An empirical study on the role of patents in fostering local pharmaceutical innovation in China

Abstract

International analysts tend to view China as a major beneficiary of the TRIPS Agreement, particularly concerning the effects of the stronger patents of TRIPS on local innovation. Chinese policymakers were also motivated to adopt TRIPS IP reforms by the expectation that stronger patents would stimulate China’s development and improve its ability to match the performance of developed countries more rapidly. Yet, due to the lack of empirical studies, these assumptions remain theoretical. This research investigates empirical evidence to test these assumptions and determine actual impacts on China’s pharmaceutical innovation. It seeks to answer two main questions: (1) how has the TRIPS legal framework affected China’s ability to formulate a pro-development patent policy for pharmaceuticals? (2) how has China’s patent policy affected domestic pharmaceutical innovation? The investigation adopts a public health perspective, through comparative legal analysis and statistical study. The empirical assessment was built on country-level data collection. The legal evaluation has revealed that China has adopted a pro-patent policy for pharmaceuticals, in implementing TRIPS, Chinese policy-makers did not balance intrinsic industry interests in strong patent protection against wider socio-economic interests and issues under Chinese law and legal practices. This research has found that China’s pro-patent policy has had multifaceted economic effects on innovation. Whereas, positive effects of patent strengthening were indentified empirically through innovation indicators, including patent applications and grants, R&D expenditure and ITT inflow, the study also revealed various problems and challenges. Local innovation remains imitation-oriented, little R&D is devoted to researching cures for major 4 diseases, more MNC patents control leading and upstream technologies, and patent litigation has greatly increased. These developments do not augur well for China’s ability to approach developed countries in pharmaceutical innovation. The Chinese experience revealed in this thesis contrasts with conventional expectations of the effects of TRIPS, at least in the Chinese pharmaceutical industry.