BIO CEO Makes Case for 12-Year Data Exclusivity Period

    By Donald Zuhn --

Last week, CNBC anchor Joe Kernen challenged Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood over the wisdom of implementing a follow-on biologics (FOB) regulatory pathway that provides innovator biologics manufacturers with 12 years of exclusivity.  Mr. Greenwood, however, was up to the challenge, as he explained why a 12-year exclusivity period is not only necessary for the biotech industry, but good for patients.  The discussion took place on CNBC's "Squawk Box," which devoted a portion of its show last Thursday to the topic of fixing America's health care system (a video of the discussion can be found here).  Appearing with Mr. Greenwood on the healthcare "Squawk Summit" were former Secretary of Health and Human Services Tommy Thompson, former Food and Drug Administration (FDA) Commissioner Dr. Scott Gottlieb, and CNBC co-anchors Becky Quirk and Carl Quintanilla.

Mr. Kernen (at left) kicked off the discussion by saying that he felt "biotech got a pretty good deal" when it convinced both the Senate Health, Education, Labor and Pensions (HELP) Committee and the House Committee on Energy and Commerce to adopt 12-year exclusivity periods (see "House Committee Approves Health Care Reform Bill Calling for 12-Year Exclusivity Period" and "Senators Hatch and Enzi Champion 12-Year Data Exclusivity in Senate").  Mr. Kernen then asked the BIO CEO how the biotech industry was able to secure the 12-year period, stating that "there's this notion that people were bought off," and then inquiring why biotech should be excluded "from the cost pressures that everyone else is going to have to live under?"  Mr. Greenwood responded that no one had been "bought off," and that BIO had instead spent three and a half years "carefully explaining to one member of Congress at a time what the science is."  He also noted that while BIO wanted to have competition from generic companies, "you have to above all else make sure that the incentives for innovation remain."  And Mr. Greenwood explained that for the biotech industry, such incentives could only be maintained by providing innovators with 12-14 years of data exclusivity "before the generics can come in and use our [clinical] data that we pay hundreds of millions of dollars to gather."

Mr. Kernen then argued that in view of the high cost of biologic drugs, the biotech industry had opened itself up to a lot of criticism by lobbying for such a lengthy exclusivity period -- becoming a "poster child for the exorbitant costs of treatment."  Mr. Greenwood (at right) agreed that some biologics are indeed very expensive, but noted that they are also extraordinarily expensive to manufacture, with biologic drug manufacturing plants costing between $400 and $500 million to build.  Mr. Greenwood also noted that because "most of the products that we try to create fail," one has to take those costs into consideration as well.  He then returned to the issue of competition, saying that the biotech industry "was not afraid of competition," and that "competition will bring [biologic drug] prices down."  However, Mr. Greenwood reiterated that "if the competition comes too soon, . . . no one will invest the billions of dollars that it takes to make a new drug, and there won't be anything for the generic companies to copy at the end of the day anyway."

Mr. Kernen then inquired whether Europe's experience with biosimilars confirmed Mr. Greenwood's fears, asking if there had been "a loss of innovation in Europe because of . . . not protecting patents."  Mr. Greenwood responded that "Europeans used to control the biotechnology world, they used to lead in innovation in biotechnology," but that "over time, because of their price controls, because they have put so much of their focus on squeezing out the profitability of these companies in order to pay for their public system, there's been little left to invest in innovation, and people don't want to invest in those companies, and so it's moved here."  Mr. Thompson (at left) concurred, noting that while 50-60% of drugs used to be produced in Europe, 75-80% of drugs were now being produced in America, which he said "shows what a free enterprise system will do to encourage new innovation."  Dr. Gottlieb contended that the "biotech industry won this debate, so far, on the merits of the argument," adding that "people on Capitol Hill do care about real innovation -- and real innovation is coming out of the biotech sector."  In contrast, Dr. Gottlieb believed that the pharmaceutical industry was "trying to win the argument on lobbying."

Returning to the exclusivity debate, Mr. Kernen asked "how is 12 year exclusivity not fighting competition"?  Mr. Greenwood replied that "no competition means we don't have a bill," arguing that "our strategy could have been, let's block a bill, we'll have no competition forever."  Instead, he said, the biotech industry fought for a 12-year period that "is not a random number," but rather is "based on very sound data done in peer-reviewed, published articles about how long it takes to recover the investment that you make in these products."  Mr. Kernen then helped make Mr. Greenwood's case, saying that "it's almost a metaphor for the delivery of health care, because people would like to separate the profit motive completely from health care, but this is an example of how a profit motive is essential to raise private capital to get the work done that eventually results in a new drug."  Dr. Gottlieb (at right) reminded the panel that "the average patent life on a small molecule drug is about 12 years -- it's actually more than 12 years -- so the idea of a drug being protected for 12 years isn't extraordinary."

Defending the work done by the biotech sector, Mr. Greenwood noted that:

[T]he American taxpayer spends $30 billion a year on NIH, and that funds basic research.  It doesn't make drugs -- it makes good academic papers.  And then we rely upon my 1,250 little biotech companies and middle-sized biotech companies to try to take that basic knowledge and turn it into something that prevents a couple from having to bury its child, that prevents somebody from forgetting who his wife is because of his Alzheimer's . . . and that only happens if the American taxpayer -- whether it's a mutual fund or some day trader -- says "I'm going to put my money into this.  I want to bet on this."  And I keep telling all my liberal friends in the Congress, if you want to cure all of these diseases . . . don't you want this industry to be the biggest private sector, at-risk capital, money magnet in the world?

On the topic of research costs, Dr. Gottlieb noted that the size of clinical trials had risen in the past eight years from a couple hundred patients to tens of thousands of patients.  He then offered that an analysis of research costs in the current issue of Nature "made the argument that the rate of return on drugs is less than the cost of capital -- that [drug manufacturers] are actually losing money by investing their capital in drugs," a situation he said "can't continue."

Mr. Kernen argued that despite all of the talk about American innovation, "our outcomes are worse . . . than anywhere else in the world, where they spend much less money on it."  He followed by asking Mr. Greenwood whether the government, as opposed to the private sector, could innovate.  Mr. Greenwood bluntly responded that "[t]he government cannot innovate," asking Mr. Kernen "[w]hen has the government ever innovated successfully?"  Instead, Mr. Greenwood argued that "[t]he government can spur innovation," and "it's at-risk capital that actually makes the bets on what's going to work and what's not going to work."  Mr. Thompson, however, disagreed, noting that 85% of the NIH's $35 billion annual budget goes to universities, researchers, and foundations to conduct research, and that this money constitutes the "stimulus to encourage innovation."

Comments

[Keep It Real]

Greenwood: "[T]he American taxpayer spends $30 billion a year on NIH, and that funds basic research. It doesn't make drugs -- it makes good academic papers."

Wow, that's a remarkable trivialization of the contributions of publically funded research scientists to the development of drugs to teach diseases. Breathtaking, really.

"I keep telling all my liberal friends in the Congress, if you want to cure all of these diseases . . . don't you want this industry to be the biggest private sector, at-risk capital, money magnet in the world?"

If that's the goal, then why not minimize the risk and maximize the profit potential for wealthy investors even further! Deregulate the industry and provide them with 30 years of data exclusivity! Why, I can already smell the sweet aroma of pure profit.

[Keep It Real]

Treat, not "teach."

[Kevin E. Noonan]

Dear Noise:

I don't think we want universities to become R&D arms of the pharma (or even the biotech) industries. I remember one of my professors saying "Technology is when you know the answer" - the fun and fulfillment of university research is trying to find out the questions. I think, in his own focused way, that this was Mr. Greenwood's message - the university is not the right place to do drug development. It's just not their mission, and would be a terrible waste of taxpayer dollars.

That causes its own set of difficulties for academic researchers - it's why Rochester lost the Vioxx/Celebrex case, but it's also why biotech needs academics. University scientists discover the targets and the genetic polymorphisms relating to disease; the more mundane (but just as difficult) task is to find and produce a drug based on the university scientists' work.

Two different tasks, two different groups of actors.

But if you want to disparage, we'd be happy to let you do a guest post if you can show how the Grabowski study in Nature was incorrect (that is the basis for Mr. Greenwood's economic argument on the need for 12 years of exclusivity to permit investors to recoup development costs). And don't forget, the biogenerics can always do the safety and efficacy studies themselves, and then they won't need the innovators' data in the first place.

Thanks for the comment.

[6]

A method comprising: Suplexing Mr. Greenwood with the assistance of a mechanical limb.

Not anticipated. Whoops I think the government just innovated.