From patent application to final approval and marketing, a new drug often takes more than ten years. During this period, the time spent on clinical trials and drug review and approval directly compresses the actual protection period of patent rights.

The protection period for ordinary invention patents is twenty years. But after a new drug is launched, the real time to “monopolize the market” may only be a few years—because the patent protection period starts from the filing date, not from the launch date. If the approval takes ten years, the patent protection period is correspondingly reduced by ten years.

The PTE system aims to address this issue—providing corresponding compensation for the patent protection period taken up due to new drug marketing review and approval.

This article systematically reviews the core rules and practical points of this system.

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1. Applicable Subjects and Scope of PTE (1) Which drugs can apply for PTE?

PTE is limited to innovative drugs approved for market marketing by the State Council’s drug regulatory authority and improved new drugs that meet the requirements.
Innovative drugs are classified as Class 1 drugs, meaning they are “globally new” drugs not yet marketed domestically or internationally. This means that drugs that have been marketed overseas but have not yet been marketed in China (such as Category 5.1 chemical drugs) cannot apply for PTE patents even if approved for marketing in China.
The scope of application for improved new drugs is strictly limited to the following five categories:

Category	Specific circumstances
Category 2.1 chemical drugs	Drugs with known active ingredients forming esters or salts
Chemical drugs are classified as Class 2.4	Drugs containing new indications of known active ingredients
Preventive biological products are Class 2.2	Vaccines with improved strains and strains
Therapeutic Biologics Class 2.2	Biologics with new indications
Traditional Chinese medicine is classified as category 2 and 3	Enhance the functions of traditional Chinese medicines for indication

(2) Which patents can be applied for for patents eligible for PTE

compensation, limited to invention patents related to new drugs, specifically including:

• Product invention patents for pharmaceutical active substances
• Invention patent for preparation method
• Patent for pharmaceutical use invention

(3) Which patents do not fall within the scope
of PTE compensation In practice, the following types of patents generally cannot receive PTE compensation:

• Intermediate and metabolite patents—patents for products, preparation methods, or pharmaceutical uses that are not considered active pharmaceutical substances.
• Formulation patents, dosage form patents, and compound composition patents—these are not patents for active substances and do not meet the patent type requirements for PTE.
• Patents for simple detection methods and quality control methods are not related to new drug inventions.
• Packaging and design patents—not considered invention patents.
• Utility model patents and design patents—PTE applies only to invention patents.

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2. Applicable Conditions for PTE Applications for PTE must simultaneously meet the following six conditions:

1. Time condition: The patent authorization announcement date must be earlier than the date the drug marketing authorization application is approved, i.e., “patent first, drug later.” This requires pharmaceutical companies to establish patent layouts early in R&D to ensure patent authorization is granted before drugs are approved.
2. Patent validity: When submitting a compensation claim, the patent right must be in a valid state.
3. No duplicate compensation: The patent has not received compensation for the drug patent term itself, i.e., “one patent, one subsidy.”
4. Technical Coverage: The claims for the compensation patent must include technical solutions related to the new drug that has been approved for marketing. Technical solutions for new drugs are subject to the drug structure, composition and content, approved manufacturing processes, and indications approved by the drug administration. If the designated claims do not include technical solutions related to the new drug, no compensation will be provided.
5. One Drug, One Benefit: If a drug has multiple patents simultaneously, the patent holder can only request compensation for one patent.
6. One Specialty, One Drug: If a single patent involves multiple drugs at the same time, only one drug can be requested for compensation for that patent.

3. Rules

for Calculating the PTE Compensation Period The key to calculating the PTE compensation period is to focus on two key points and two upper limits.
Two time points:
the patent application date. From that day on, patents have a 20-year protection period.

• New drug marketing authorization date. From this day on, patent holders truly could “monopolize the market.”

The interval between the two is the time PTE needs to compensate.
Two upper limits: compensation period not exceeding 5 years; The total effective patent term after a new drug is launched shall not exceed 14 years.

The calculation is divided into three steps:
Step 1: Calculate the basic compensation days. The
basic compensation days = new drug marketing authorization date – patent application date – 5 years
. Step 2: Determine the preliminary compensation period
. If the basic compensation period is ≤ 5 years, the preliminary compensation period is the actual number of days;
If the basic compensation period is > 5 years, the preliminary compensation period is 5 years.
Step 3: Use the 14-year upper limit for final calibration

• If the preliminary compensation period + the remaining validity of the new drug after the new drug is launched ≤ 14 years, the final compensation period is the preliminary compensation period;
• If the preliminary compensation period + the remaining validity period of the new drug after marketing is > 14 years, the final compensation period = 14 years – the remaining validity period of the new drug after the new drug is launched.

Let me give three intuitive examples to understand three scenarios:

Scenario 1: From patent application to listing, it takes 8
years,
totaling 8 years. Subtract the previous 5-year benchmark period: 8 minus 5 equals 3 years. If 3 years is less than 5 years, it does not exceed the limit, so the preliminary compensation period is 3 years. At this point, the remaining validity period of the patent is still 12 years. 12 years plus 3 years equals 15 years, exceeding the 14-year limit.
The final compensation period should be compressed to: 14 years minus 12 years, equals 2 years. Final compensation: 2 years.

The key point is: the basic compensation hasn’t hit its ceiling, but the 2014 annual cap has been hit.

Scenario 2: From patent application to listing, a total of 6 years

Total duration is 6 years, minus the previous 5-year base period: 6 minus 5 equals 1 year. The basic compensation period is 1 year. If the period is less than 5 years, the limit is not exceeded. The remaining validity of the patent is 14 years. 14 years plus 1 year equals 15 years, exceeding the 14-year limit.
The final compensation should be compressed as: 14 years minus 14 years equals 0 years. Final compensation: 0 years.

The key point is: although the basic compensation is one year, the remaining patent period after listing has already been used for 14 years, leaving zero compensation space.

Scenario 3: From patent application to market listing, the total period is 13 years

The total duration is 13 years, minus the previous 5 years of the base period: 13 minus 5 equals 8 years. Eight years is greater than five years, exceeding the limit, so the compensation period is at most five years. After the IPO, the remaining validity period of the patent remains for 7 years. 7 years plus 5 years equals 12 years, not exceeding the 14-year limit, final compensation: 5 years.

The key point is: the basic compensation has reached its peak (5-year limit), but the 14-year limit has not been reached.

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4. Limitations

on the scope of protection during the compensation period After entering the PTE compensation period, the scope of patent protection is narrower than before—it no longer covers the full scope of the original patent claims, but is limited to the specific drug and indication approved for market by the NMPA.
Specific limitations for three types:

• The protection scope of product claims is limited to marketed new drugs for approved indications;
• The protection scope of claims for pharmaceutical use is limited to approved indications for newly marketed drugs;
• The scope of protection for the preparatory method claims is limited to the production process filed with the NMPA for marketed new drug products for approved indications

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5. PTE Application and Approval Process

(1) Who can apply and when to apply
for PTE Requests? The patent holder must submit them. If the patent holder and the drug marketing authorization holder are inconsistent, written consent from the drug marketing authorization holder shall be obtained.
For general drugs:
Within 3 months from the date the drug receives marketing authorization in China, submit a request to the National Intellectual Property Office and pay the corresponding fees. If the fee is not submitted or paid in full within the deadline, a decision will be made not to provide compensation.
For drugs with conditional marketing authorization:
the application deadline is the “official marketing authorization date,” and the request must be submitted within 3 months from the date of formal marketing authorization; The starting point for calculating the compensation period is the “Conditional Marketing Authorization Date.”
(2) What materials
need to be submitted Core request documents: The PTE request form must specify marketing authorization information (drug name, registration classification, approved indications, marketing authorization date, etc.) and patent-related information (patent number, designation of claims related to the new drug), It also explains why the designated claims include technical solutions related to the new drug and the basis for calculating the compensation period.
Proof of rights and subjects: If the patentee and the drug marketing authorization holder are inconsistent, a written consent form must be submitted; Copies of the patent register, patent payment vouchers, etc., to prove the patent is valid and that no PTE compensation has been received.
Drug and technical solution certificate: drug registration certificate and attachments; A comparison table of features between the new drug’s related technical solutions and designated claims, used to demonstrate the inclusion relationship between claims and approved new drugs.
Content involving trade secrets may be coated or masked, but this must not affect the determination of whether the specified claims include technical solutions related to new drugs.
(3) Approval process

• If the examination does not meet the requirements, the Patent Office will give the requester at least one opportunity to submit opinions or amend documents. If still not met, a decision not to provide compensation shall be made.
• If the conditions are met, the Patent Office shall decide to grant compensation within a specified period and inform the compensation period.

The decision to grant compensation is recorded in the patent register and announced in the patent gazette.

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6. Administrative reconsideration

According to Announcement No. 560 of the National Intellectual Property Administration, if the patent holder, or interested parties involved in infringement disputes or have already filed drug registration applications for related patents, and are dissatisfied with the decision made by the National Intellectual Property Administration regarding whether to grant compensation for patent rights during the term of the patent, they may apply to the National Intellectual Property Administration for administrative reconsideration. The application for reconsideration shall be submitted within 60 days from the date of knowing or should have known of the administrative act.

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7. Practical Suggestions

First, patent layout should be planned in advance. Pharmaceutical companies should accurately grasp the main points of technological innovation and design claims with precision, ensuring the broadest possible protection while maintaining legal stability. At the same time, core patents and peripheral patents are combined and positioned together to form a tight patent network. This avoids a single patent involving multiple drugs simultaneously, and ensures that each new drug has its own patent layout through separate or divisional applications.
Second, patent applications and drug applications need to coordinate progress. Pharmaceutical companies need to balance drug approval and patent filing strategies, shortening examination cycles through pre-examination and priority examination, ensuring that the patent authorization announcement date precedes the drug approval date.
Third, conditional approval and normal application must be balanced. Conditional approval to accelerate market launch may shorten PTE compensation time, while normal filing takes longer but can be offset through PTE. Pharmaceutical companies need to make comprehensive decisions based on factors such as patent examination progress, market competition landscape, and product lifecycle.
Fourth, establish a systematic intellectual property management system. Monitor and track the entire process of intellectual property application, registration, and registration, comprehensively monitor the timelines for key points such as fee payment and document responses, and ensure that PTE requests are submitted promptly within three months after drug approval.
Fifth, focus on the challenges posed by administrative reconsideration to PTE decisions. When applying for PTE, original drug companies must ensure that technical solutions match and that supporting materials are sufficient to handle possible administrative reconsiderations.

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8. Conclusion

Since the implementation of China’s pharmaceutical patent term compensation system, efforts have been made to balance incentivizing innovation with ensuring drug accessibility. For original research drug companies, PTE is an important tool for recovering R&D investment and extending market exclusivity; For generic drug companies, the clarification of PTE review rules provides clearer design space and paths for challenges to circumvent. Proactively tracking key time nodes and coordinating patent layout and application strategies in advance is a pragmatic choice to maximize patent value within this rule system.

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