In recent months, Techdirt has reported on an important development in the world of medicine, as both India and Brazil have allowed local companies to produce cheap generic versions of drugs covered by patents. In an even bigger blow to Western pharmaceutical companies, it looks like China is following suit:

China has overhauled parts of its intellectual property laws to allow its drug makers to make cheap copies of medicines still under patent protection in an initiative likely to unnerve foreign pharmaceutical companies.

Even worse for those companies, the proposed legislation would allow Chinese generics to be sold in other countries:

For "reasons of public health", eligible drug makers can also ask to export these medicines to other countries, including members of the World Trade Organisation.

Both ACTA and TPP have clauses that would probably make that more difficult - another reason why China is unlikely to sign up for either.

As the Reuters article quoted above explains, China has prepared this move carefully, consulting with other countries that have taken this route in order to prevent it being challenged in international forums like the WTO. It is yet another example of China moving up the production chain:

China's stable of generic drug makers has been producing the key ingredients - or active pharmaceutical ingredients (APIs) - in medicines for years, exporting them to foreign drug makers, which then sell the patented finished products back to China at prices which the average Chinese citizen often cannot afford.

Pharmaceutical companies in the West will doubtless fight this directly in the courts and indirectly through lobbying of their respective governments, but it's hard to see China backing down, since that would have negative consequences for the health of its citizens and entail an unacceptable loss of face.