In the debate over establishing a regulatory pathway for biologics, the White House recommended this week to limit data exclusivity for biologics to seven years, according to a Reuters report. Reuters reported that the Office of Management and Budget Director Peter Orszag and Nancy-Ann DeParle, director of the White House Health Reform Office, sent a letter to Representative Henry Waxman (D-CA), chair of the House Energy and Commerce Committee, whose committee is considering biosimilar legislation, stating that seven years “strikes the appropriate balance between innovation and competition.” As would be expected, supporters of limiting exclusivity such as the Generic Pharmaceutical Association (GPhA) applauded the proposal while the Biotechnology Industry Organization (BIO) raised concerns.
As discussed in PharmTech’s blog, the debate on data exclusivity for biologics was intensified with the release of a Federal Trade Commission (FTC) report earlier this month that said that the 12–14 years of regulatory exclusivity for biologics was too long to promote innovation particularly since innovator-drug firms would likely retain substantial market share after the entry of a follow-on biologic (FOB), according to an FTC press release.
GPhA agreed. “In citing the recent FTC report on biogenerics, the President rejects attempts by the pharmaceutical and biotech industries to needlessly extend market exclusivity provisions to an unprecedented period of 12 to 14 years simply to maintain their monopolies on biopharmaceutical products,” said GPhA President and CEO Kathleen Jaeger, in prepared statement. “The White House and Office of Management and Budget correctly recognize that this exclusivity model will not achieve what should be our shared goal of balancing pharmaceutical innovation and much needed consumer access.”
However, BIO, which represents innovator biotechnology drug companies, said curtailing exclusivity was ill-advised. “We are extremely concerned that the seven years of data exclusivity called for by the administration in the letter points to a risky short cut to biosimilars,” said BIO President and CEO Jim Greenwood in a prepared statement. “We believe this abbreviated period will undermine the incentives necessary for continued biotech research into breakthrough medicines and cures for diseases such as cancer, multiple sclerosis, Alzheimer’s and HIV/AIDS as well as unmet medical needs.”
Whether one sides with GPhA and the White House or with BIO, it is important to consider not just “the end” but “the means.” Part of the argument for limiting exclusivity is that competition in the FOB market would be narrow given the higher barriers of entry (i.e., cost and expertise) compared with competition in the small-molecule generic-drug market. As a result, the FOB market would have fewer suppliers and higher prices.
Although this may be true, the mechanism for addressing anticompetitive concerns in the FOB market is not to circumscribe innovator-drug companies. The concerns raised by the FTC in a still nascent FOB market are not a by-product of anticompetitive practices by innovator-drug companies but result from the market itself. Higher capital costs for producing biologics, limited technical expertise of suppliers in producing biologics, and a lower market return on biologics given the often more specific patient focus of a biopharmceutical are major reasons for the anticipated reduced entry of suppliers in the FOB market. How would limiting innovator-drug companies address these underlying fundamentals? Moreover, given the quality demands on any pharmaceutical product, particularly biologics with their more complex nature compared with small molecules, is it really desirable to create an FOB market that would encourage a multitude of suppliers?
Access to affordable medicines and fair pricing of pharmaceuticals for the consumer and for the companies that produce them is a critical issue for biologics or small-molecule pharmaceutical products, but we need to be careful about the tools of reform. Different policy mechanisms more specific to the actual goal, such as pricing ceilings for drugs or other models in healthcare reform, are more appropriate and should be on the table. These choices will no doubt engender fierce debate as well. But at least we would not be obfuscating the issues and would have a meaningful start to get to the real heart of the matter.