By Kevin E. Noonan --
Policy arguments based solely on outcome rather than process are rarely effective when put into practice. This is because the desired benefits of the outcome blind the policymaker to the question of whether the desired outcome can be achieved without considering the effects (intended or otherwise) by the process. This effect can be seen, for example, in the Federal Trade Commission's crusade to ban "reverse payment"-containing settlements of ANDA litigation. The desired outcome is cheaper drug prices as soon as possible. However, against the "per se" illegal stance of the FTC, several regional Courts of Appeal, as well as the Federal Circuit, have assessed the reasonableness of such settlements and found instances where such agreements are, and are not, anticompetitive -- something an outright ban cannot accommodate. Indeed, according to some of these analyses, generic drug entry would be delayed, and unnecessary drug costs incurred, by the ban advocated by the FTC.
The same type of goal-oriented thinking is
evidenced in an Op-Ed piece (where else?) in The New York Times ("Biologics Boondoggle"). (The Times has previously voiced its
objections to the length of the data exclusivity period; see "Follow-on Biologics News Briefs - No. 11"). Today's piece was written by Anthony D.
So, director of the Program on Global Health and Technology Access at Duke
University, and Samuel L. Katz, a professor and chairman emeritus of Duke's Pediatrics
department. Their goal, like the
FTC's, is to hasten the availability of generic drugs, in their case biologic
drugs, to increase patient access and reduce costs. And, like the FTC, they have a "simple" solution --
limit the data exclusivity period of biologic drugs to 5 years, the same period
"enjoyed" by conventional, small molecule drugs. But this position ignores most of the
evidence that this is not a sufficient period to maintain innovation in
biologic drug development, and reduces to greed (never expressly stated) the
motivations of the biotechnology industry in advocating for the 12-year period
contained in both the House and Senate versions of the healthcare reform bill.
The position also ignores the evidence, ironically in a peer-reviewed scientific paper (not an op-ed piece) by their colleague, Professor Henry Grabowski, that the "proper" data exclusivity term is between 14 and 17 years (see "Professor Grabowski's Economic Analysis of data Exclusivity for Follow-on Biologic Drugs"), and that the 12-year period is a compromise from the term that the data indicates is necessary. It also ignores the current situation, where the data exclusivity period is unlimited since there are no follow-on biologic provisions under current U.S. law. Also ignored is the reality that the data exclusivity period is one of the few provisions of the two versions of the healthcare bill that are in agreement (a fault shared with President Obama; see "Snatching Defeat from the Jaws of Victory?"), or that the term could be easily reduced if it turns out to be longer than necessary.
Further, unlike other entrants in this debate (even the FTC), the article contains no compelling economic arguments. Besides bemoaning the high costs of biologic drugs, the only mention in the piece about the economics of biologic drugs, generic or otherwise, is the assertion that biologic drugs cost about the same to bring to market as conventional drugs (without any citation to the basis for this statement other than "according to studies cited by the pharmaceutical industry's own trade association"). There is also reference to the high prices of these drugs, such as Herceptin® for breast cancer, Humira® for Crohn's disease, and Cerezyme® for Gaucher's disease. The prices are high, but these drugs are used to treat life-threatening illnesses (in the Gaucher's disease example, a lethal childhood disease); while there may be a debate to be had on whether our society can afford to treat these diseases (or ethically afford not to), their cost is not the best way to frame the debate (and, according to the FTC's report, the savings achieved by follow-on biologic drugs won't be that significant anyway, reducing the costs by no more than 30%, in contrast to the 80-90% reductions seen with conventional drugs; see "No One Seems Happy with Follow-on Biologics According to the FTC").
Also not ignored are allegations about excessive "monopoly protection" (using a buzzword that always signals an intent to inflame rather than illuminate), or that biologic drug makers can extend their "monopoly" by making minor changes in the drugs (which would not preclude the generic biologic drug maker from using the innovator's data to obtain approval for the original version of the drug), or that the 12-year data exclusivity period for biologics will be used to bootstrap a longer data exclusivity period for conventional drugs (again, with no attribution except a statement that "GlaxoSmithKline has already called for 14 years of exclusivity for conventional drugs"; regardless of anything GSK might wish, changing the data exclusivity period for conventional drugs is not part of any follow-on biologics legislation introduced either as stand-alone legislation (H.R. 1427 or 1548 or S. 726 ) or as part of the healthcare bill (H.R. 3590)). As such, the suggestion is an irrelevancy, except to once again increase the sense of "urgency" the writers seem to want to engender to provoke the public to adopt their position.
That position is clearly expressed in the last paragraph of their piece:
Congress should allow biologics no more than five years of protection. That would provide drug makers plenty of incentive for innovation, and still protect consumers from the high prices that extended monopolies allow. Striking the right balance will ensure that Americans can afford the most effective medicines available.
Providing cheaper drugs is an admirable goal, for many reasons -- improved access to these drugs, sound economics, or just plain thrift. But cheaper drugs come with a price in the real world, and part of that price is to make drug development less attractive for investment and investors. That may sound cold-blooded, but anyone who has a 401k account wants her investments to be profitable, so the public should understand the need for some assurance of a return on investment. The current economic downturn cannot blind us to the folly of killing the golden goose of biologic drug development, and nothing will cook that goose more quickly and more certainly than creating a climate inimical to investment in these drugs. That isn't a goal anyone wants.