Biotech Bottleneck: Congress can encourage competition within an increasingly important class of prescription drugs

Washington Post Editorial

WITH A NAME like the Affordable Health Choices Act, you’d think the health-care reform bill that passed the Senate Health, Education, Labor and Pensions Committee this month would have made an effort to provide affordable health choices. But instead, the bill includes a provision that would create a 12-year market exclusivity period for brand-name biologic drugs. This would drive costs to consumers above even current levels, making the title little more than a mockery.

Biologic drugs, medical therapeutics derived through biotechnology techniques, are an important and ever-expanding field of prescription drug innovation. Forty-five billion dollars of U.S. prescription drug sales last year were biologics, and they comprise approximately 25 percent of new drugs. Prices for a single course of a brand-name biologic can soar into the tens of thousands of dollars, and this is not likely to change soon. Big pharmaceutical companies maintain that a lengthy exclusivity period in addition to the patent protection they already receive is necessary to drive continued innovation. But is it?

A Federal Trade Commission report released last month suggested the opposite — that the biotech industry’s patents on its biologic innovations are so strong that no added exclusivity period is necessary. Biologic drugs require a much more complicated manufacturing process than their chemical equivalents, and, thus, a greater research investment. But the flip side is that many stages of the process can be patented — from the drug products themselves to the genes that produce them to the cells in which they are made. This makes entry into the market by follow-on-biologics, or “biosimilars,” more difficult because multiple patents are harder to design around. Unlike the market for more traditional prescription drugs, in which the entrance of a generic competitor cuts sharply into the profits of a brand-name innovator, the imperfect substitution between biologics means that pioneer biologics retain a large market share even when biosimilar drugs are introduced, allowing innovators a lengthy period in which to recoup their investment.

The Obama administration has favored a seven-year exclusivity period, characterized as a “generous compromise.” Any additional protection would be not only unnecessary but harmful. An extended monopoly would delay the entry of biogenerics and drive costs even higher. Especially considering that the government is a major purchaser of biologics — the top six drugs for Medicare Part B expenditures in 2006 and 2007 were all biologics — this failure to open the market will be costly.

There is still time for action. In the House, a pending amendment would offer a similar 12-year exclusion period, but there is an alternative: a bill put forth by Reps. Henry A. Waxman (D-Calif.) and Nathan Deal (R-Ga.) that would limit the exclusion period to five years. If Congress is serious about health-care reform, it must take another look at whether its legislation truly balances incentives for innovation against the need for price competition.