Data or Market Exclusivity? (Perhaps) Only Congress Knows for Sure

By Kevin E. Noonan --

A debate has begun on the meaning of the term "exclusivity" in the follow-on biologics pathway provisions of the Patient Protection and Affordable Care Act (P.L. 111-148), § 351(k) of the Public Health Service Act, codified at 42 U.S.C. § 262(k)).  The debate centers on the availability of innovator drug company data to be used in support of a follow-on biologic drug application.  And the consequences of how the Food and Drug Administration interprets the term (or how Congress amends the law to better define it) will impact how quickly follow-on biologic drugs will be available after the twelve-year exclusivity period expires.

The scheme as set forth in the law is simple:  the Agency is not empowered to accept a follow-on biologic drug application for four years after the reference drug (the law limits the follow-on biologic to a single reference biologic drug) has been approved under a Biologic License Application (BLA; § 351(k)(7)(B) of the Public Health Service Act, codified at 42 U.S.C. § 262(k)(7(B)).  Then, the law specifies that a follow-on biologic drug application cannot be approved until twelve years after first approval of the reference biologic drug (§ 351(k)(7)(A) of the PHSA).

This leaves the question:  is the innovator's reference drug data available to the follow-on biologic drug applicant prior to the end of the twelve-year exclusivity period?  Innovator drug companies and Members of Congress (from both chambers) have taken the position that the law prescribes "data exclusivity," and that the plain meaning of that phrase is that follow-on biologic drug applicants are not to have access to an innovator's biologic drug data until the twelve year term has expired (see "Senators Let FDA Know Their Intent Regarding Data Exclusivity Provisions of PPACA" and "Representatives Send Letter to FDA to Explain Data Exclusivity Provisions of Biosimilars Legislation").  These MOCs and innovators have taken the position that this is not equivalent to market exclusivity, because the follow-on biologic drug applicant can always submit its own data (as unlikely as such a scenario may be).

The generic drug industry (because, frankly, the follow-on biologic drug industry does not yet exist) has taken the opposite position:  that the law prescribes market exclusivity for the innovator, and that once the four-year exclusionary term is over the biologic drug innovator's data should be available to support their follow-on biologic drug applications (see "More on Data Exclusivity").  They are joined in their position by several Senators who disagree with their colleagues, as set forth in yet another letter to FDA Commissioner Margaret Hamburg.  In this letter, sent on Monday by Senators Sherrod Brown (D-OH), John McCain (R-AZ), Charles Schumer (D-NY), and Tom Harkin (D-IA), the Senators state that they are "extremely concerned about possible misinterpretations" of the provisions of the follow-on biologics law, which misinterpretations "could further delay the availability of generic biologic drugs, restricting access for many Americans and driving up costs for the Federal government."

They note that biologic drugs are a "new frontier" in medicine and that "half of the sales from the Top 100 medicines in 2014" will be biologic drugs.  Citing a Federal Trade Commission report that the annual cost for a "popular biologic [drug] treatment for breast cancer can cost $48,000," they caution that such costs "will continue to be a significant contributor to healthcare costs," both for individuals and the nation as a whole.

They do not state a particular interpretation of the exclusivity term -- "data exclusivity" versus "market exclusivity" -- but they do encourage the Commissioner to "disregard any interpretation that would result in further delay of the availability of generic biologic drugs."  They express concern because "[i]t has recently been brought to our attention that the FDA has received suggested statutory interpretations which, if implemented . . . , could result in generic competition being delayed beyond the 12 year exclusivity period in the statute."  The Senators express their version of statutory interpretation by stating that "the statute is clear that the FDA can begin reviewing biogeneric applications during the 12 year exclusivity period" -- an outcome that mandates the interpretation that the period between the fourth year and the end of the twelfth year after innovator biologic drug approval is market exclusivity, not data exclusivity.

And they remind the Commissioner that they did not support the twelve-year exclusivity term in the law as it was being debated before passage:

It should be noted that we remain opposed to the 12 years of exclusivity that was granted to protect brand-name biologics from market competition -- current law results in limited access for patients who cannot afford these therapies and higher costs for the federal government.

Besides the clear economic parts of this debate and positions taken in service thereof, there is also a policy argument:  if the intent of the law was to speed entry into the marketplace of follow-on biologic drugs (like the Hatch-Waxman Act did for generic copies of conventional drugs), then the position taken by these Senators is consistent with that Congressional intent.  However, it should be recognized that the Hatch-Waxman Act contained a quid-pro-quo (if not a tit for tat) in that innovator drug companies became entitled under the law to up to five years of patent term extension to make up for regulatory delay.  Thus, permitting generic drug companies to have access to innovator data was countered by extending patent term to prevent the generic drug makers from entering the market until either the (extended) patent term expired or they were able to show that the patent(s) protecting the innovator drugs were not infringed, were invalid or were unenforceable.  (The negative policy consequences of those provisions have been discussed previously; see "Maybe Hatch-Waxman Data Exclusivity Isn't So Good For Traditional Drugs After All").

There are no such provisions contained in the PPACA; even the convoluted patent enforcement provisions do not provide much solace to innovator biologic drug companies.  Thus, the other side of the debate that must be acknowledged is that the exclusivity term significantly affects the likelihood for a positive return on investment for drugs that are recognized by all to be much more complex and expensive to develop and bring to market.  Indeed, prior to passage peer-reviewed studies by a leading economist supported a much longer exclusivity term (see "Professor Grabowski's Economic Analysis of Data Exclusivity for Follow-on Biologic Drugs"), and recent studies indicate a longer exclusivity term may be beneficial for conventional drugs (see "Academic Study Supports Longer Data Exclusivity Term for Conventional Drugs").  It cannot be forgotten that in the drive to produce follow-on biologic drugs there must be an innovator drug for the follow-on applicant to copy, and in the absence of these drugs there is no evidence that follow-on biologic drug applicants will become innovators (at least of the experience with generic drug makers can be our guide).  Thus, as the FDA considers its policies, and Congress considers whether to modify the law, both sides of the debate must strive for some equipoise.  The problems of access to biologic drugs is a real one but one that has alternative (albeit expensive) solutions to diminished exclusivity periods for innovators.  But if the solution to this problem is laid solely and exclusively at the doorstep of innovator biologic drug makers, we may face a different and much less easily solved problem:  the biotechnology golden goose may be dead, because it may be too expensive to make biologic drugs in the first place.  There are no alternative solutions to that problem, and the cost -- the human cost -- may make the financial costs bemoaned by the Senators pale in comparison.

Comments

[EG]

Kevin,

As much as it gives me pause to agree with our Senator Brown, after reading the language of § 351(k)(7)(A), I would interpret that language to mean "market exclusivity" for at least two reasons. First, it would make no sense that you could even submit an application for approval if the data weren't available to support that application. Second, if data exclusivity was intended, § 351(k)(7)(A) should have been phrased differently to say so. I don't buy the "plain language" argument being made by the proponents of this legislation.

[Skeptical]

"cannot be approved"

These seem to be the operative words to me.

There is a ton of preparation that needs to be undertaken prior to "approval." As EG indicates, data need be available prior to the legislated time, or it is a defacto extension of that legislated benefit.

[Kevin Outterson]

The quid pro quo for a biosimilar regulatory pathway was 12 years of exclusivity for the innovator company.

[BigPharmaBigBiotech]

Kevin, not sure I understand the quid pro quo argument based on Hatch Waxman. The PTE law applies to both BLA drugs as well as NDA drugs, so one could argue that BLA filers have been benefiting from the quo without the quid, and the market exclusivity interpretation of the new law finally gives the quid to biosimilar companies.

[General Admission]

Just wondering - how has the EU dealt with this issue (assuming it has had to)?

[6]

"and the cost -- the human cost -- may make the financial costs bemoaned by the Senators pale in comparison."

I thought we just got through talking about there being a human cost already? Or do only rich people count as human for the purposes of the human cost analysis?

[Kevin E. Noonan]

All but 6:

I tend to agree that the Senators' arguments are "reasonable" interpretations, but I think the point is that the statute is unclear. Particularly in view of the fact that there are many things a follow-on biologic applicant must do to show the capacity to produce a drug that is safe and efficacious, it might not be unreasonable to interpret "data exclusivity" as precisely that - the data is exclusive to the innovator for the entire 12-year period.

Ultimately this is a policy and political issue - hence the final paragraph of the post. I think the interpretation the statutory language gets depends on the assumptions and intentions - for example, if Professor Grabowsky is right, the innovator needs as much time as possible before a competing biologic drug comes to market.

On the other hand, if the FTC is right the decrease in price will be much more gradual than for conventional drugs, which show of >80% decrease in price with the entry of more than 1 generic. The FTC thinks there will be no more than a 30% price drop for biologic drugs, which obviously has completely different implications and consequences.

It is well to remember that before the PPACA there was no pathway for these drugs, and hence the exclusivity was infinite. I suggest that we let this play out as conservatively as possible, because there is no putting the genie back in the bottle. There is plenty of time to change the exclusivity term consistent with experience moving forward.

Thanks for the comments.

[Skeptical]

Kevin,

I cannot follow your logice when you first state:

"Particularly in view of the fact that there are many things a follow-on biologic applicant must do to show the capacity to produce a drug that is safe and efficacious,"

but then you follow with

"it might not be unreasonable to interpret "data exclusivity" as precisely that - the data is exclusive to the innovator for the entire 12-year period."

Isn't the problem that it DOESN'T say "data exclusivity"?

Also, your lead in portion mirrors my post in all things EXCEPT the logical conclusion. If in fact as you suggest that there are many things that must be done, then the 12 year term is far LESS likely to mean exclusivity for the data. It simply would not make sense to give the exclusivity period, then give an additional de facto period of exclusivity based on merely STARTING the process after twelve years, when the clear langueage states "APPROVED."

I am having difficulty squaring any possibility that we both can be correct.

[Kevin E. Noonan]

Dear Skeptical:

I am sure we are not both correct. I don't think there is a "correct" here, but I do think that, insofar as the political compromise can be accessed as part of the legislative history, the fact that the bill does not say "market exclusivity," coupled with the argument (well-documented on the blog) that the innovator industry wanted 14+ years and the generic industry wanted 0-5 years, suggests that the follow-on applicant is not entitled to the data until the exclusivity period has run.

But as I mentioned, there are good logical bases for each position, so logic won't save us - the implications of each position, and the weight policymakers give those implications, are all that will matter unless Congress amends the statute.

Or, if the Tea Party has its way, repeal the statute in its entirety.

Thanks for the comment.

[Skeptical]

Kevin,

I do not see the logic to make the jump of "suggests that the follow-on applicant is not entitled to the data until the exclusivity period has run."

There is no connection between what either party wanted to suggest anything of the sort.

The clearest indicator (short of, as you say, the explicit use of the modifier) is what happens AFTER the period of exclusivity. The indicator of "approved" yields a stronger conclusion that the steps leading to approval have been underway - which means that the data must not be the driver of that twelve year period.

[Kevin E. Noonan]

Dear Skeptical:

I could argue that the language that a follow-on biologic drug will not be approved until 12 years after first approval of the reference drug sets a floor, not a ceiling - the FDA can't approve before that time, but doesn't have to approve at that time.

Which is why I don't think we can logic ourselves out of this - it is ultimately a policy choice (absent Congressional action) and we will have to see how the agency decides to interpret the rule.

Thanks for the comment.

[Skeptical]

In reference to "but doesn't have to approve at that time." - You could argue that - but that would be capricious and pedantic. It is an unreasonable reading along the lines of "I can withhold this if I feel like it." If you view it as a floor, then the law has NO ceiling and the agency could extend exclusivity forever. The rule is a limit - by its very nature it is a ceiling, not a floor. This was a legislative action - not a negotiation between the two parties wanting the exclusivity period to be so limited in opposite directions.

I think we can logic our way out of this - but it takes a willingness to accept the written clues as they are - not twist them with the bias for longer protection.

As far as moving away from the how many angels on top of the pin banter, you are correct that we have to wait for the agency (and perhaps the courts or Congress or both).

[Kevin E. Noonan]

Dear Skeptical:

Well, no - if we view this the way several MOCs involved in passing the law and the innovator community does, then the deadline for releasing the data is when the twelfth year of exclusivity expires. This may be later than the generics industry wants, but it is a date certain. As would be a date after the four year exclusion on filing an application - after all, you could make the same argument that the data should be available immediately, so the biogeneric applicants could file their applications at the earliest possible date. Such a position would be supported by the Byzantine litigation provisions, which could be pursued in the years between the 4th and 12th year deadlines, making it even more likely that the biogeneric could enter the marketplace at the earliest possible moment.

I am not saying either side has the better textual reading of the statute - and that's where the politics comes in. The bill is incredibly vague on many important issue like this one - including what constitutes a biosimilar in the first place. I think this reflects the desire to get the pathway up and running and to deal with the details - such as the subject of our discussion - when they arose. So while I understand that you have support for your position, so does the other side. And that's what will need to be worked out, by Congress or the agency, before biosimilars become widely available.

Thanks for the comment.

[Skeptical]

Kevin,

It is not that I do not understand the position being put forth. I do. It is the stretch in logic in defending that position that I am having trouble with.

Even the point that you are trying to establish by saying "I am not saying either side has the better textual reading of the statute" - that both sides have a equally valid view - is biased by your interests.

I am saying that the earlier release clearly DOES have a better textual reading. That better textual reading is likewise reinforced with the intent (read that as policy) of the law in the first place. Any attempt at reading the twelve year mark as a floor - rather than as a ceiling - simply fails due to the reason for the law in the first place. Again - the mark as a floor (or as a date certain) - is not textually supported because such a reading fails to provide the actual execution of the law's intent.

As for the release of the data immediately, yes, I would have no problem with that. As I indicated in my first post, if the data is related to the right obtained, that data does belong to the public. Can you provide an argument for what is seemingly a trade secret type of treatment?

[6]

"It is the stretch in logic in defending that position that I am having trouble with."

Kevin and his buddies are rather prone to making those :( With a straight face even. The best part is, they have such a stoic demeanor that they can do it without cracking even the faintest glimmer of a smile. Subjects that you would think would make them rofl while presenting their reading they have somehow been trained to present without rofling.

Or maybe they just don't have a sense of humor.

[Kevin E. Noonan]

Sorry, Skeptical, for the delay.

The simple answer is that the data required for patenting is not co-extensive with the data needed for FDA approval. The fact that we are having this debate is evidence that the data is not in the public domain, which it would be if it were necessary for patenting - it would be in the published application.

And while your position - that the law was passed to provide a biogeneric pathway - is correct, the details are not so clear. After all, the innovator biologic drug industry had essentially an infinite exclusivity period prior to the law's passage, so any reduction is a benefit for the public and the (nascent) biogeneric drug industry. Either way, the law's intent is satisfied - just earlier in your reading than in the alternative.

Keep in mind - a group of Senators and Congressmen/women sent FDA their own separate letters, taking the exact opposite position of the Senators whose letter was the subject of the post. And those Senators and Congressmen/women were the ones who supported the law - this latter group opposed it. So it is a little funny to talk about the legislative intent of the members who either voted against or spoke against the provisions being interpreted, don't you think?

Thanks for the comment.

[Skeptical]

Yes Kevin, although "funny" is not the term I would use.

And I do not find it surprising that there are still sides pushing and pulling the limit established by law in opposite directions. Where money lies, politicians are sure to follow.

I think that in this particular field the governmental intrusion is higher than in other fields. This intrusion speaks to a higher degree of public interest and thus the normal rules of patent disclosure (without undue experimentation) may not apply.

I think that you missed my point on the floor/ceiling comment though - if as you put it, the law is a floor, there is no ceiling in the law and the law's intent MAY NOT be satisfied. The very word "approved" has critical connotations, of which even lawmakers past positions may not align - we both know that what comes out of the legislative process often does not bear on the intent of individual senators. Legislative intent is not the same as individual senators' intent. What you see in the post passage comments are negotiations for future law making, the staking out of positions for the give and take that will come. I do not put credence in these comments (from either side).