AEGiS-WSJ: China's Viagra Heist

Important note: Information in this article was accurate in 2004. The state of the art may have changed since the publication date.

China's Viagra Heist

Wall Street Journal - July 9, 2004

When Pfizer invented Viagra it thought it had a right to be richly rewarded for coming up with a product that would improve the lives of millions. And, more or less, that's the way it's worked out. But this week China decided to ignore market principles, its own World Trade Organization commitments and the long-term interests of its people by overturning the drug's patent.

Pfizer is appealing the action by the State Intellectual Property Office, whose decision on the erectile-dysfunction drug was made retroactively on the narrow grounds that the New York-based company had not supplied some of the information required to uphold the patent. But the appeal process is expensive. Moreover, the decision in favor of a group of Chinese pharmaceutical companies who had petitioned the SIPO demonstrates a troubling pattern. Although it is under international pressure to respect intellectual property rights, China is acceding to the demands of its own companies for patent-nullification.

Foreign businessmen who had breathed a sigh of relief earlier this year when a senior official, Vice Premier Wu Yi, was put in charge of IPR protection and promised in Washington to crack down on piracy are now wondering who's in charge. "Improving IPR enforcement is one of China's WTO commitments, and it's truly disappointing to see line bureaucrats ignoring a company's well-established patent," Patrick Powers, head of the U.S.-China Business Council, told us.

It is of course pure coincidence that China's Viagra decision comes one week before pharmaceutical companies are scheduled to duly play their assigned role of villains at a giant AIDS conference in Bangkok. Julian Morris explains how empty are the claims that HIV sufferers die because the people who run giant drug companies have no heart.

In the case of Viagra, there is little room for pulling at heart strings. The high profile nature of the drug, however, invites retaliation from the U.S. and the EU, and foreign diplomats in Beijing are already hinting such action is being considered. The timing couldn't be worse on other fronts as well. China's political and economic rise already has it teetering on the verge of becoming a major point of contention in the presidential campaigns in the U.S. While much of the criticism of China comes from mostly Democratic Party protectionists courting the labor union vote, Beijing's inaction on IPR protection leaves it open to legitimate criticism. This week's decision does not help.

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