By Donald Zuhn --
In a report originally published by the American Enterprise Institute for Public Policy Research (AEI) late last year, the nonpartisan public policy group advocated for a 12 to 14-year exclusivity period, concluding that "the social losses from providing for fairly long exclusivity periods (twelve to fourteen years) would be small compared to what are likely to be substantial social gains from exclusivity." The report, which was authored by AEI Resident Scholar Dr. John Calfee, was one of 58 past articles that the AEI collected as part of its Health Policy Outlook series (see "AEI Believes Advantages of Longer Data Exclusivity Period Outweigh Disadvantages"). Today, we focus on another article in that series, "Facing Reality on Follow-On Biologics," which was also written by Dr. Calfee.
For those suggesting that significant health care cost savings can be obtained through the implementation of a follow-on biologics regulatory pathway, Dr. Calfee (at left) counters that "[t]here is no reason to expect a reasonable follow-on biologic law to bring dramatic cuts in health-care spending as claimed," and warns that if Congress is not careful, "it will interrupt long-term drug research programs and reduce incentives to develop new biologics." Dr. Calfee explains that the factor that allowed generic small molecule drugs to go from less than 20% of the prescription market in 1984, when the Hatch-Waxman Act was passed, to more than 50% by 2000, does not apply to biologic drugs. That factor is "interchangeability based on bioequivalence." Because biologics are more complex than small molecule therapeutics, "the 'generic' that comes from a new biologic manufacturing facility may not work the same way as drugs that patients have been using for years." As a result, a follow-on biologic "will have to be supported by far more data than is required for small-molecule generics."
In addition to issues regarding interchangeability, Dr. Calfee notes that "doctors have always been the toughest sell for generic drugs," explaining that "[w]hen choosing between a branded pioneer biologic and a quasi-generic of uncertain bioequivalence, doctors have been exceptionally reluctant to switch." Other factors that Dr. Calfee believes will preclude large cost savings include higher manufacturing costs, fewer generic versions of a particular biologic, and modestly reduced biosimilar pricing. Dr. Calfee therefore predicts that "[g]iven the vast differences between traditional generics and FOBs, there is little reason to think that legislation to create a new regulatory pathway for biologics will significantly cut health-care costs in the near future."
Dr. Calfee concludes the report with a discussion of intellectual property issues. Noting that the small molecule regulatory schemes in the U.S. and EU provide 5 and 10 years of data exclusivity, respectively, he contends that "[i]n both cases, the data exclusivity clause is an escape valve designed to preserve research and development (R&D) incentives in case patents do not do the job." Dr. Calfee argues that such an "escape valve" would be relevant for follow-on biologics, since the patents that protect biologics are, like the drugs themselves, more complex than their small molecule counterparts, and therefore, "may also be more susceptible to challenge than traditional small-molecule patents."