Follow-on Biologics Data Exclusivity Debate Scorecard - Part I

    By Donald Zuhn --

Over the past twelve months, Patent Docs has reported on a number of papers, letters, and statements that outline positions taken by various players in the follow-on biologics data exclusivity debate.  In view of last week's Time magazine article "How Drug-Industry Lobbyists Got Their Way on Health Care," which mentions that Duke University Prof. Henry Grabowski's oft-cited data exclusivity study was funded by the Pharmaceutical Research and Manufacturers of America (PhRMA) and two partisan patient groups (see "Time Magazine on Data Exclusivity Debate"), a review of these players and their positions on the issue seems timely.  Today, we summarize the positions of ten individuals or groups that have participated in the debate.  Among those who have advocated for shorter data exclusivity periods (i.e., less than 8 years) are:

• Alex Brill (at right), a principal at Matrix Global Advisors, LLC and former chief economist to the House Ways and Means Committee, who released a white paper entitled "Proper Duration of Data Exclusivity for Generic Biologics:  A Critique," which asserts that a follow-on biologics regulatory pathway providing a data exclusivity period of seven years would be "sufficient for maintaining strong incentives to innovate while fostering a competitive marketplace" (see "Former House Ways and Means Economist Claims 7-Year Data Exclusivity Period Is Sufficient").  The paper, which was funded by Teva Pharmaceuticals, finds fault with some aspects of an economic model described by Duke University economist Henry Grabowski in a paper published in Nature Reviews Drug Discovery, and specifically determines that a biologic's "break-even" point (i.e., "the number of years required for an average portfolio of biologic drug investments to recoup all development and fixed production costs and to also reward the investors their expected (double-digit) rate of return") is just under 9 years -- as opposed to Prof. Grawbowski's calculation of between 12.9 and 16.2 years.

• Dr. Laurence J. Kotlikoff (at right), a professor of economics at Boston University, who authored a report entitled "Stimulating Innovation in the Biologics Industry:  A Balanced Approach to Marketing Exclusivity," which contends that Congress should look to the Hatch-Waxman model (which generally provides four years of data exclusivity and one year of approval exclusivity) when determining an appropriate exclusivity period (see "BU Economics Professor Releases Report on the Impact of Marketing Exclusivity on Biologics Innovation").  The report, which was funded by Teva Pharmaceuticals USA, concludes that "[t]here are, quite simply, no compelling differences between the chemical-based and protein-based medication industries to justify deviating from a policy [embodied in the Hatch-Waxman Act] that has succeeded for over a quarter of a century in both dramatically reducing drug prices and stimulating innovation."

• The National Coalition on Health Care (NCHC), which describes itself as a non-profit and "rigorously non-partisan" coalition comprised of more than 70 organizations, and which wrote a letter to the Senate Health Committee urging it "to oppose generic biologics legislation that contains excessive periods of exclusivity or that contains other unnecessary and significant barriers to generic, biologic competition."  The group concluded that "[t]he five year period of exclusivity provided in [Rep. Waxman's biosimilar bill] follows the Hatch-Waxman model and is the appropriate period of exclusivity," and suggested that "[a]n unnecessarily long period of exclusivity would . . . diminish the incentives for other companies to continue innovating, actually resulting in less innovation over time." (see "NCHC Sends Letter on Biosimilars to Senate Health Committee").

Among those who have advocated for longer data exclusivity periods (i.e., 10 or more years) are:

• Amgen Inc. Vice President and Law & Intellectual Property Officer Stuart Watt, who told attendees of the Biotechnology Industry Organization (BIO) Intellectual Property Counsels' Committee (IPCC) conference in March 2009 that an exclusivity period of at least 12 years is needed to provide incentives to innovator drug companies to continue developing new biologic drugs (see "Amgen VP Makes Case for Longer Exclusivity Period in Follow-on Biologics Legislation").  In support of a 12-year exclusivity period, Mr. Watt pointed to three factors:  the research and development costs for bringing a biologic drug to market ($1 billion), the average product development time (12-15 years), and the product development risk (1 out of 100 candidates).

• Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood (at right), who stated that BIO supports a 14-year exclusivity period, noting that while "[l]ots of folks in the generic industry think it should be less," BIO was concerned that "if the industry does not have enough time to recover its investments, those investments will never be made" (see "BIO CEO Outlines Challenges for Obama Administration").

• Eli Lilly and Company Senior Vice President and General Counsel Robert Armitage (at right), who stated In an interview with the Washington Legal Foundation (WLF) that "Lilly has been adamant that a period of data exclusivity of 15-20 years for innovative products would represent the best policy choice for overall patient welfare," and further, that a 5-year or 10-year period of data exclusivity did not "make sense" in view of the safety hurdles and small number of new medicines coming to market (see "Washington Legal Foundation 'Conversations With' Series Examines IP Issues").

• In a paper primarily concerned with patent reform (as evidenced by its title: "Promoting Innovation with Patent Reform: A Memo to President-elect Obama"), Senior Legal Policy Analyst Andrew Grossman (at right) of The Heritage Foundation also touched on the issue of data exclusivity under a follow-on biologics regulatory pathway (see "Heritage Foundation Offers Patent Reform Proposals to the New President").  Stating that "[w]ithout adequate data exclusivity, innovation in the biotech sector will dry up, leading to fewer lifesaving treatments and eroding America's leadership in this field," Mr. Grossman advised against "[i]mposing a short exclusivity period or otherwise limiting enforcement of biologic patents."  While exclusivity periods of between 0-14 years had been proposed in various follow-on biologics bills introduced in the House and Senate at the time of the publication, the Heritage Foundation paper only mentions the 14-year period.

• The Intellectual Property Owners Association (IPO) Board, which passed a resolution during its 2008 Annual Meeting supporting biosimilar legislation that would "promote[] continued innovation by providing at least 14 years of data exclusivity for an innovator’s biological product with additional periods of exclusivity available for new indications and/or for approval for use in the pediatric population (see "Follow-on Biologics News Briefs - No. 1").

• Johnson & Johnson executive director for biotechnology policy Audrey Philips, who contended that follow-on biologics legislation should strike "the right balance between saving money and still having medicines to advance in the future," and concluded that a 5-year exclusivity period would "certainly have a chilling effect on [biotech] investment" (see "Follow-on Biologics News Briefs - No. 3").  Instead, Ms. Philips argued for a 14-year exclusivity period.

• The National Venture Capital Association (NVCA), which released the results of a study conducted by Iain Cockburn, Professor of Finance and Economics at the Boston University School of Management, and Josh Lerner, Professor of Investment Banking at the Harvard University School of Business, suggesting that "a data exclusivity period of at least 12 years for innovator products is a critical fulcrum in the effort to balance cost with the preservation of biotech innovation" (see "NVCA Study Supports 12-Year Data Exclusivity Period").  In particular, the NVCA concludes that "the exclusivity period should be at least 12 years so that investors in innovation can exceed the [cost of capital] hurdle rate," and states that a 7-year data exclusivity period "would not be long enough to clear the 20% hurdle rate for investing in early stage companies," and would "drastically reduce such investments and thwart future innovation in a meaningful way."

Readers are encouraged to review our prior, more detailed coverage of the paper, letters, and statements described above.

Comments

[Willliam (Bill) Haddad]

Why is anyone surprised at the Henry Grabowski's subsidized comments? He played the same role when we fought for Hatch-Waxman. He was wrong then and he is wrong today. He is entitled to his opinion that should be respected but he is not entitled to play the usual Pharma game of using his credentials as a screen for Pharma arguments. Now biotech products enjoy virtual perpetual patents...that is correct, perpetual patents. For those who are not keeping track of events, Pharma and Bio are now fully engaged, mostly secretly, in a worldwide anti-generic campaign. In European ports legal transshipments of generic drugs are being seized as "counterfeits" most held in storage for a time and then apologically sent back to the generic company as a "mistake." Why would a counterfeiter use generics that sell, for example, for a dollar when the counterfeiter can exert the same illegal activity to counterfeit a brand name product(which should be and is illegal)? Two-thirds of the people in poor countries are currently and systematically being denied access to generic drugs due to the "Indian Ordinance" supported and promoted by Pharma. Remember,too, that the multinationals kept the price of AIDS drugs at $12-15,000 in the poor nations of the world where 35-plus millions were on the pathway to dying while Pharma block the use of generic clones created in a much simplier combination and regime that would sell for a dollar a day (today: under $100 a year) when the brands could not sell their products in the poor nations? President Bush in his 2003 State of the Union cited that example as the rationale for the world's largest contribution to AIDS treatment in poor nations...yes President Bush. The generic triple remains WHO's first line treatment for AIDS? Now upwards of three million patients are now alive and on affordable generic AIDS medicines.The answer is simple: Pharma companies did not want the western nations where their product from three different companies sold for $15,000 a year, to learn that a simplfied version, one table twice a day, was affordable? A large portion of the high price for AIDS medicines in the United States is financed by the governments, federal and States and in some States is being restrained due to the high cost. It appears that what I used to call the cadre of "academic whores" are back in business.

(FYI: As head of the generic trade association, I initiated and negotiated Hatch-Waxman that opened the market to generics after thirty-five years of failed attempts with the long time opposition supported by these so-called neutral and "fair minded" academics who also failed to disclose that their reserach was not peer-reviewed and paid for by an interested party. It is up to their Universities to put a stop to this nonsense). Bill Haddad

[Kevin E. Noonan]

Dear Bill:

Here's another peer-reviewed article you probably won't like:

www.patentdocs.org/2009/10/maybe-hatchwaxman-data-exclusivity-isnt-so-good-for-traditional-drugs-after-all.html

Thanks for the comment.

[Kevin E. Noonan]

Dear Bill:

Sorry, I forgot to include the fact that, if everyone agreed on the current 12-year data exclusivity period, it would be a vast improvement on infinity, the current term.

And Congress could always revisit if 12 years turns out to be too much.

Thanks for the comment.

P.S. We don't really do the ad hominem stuff here. It doesn't advance the debate, it is emotional rather than intellectual, and it just annoys people rather than making them think.