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China and Potential Opportunity for Pharmaceutical Investments

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Although many areas of contention exist in trade relations between the United States and China, ties are strengthening between the two countries, particularly in the areas of science and technology. A recent Innovation and Investment Summit in Houston, for example, focused on American businesses that need China’s market and China’s need to tap into technological innovation.

Beijing’s financial district and court system is evolving to meet international investment and litigation needs.

Beijing’s financial district and court system is evolving to meet international investment and litigation needs.Potential pharmaceutical investment opportunities in China may involve more complexity than opportunities in countries with longer histories of partnerships with U.S. businesses, but opportunities in China represent tremendous potential – particularly in technology-heavy sectors like pharmaceuticals. Here are some things American investors should know about the potential for pharmaceutical investment in China.

China Pouring Resources into Pharmaceutical Innovation

The pharmaceutical investment market in China is heating up. New drug support policies in China have meant that China isn’t an emerging market any longer, but is becoming a potentially strategic partner. By the year 2020, the pharmaceutical industry in China is expected to be worth $1 trillion – a market big enough that it can’t be ignored. Moreover, local and international investment firms have stepped up and developed medical and pharmaceutical funds that invest in China, and many Chinese scientists who had previously been working overseas are now returning to China to start businesses there.

International Mergers and Acquisitions Picking Up

The China Food and Drug Administration (CFDA) is now a member of the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use. This move will allow China to participate in the new drug development wave that is taking place in the U.S. and Europe. In only the past year, many Chinese pharmaceutical companies and investment firms have engaged in international mergers and acquisitions. An estimated 17 mergers and acquisitions were initiated by Chinese pharma companies in 2017, and seven of them were worth more than half a billion dollars each. Though Chinese R&D lags behind that in Europe and America, partnerships, mergers, and acquisitions are expected to change this.

IP Litigation in China Not the Kafkaesque Nightmare Many Envision

The Chinese patent litigation system is less impenetrable than it was only a few years ago.

The Chinese patent litigation system is less impenetrable than it was only a few years ago.Finally, there has been some correction to the notion that patent infringement litigation in China is a baffling, unwinnable ordeal. Until 2014, westerners had hardly any access to information about Chinese patent litigation, but judicial reform in China has changed this. Much of the information shared since 2014 has challenged ideas that patent enforcement in China is virtually impossible. In fact, foreign patent holders are as likely to litigate in China s domestic patent holders, and surprisingly, they have higher win rates as well as higher average damages.

The Chinese intellectual property legal system is now more mature, and China increasingly wants to be seen internationally as promoting fairness in IP litigation, so those who may have balked at dealing with intellectual property in China may want to take a second look. Recent changes to China’s patent laws now permit an expanded range of subject matter that is eligible for patent protection there. Furthermore, business method patents tied to technical innovations are now permitted.

The bottom line is, dealing with drug patents in China is not as risky as many people think. And with China pouring so many resources into pharmaceuticals, drug patent protection is expected to conform more closely to western expectations as the next few years proceed.

Fear of litigating drug patents in China has turned many American companies against the idea of expansion in China, but things are changing. China is strongly interested in pharmaceutical investment as well as partnerships with American and European companies. The court system in China is also evolving, and data indicate that in practice, intellectual property lawsuits in China are more straightforward and winnable than most people realize. In short, it’s time to take a second look at China with regard to technological and pharmaceutical investment.

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