Taiwan Passes Patent Linkage Legislation

The Taiwan government deserves congratulations for its recent enactment of landmark legislation establishing a Patent Linkage system for pharmaceutical products, a mechanism designed to prevent infringing drugs from being licensed while an original medication still holds a valid patent in this market. Credit goes both to the executive branch agencies that ushered through this initiative – including the Ministry of Health and Welfare, the Taiwan Intellectual Property Office under the Ministry of Economic Affairs, and the National Development Council – as well as the Legislative Yun, which passed the necessary amendments to the Pharmaceutical Affairs Act at the end of December.

“For the world’s pharmaceutical industry, Taiwan’s accomplishment in establishing a Patent Linkage system is extremely noteworthy,” says Heather Lin, Chief Operating Officer for the International Research-based Pharmaceutical Manufacturers Association (IRPMA). “It represents a crucial step forward. With the assurance of greater protection for their products, the world’s leading drug companies will be better positioned to contribute to the health of this society as Taiwan confronts the challenges of a rapidly aging population.”

Even more importantly, the adoption of Patent Linkage sends a clear signal to the international business community of Taiwan’s commitment to high standards of intellectual property rights protection. At a time when Taiwan has been lagging behind most other countries in the region in attracting foreign direct investment (FDI), it reminds multinational corporations that Taiwan is among the best places in this area for operations with confidential technology or trade secrets.

For both foreign and domestic investors, this kind of strong IPR protection will be crucial to the success of the sophisticated biomedical sector that Taiwan is aiming to develop as part of its “5+2 Innovative Industry” program to provide a promising path forward for the national economy. Studies have shown that IPR protection and market access are the two main factors that biomedical companies consider when deciding where to invest.

Previously the process of licensing approval for pharmaceutical products operated without any effective mechanism for determining whether those products were covered by existing patents. An industry survey conducted in 2012 found that since the year 2000, a total of 65 generic drugs (based on products from 22 originators) received product approval and reimbursement prices while the original drug was still under patent. What followed were lengthy legal suits that were costly and disruptive for both plaintiffs and defendants.

Under the new Patent Linkage mechanism, which will resemble the Orange Book system that has long   been in use in the United States, generic manufacturers will also benefit by having a clearer environment in which to operate, minimizing the risk of being caught up in litigation. “It will be much easier for generic producers to check on the status of an original drug, giving them much greater clarity to know which products they are free to market,” notes Heather Lin. “And an appeal process will be available for generic manufacturers if they wish to challenge claims that they are infringing.”

Establishment of Patent Linkage in Taiwan has been a key goal for the pharmaceutical industry for more than a decade. The issue first appeared in the 2006 edition of AmCham Taipei’s annual Taiwan White Paper.

Although resolving the issue was a lengthy process, Taiwan can feel proud that it has now shown itself to be a stalwart proponent of intellectual property protection, with the promise that implies for Taiwan’s continued steady upgrading to higher-value industries.