By Philip Stevens, Executive Director of Geneva Network
Taiwan’s downward revision of its growth and export forecasts last month confirms the need to diversify from its main business of exporting of manufactured commodities.
The government’s 5+2 Industrial Innovation Plan aims to do just that by restructuring Taiwan’s economy towards higher value knowledge-based industries such as biotech, green energy and defence. It includes upgrades to Taiwan’s system for the protection of intellectual property, including the introduction of a patent linkage system.
“The 5+2 industries plan focuses on the transformation of Taiwan’s industrial development,” according to Kung Ming-hsin, former deputy minister for the National Development Council (NDC) and current minister without portfolio.
As an established provider of manufactured goods to the world’s supply chains, Taiwan’s industries have been forced to compete on cost rather than value, says Kung. That diverts domestic companies away from Research and Development (R&D) and prevents them from moving up the value-chain.
The government’s remedy is to support the building of stronger innovative industries in Taiwan. One main area of focus is upgrading the domestic biomedical industry, one of the five pillars of the new plan.
The Taiwanese pharmaceutical industry is heavily slanted towards generic manufacturing, which means narrow margins and little economic value domestically.
Transforming it into a sector built on innovation rather than copying requires partnership and collaboration with foreign companies. But investment remains elusive.
Intellectual property is a major roadblock. In its latest research report on Taiwan, market insight consultancy IHS Markit says “challenges in intellectual property rights policies persist, deterring multinational companies from investing in the sector….One major issue is that many patent-infringing drugs are being approved and included in the reimbursement list (of the public health system).”
Encouragingly, the Tsai administration recognises that a system where the national drug regulator approves and the public health system reimburses patent-infringing drugs is incompatible with Taiwan’s ambition to become an innovation-driven economy.
So, Taiwan is one of several countries preparing to introduce a ‘patent linkage’ system to reduce the numbers of generic drugs gaining marketing approval before the originator patent has expired.
The plan, an amendment to 2018’s Pharmaceutical Affairs Act, will require the Taiwan FDA to notify originators when competitors request market approval for a generic version of a patented drug. Patent linkage is therefore a mechanism for the early resolution of patent disputes, which injects certainty and transparency into the IP framework.
Generic drug manufacturers will also benefit by getting the necessary information to contest the validity of questionable originator patents. They will be able to more rapidly launch generic drugs that don’t carry a litigation risk, accelerating patient access.
Greater certainty over their IP rights through the proposed patent linkage system will embolden potential investors in Taiwan, particularly in the innovative life science industry. Greater investment and partnership by these companies will drive innovation within the Taiwanese pharmaceutical industry. Economic growth and value-added jobs will follow.
Despite the government’s ambitious plans, problems are emerging. Original plans for the patent linkage scheme covered both normal “chemical” pharmaceuticals and newer high-technology “biologic” drugs. Local pharmaceutical companies want biologic drugs excluded from the final law.
This would be a mistake. Biologic drugs – medicines produced from or containing living organisms – are an increasingly important component of the clinical toolkit. They are responsible for startling advances in the treatment of cancer, arthritis and many other diseases.
But biologic drugs are expensive to manufacture, with a large-scale biotech facility costing up to five times more than a standard medicine factory. R&D is costlier still. Why risk such a sizeable investment in Taiwan if a company’s IPRs are not fully protected?
There are fears that the inclusion of biologics in the patent linkage law will disadvantage the burgeoning Taiwanese biosimilar industry, which manufactures similar versions of original biologic drugs. It’s also a strategic sector the government hopes to develop.
The South Korean experience suggests such fears are unfounded. It has a patent linkage system covering biologics, yet manufactures two in three biosimilars sold worldwide, according to Business Korea. South Korea’s exports of biosimilars grew by 29% in 2017 to US$1.37bn, accounting for 34% of its total pharmaceutical exports.
This suggests a thriving biosimilars industry can emerge within a strong intellectual property framework, and patent linkage is no threat. This view is likely shared by the Chinese government, currently considering its own patent linkage system.
A robust IPR framework is essential for achieving the government’s ambition of moving to a high-value, knowledge-based economy. Within that, a broad patent linkage system will put Taiwan’s IP system in line with the world’s most competitive knowledge economies, including the United States, Korea and Singapore. The new reform should be welcomed.
Philip Stevens is Executive Director of Geneva Network, a UK-based research organisation focusing on international innovation and trade policy
【2019-03-28 / Up Media】
