Last week, Rep. Henry Waxman and several other representatives unveiled the latest version of a bill designed to lower the price of drugs by encouraging generic competition in biological products ("biologics"). Biologics are products derived from living processes and used to prevent, treat, or cure human illness. Most drugs, in contrast, are synthesized using chemical reactions. Biologics include products such as vaccines, blood-derived products, antibodies, and recombinant proteins (e.g. proteins that modulate the immune system, or proteins that induce the proliferation of red blood cells). Over the past 30 years, a revolution in recombinant DNA technology has propelled the sub-field of biologics from the periphery into prominence in the biopharmaceutical industry. Three of the top 10 best-selling drugs in the U.S. in 2007 were biologics (Enbrel, Aransep, and Epogen), and biological products now represent some of the most expensive drugs on the market; annual per-patient treatment costs for one expensive drug topped $300,000 last year.
The new bill, H.R. 1427, dubbed the "Promoting Innovation and Access to Life-Saving Medicines Act," is intended to introduce price competition in biologics by granting the FDA clear authority to approve generic, or "follow-on" biologics, which are comparable in safety and efficacy to biologics already on the market. The new legislation is modeled on the Hatch-Waxman Act of 1984, which allowed generic manufacturers to gain market approval by showing that their products were interchangeable, or bio-equivalent, with previously approved products, without the need to preform additional clinical trials. Until now, the FDA has been reluctant to allow for this type of abbreviated approval for biologics, which have historically been regulated under a different legal regime from other drugs. Although, as described in this testimony by an FDA official, the story is more complicated. Some proteins that were initially purified from human and animal tissues, such as insulin and human growth hormone, were categorized as drugs when they first obtained FDA market approval. Today these substances remain regulated as drugs, even though they are now synthesized using recombinant DNA technology, like many biologics.
Previous attempts to create an abbreviated approval pathway for generic, or "follow-on" biologics, have stalled based on concerns that the new pathway will fail to ensure patient safety and protect the profits of innovator firms. A major sticking-point has been the inclusion, in some versions of the legislation, of a "data-exclusivity" provision that would prevent generic firms from gaining approval based on comparisons to an innovator product for 12-14 years after the innovator gains approval. The data exclusivity term would run concurrent with the term of any patents covering the innovator product. Data exclusivity would protect innovator firms whose patents have expired or been interpreted too narrowly to effectively block competition. The new H.R. 1427 attempts to compromise with innovators by offering shorter, 3- and 5- year periods of data exclusivity, similar to the periods currently available to other drugs under the 1984 Hatch-Waxman regime (a model suggested by Boston University Scholar Laurence Kotlikoff).
While the debate rages on over how best to protect investment by innovators under the new regime, few have raised the question of whether or not the new legislation will actually be successful in promoting generic competition. Lawmakers and lobbyists pushing for the extended period of data exclusivity appear to assume that once the pathway is open, it will be a simple matter for generic firms to reverse engineer the originator product. The success of the Hatch-Waxman regime has relied on the fact that most drugs are easy to reverse engineer -- the process of characterizing and reproducing a simple chemical entity can cost as little as $100 million and take as few as 6 months. Once Hatch-Waxman removed the barrier of submitting independent clinical data, generic competition was immediate and dramatic: the share of prescriptions filled by generic drugs rose from 19% to 40% in the first decade following the act (as described in this FTC Comment).
By contrast, the process of reverse-engineering a biologic is much more complicated. As the FDA notes, biologics tend to be more complex, heterogenous, and harder to characterize than their chemical counterparts. Unlike most chemical drugs, the particulars of the production process for biologics can have major effects on the structure of the end product. Use of different cell-lines or small changes to the manufacturing process can lead to dangerous variations in the product that can be difficult to detect without additional clinical studies. The importance of the manufacturing process and use of particular cell lines means that a product may remain difficult to reproduce, even where elements have been disclosed in a patent application. The innovator biologics industry has argued that it would be impossible -- at least in some cases -- to design a follow-on products that could be safely exchanged with the innovator product. This assertion has prompted criticism that many biologics patents are actually invalid because they fail to disclose enough information to enable a person skilled in the art to make and use the invention. See 35 U.S.C. § 112
Such barriers to reverse-engineering biologics will cut into the effectiveness of the new legislation by making it difficult for generic firms to prove that their drugs are similar enough to the innovator product to gain regulatory approval without preforming additional clinical trials. Even Henry Grabowski, a Duke University economist who has argued for a 12-16 year data exclusivity period to protect innovation, admits that the new legislation will not work as well as Hatch-Waxman at promoting competition for biologics. In a 2006 paper published in Health Affairs, Grabowski estimated that even with an abbreviated approval process in place, technological and manufacturing barriers to copying would result in fewer follow-on biologics. Less generic competition means that prices are not likely to drop as dramatically for biologics as they had for simpler drugs following Hatch-Waxman.
The troubling implication is that some biologics will be able to maintain their monopolies -- and resulting high prices -- even after the new legislation takes effect. Even more troubling is the fact that no attempt has been made to generate new solutions to the new challenges presented by biologics. Instead, the debates have focused on which elements of the Hatch-Waxman regime, such as data exclusivity, will be incorporated into the new legislation.
Solutions do exist. One potentially simple fix to the problem could be to borrow from patent law and require the innovator firm to meet an additional disclosure requirement in return for the allotted period of data exclusivity. If innovator firms insist on an 12-14 year period of monopoly protection, it is reasonable and fair to ensure that when the period expires, generic firms will be allowed to compete. A disclosure requirement could ensure competition by giving generic firms the information and materials necessary to replicate the innovator product with a minimum of additional expense. This would mean, in many cases, requiring the innovator firm to share cell lines and disclose manufacturing processes that would otherwise be protected by trade secrets. Such a requirement would also assist with public safety by ensuring that generic biologics were as similar as possible to the innovator -- reducing the danger of unexpected side-effects. Publication of the disclosure could be timed to coincide with the expiration of patent and data exclusivity terms, as a way to prevent generics firms from manipulating the system by seeking early entry.
The paradigm for generic entry developed for chemical drugs fails to address existing barriers to production of follow-on biologics. If lawmakers do not recognize these problems and incorporate new solutions to overcome them, the new legislation will not be effective at lowering the price of biologics.
*For further discussion of biologics and data exclusivity, see the Fall 2009 edition of the Harvard Journal of Law & Technology, featuring "A Longer Monopoly for Biologics?: Implications of Data Exclusivity as a Tool For Innovation," a student Note by Sarah Sorscher.
Sarah Sorscher is a JD/MPH Candidate at Harvard Law School. Sara Crager is an MD/PhD Candidate at Yale.