Jan 16, 2020 - World

U.S.-China trade deal could be good for Big Pharma

Illustration of an opened pill capsule with Chinese stars. Money is falling from the inside of the pill.

Illustration: Aïda Amer/Axios

President Trump's new trade agreement with China includes patent protections that could be a big boon to drug companies.

Why it matters: China's enormous population is a lucrative market for pharma, and the country is also actively trying to build up its own domestic drug industry. But it's not guaranteed that China will actually abide by the agreement.

Details: The trade agreement would set up patent protections in China that are similar to U.S. law.

  • It would help protect branded drugs from generic competition while they're still under patent protection.
  • Drugmakers could also receive a patent extension if there's a delay during the approval process.

The big picture: This is good news for Big Pharma, especially after biologic protections were recently removed from the trade agreement with Mexico and Canada that's currently making its way through Congress.

  • But the agreement doesn't include a measure giving drugs a certain patent exclusivity period, something the industry has been pushing for in trade deals in the recent past, specifically for biologics.

Between the lines: If China complies with the agreement, it'd be great for American drug companies, which could enter the Chinese market with the expectation that their patents would be respected. But it could also be good for China's budding drug industry.

  • "This is a way for them to be able to create a domestic industry but also maintain affordability and access, which China is going to do anyway because it’s a controlled economy," said Chris Campbell, chief strategist at Duff & Phelps.

The bottom line, from Axios China reporter Bethany Allen-Ebrahimian:

  • It's up to China to implement the legal protections it has agreed to in the deal -- but significantly, the agreement does include six pages outlining an evaluation and enforcement mechanism. That's a step in the right direction.
  • But Chinese government officials have previously falsified data, and China has reneged on agreements in the past.

Go deeper: China offers drug companies market access in exchange for lower prices

Go deeper