China Announces New Initiatives to Level the Playing Field for Innovative and Generic Drugs

by Ropes & Gray LLP

Ropes & Gray LLP

China’s Government will launch several incentives to enhance accessibility of innovative drugs, especially imported oncology drugs. The State Council, China’s cabinet, has decided not to apply any tariff on imported drugs, and will include imported new drugs (especially urgently required oncology drugs) in the government-funded Basic Medical Insurance on a rolling basis. Companies can use their own testing reports to satisfy the import drug testing requirements and reduce time to clear customs. Innovative chemical drugs will enjoy a 6-year data exclusivity period. New drugs to be launched concurrently in China and globally will be entitled to a 5-year patent term extension.

Meanwhile, the government will encourage research and development of generics and enhance generics’ quality and efficacy, the State Council announced on April 3, 2018, in its Circular on Opinions Concerning Reforms of Policies to Improve the Supply and Utilization of Generics (the “Circular No.20”). Circular No. 20 outlines a series of reforms to bolster generic drug makers, which will have significant impact on the market dynamics between innovative pharmaceutical companies and generic manufacturers.

The Circular No.20 proposes the following key initiatives:

  1. Improve market access of high quality generics. China’s State Drug Administration (formerly the CFDA) rolled out the Generic Quality Consistency Evaluation in 2015. Generics whose quality and efficacy are deemed equivalent to originator products (i.e., high quality generics) will enjoy preferential treatment in public hospital tenders and prescriptions. Specifically, public hospitals will be required to list high quality generics in their formularies and purchase them through collective tenders. Physicians at public hospitals will be required to prescribe pharmaceuticals using their generic names, and hospitals will be encouraged to fulfill the prescriptions with high quality generics. The government-funded Basic Medical Insurance will reimburse for high quality generics at the same rate as it would for the corresponding brand name drug. This reimbursement policy is designed to encourage medical institutions to switch to and dispense high quality generics.
  2. Authorize compulsory license grants to enhance availability of innovative drugs. Patentees will be encouraged to voluntarily grant licenses to Chinese generic manufacturers. In addition, Chinese generic manufacturers that meet the compulsory licensing requirements can apply for compulsory licenses in certain circumstances with the State Intellectual Property Office (“SIPO”). The National Health Commission (“NHC”), the Ministry of Industry and Information Technology (“MIIT”), and the State Drug Administration can request SIPO to grant a compulsory licenses to Chinese generic manufacturers if there is a serious threat to the public health.
  3. Balance the interests of innovative and generic drug manufacturers. The government will encourage both the creation of innovative drugs and the development of generic drugs. The initiatives will promote an intellectual property protection system that adapts to China’s economic and social development, while balancing the interests of patentees and the public. The government will establish an early-warning patent system in the pharmaceutical industry to mitigate the risk of patent infringement for generic drug makers.
  4. Provide policy incentives for the development of generics. The government encourages development of generics that are clinically required, with proven therapeutic benefits, and in high demand (i.e., high priority generics). In addition, drugs that treat orphan diseases, pandemic diseases, or pediatric illnesses, or that will go off patent protection within one year are also deemed high priority generics. A government research grant will be used to fund the development of high priority generics and the in-licensing/acquisition of related manufacturing and packaging technology. Once a generic drug manufacturer is qualified as a high-tech enterprise, the company will be eligible for tax incentives—the normal 25% corporate income tax rate will be reduced to 15%.
  5. Tighten approval standards and accelerate the approval process for generics. Generic drugs will be approved only if their quality and efficacy are proven to be equivalent to the originator products. If a generic drug has been developed based on a compulsory license, listed in the catalog of high priority generics, or supported by the government research grant (i.e., National Science and Technology Major Projects), it can be eligible for expedited review.

These initiatives illustrate the Chinese government’s intention to foster an innovation-conducive environment for multinational pharmaceutical companies. On the other hand, the Chinese government is keen to reduce the healthcare burden of Chinese patients by refining the regulatory framework for generics. While many hurdles for regulatory approval of innovator drugs have been eliminated, commercial success will require a sophisticated market access strategy that can fend off pressure from high quality generics. We recommend that multinational pharmaceutical companies carefully assess their competitive advantages and refine their commercialization strategy under these new initiatives.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ropes & Gray LLP | Attorney Advertising

Written by:

Ropes & Gray LLP

Ropes & Gray LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.