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Pfizer v. China
Legal experts claim an impending courtroom battle over Viagra proves that China is cleaning up its intellectual property act.
August 26, 2004
Some pharmaceutical industry insiders figured the fix was in last month, when 17 Chinese companies announced plans to develop a domestic version of Viagra, just five weeks after Chinese officials revoked Pfizer’s patent on the erectile dysfunction drug.
Pfizer cried foul, and vowed to appeal the decision in the Chinese courts. It wasn’t difficult for the world’s largest drug maker to cast China as the bully in this drama, given the nation’s lackluster record of protecting intellectual property rights.
But some legal experts say Pfizer’s looming legal battle is a positive indication that China’s system for dealing with patents is maturing.
“As long as people are interested in dealing with commercial disputes through court, it is a sign that a country is developing a proper legal system rather than ignoring it,” says Doug Clark, an intellectual property rights attorney who has practiced law in China for about 10 years.
Strong medicine
For its part, New York City-based Pfizer is painting the dispute as a bellwether of intellectual property protection in China.
The last thing Pfizer wants to see is a flood of Chinese-made generic Viagra hitting the global market. The small, blue pills earned Pfizer $1.9 billion worldwide in 2003.
Bryant Haskins, director of corporate media relations for Pfizer, says the upshot of its Viagra tussle in the Beijing People’s Immediate Court will determine the fate of Pfizer’s plan to introduce 15 new drugs in China over the next five years.
“Whether our IP rights are being recognized would affect how we proceed in doing business (in China) in the future,” Mr. Haskins says. But he adds that Pfizer has no plans to withdraw from China.
China’s drug market had an estimated value of $7.4 billion in 2003, up from $6.1 billion in 2002, according to IMS Health, a pharmaceutical industry research firm based in Fairfield, Connecticut.
Pfizer’s patent problems are not solely in China.
Patent offices and courts around the world routinely wrestle with patent challenges, whether they deal with software or biotechnology, says Peter Yu, director of the Intellectual Property and Communications program at Michigan State University’s College of Law.
In 2002, an appeals court in the United Kingdom invalidated Pfizer’s patent that claimed to give the company the exclusive right to use a group of enzyme blockers, including Viagra’s key ingredient, sildenafil citrate.
Even in the United States, the Viagra patent is a source of contention. In 2002, Pfizer sued Eli Lilly/ICOS, GlaxoSmithKline, and Bayer Pharmaceuticals, all makers of erectile dysfunction drugs that employ enzyme blockers similar to sildenafil citrate.
The suit sparked a review by the United States Patent and Trademark Office of the Viagra patent. The review is still pending, and no decision has been made.
Pfizer officials have accused China’s patent office of giving preferential treatment to its local companies. But evidence says otherwise, says Mr. Clark, who is with Lovells, an international law firm based in London.
For example, GlaxoSmithKline successfully fended off a Chinese challenge to its diabetes drug in China’s patent office two years ago, says Pam Duncan, the London-based company’s spokeswoman.
Small victory?
Still, China’s overall track record on protecting intellectual property shows why business advocates and analysts are grumbling about the Pfizer case.
Piracy is such a big problem that winning court battles on intellectual property disputes doesn’t go very far toward protecting a company’s bottom line, says Robert Kapp, president of the U.S.-China Business Council, a lobbying group in Washington, D.C.
Counterfeit Viagra and local brands touting the same effect for less money are plentiful in Chinese pharmacies. Just six months after Pfizer began selling Viagra in China in 2000, the state-run media reported that 90 percent of the Viagra pills sold in Shanghai were fake.
It’s no surprise that the market for cheap Viagra in China is vast. One pill now fetches $12 in a country where 70 percent of workers earn between $100 and $300 a month. The 17-company consortium planning to produce a generic version, would sell their product at half that price, according to a state media report.
Given the rampant problem with piracy, it’s hard for pharmaceutical companies to tally how much they lose in revenue as a result of counterfeit drugs, says Mark Grayson, vice president of the Pharmaceutical Research and Manufacturing Association in Washington, D.C.
On China’s Commerce Ministry Web site last year, staff of the U.S.-China Business Council found links to eight or nine Chinese companies that produced drugs using sildenafil citrate, Mr. Kapp says.
Senior ministry officials said they didn’t know about the links and “were mortified” when the council brought up the issue, says Patrick Powers, director of the council’s China operations. The ministry got rid of the links within 24 hours.
Viagra’s market share in China has remained small because it’s sold only in hospitals, says Mr. Haskins, who declines to disclose the sales figures.
Whether Pfizer will win the appeal is difficult to predict, although legal experts say the case will receive more careful treatment from the Chinese court because it has received international publicity.
Chinese courts are relatively new at dealing with patent cases, having done so only within the last 10 years, Mr. Clark says. If Pfizer wins, it would hold the patent until the patent expires in 2014.
Chinese patent office officials didn’t respond to an e-mail request for comments about Pfizer’s patent. In the few instances when the patent office talked publicly about its Viagra decision with reporters in China, they said they wanted to be careful about granting patents.
“We are very cautious when we grant a patent, because a patent means a market, and that may mean allowing the monopolization of a market,” an anonymous spokeswoman told Agence France-Presse last month.
Pfizer maintains that it still holds the patent for Viagra until the court says otherwise. Pfizer has until October to file an appeal. source :-http://www.redherring.com/ | 
