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China's Viagra Test
by Roger Pilon
13 August 2004
Roger Pilon is vice president for legal affairs
at the Cato Institute in Washington, D.C., and director of Cato's
Center for Constitutional Studies. He is the author, most recently,
of "Drug Reimportation: The Free Market Solution," Cato
Policy Analysis No. 521.
Early last month an international outcry arose
when China lifted patent protection for Pfizer's erectile
dysfunction drug, Viagra. But the matter may not be as simple
as the initial reaction suggested. Further proceedings will be necessary
to answer that. Far more important, however, they will be crucial
to answering a more fundamental question, central to China's full
participation in the global economy: Is China prepared to institute
and live by the rule of law?
That concern looms especially large when it comes
to protecting patents and other forms of intellectual property,
about which China has been so notoriously deficient. More than two
decades ago, China began instituting rudimentary protections for
agricultural property, and the benefits were evident even to the
regime's most ardent communists. Yet the principle is no different
in the case of intellectual property. As with crops, if we want
the benefits of human industry and creativity, we must have in place
a system that enables those who do the spadework to reap the rewards.
There are few industries in which that principle
rings truer than pharmaceuticals. As regulatory regimes have grown
in many countries over recent decades, much of the world's drug
research, development, and production has shifted to the United
States, which is still relatively free. But even in the U.S., Food
and Drug Administration safety and efficacy standards impose extraordinary
up-front R&D costs on drug companies. On average, from the time
a company first applies for a patent, it takes 12 to 15 years and
$800 million before the first pill reaches the market. Obviously,
if others were free to copy and sell that pill, having incurred
none of those costs, there would be no incentive to make that kind
of investment -- and none of the modern "miracle" drugs
that investment produces. No one grows crops if others are free
to harvest them.
That's why the international hue and cry went up
last month when the patent re-examination board of China's State
Intellectual Property Office (SIPO) revoked Pfizer's China patent
for Viagra. Because the effect
was to allow domestic Chinese companies to begin copying and selling
the drug themselves, the decision had all the appearances of outright
theft -- from an American company, for the benefit of domestic companies.
Indeed, just last week, China's state media reported that 17 pharmaceutical
companies, headed by Tonghua Hongtaomao Pharmaceutical Co Ltd. from
northeastern China, are hoping to set up a joint-stock company to
make the drug and sell it for half the price of Viagra.
Can they get away with that? It's here that the
devil may be in the details, but at the moment those details are
less than clear, which is why further proceedings are so important.
Pfizer's Viagra entered the Chinese market in July 2000 as a controlled
substance, not advertised, and available by prescription to a small
number of hospitals. In September 2001, however, SIPO awarded Pfizer
a so-called use permit for the drug. That's a patent not on the
ingredients but on the "novel" use to which they're put.
It seems that the active ingredient in Viagra,
sildenafil citrate, was first thought to be promising as a heart
medication. During testing, however, the chemical's use for erectile
dysfunction was noticed, and so Pfizer began seeking patents for
that use. But not all countries grant use patents. When China did
in this case, it took less than a month for 12 domestic drug companies
that use sildenafil citrate in their products to object -- not least
because granting Pfizer the patent meant that they would be unable
to market their drugs as remedies for erectile dysfunction until
the year 2014. That was the objection the patent re-examination
board upheld when it lifted Pfizer's patent last month, apparently
because Pfizer's application had failed to accurately explain the
use of the drug's key ingredients. Pfizer responds that the board
is asking for information that was not required or requested when
the company applied for the patent. It is appealing the decision.
The technical issues here are murky, to be sure,
and may involve close calls, as is often the case in patent disputes.
This is not the place to sort them out. That place, rather, is in
the appellate proceeding that will follow. And in that forum, the
larger issue could not be more clear. As this appeal is adjudicated,
it is absolutely essential -- for China, and the world that deals
with it -- that the proceedings be transparent, for all the world
to see, if that huge nation is to become a full and trusted participant
in the global economic community. The precondition for participation
in that community is respect for property rights and contracts.
Intellectual property is no less important than the real property
the farmer tills. In fact, in the modern world, it is doubtless
more important. The world will be watching.
This article was published in Apple Daily (Hong
Kong), Aug. 11, 2004.
source :-http://www.cato.org |
