On December 17, 2021, the Supreme People's Court made civil Ruling of Zhimin final No. 388 (2021) on the withdrawal of the appeal of the appellant (the original plaintiff) AstraZeneca AB against the appellee (the original defendant) Jiangsu Aosaikang Pharmaceutical Co., LTD. In this ruling,  the Supreme People's Court has conducted an anti-monopoly examination of "Drug Patent Reverse Payment Agreement" for the first time.

In this case, Astrazeneca acquires the patent rights involved from BMS, an outsider to the case.  The patent expires on March 5, 2021. The compound defined by claim 8 is saxagliptin, that is, the active ingredient in the diabetes drug saxagliptin tablet.  The outsider of the case, Jiangsu Vcare Pharmaceutical Technology Co., LTD. (Vcare), had requested invalidation of the patents involved in the case in 2011; later, BMS and Vcare signed a Settlement Agreement, stipulating that Vcare would withdraw the request for invalidation within 5 days from the effective date of the agreement, and BMS and the subsequent patentee (astrazeneca in this case) undertake not to pursue the actions of patent involved in the case conducted by Vcare and its affiliates (Orasecon in this case) after January 1, 2016 (more than five years prior to the expiration of the patent protection term); and later, Vcare withdrew the request for invalidation in accordance with the agreement, and its affiliated party Osecan applied for registration, manufacture, use, promise to sell and sell saxagliptin tablets after the agreed date.  Astrazeneca filed a lawsuit with the Nanjing Intermediate People's Court in Jiangsu province, claiming that Orsaikan infringed the patent rights.  

The court of first instance held that as a related party of Vcare, Orsecom had the right to implement the patent involved in the case according to the Settlement Agreement, so it rejected all the claims of Astrazeneca AB.  

Astrazeneca appealed to the Supreme People's Court, and later withdrew its appeal on the grounds that it had reached a settlement with Orsecon.

In examinationing the application to withdraw the appeal, the Supreme People's Court found that the Settlement Agreement involved in the case complied with the appearance of a so-called "Drug Patent Reverse Payment Agreement".  So-called "Drug Patent Reverse Payment Agreement " is a direct or indirect interest compensation the drug patent right holder promised to give to the generic drug applicant (including reducing non-interest of the generic drug applicant and other disguised compensations), and the generic drug applicant undertakes not to challenge the agreement of the validity of the drug related patents or delay access to the patent medicine market.

The Supreme People's Court pointed out that in the drug patent case involving the drug patent holder and the generic drug applicant, the People's Court should generally examination to a certain extent whether a case agreement or settlement agreement with the appearance of a so-called "Drug Patent Reverse Payment Agreement" violates the Anti-monopoly Law.  However, considering the highly professional and complex nature of the anti-monopoly examination, such examination in non-monopoly cases is generally limited to preliminary examination.  In addition, the Supreme People's Court held that the Settlement Agreement involved in the case is a "Drug Patent Reverse Payment Agreement" that does not challenge the validity of patent rights. The core of the judgment of whether it is suspected of constituting a monopoly agreement regulated by the Anti-monopoly Law lies in whether it is suspected of excluding and restricting the competition in the relevant market.  In this regard, the actual situation of signing and performing relevant agreements may be generally compared with the hypothetical situation of not signing and performing relevant agreements, focusing on the possibility of invalidation of drug-related patent rights due to the invalidation request if the generic drug applicant fails to withdraw the invalidation request.  Then, based on this, whether and to what extent relevant agreements have caused competition damage to relevant markets will be analyzed. Among them, if the generic drug applicant does not withdraw the invalidation request, the possibility of the patent right being invalid is the primary issue.  In principle, in order to make the generic drug applicant withdraw the invalidation request, and give the patent right gives high interest compensation without justified reasons, the patent right holder may regard it as an important factor to determine that the patent right is more likely to be invalid due to the invalidation request put forward by the generic drug applicant.  

Specifically, applying to this case, although the Settlement Agreement involved in the case complied with the appearance of "Drug Patent Reverse Payment Agreement", considering that its protection term has expired, the possible illegal monopoly status no longer exists, and there is no barrier to enter the market related to the drug involved in the case based on the patent right involved in the case.  There is no need or urgency to further ascertain whether the Settlement Agreement involved in the case is suspected of violating the Anti-monopoly Law.

Meanwhile, BMS and Vcare, as the signatories of the Settlement Agreement involved in the case, did not participate in the lawsuit and lacked relevant evidence in the examination procedure of the invalidation request involved in the case. According to the existing evidence,  the present case is still difficult to determine whether BMS allowed Vcare and its affiliates to enter the market related to the patent drug involved in the case in advance has legitimate reasons other than withdrawing the invalidation request and the possibility of the patent right involved in the case being invalidated due to Vcare's invalidation request.  Accordingly, conditions are not yet in place to further determine whether the Settlement Agreement involved in the case is obviously suspected of violating the Anti-monopoly Law.  Therefore, the case may not be subject to further examination and treatment. Due to a preliminary examination, currently, it is hard to get the conclustion that the Settlement Agreement involved in the case is obviously suspected of violating the Anti-monopoly Law, and there is no longer necessary for further examination. Although the first-instance judgment fails to conduct anti-monopoly related examination on the Settlement Agreement involved in the case, its final ruling result is still correct, therefore, the Supreme People's Court ultimately allowed Astrazeneca to withdraw its appeal.