On Friday, July 31st, the United States House Committee on Energy and Commerce approved “America’s Affordable Health Choices Act” by a narrow three-vote margin. The bill was introduced in the House by Wisconsin Democrat Representative John Dingell. Representatives from around the country stated that the bill “will deliver the results the nation’s health care system so desperately needs: lower costs, better quality, and broader coverage.”
Along with approving the bill, a series of mark-ups were also announced by the Committee. One of the most important mark-ups was an amendment to the biologics legislation. The amendment includes a licensure pathway for biosimilar biological products. Biologic products are medications such as vaccines, blood, allergenics, tissues, gene therapy products, and recombinant therapeutic proteins, to name a few, that are created by biological processes instead of chemical processes like most medicines. Biologics can be composed of natural substances such as sugars, proteins or nucleic acids, and sometimes are even living cells and tissues that have been isolated from natural sources. They are used in many fields of medicine, primarily rheumatology and oncology. For example, “fusion proteins” are used to create receptors in the immune system to help treat diseases such as arthritis and psoriasis.
Biosimilars are similar to a generic version of a standard pharmaceutical drug, but because biologics are typically very complex, and thus are highly sensitive to manufacturing techniques, non-innovative companies usually have difficulty re-creating the compound. As well, because biologics are made using biological processes, not chemical processes, the synthesis process is often hard to control. Therefore these compounds are rarely identical to their original counterparts and thus are given the unique name “biosimilars.” These small, but important differences can have profound impacts on the drug’s performance.
The amendment to the Public Health Services Act (42 U.S.C. 262) includes a provision that prevents the FDA from approving applications for biosimilar compounds for 12 years after licensing of the biologic. Also, on July 14th, the Senate Healthy, Education, Labor and Pensions Committee (HELP Committee) and the House Committee on Energy and Commerce approved an amendment granting a 12-year data exclusivity period for biologic drug innovators. Exclusivity periods prevent the FDA from accessing the innovator's research data on the biologic when assessing another company's application for approval to sell an equivalent biosimilar. This, in effect, gives innovators a monopoly since biosimilar manufacturers rarely would want to invest in gathering their own research. The Obama administration had originally stated that a 7-year exclusivity period would be generous.
An interesting commentary about the 12-year data exclusivity period took place on the CNBC show “Squawk Box” on August 13th. CNBC anchor Joe Kernon began the conversation by referencing a widespread belief in the intellectual property world that by gaining a 12-year exclusivity period, the biotech industry was excluded, “from the cost pressures that everyone else is going to have to live under.” Jim Greenwood, President and CEO of Biotechnology Industry Organization, replied by referring to the fact that providing innovators with 12-14 years of data exclusivity is necessary in order to maintain research incentives due to the high cost of developing and producing biologics. This number was based on data gathering by a study from Duke University about how long it takes to recover the investment required to make biologics. A National Venture Capital Association study provided similar results. Biologic drug manufacturing plants can cost upwards of $500 million to construct, and without adequate protection for the research efforts of innovators, investors will be hesitant to give the billions of dollars required to make a new drug. Regardless of the length of the exclusivity period, biologic drugs will continue to be protected from being copied by patents, and in many cases, the patent protection will be longer than the exclusivity period. For example, the breast cancer drug Herceptin has patents that are valid 21 years from the drug’s 1998 approval.
However, biologics innovators also argue that patents may offer less protection for biologics than for typical, small-molecule drugs. This discrepancy is due to the fact that biosimilars, the “generic” versions of these drugs, cannot technically be an exact duplicate of the original drug due to the complicated nature of these drugs and the biological methods used to produce them. Therefore, it is technically feasible for a biosimilar manufacturer to argue that it is not infringing on the patent for the original biologic.
Representatives for biosimilar producers argue that “If your patents are strong, let your patents stand for themselves.” According to Katie Huffard, executive director of the Coalition for a Competitive Pharmaceutical Market, “That’s what every other industry has to do.”
Interestingly, Jim Greenwood stated:
[T]he American taxpayer spends $30 billion a year on NIH, and that funds basic research. It doesn’t make drugs– it makes good academic papers. And then we rely upon my 1 250 little biotech companies and middle-sized biotech companies to try to take that basic knowledge and turn it into something that prevents a couple from having to bury its child, that prevents somebody from forgetting who his wife is because of his Alzheimer’s...and that only happens if the American taxpayer– whether it’s a mutual fund or some day-trader says “I’m going to put my money into this. I want to bet on this.” And I keep telling all my liberal friends in the Congress, if you want to cure all of these diseases...don’t you want this industry to be the biggest private sector, at-risk capital, money magnet in the world?
Greenwood also claimed that “the government cannot innovate– when has the government ever innovated successfully?”
Is funding being channeled into the wrong type of research? Couldn’t it be argued that basic research lays the foundation for the products that biotech companies produce? Tommy Thompson, former Secretary of Health and Human Services, argues that the majority of the NIH’s annual $35 billion budget provides a “stimulus to encourage innovation.” Is it the government’s role to encourage innovation or should this be left to the private sector? Even if one does not agree with the long length of exclusivity given to biologic innovators, it can also be seen as refreshing that the laws are being tailored to the type of technology they are meant to protect. These types of debates show a deeper analysis of the issues involved that are often overlooked in other areas of intellectual property law.