The Chinese government has announced a new pharmaceutical policy that will include tax breaks to promote generics, allow compulsory patent licensing during public health emergencies or shortages of key drugs and prevent physicians from prescribing branded medicines.

As part of the new policy, the trade journal Fierce Pharma reports, some qualified generics producers could be designated as high-tech enterprises and enjoy a 15% corporate tax rate, compared to the 25% companies without this designation would pay. 

China’s health department will compile and actively update a drug list that encourages companies to produce generic versions of their drugs. This would include medications for rare diseases, major infectious diseases and pediatric treatments, as well as important drugs that are short.

A provision of the policy that could be of concern to foreign companies manufacturing or selling drugs on the Chinese market would foresee tweaking intellectual property protection. This, the government said, would serve to “strike a balance between the interests of patent holders and the public.”

Going forward, China will require that all medications, whether branded or generic, be listed under their generic names in the procurement catalogs hospitals use to purchase drugs. The generics will also be covered by national insurance under the same standards.

Generics already account for the lion’s share of pharmaceuticals approved in China. Of the around 170,000 drug approvals issued by the Chinese food and drug administration (CFDA) more than 95% are believed to be generics, Fierce Pharma said. As many of these drugs are considered less effective than the original formulation, the CDFA has launched a generics bioequivalence evaluation campaign.

Multinational drugmakers continue to invest heavily in China. Many big-name Western firms have manufacturing capacity in the People’s Republic and joint ventures or alliances with Chinese players.

Western players have frequently complained about patent infringement by Chinese pharmaceutical producers. The US Department of Commerce has noted that in China companies may not bring patent infringement suits until the copied product hits the market, injunctions are rarely granted, and damages awarded are usually too low to cover lost revenue.