By Donald Zuhn --
On Monday, President Obama released his plan for economic growth and deficit reduction. The 80-page plan, entitled "Living Within Our Means and Investing in the Future," outlines how the President would pay for the proposals in the American Jobs Act, which he unveiled on September 8th. According to the President, the plan would also realize more than $3 trillion in net deficit reduction over the next 10 years.
In the plan's section on "Health Savings," the Administration proposes "modifying the length of exclusivity on brand name biologics" established under the Approval Pathway for Biosimilar Biological Products section of the Patient Protection and Affordable Care Act (PPACA) by "award[ing] brand biologic manufacturers seven years of exclusivity rather than 12 years under current law." In particular, the plan proposes to:
Reduce the exclusivity period for generic biologics. Access to affordable lifesaving medicines is essential to improving the quality and efficiency of health care. The Administration's proposal accelerates access to affordable generic biologics by modifying the length of exclusivity on brand name biologics to encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products. Beginning in 2012, this proposal would award brand biologic manufacturers seven years of exclusivity rather than 12 years under current law and prohibit additional periods of exclusivity for brand biologics due minor changes in product formulations, a practice often referred to as "evergreening." Reducing the exclusivity period increases the availability of generic biologics to encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products. The Administration's proposal strikes a balance between promoting affordable access to medications and encouraging innovation to develop needed therapies. The proposal will result in $3.5 billion in savings over 10 years to Federal health programs including Medicare and Medicaid.
The Administration contends that shortening the exclusivity period will produce $300 million in savings between 2012 and 2016 (but no savings between 2012 and 2014) and $3.5 billion in savings between 2012 and 2021.
The President's attempts to shorten the exclusivity period from the 12 years provided under the PPACA to 7 years has become a common refrain. Before signing the PPACA in March 2010, the President pushed hard for a reduction of the 12-year period (see "Snatching Defeat from the Jaws of Victory?"). The Administration's support for a 7-year exclusivity period can be traced back to a letter the White House sent in June 2009 to Rep. Henry Waxman (D-CA), then the Chairman (and now Ranking Member) of the House Energy and Commerce Committee, stating that a biosimilars regulatory pathway providing a 7-year data exclusivity period would "strike the appropriate balance between innovation and competition" (see "White House Recommends 7-Year Data Exclusivity Period for Follow-on Biologics"). In February, the President unveiled his 2012 budget, which specified that the exclusivity period be reduced to 7 years (see "President's Budget Proposal Increases Funding for Basic Research But Seeks to "Trim" Data Exclusivity Period and Pay-for-Delay Agreements").
As with the President's 2012 budget, his deficit reduction plan also proposes to:
Prohibit "pay for delay" agreements to increase the availability of generic drugs and biologics. The high cost of prescription drugs places a significant burden on Americans today, causing many to skip doses, split pills or forgo needed medications altogether. The Administration proposes to increase the availability of generic drugs and biologics by authorizing the Federal Trade Commission (FTC) to stop companies from entering into anti- competitive deals, known also as "pay for delay" agreements, intended to block consumer access to safe and effective generics. A 2010 Federal Trade Commission study that evaluated the universe of brand-generic settlements and 2008 drug expenditure data found that on average, these agreements delayed entry of a generic by 17 months and cost American consumers as much as $3.5 billion per year. More recently, the FTC reported that the number of pay-for-delay agreements skyrocketed from 19 in 2009 to 31 in 2010.
Such deals block access to generics and can cost consumers billions of dollars because generic drugs are typically priced significantly less than their branded counterparts. These agreements reduce competition and raise the cost of care for patients both directly, through higher drug and biologic prices, and indirectly through higher health care premiums. The Administration's proposal facilitates greater access to lower-cost generics and will generate $2.7 billion over 10 years in savings to Federal health programs including Medicare and Medicaid.
The Administration contends that the pay-for-delay ban will produce $400 million in savings between 2012 and 2016 (with no savings in 2012) and $2.7 billion in savings between 2012 and 2021. Interestingly, the President's 2012 budget indicated that a pay-for-delay ban would produce far more savings over the same periods -- in particular, $3.42 billion in savings between 2012 and 2016 and $8.79 billion between 2012 and 2021.
As with the proposal to shorten the exclusivity period, little is new about the Administration's proposal prohibit pay-for-delay agreements. Prior to the February 2010 health care meeting at the White House, the President outlined 34 key improvements to reform health care, including a ban of pay-for-delay settlements, wherein a brand-name pharmaceutical company can delay generic competition through an agreement to pay a generic company to keep its drug off the market for a period of time (see "President's Health Care Plan Includes Pay-for-Delay Ban and Biosimilar Regulatory Pathway").
Neither of the above proposals is included in the American Jobs Act of 2011, so both would require additional legislation.