Follow-on Biologics News Briefs - No. 8

    By Donald Zuhn --

President Obama Wants to Speed Up Introduction of Generic Drugs

In a health care town hall meeting held in Portsmouth, NH last week, President Obama told attendees that he wanted to speed up the introduction of generic drugs into the marketplace.  His comment came during an exchange with a man who complained about being forced to try two different generic versions of Lipitor after taking the brand drug for ten years.  After noting that "in nine out of 10 cases, the generic might work as well or better than the brand name," the President stated that "it makes sense for us to make sure that we're getting the best deal possible and not just giving drug makers or insurers more money than they should be getting."  Before calling on the next questioner, the President added:

[O]ne of the things I want to do is to speed up generics getting introduced to the marketplace, because right now drug companies -- right now drug companies are fighting so that they can keep essentially their patents on their brand-name drugs a lot longer.  And if we can make those patents a little bit shorter, generics get on the market sooner, ultimately you as consumers will save money.

According to a report in The New York Times, President Obama's comment about speeding up the introduction of generic drugs was met with applause from those in attendance.  Given the new Administration's support for a 7-year data exclusivity period, the President's comment about speeding up generic drug entry was not too surprising (see "White House Recommends 7-Year Data Exclusivity Period for Follow-on Biologics") -- although the President seemed to be confusing patent term for data exclusivity.

Biosimilars Pose "Limited Threat"

A recent Dow Jones article ("European Biosimilars Market May Hint At Limited US Threat") suggests that Europe's experience with biosimilars "may reveal that their effects [in the U.S.] will be limited."  The article states that biosimilars (also known as follow-on biologics or biogenerics) "haven't gained traction in Europe because of limited cost savings and worries that they aren't exact copies."  Both explanations call to mind the report on follow-on biologics issued by the Federal Trade Commission in June (see "No One Seems Happy with Follow-on Biologics According to the FTC").  With regard to cost savings, the Dow Jones article contends that the "struggles [faced by biosimilars] in the more cost-conscious European market hints that lucrative U.S. biologic drugs may be able to defend their turf."  The article notes that while some European biosimilars have been on the market for 18 months, these drugs have managed to capture only 5-10% of the market, while small molecule generics frequently capture 80% of the market.

Amgen CEO Says Biologic Manufacturers Will Likely Retain Market Share

A Thomson Reuters article ("Amgen CEO says threat from biosimilars not absolute") last May noted that Amgen CEO Kevin Sharer (at right) believed that "smart" biotech companies would be able to retain half of their biologic sales even after market entry of follow-on biologics.  During Deutsche Bank AG's annual healthcare conference, Mr. Sharer told attendees that some biotech companies would be able to "sustain 30 percent to 50 percent of cash flow from products if they're smart competitors."  The FTC's follow-on biologics report, which was released one month later, suggested that biologic drug manufacturers would likely retain 70-90% of their market share following biosimilar market entry.  While the FTC's and Mr. Sharer's ranges differ, both are much higher than typically seen for small molecule drugs.

PhRMA VP Says 12 Years of Exclusivity Is Needed

In a USA Today op-ed piece last week, Pharmaceutical Research and Manufacturers of America (PhRMA) senior vice president Ken Johnson stated that "America's biopharmaceutical research companies support an approval pathway for biosimilars that balances patient safety and competition with strong incentives for the investment needed to develop new, life-saving medicines."  However, Mr. Johnson argued that "if an approval pathway for biosimilars fails to provide at least 12 years of data protection, much of U.S.-based research and development (R&D) will be stymied, drying up investment needed to develop new medicines and create jobs."

Noting that the development of a biologic drug can take more than 15 years and cost more than $1.2 billion, Mr. Johnson contended that "patents provide an unclear level of certainty to biologics innovators, which means that all [of a innovator's] work and investment could be unprotected."  According to Mr. Johnson, this uncertainty is the result of the very nature of biosimilars, which "will be similar -- not identical -- to innovator biologics," and therefore, will allow generic drug manufacturers to "make biosimilars [that] could potentially circumvent an innovator's patents, rendering its rightful patent protection ineffective."  He concluded that "robust data and patent protection are complementary and essential to help protect and drive innovation in the U.S., where the vast majority of biologic research is conducted."

Comments

[Kevin Outterson]

Perhaps Obama's comment was referring to small molecule generics, particularly the FTC report and testimony on "pay for delay" settlements.

On FOBs, I find it interesting that the industry warns Congress of the necessity of a long DE period, but calms Wall Street and VC firms with the EU experience of reduced market penetration by FOBs. These two lines of thought should be integrated and we should see a model of the true implications to BIO cash flow from FOB legislation.

[Donald Zuhn]

Kevin:

I agree. It's possible (and perhaps more likely) that the President was speaking about "pay for delay" agreements (or reverse payments) between small molecule innovators and generics. Particularly since the Obama Administration (via the DOJ) recently expressed agreement with the FTC on that issue as well.

Thanks for the comment.

Don

[Jeff G]

I'm not sure what arguments BIO et al. have left to support 12 years of data exclusivity. It seems, at this point, that the proponents of 12 years keep falling back on Prof. Grabowski's paper and the patent circumvention argument recited by Mr. Johnson.

In my understanding the 12 or so years that Prof. Grabowski has calculated it would take a biologic portfolio to break even is properly interpreted as a maximum, rather than an optimum, period of market protection. Any profits accrued after this point are in excess of what is required to stimulate investment in the portfolio and represent a windfall to the investors at the expense of patients who take the biologics. There is mounting evidence, from the FTC, the European experience, and Amgen's CEO as stated above, that biologics will continue to maintain a large portion of market share, and continue to draw significant profits, after the entry of biosimilars. Therefore, Prof. Grabowski's study would seem to indicate that 12 years of exclusivity is excessive.

As for the patent circumvention argument, it seems clear that the allowance of similarity, rather than equivalence, is a concession to the impossibility of manufacturing a biologic that has molecule-by-molecule identity to another rather than an attempt to give flexibility to generic manufacturers. I will be surprised, for example, if the FDA approves biosimilars that do not share amino acid sequence identity to their predecessors. I think it is very likely that a patent that covers a biologic will have sufficient scope to cover any biosimilars that might be approved by the FDA. I haven't ever seen any real evidence that this fear of widespread patent circumvention is a legitimate possibility. If it exists I would love to see it.

In any case, thanks for covering this topic in such depth on your blog. I've loved reading it.

[Kevin E. Noonan]

Dear Jeff:

A clarification or two. The Grabowski data show a range of 13.2-16.9 years necessary to "break even" on a biologic drug, so the 12-year exclusivity number is actually lower than what Professor Grabowski reports as necessary.

Also, Dr. Gregory Glover gave a talk at BIO 2009 documenting the differences between patent and regulatory protection under a biosimilars scheme (at http://www.patentdocs.org/2009/05/docs-at-bio-patent-reform-super-session.html). While it may be possible that the FDA requires amino acid sequence identity, the statute doesn't mandate that outcome, and a clever biogeneric could make the argument that a valine-to-leucine change is a difference of one methylene group (-CH2-) in a molecule comprising 6,000 atoms or so. Since it is unlikely (but not impossible) that this will cause a difference in bioactivity, you have the potential for copying without infringement that many in the biotechnology community fear.

The biggest risk in the biosimilars issue is that small differences in how the drugs are made will have unintended consequences - a completely unknowable outcome. This shouldn't prevent Congress from outlining a biosimilars approval pathway, but it is a topic that goes undiscussed in the hoopla over data exclusivity. Even small molecule generics can have unintended effects on some patients (Wellbutrin XL being one example).

The FTC, the EU and CEO Sherer may be right, and if they are Congress can always reduce the data exclusivity term if it turns out to be too long. It will be much more difficult to put the genie back in the bottle if it turns out that 12 years is too short a time and has the feared negative effects on biopharma investment. And 12 years of data exclusivity is a lot shorter than it is today (substantially unlimited).

We are gratified that you enjoy the blog. We have fun doing it. Thanks for the comment.