burden on hospitals and hamper their development. If the government takes the entire responsibility to support the hospitals’ financial problem, the government will bear the heavy financial burden. So there are many challenges and the reform is in the dilemma.155 One suggestion on this issue is to increase the hospitals’ services fees and cooperate with the private insurance companies to relieve the public’s economic pressure of healthcare.

4.1.4 Other policies issues

Besides the above problems which cause the high drug price, there are other medical policies leading to undermine the accessibility of medicines. For example, centralized purchasing and tiered bidding implemented by the public hospitals, which established with the original aim to reduce the drug prices. They are the policies for public hospitals when their inner pharmacies purchase drugs through bidding. The government-oriented centralized purchase procedure, which adopting the tiered bidding measure to different quality of drugs, in fact makes the minority’s foreign companies’ drug price competition only happening between themselves but not with the majority’s domestic companies because the bidding is tiered by qualities. It increases the chance of the foreign companies to win while the competition of the pharmaceutical industry is discouraged. Moreover another purchasing measure by the public hospitals also reverses the competition equality. According to the Measures for the Administration of Prescriptions156, hospitals can order two products for every generic named drug. However during the implementation this measure is evolved to 155 Implementing Health Care Reform Policies in China, Challenges and Opportunities, A

report of The CSIS Freeman Chair in China Studies, December 2011, p29-32.156 Measure for the Administration of prescriptions, Ministry of Health, Order of the

Ministry of Health No.53, Effective date: 1st May, 2007, available at: http://www.lawinfochina.com/display.aspx?lib=law&id=5971&CGid= (Search date: 03/11/2012).

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ordering two products of one is from foreign or joint venture companies and the other is from domestic companies. So those policies indeed provide more protection to the foreign and joint venture pharmaceutical companies. The drugs’ prices of them are little affected and they can win the bid with the higher price. The price reducing measure actually only brings its effects on the domestic produced drugs. All those policies in fact cause the unfair competition between the foreign and local pharmaceuticals.

In addition, the State Council released the 12th Five-Year Plan on drug safety and standards and it asked for the evaluation of the generics quality with the compliance of the respective original drug standard.157 If the quality cannot meet the compliance standard, the generics would be deregistered. The quality gap might exist between the original medicines and local produced generics so it is dispensable to have the quality compliance evaluation. However take the original medicines as the evaluation standard is considered not appropriate. Because the national legal standard legally is the Pharmacopoeia of the People’s Republic of China and if the Pharmacopoeia standard is not high enough then it should be revised but not take original drugs as the reference. Even if the generic reach the quality of the original drug, the price of the generic is still a problem since the original drugs enjoy the pricing privilege. If the same quality generics can enjoy the same price of original drugs, which means the generics price would be generally increased. But if generics are not allowed to share the same price, then whether the competition is equal would be questioned.158 The consequence is hospitals usually prefer purchasing expensive original drugs as they can make more profits on prescribing them. Anyway eventually the public takes the burden on paying the bills.

4.2 Pharmaceutical industry Even though under the international human rights regime states have

primary responsibility for enhancing access to medicines, pharmaceutical companies’ Corporation Social Responsibility as a shared responsibility plays an indispensable role to enhance the access to medicines.

Millennium Development Goals (MDGs), including those connected to sexual and reproductive health such as reducing, and combating HIV/AIDS, malaria and other diseases, depend upon improving access to medicines. Indeed, one of the MDG targets is to provide, “in cooperation with pharmaceutical companies, access to affordable essential drugs in developing countries.”159 And as confirmed by the United Nations Global Compact, the Special Representative of the Secretary General on Human

157 Reed Smith LLP, State Council releases the 12th Five-Year Plan on drug safety and standards, March 13, 2012, available at: http://www.lexology.com/library/detail.aspx?g=42328492-384f-4ee9-b84c-34717567ee9b (Search date: 03/11/2012).

158 Hongzhi Wang, From Doha Declaration to Review the National Drug Policies, Healthcare Executive, 27,Sep, 2012 (In Chinese), available at: http://www.he-cn.com/article.asp?id=41279 (Search date: 03/11/2012).

159 Millennium Development Goals 2000, Target 17 of Goal 8.

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Rights and Transnational Corporations and Other Business Enterprises, the Committee on Economic Social and Culture Rights, the Business Leaders Initiative on Human Rights, and many others, the private business sector has human rights responsibilities. Pharmaceutical companies, including innovator, generic and biotechnology companies, have human rights responsibilities in relation to access to medicines. They should contribute through various ways to the realization of the right to the highest attainable standard of health, such as providing individual and communities with important information about public health issues. Enhancing access to medicines, however, has the central place in the society mission of pharmaceutical companies. For this reason, these non-exhaustive, inter-related Guidelines focus on the human rights responsibilities of pharmaceutical companies in relation to access to medicines.160

According to the Human Rights Guidelines for Pharmaceutical Companies in Relation to Access to Medicines, the company should adopt a human rights policy statement which expressly recognizes the importance of human rights generally, and the right to the highest attainable standard of health in particular in relation to the strategies, policies, programs, projects and activities of the company; and whenever formulation and implementing its strategies, programs, projects and activities that bearing upon access to medicines; the company should give particular attention to the needs of disadvantaged individuals, communities and populations, such as children, the elderly and those living poverty; it should also give particular attention to the very poorest in all markets, as well as gender-related issue and should be as transparent as possible; in conjunction with other pharmaceutical disclosure of companies, the company should agree to standard for the systematic disclosure of company information and data bearing upon access to medicines, thereby making it easier to evaluate the performance of one company against another, as well as the performance of the same company over time; the company should also take responsibilities on its management, monitoring, accountability and publicly adopt effective anti-corruption policies and measures; disclosure all current advocacy and lobbying positions, and related activities, at the regional, national and international levels, that impact or may impact upon access to medicines; regarding the company, the company should manufacture medicines that comply with current WHO Good Manufacturing Practice Guidelines, as well as other appropriate international regulatory requirements for quality, safety and efficacy; the clinical trials should observe the highest ethical and human rights standards, including non-discrimination, equality and the requirements of informed consent; it should engage constructively with key international and other initiatives that are searching for new, sustainable and effective approaches to accelerate and enhance research and development for neglected disease; especially, it should respect the flexibilities of provisions in the TRIPS Agreement and respect the letter and spirit of the Doha Declaration, so it should make and respect a public commitment not to lobby for more demanding protection of intellectual property interests than

160 Rajat Khosla, Paul Hunt, Human Rights Guidelines for Pharmaceutical Companies in Relation to Access To Medicines, p13, h,i,l.

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those required by TRIPS; should issue non-exclusive voluntary licenses with a view to increasing access to all medicines and they should also include any necessary transfer of technology; for ensuring the medicines as affordable to as many people as possible, the company should consider all the arrangements of pricing, discounting and donations.161 In China, for promoting access to medicines there is no doubt to both of foreign and domestic pharmaceutical industries are indispensable actors to this issue. The following part is reviewing how about their practices.

4.2.1 Foreign pharmaceutical companies

To the pharmaceuticals there are still several areas where all companies could improve their approaches significantly, such as making their drug donations to be more needs-based and allowing developing country regulators to use their clinical trial data to accelerate the approval of generic medicines. According to the Access to Medicine Index, Novo Nordisk is the leader when it comes to allowing its clinical trial data to be used in the approval process for generic medicines, which is an important indicator of competition behavior focus to access to medicine. It is the only company that states it does not apply data exclusivity in countries covered by the Index, nor does it apply for patent rights in more than 97% of focus countries. Several other companies have become more transparent in this area, disclosing a conditional commitment, for instance not to apply data exclusive for specific diseases or under specific conditions.162

However, with the continually controlling on the core patent expired by the foreign companies it is common to see that impedes the domestic generic come into market. Lacking of competition makes the price still high even though after the patent being expired. The case of 3TC can show us as the instance. Lamivudine, patent held by GlaxoSmithKline (GSK), also known as 3TC, is a drug recommended by WHO to use for 1st and 2cd line HIV/AIDS treatment, and also treat Hepatitis B in different formulation. China is the biggest supplier of Active Pharmaceutical Ingredient (API/ raw material) of 3TC to the world, but Chinese patients have no access to generic 3TC due to patent protection. GSK introduced the drug to China in 1990 before China started granting patent on medicines, so only manufacture process of 3TC can be patented at that time. However, GSK got a number of exclusive protections on 3TC in China against the background of bilateral trade negotiation between China and US. In 2007, the main exclusive protections of 3TC expired which means in theory, Chinese company can produce 3TC by using other synthetic process. However, GSK announced publically on its website that infringement will occur if any company in China is to produce 3TC as its process patent covers all products of 3TC. Under such circumstance, no locally produced generics of 3TC is available in China; although this is a drug invented in last 161 Rajat Khosla, Paul Hunt, Human Rights Guidelines for Pharmaceutical Companies in

Relation to Access To Medicines, p14-21,162 The Access to Medicine Index 2012, Access to Medicine Foundation, p35, Available at:

http://www.accesstomedicineindex.org/sites/www.accesstomedicineindex.org/files/2012-access-to-medicine-index-full-report-clickable.pdf (Search date: 03/11/2012).

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century and has been widely used in generic version in many other developing countries. Both Chinese patients and Chinese generic manufacturers are not benefited from such broad patenting.163

Besides of controlling on the off-patented medicines as the above way, foreign companies also have the advantage on their generics research and development. Because the most medical patents are hold by those big pharmaceuticals so that after the core patent being expired, they can utilize their advantaged competency to avoid the dependent patent in order to make generics faster and take over the market. And the case of Gilead who joined the Medicine Patent Pool and allowed 111 countries to produce the generic which used with other ARV medicines for the treatment of 1st and 2nd line for HIV and HBV, but china was excluded, which maybe can show us that profit orientated big foreign pharmaceutical companies are reluctant to give up their exclusive rights especially to the country like China where with a huge market.164

Another big pharmaceutical industry’s scandal was exposed in summer 2013 in China. The GSK China has been accused of using travel agencies and other middlemen to tunnel billions RMB to bribe doctors and officials in order to boost sales - and prices - of its products. As the news reported “that medicine that cost 30 RMB to make could be sold to patients for as much as 300 RMB. Some Chinese say the revelations explain why medical care has become so expensive and why many doctors are so insistent on prescribing particular brand name drugs…the GSK case as a demonstration of the Chinese government's resolve to further improve the investment environment to provide a fair and level playing field. Corruption involving multinationals in China has made headlines before.”165 From that we can see the foreign pharmaceuticals illegal conduction that practiced in China with the direct effect on the high price of drugs that undermines the accessibility to medicines in China.

4.2.2 Domestic pharmaceutical companies

Chinese domestic pharmaceuticals mainly produce generics and after the years of developing, the general generic manufacture capacity is in the front of the world. Meanwhile because of lacking the investment and ability on the R&D and inadequate policy support, Chinese pharmaceutical industry still remains at low position within the whole producing chain, which mainly depends on the API exportation to foreign countries, basic types of protein and antibiotic drugs production. The competition between 163 Responses from Hu Yuanqiong, China Access to Medicines Research Group, Informal

Interactive Hearing of the General Assembly with Non-Governmental Organizations, Civil Society Organizations and the Private Sector Regarding Unites Nations Millennium Development Goals (MDG), United Nations Headquarters, New York, June 14-15, 2010,

164 Gilead granted license to medicines pool, devil is in details, SUNS No.7195, July, 21, 2011, available at: http://www.twnside.org.sg/title2/intellectual_property/info.service/2011/ipr.info.11070 . htm (Search date: 03/11/2012).

165 Chen Weihua, Pharma bribery scandal in China just the tip of the iceberg? Available at: http://usa.chinadaily.com.cn/opinion/2013-07/18/content_16795071.htm

(Search date: 15/08/2013).

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the domestic companies themselves is severe, which leads the domestic companies actually take the small market share comparing to foreign pharmaceuticals. Except the unreasonable provisions of Chinese medical regulatory policies and institutions as the external actors, the domestic pharmaceutical companies have their own internal problems that causing the situation today.

Although since 2011 to 2014 it is the time for a large number of medicines to be off patented, which should be a great opportunity to the generic companies, Chinese pharmaceuticals however cannot catch the chance as easy as expected. Actually, one foreign patented medical product is usually protected by both core patent and dependent patents. The “off-patent” we talk about here is the core patent. That means the core patent expired drugs that are still under the protection of dependent patents and they could not be completely copied. Under this circumstance, the competency of avoiding patent technology plays an important role to the generic producers, because this technology also needs R&D strength. However, Chinese pharmaceutical industry put little income into the R&D, along with insufficient investment and support from government, academic universities and other organizations. According to the statistical data of 2011, only less than 5% of the income was invested into the R&D, which was far less than average level of 10% that European and American countries did. So for domestic generic producers to capture the opportunity of many core patents being expired and take over the market still meets obstacles.166

Besides, the motivation for applying the compulsory licenses is not strong enough to the domestic pharmaceuticals. Comparing to the long-term application and dealing with the governmental department, as the biggest API exportation country that take over 30% of API provision globally they prefer rather on selling API to make profits. The quality of domestic produced drugs is also an issue that many patients worry about, so that if their financial affordability is good they prefer choose foreign or joint-venture companies’ products. And in case of medical disputes happening, hospitals prefer prescribe foreign patented drugs because of the quality are considered more trustable.

4.3 Impact of other actorsBesides of the states and pharmaceutical industries, other actors like

NGOs, media, consumer advocacy groups and public opinion in general carefully watch the steps taken by pharmaceuticals. And their movements often share the same broad goals when it comes to improving access to medicines. They represent the needs and goals of different populations and their public opinion and information provided are very important with regard to access to medicine.166 Industry Review, China Credit Rating, Vol. 22, May, 2012, available at:

http://pg.jrj.com.cn/acc/Res/CN_RES/INDUS/2012/6/19/fa457930-8c32-42be-875c-ffde0cd666f3.pdf (In Chinese) (Search date: 03/11/2012).

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Recent progress in a number of countries shows that access to essential medicines can be improved through stronger partnership among governments, pharmaceutical companies and the civil society, including consumers, working together to ensure universal access to medicines.167 The case of the WHO-HAI Africa Regional Collaboration for Action on Essential Medicines shows that the achievements were built on the collaboration partners. Different partner should be defined different roles, responsibilities and expectations since the existence of ‘different interests among the diverse stakeholders’, but emphasis ‘that all are working to the same objectives’, and ‘the benefit of harmonizing strategies and action plans’. In Uganda and Ghana, Health Action International members developed increasingly independent capacity as civil society groups, with the independent budget lines which contributed to the results.168 Foreign civil groups always widely engage and actively participate in this issue. Take an example, the Malaysian AIDS council, an umbrella group of 49 civil society groups, asked the Malaysian Minister of Health to begin a government sponsored program to provide second line treatment to people with HIV/AIDS. In order to make this feasible, the Council requests that the Ministry grant a compulsory license for government use under Section 84 of the Patents Act for patents related to Lopinavir+Ritonavir, and important antiretroviral sold under the brand name Kaletra by Abbott.169 So lacking of strong and collaborated calling from concerning civil groups is also a reason for why China has not issue any compulsory license yet. In China the good governance environment for the NGOs and civil group’s development has not been established. Independent status is not encouraged by policies supporting and there are different kinds of obstacles always coming up during their practice. There is a long way for Chinese civil groups to grow and develop since civil society is built under the democratic social mechanism, which hasn’t been realized in today’s China yet.

167 Access to affordable essential medicines, WHO, available at: http://www.who.int/medicines/mdg/MDG08ChapterEMedsEn.pdf (Search date: 03/11/2012).

168 Nel Druce, Government, Civil society and WHO partnership: A catalyst for better access to medicines, External Document, August 2008, available at: http://apps.who.int/medicinedocs/documents/s16565e/s16565e.pdf (Search date: 03/11/2012).

169 Malaysian Civil Society Groups Seek Compulsory License for Second Line HIV/AIDS medicine, May 22,2012, available at: http://infojustice.org/archives/25595 (Search date: 03/11/2012).

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5. How can China Improve Accessing to Medicines?

Regarding to address the issues related to access to medicine, China has made efforts in such measures, for example, expansion of medical insurance coverage, free distribution and administration of preventive vaccines in China and building a national essential drug system, some initiatives were drafted in promoting drug innovation and new drug development, new treatment options are researched to meet the unmet medical needs of citizens.170 Government is used to taking those actions to present its commitment in protecting and promoting the health of its citizen. The previous parts of the thesis have discussed the flaws that existing among the legislation and enforcement of relevant patent law and public healthcare policies. Obviously, the issue is not attributed by a single actor, and all stakeholders should take their responsibilities so can ensure and enhance access to medicines. State as the primary duty bearer on respect, protect and fulfill human rights for its citizens should take the responsibility to promote right to health, encourage domestic and imported generic product coming into the market, providing a sound and fair competition market environment, making efforts on the negotiation with foreign pharmaceutical companies to reduce the drug price and bewaring of any reverse effects of over-protection on medical patent through FDAs. Other actors’ efforts on enhancing this issue and their corporation also built on the common view, which needs the government policies supporting and protecting.

5.1 Improve access to medicines under the medical patent system

Under the medical patent system and the TRIPS Agreement, on the one hand China as “copy country”, that usually be criticized by western countries, is working on protecting its and foreign intellectual property rights though joining international agreement and amending domestic legislations, on the other hand, with the big population and a big number of patients, China is also bear a big burden on improving its public health situation, which needs the caution of no over-protection on the medical patent rights. The balance of the IPR development and properly limiting the IPRs for protecting the public interests should be considered by the concerning departments when the statutes and regulations are being drafted and implemented.

170 Zhang Wei, Facilitating the Access to Medicine: China’s Perspective and the Role of SFDA, The 13the International Conference of Drug Regulatory Authorities Workshop H “Regulator’s Contribution to Access”, Bern Switzerland, September 16-19, 2008

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Through review the legislation about medical patent in Chapter 3 of the thesis, it is not hard to find that China has adopted the TRIPS flexibilities into the patent law and other relevant regulations. The flexibilities are such as compulsory license, parallel importation and Bolar exemption etc. The issue is on enforcing the provisions. And because of the different interests of stakeholders, the enforcement of these flexibilities such as compulsory licensing has not been granted by the government. Under this situation the patients, such as with AIDS/HIV, must spend much more on buying the patented medicines and also increase the financial burden on the relevant NGOs and government when they purchase the drugs for the treatments to the patients. Some flexible provisions, such as Bolar exemption and parallel import, need be more detailed regulated and a further interpretation with consideration of the different parties’ interests in hence to be implemented in an appropriate way.

Furthermore, China has also adopted some TRIPS-plus provisions such as data exclusivity which by other countries, like the US it can be played useful role on balance the patents’ protecting and encouraging generics come to the markets. However on the opposite, in China those TRIPS-plus bring more difficulties for generic medicines coming into the market. So China should revise those flaws within the provisions so that making them be feasible on balance the rights. Besides it should be aware of more TRIPS-plus to be adopted in future when negotiate with western developed countries in terms of signing FTAs until it is ready and mature enough to accept. Comparing to the neighbor country India, both of them are big developing countries and in a great need of generic medicines to meet the local patients demand. India stipulated a tough standard on granting patent protection in its national patent law and the government encouraged the generic producing through issuing compulsory licenses. These measures benefit the public to enjoy their right to health through increasing the accessibility to cheap medicines and it is also save the government financial allocation on purchasing drugs. The following are the other two points that specially can be suggested to work with.

5.1.1 Issuing medicine compulsory licenses

As the Chapter 3 has talked we know that patent CL has been allowed and written into the statute since 2003,171 the reasons why after so many years China still has no movement to grant the first CL case while other countries use it commonly to protect their national public health, has been discussed earlier in the thesis. So far, even though there are many callings to the government for issuing medical patent CL, the difficulties of applying and issuing are exiting. The circumstances of applying CL can be patent holders not implementing the patent without legal reasons; practicing patent right is decided as monopolistic conduct; when the national emergency situation happens or for the public interests; when a big technical improvement and significant economical benefits of the new patent right

171 It means the Measures on Compulsory Licensing for Patent Exploitation, Order No.31 of the State I intellectual Property Office (Implemented on 15 July, 2003).

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relies on the previous patent’s carrying out to be realized.172 The above conditions are not easily can be used. Take example, although the numbers of patients with hepatitis B, AIDS/HIV and cancers is very big, when asked whether it has reached the extent of public health crisis, the answer is not easy to be given. Chinese government should take movement to make the conditions are less hard to applied so that increase the CL provision’s feasibility, but not only consider the foreign pharmaceuticals investment interests so reluctant to challenge the patent protection over-offered. The circumstances of “where the national emergency occurs and where the public interest requires” need the further and more detailed interpretation for clarifying when and how the generics manufactures could apply and allowing the exception of applying and CL for the public health interests. To assist the implementation of CL, the channels for patients to appeal their need should be established as well and the government should take the applications seriously on making the decision.

If CL cannot be issued in short term by the government, there is also a method of taking granting CL as a threat when government negotiates with foreign pharmaceuticals so that get the drug price reduced, just like other countries do, which is also a way to reach the aim of enhancing citizen’s access to medicines.

5.1.2 Revise and be awre of TRIPS-plus provisions

Facing pressures come from the Office of the US Trade Representative and multinational pharmaceutical companies demand on the stronger pharmaceutical IP protection, China has added TRIP-plus provisions within its IP laws and drug regulatory framework, such as patent linkage and data exclusivity. Those systems are advocated by the pharmaceutical advanced developed countries, where can be functional practiced on protecting the IPR while the patent disputes can be solved timely, which can encourage the generics producers apply for the approval. At the same time to many other countries from the certain extent, they also admit their positive functions, such as the importance of the communication between the administrative agency and patent office’s that imposed by the patent linkage system. However in case of the provisions’ inappropriate stipulation and practices which could build the obstacles to the generics entering into the market, they reject to adopt those provisions into domestic laws since those are not explicitly stipulated by the TRIPS.173 In China those provisions need a great effort to be revised in order to increase their positive effects of solving the patent disputes and avoid bringing the hurdles to the generics for their coming into market.

172 Article 5-8, Measures on Compulsory Licensing for Patent Exploitation, Order No.64 of the State Intellectual Property Office (Promulgated on 15 March 2012 and implemented on 1 May 2012).

173 Anqi Hu, Increase the Accessibility to Medicines Within the Patent Regime (在专利制度下增加药品的可及性——以公共健康为视角)(In Chinese), p7.

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Regarding the patent linkage, promote transparent and open examination and approval information and procedures as a principle should be applied. SFDA could list all drug applications on its website for the patent holders to track information and bring a timely infringement action. The judicial remedies for patent infringement should also be strengthened. China should emphasize judicial procedures, intensify punishments upon patent infringements, and increase violation costs for patent infringements. Regarding the data exclusivity, allowing for protection only to NCE, not to new indications, new dosage forms, new combinations, crystalline forms, isomers and so on. And assure data protection for traditional medicines to encourage innovation, because for most of traditional medicines already in the public domain there is no patent protection under the patent law. While allowing a compulsory license under some circumstances to be issued under the data exclusivity protection term and confirm the Bolar exemption applications for marketing approval even during the period of data exclusivity.174 Furthermore, the relevant law and regulations should also resist the extension of patent terms and the ‘evergreening’ patent. Beware of any TRIP-plus provision that restricting the promotion of generics to be imposed by the FTAs. The US Hatch-Waxman Act is a complex regulatory regime that balances fostering innovation with accelerating generics entry. Without expertise of IP China should not totally copy the system from the US or simply abandon the provisions that had adopted, we can take a lesson from Japan that created its national suitable IP regime to balance the different parties’ interests. On one hand complying with the TRIPS minimum obligations and on one the other hand using the TRIP plus to impose both obligations and rights to both patent holders and generic applicants is the way for China to go.

5.2 Improve access to medicines through public hospital reform

As we have concluded that the problem of hard to access to medicines in China is not attributed by the single reason. The medical patent right protection brings the adverse impact on this issue, meanwhile the national healthcare system and medical regulatory policies also have many flaws that should not be ignored. And this part would provide some recommendations on how to improve accessing to medicines regarding the national healthcare reform.

5.2.1 Separate prescription and dispensing function of public hospitals

As the Chapter 4 has introduced that the combination of prescription and dispensing system in the public hospitals has motivated the prescription of expensive drugs to patients, which actually increases the difficulty of accessing to medicines in terms of bearing high cost of medicines. Since

174 Supra 18, p6-8.

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the government and people have been aware this problem for long time, the national action of separating these two functions in the public hospitals has started since last year, which is also confirmed by the New Healthcare Reform Plan through public hospitals reforms. The first measure of separating is to cancel the rule of offering15% reimburse, which means that public hospitals are used to getting 15% of drug cost reimbursement from government subsidy.175 That rule is also called “none mark-up” policy and since last year it has carried out in some pilot cities.

Take Xiamen City as an example, after carrying out the “none mark-up” policy the expenses on medicines has reduced of 15 million RMB for only one month. However the outcomes of the policy are that both of the percentage of selling drugs taking the total hospital income and the total hospitals’ income had been deceased. In order to keep the hospitals running, the medical services fees must be raised up so that to pay the personnel, facilities and other costs. And the government needs to allocate more financial subsidy to the hospitals. Many people are criticizing the policy actually does not benefit the public so much, because of the financial subsidy provided by the government also coming from the tax paid by the public, besides the public hospitals income is largely reduced. However this policy could force the public hospitals to be more reasonable on the prescription and rational on the administration and management to improve its efficient.176 Establishing the system of hospitals de-link of dispensing drugs is definitely a task that should be fulfilled by the healthcare reform as soon as possible.

5.2.2 Attack drug kickbacks by legal means

The overuse and the high expenses of drugs through the public hospitals’ prescription is also caused by another very “Chinese” reason – drug kickbacks, which means that the commissions or the bonus offered to the doctors and hospitals by the drug providers. This action is considered as a public secret commonly happening within the hospital industry, which is an illegal conduction. A survey shows 54% Chinese doctors takes drug kickbacks from pharmaceutical dealers, another 39% receive subsidy for attending medical meetings, while most citizens believe the actual figure is much higher. The kickbacks among the drug circulate chain is even seemed as a Chinese culture that has its own history and reasons to assist it develops. The thesis is not going to put more word on the background of the phenomenon, but the importance of attacking this “cultured” is what to be emphasized here.

One of the sounds that question the actual effect of non-mark up policy, which was talked about earlier, actually comes from the people inside the 175 IMS Health, Healthcare Reform in China, available at:

http://imshealth.com/imshealth/Global/Content/Pharmerging/Document/China_Healthcare_Reform.pdf (Search date: 15/05/2013)

176 The “Non Mark-Up” Policy Implemented for One Month Makes the Patients’ Expenses on Drugs to be Reduced 15 Million RMB (药品“零加成”实施满月减轻患者医药负担1500万元) (In Chinese), April,3,2013, available at: http://news.xmnn.cn/a/xmxw/201304/t20130403_3221422.htm (Search date:15/05/2013)

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industry who believe the medicines final high price actually mainly caused by the kickbacks received by the hospitals and doctors. The 15% markup, comparing to the big amount of kickbacks, brings less impact on increasing the final drug price paid by the patients. Take an example, if a drug win the bid as 100 RMB, 20 RMB of which is privately returned to the hospital and another 20 RMB paid to the doctors as kickback by the drug providers. Plus the 15 RMB, the 15% markup received as governmental reimbursement, hospitals and doctors can get about 55 RMB from the drug. That is basically the mechanism called as “affording doctors by medicines”.177 The way finally ending this phenomenon should be back to the independence of hospitals prescription and dispensation. Those unnecessary extra payments secretly increase the cost of medicines and finally convert the burden to the citizens.

For the new hospital reform can be fulfilled, taking strictly legal measure to restrain and punish the kickback conduction is essential and it is the government responsibility to control the drug price for guarantee its citizen can financially access to medicines. The legal ground of the bribery crime conviction can be found in the domestic Criminal Law.178 In fact, the cases involving moral degeneration among doctors have been reported a lot. The Vice dean of Beijing Oriental Hospital Shang Xianrong held as much as 600,000 RMB within several months through accepting and even requesting kickbacks directly from drug providers. Last August, courts in Shenzhen, Zhuhai and other cities convicted tens of doctors and hospital administrative staffs.179 It is also should be noted that in some cases, the cash bribery is being instead by non-cash return as invisible. Such as hospitals are allowed to delayed transfer the purchase payment, sometimes one year of transfer period is offered by the drugs providers. As we know hospitals as the sector holding big amount of cash and the interests through banks or other investment methods can be huge, which actually as the economical return given by their agreement on the delayed payment. The scandal of GSK China bribery shows that the multinational pharmaceutical also participated in the medical industry corruption. Other foreign pharmaceutical companies are also under the investigations with the suspect of business bribery. Through legal means to attack those business and administrative bribery and corruption activities are indispensable to reduce the drugs’ price, in terms of saving the huge unjustified costs within the industrial chains.

177 Abandon drug markup policy could not change the high price of drugs and excessive prescription phenomenon (取消药品加成改变不了药价虚高和大处方现象)(In Chinese), February 8, 2012, available at: http://www.315jiage.cn/html/c62/100483p2.htm(Search date:15/05/2013).

178 Article 163, 164, Criminal Law of the People’s Republic of China (Adopted at the Second Session of the Fifth National People’s Congress on July 1979, revised at the Fifth Session of the Eighth National People’s Congress on March 14, 1997 and promulgated by Order No.83 of the President of the People’s Republic of China on MARCH 14,1997)

179 Chapter 19- Health Care, Great Wall Numbers, March 20, 2013, available at: http://www.ofnumbers.com/2013/03/20/chapter-19-health-care/(Search date: 15/05/2013).

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5.2.3 Open the healthcare service market

For improving access to medicines, opening the healthcare sector to private service providers is as important as the healthcare system internal reform. Government should encourage the medical services to develop as private business institution form. The fair competition environment should be built up between the public and private service providers, as it will assist the citizens accessing the good and reasonable health treatment.180 By purchasing generic cheaper drugs to weaken the patients’ financial burden for the treatment and who can provide better service and ask for reasonable service fees can win more patients’ choices. With the aim of promoting the public health situation, the establishment of this workable competition mechanism is greatly relied on the government policy’s and relevant regulations’ supports.

5.3 Lessons learnt from India Before 2005, only manufacturing processes could be patented in India,

not molecules. The result was a strong generic industry could be built up with the skills of chemists who developed new ways to make drugs without infringing process patents. Product patents were introduced in when India jointed the WTO and complied with the TRIPS Agreement. However, numerous western pharmaceutical companies show their struggle for patenting their drug molecules in India. For example, Pfizer was granted a patent for anticancer agent Sutent in 2007, but this was revoked last year. Merck & Co is currently also suing Indian firm Glenmark over genetic versions of its diabetes treatment Januvia and Janumet. The high court in Delhi has allowed the suit to proceed, but denied Merck an injunction to prevent Glenmark from selling its generic versions in the meantime. And even when patents are granted, India’s government can override them by issuing a ‘compulsory license, as happened with Bayer’s anticancer drug Nexavar last year.181

In the early April this year, India’s Supreme Court has denied the Novartis’ appeal against the decision to refuse patent protection for its anticancer drug Gilvec. The court says the new polymorph of Glivec does not enhance its efficiency enough to warrant a patent, despite Novartis’ assertion that the new form is thermodynamically more stable and less hygroscopic and thus is easier to process and more stable on storage. That decision met widespread dismay of the pharmaceutical industry that claims that in order to solve the real health challenges of India’s patients, it is critically important for India promote a policy environment that supports

180 Abandon drug markup policy could not change the high price of drugs and excessive prescription phenomenon (取消药品加成改变不了药价虚高和大处方现象) (In Chinese), February 8, 2012, available at: http://www.315jiage.cn/html/c62/100483p2.htm (Search date: 15/05/2013).

181 India Green Lights Production of Patented Cancer Drug, March 20, 2012, available at: http://www.rsc.org/chemistryworld/News/2012/March/india-generics-natco-nexavar-compulsory-licence.asp (Search date: 15/05/2013).

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continued research and development of new medicines for the health of patients in India and worldwide. However, that decision was welcomed by humanitarian organizations such as Médicins Sans Frontières (MSF), which said that Indian law is designed to prevent drugs’ patent protection being extended through formulation modifications, and this was a ‘major victory’ for patient access to affordable medicines. India as the “pharmacy of the poor” makes a huge relief for the millions of patients and doctors in developing countries that depend on affordable medicines from India.182 Compare to India, in terms of the challenges to the patent protection, the competency of the generic production, innovation of the drugs and international market development, Chinese domestic pharmaceutical industry is far behind of India.

Actually, China and India share the commons in their pharmaceutical industries. In India, there are about more 20,000 registered companies and more than 90% of them are small companies. In China, small and medium sizes pharmaceutical companies took the part of 86.8% among the 6000 companies.183 As the capacity of R&D is limited, both of the industries depend on the generics production, so the new innovation drugs take little part of the production. However, although they are similar in certain extent, India after the decades’ development has established the international influential pharmaceutical companies, such as Dr. Reddy’s and Cipla, who are not only simply work on the generics and also invent the innovation drugs and entered into the western developed countries market through acquisitions. And that change is caused by the differences among the two counties judicial context. As earlier said, India started to grant patent protection to medicines was much later than China so it could to develop its generic industry under the circumstances. And even after complying with the TRIPS Agreement, Indian attitude to the medical patent is always as cautions as possible and made use of the TRIPS flexibilities as fully as they can, like compulsory license, to improve the financial accessibility to medicines.

The biggest difference, besides of India is more likely to challenge the western medical patent protection, is that the generics can be also involved with the innovation steps by the Indian pharmaceutical manufacturers. That is why India pharmaceutical industry is important in the world. If China would like to change its current industry situation, giving up the mode of simply copying meanwhile put more efforts on the innovation and research the picture must be changed from today.

182 Sarah Houlton, India Rejects Novartis Patent Appeal, April 8, 2012, para1-7, available at: http://www.rsc.org/chemistryworld/2013/04/india-novartis-glivec-gleevec-patent(Search date: 15/05/2013).

183 Chinese Pharmaceutical Industry is 10-15 years far behind of Indian ( 中印制药龙象之争,中国药企落后印度 10至 15年) (In Chinese), August 22, 2006, available at ： http://finance.sina.com.cn/chanjing/b/20060822/02262842182.shtml (Search date:15/05/2013).

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5.4 Protect Chinese traditional medicines by IPRs tools

On one hand, China has provided patent right protection which reached the international level with complying obligations imposed by the TRIPS. On the other hand, the domestic manufacturers’ innovation and R&D abilities are still at the developing country’s level. This incompatibility can be understood as China provides more protection to the foreign companies while the local industry is hard to take get benefits from the IPR protection. Actually, the traditional Chinese medicine as the indigenous knowledge is a national treasure that should be protected and promoted through the IPRs.

In the early 1990s, China signed the Agreement184 after the negotiations with the US and promised to revise the patent law to provide patent protection to medicines. At that time, the traditional Chinese drugs were considered to be also protected by the IPRs. However, as the local advantage Chinese traditional medicines is slowly developing under the IPR protection. One reason behind of this phenomenon is that, during the long time, many traditional medicines are being used as the API and are considered without high technology involved, so the development of them are gradually marginalized and being ignored by the local Chinese people and industry. The interesting thing is that many traditional medicines as the Chinese wisdom after the chemical treatment processed are turned to the chemical medicines, which being as the foreign patented products. One example is that in March, 2001, the PHY906, as known as the four herbs Chinese medicine, and its application in the chemotherapy was applied to the patent protection by the Yale University respectively in China and the US. The PHY906 actually is the four herbs formulation which can be dated back to 1800 years ago in the ancient Chinese medicine book that called Treatise on Cold Pathogenic and Miscellaneous Diseases,185 written by Zhang Zhongjing in the 3rd century. The formulation of the four herbs later to be clinical used as the treatment of dysentery, acute enteritis, infantile diarrhea, enteritis, the digestive tract viral cold, ulcerative colitis, etc. The name of this formulation in the ancient book is called “Huang Qin Tang” which was not mentioned in the Yale University’s patent application, where proved the formulation’s new function on treating colorectal cancer, pancreatic cancer and liver cancer.186

The development and application of the traditional Chinese medicines and its patent protection have changed from the new formulation protection at the beginning to the today’s new function discovered and described by

184 The Memorandum of Understanding with the United States, 1992 and the Sino-US Agreement on Intellectual Property Rights, 1995.

185 Zhang Zhongjing, Treatise on Cold Pathogenic and Miscellaneous Diseases (伤害杂病论), available at: http://en.wikipedia.org/wiki/Zhang_Zhongjing (Search date: 15/05/2013).

186 Huang Qin Tang (PHY906) (黄芩汤), available at: https://sites.google.com/site/survivinggastroparesis/disclaimer/herbal-remedies/huang-qin-tang-phy906 (Search date: 15/05/2013).

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the new scientific technology. This movement has already made a big economical benefit in the market. Considering the growing generic manufacture demands the supplement of the APIs, if China can control the supplement of exporting the low-end APIs but turn eyes to the traditional medicines protection with the IPR tools, the local pharmaceutical industry could be more competitive and have a bright future.

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6. ConclusionUnder the background of the paradoxical relationship existing between

patent law and access to medicine, the exclusive patent rights restrict the affordability and accessibility of the patented medicines in the developing world. The international community has realized the need of limiting the patent over-protection in those countries in the case of the people’s right to life and health are violated, in terms of the high price of the life-saving medicines, through reaching the concerning international and regional agreements. Such as the Doha Declaration it reaffirmed the TRIPS flexibilities that can be utilized by developing world countries. It is no doubt that IPRs with the aim of encouraging the inventions and innovations are indispensable to the right holders and the world development. However, comparing to other entities under the IPRs protection, medicines products need to be treated different.187 Because after viewed the context of international, regional and national human rights human rights law instruments, the access to medicines is obviously one human right issue as they have concluded it as one important approach to right to health, right to life and right to enjoyment the benefits of scientific progress and its application.

From the domestic IP legislation review, we find that China has adopted both TRIPS flexibilities, such as CL, Bolar exemption and parallel importation as to comply with the Doha Declaration, and TRIPS-plus provisions to show its willingness on providing more protection on the IPRs, such as data exclusivity and patent linkage system. In addition, the enforcement of the TRIPS flexibilities has not been actively being taken use by authorities. The reasons behind of it can be multi-facial. Different stakeholders has own interests and the flaws exits in the legislation that hamper the feasibility, all of which actually impeding the utilizing of flexibilities. On the other hand, evidences indicating the impact of TRIPS-plus provisions on public health and access to medicines. Their impact is potentially grave if a state does not have the expertise on the IP-related judicial and administrative aspects. Such as China where has a large market of generic drugs while lacks adequate basic health services for the public, the current provisions of the TRIPS-plus are hindering the generics entering into market and dramatically hurt the domestic pharmaceutical industry that mainly depends on producing generics. Therefore, China must revise the TRIP-plus provisions for eliminating its negative on restring the generics and through establishing the appropriate administrative regulation and efficient communication with the patent office’s to provide a clear and feasible channel for both patent holders and generic applicant to understand the respectively responsibilities and rights and facility the patent disputes can be solved efficiently. At the same time, China needs also to resist more TRIPS-plus provisions might be introduced by the FTAs with other country.

187 Caidan Cao, Patent Right and Access to Medicine, Master thesis, Lund University, Fall 2010, p88.

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Because China is still lacking of the expertise and experiences on the IP issues both on the legislation and its implementation, the accelerating movements is beyond its ability and the situation would be hard to correct if after adopted them. Furthermore, make full use of TRIPS flexibilities, such as issuing CL and parallel importation, build positive relationships with countries, including India and Brazil will help to resist TRIPS-plus pressure and promote medicines affordability

Although IP laws and policies limit accessing to medicines, there are a number of other factors causing the high price of drugs. The thesis examined the current hospital administrative system and healthcare policies, and found that in order to change the current situation, the healthcare reform, especially the hospital reform is very necessary. The separation of health services and medicines dispensable together with relevant health insurance mechanism assists the establishment of rational healthcare system so that citizens’ right to health can be protected and fulfilled gradually. The State’s financial allocation on the public healthcare sector also needed to be increased.

In the past 20 years, China has established a complex IPR legal framework. Since joined into the WTO for complying with the obligations imposed, it has made a great amendment on the pre-existing IPR legal regime. However after the analysis we can find that the current regime puts over attention on reaching the international level. The imbalance between the IP protection and facilitating the national development has exposed. There is a big contrast between the strictly IPRs stipulations and more infringements cases happening. On the other hand, Chinese pharmaceutical sector has been growing rapidly for recent decades. However because of lacking innovations, most of China's drug companies focus on manufacturing generic drugs. In 2010, the SFDA approved 886 domestic drug registration applications which include 651 generic drugs and it takes 73%.188 From this fact, we can conclude that efforts on IPRs protection provided by China actually only benefits the foreign pharmaceuticals, the domestic generic producers’ development and the accessibility to affordable drugs for the public are seriously harmed. The approaches to improve the accessibility to medicines, under the Chinese context, are keeping the reform on the current system, revising the relevant laws which are inconsistent with the aim of promoting public health, making sure the factual enforcement of TRIPS flexibilities’ and the TRIPS-plus provisions’ potential negative impacts. All of them should be practiced by the corresponding authorities and the realization cannot be reached if without the government, relevant authorities, foreign and domestic pharmaceutical industries and civil organizations’ cooperation towards the same goal of promoting access to medicines in China.

188 Yearbook of Statistics, SFDA, 2010, (In Chinese), available at: http s ://www.sda.gov.cn/WS01/CL0108/66530.html para.2.

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