Daily Kos on Biogenerics: My Rebuttal To Rep. Eshoo’s Rebuttal To Jane Hamsher

Daily Kos
by slinkerwink (Noelle Bell)

This diary rebuts the Huffington Post article by Rep. Eshoo, in which she defends her biologics amendment which allows pharmaceutical companies to have 12 years’ exclusivity, which would bar generic biologics [or follow-on biologics FOBs] from entering the marketplace.

Biotechnology products cost billions of dollars to develop, test and bring to market, and in order to ensure that competitors aren’t immediately allowed to free-ride on the costly safety and efficacy data produced by innovators, some period of ‘data exclusivity’ is necessary to allow some period of time to recoup the investment in developing the drug. Without such a ‘data exclusivity’ period, there would be no reason to invest in new biologics. We would see the flow of research funds going to traditional pharmaceuticals, medical devices, semiconductors, green technology or other more promising innovations.

The House and Senate health care bills include a data exclusivity period of 12 years, which is the same amount of time that all drugs enjoy on the market under patent protection, which prevents any competition. I believe the 12-year data exclusivity period preserves the existing incentives for investment in these life-saving products.

She claims that the 12 years’ exclusivity for PhRMA is needed because it encourages these pharmaceutical companies to keep investing billions of dollars in these drugs through innovation. However, the Federal Trade Commission has said otherwise about that claim for the need of exclusivity for twelve years, as seen here below:

Pioneer biologic manufacturers nevertheless have suggested that Congress institute a period of 12 to 14 years of branded exclusivity that would begin once a pioneer biologic was approved by the FDA. During this period, the FDA would be prohibited from approving an FOB product that would compete with the pioneer biologic drug. This branded exclusivity would be in addition to, and would run concurrent with, a biologic drug’s existing patent protection. The economic model put forth by pioneer drug manufacturers to justify this period is based on the average time required to recoup the investment to develop and commercialize atypical biologic drug (referred to as the “Nature model”).

Congress has implemented exclusivity provisions in the past to encourage the development of new and innovative drug products when the drug molecule is in the public domain, and therefore not patentable. The Hatch-Waxman Act provides a five-year exclusivity period to incentivize the development of new chemical entities and it provides a three-year exclusivity period for new clinical investigations of small-molecule drugs. In other instances, Congress has implemented an exclusivity period when market-based pricing has not provided sufficient incentive to develop drug products for children or small patient populations. Central to each of these exclusivities is a public policy trade-off: a restriction oncompetition is provided in return for the development of a new drug product or new use of an existing product.

A 12- to 14-year exclusivity period departs sharply from this basic trade-off, because it does not spur the creation of a new biologic drug or indication. The drug has already been incentivized through patent protection and market-based pricing. The potential harm posed by such a period is that firms will direct scarce R&D dollars toward developing low-risk clinical and safety data for drug products with proven mechanisms of action rather than toward new inventions to address unmet medical needs. Thus, a new 12- to 14-year exclusivity period imperils the efficiency benefits of a FOB approval process in the firstplace, and it risks over-investment in well-tilled areas.

Basically what the FTC is saying that the longer timeframe of 12 years’ exclusivity for PhRMA actually discourages innovation and investment in new biologics. It allows PhRMA to sit there and recoup their investment on drugs like Herceptin. In the July 14th hearing before the Energy and Commerce Committee, Larry McNeely, the Health Care Advocate for U.S. PIRG, stated the reasons for the opposition to the Eshoo amendment and uses Herceptin as an example of which PhRMA continues to profit off rather handsomely in the five-year period of its exclusivity:

On average it costs $1.2 billion to take a biologic drug to market, and companies like Genentech should be rewarded for that investment. Genentech should profit from bringing a product to market that saves lives. In fact, they have recouped their development costs and much more, earning $5.5 billion from 2003-2008 alone.

But there’s a catch. Herceptin’s patent protections, the legal mechanism that protects intellectual property in most industries, expired in 2005. The available evidence, namely Genentech’s enormous annual profits, suggests that the patents on the drug provided an ample incentive for the important research that Genentech did on this drug.

Yet today, without a pathway for follow-on biologics, Genentech continues to enjoy monopoly pricing power. They have certainly made the most of it, charging $48,000 a year wholesale for the Herceptin treatment. Some reports have indicated that some consumers paying twice that amount or more. But under current law, it’s unlikely that a generic company will introduce a cheaper version of the drug anytime soon, and Genentech recognizes that.
And Larry McNeely mentions the FTC report below:

Interestingly, the FTC concluded that in some ways biologics patents are stronger than patents on chemical drugs. It stated that “pioneer biologic drugs are covered by more and varied patents than small-molecule branded products, including manufacturing and technology platform patents.” (p. 26) Thus the FTC stated that “there is no evidence that patents claiming a biologic drug product have been designed around more frequently than those claiming small-molecule products.” (p. 26; see p. 36) In summary, the FTC found
that the pioneer biologic drug manufacturer can continue to earn significant revenues many years after FOB entry. (p. 26).

The FTC’s conclusions are important because chemical treatments have flourished without the 12 or 14 years of exclusivity that the biologics manufacturers are demanding. Under the Hatch-Waxman legislation, enacted 25 years ago, chemical drug manufacturers are entitled to only 5 years of exclusivity. Because patents almost always run longer than 5 years, the purpose and effect of this exclusivity is to provide market protection for the unusual products for which patents have expired or which have less than 5 years of patent protection remaining. For most chemical drugs, it is the patent system which provides the basic intellectual property protection.

The basic compromise that led to the enactment of Hatch-Waxman was not the 5 years of exclusivity. Instead the brand companies demanded and received patent extensions to compensate patent time lost as a result of the FDA drug approval process, which includes both the time needed to test the drugs and the time the FDA takes to approve products. Under Hatch-Waxman, companies are eligible for a patent extension of up to 5 years as long as the extension does not extend patents to more than 14 years. Importantly, these patent extensions already apply to biologics. Thus, even though Hatch-Waxman did not establish a generic program for biologics, it did give biologic innovators the same patent extensions that it gave to the chemical brands.

But there is a serious danger to conferring too much intellectual property protection. In the case of a drug like Herceptin, every year the drug’s manufacturer benefits from the high monopoly prices conferred by exclusivity will cost patients both in dollars, and in lives. Herceptin’s high monopoly prices make it less likely and more expensive for insurers to cover it. And thus, fewer patients with breast cancer have access to this life-saving medicine.

It is also significant that every year that Herceptin is enjoying monopoly profits is one more year that Genentech has no overriding incentive to develop additional products. Instead Genentech’s principal incentive is to preserve the market for its most profitable drugs, including Herceptin.

The Time Magazine, which recently did an article about how PhRMA won with its amendment sponsored by Rep. Eshoo, delves into the debate over the Eshoo amendment:

While only 20% of drugs on the market today are biologics, it is expected that, with 633 biotechnology medicines in development last year for more than 100 diseases, half the new drugs approved in 2015 will be. Biologics average more than 20 times the cost of traditional drugs: treating breast cancer with a year’s worth of the biologic Herceptin can cost $48,000; Remicade, for rheumatoid arthritis, can cost $20,000 annually. For other, rarer diseases, the price of biologic treatments can be as high as $200,000 a year.

As policymakers look for ways to control health-care costs, the price of biologics is drawing more and more scrutiny. The obvious model for bringing in competition is a 1984 law that Waxman wrote with Republican Senator Orrin Hatch. It lowered the regulatory obstacles that prevented generic drugs from making their way to market. At the time, it was expected that fast-tracking the approval of “bioequivalent” drugs would bring down medical costs by $1 billion a year. But with generics now accounting for more than 70% of prescriptions dispensed in the U.S., “the actual savings have exceeded our wildest expectations,” Waxman said in a Sept. 18 speech before the Generic Pharmaceutical Association. “In the last decade alone, generic drugs have saved consumers, businesses and state and federal governments $734 billion.”

Can a similar approach work with biotechnology drugs, which were not dealt with in the 1984 law because the industry was then in its infancy? A 2008 analysis by former Clinton Administration official Robert Shapiro, who has consulted for both biologics companies and their would-be generic competitors, suggested that generic versions of the top 12 categories of biologics whose patents have expired or will expire soon could save Americans up to $108 billion in the first 10 years and as much as $378 billion over two decades. “It’s the low-hanging fruit,” says Mark Merritt, head of the Pharmaceutical Care Management Association, the trade organization for prescription-drug-benefit managers. “If you can’t get this right on cost control, what can you get right?”

By allowing generic biologics into the market, we’d be able to save up to $108 billion in the first ten years and as much as $378 billion over two decades. The longer that PhRMA has exclusivity to its biologics, it means less savings realized for patients suffering from cancer, AIDs, and other diseases. They wouldn’t be able to get access to generic biologics for twelve years. They would have been able to get access within the shorter time frame proposed by Rep. Waxman who wanted to bring it down to five years of exclusivity:

Waxman had pushed to shield biologics for no more than five years — the same amount of time that traditional pharmaceuticals get under the Hatch-Waxman law. President Obama proposed seven years as a compromise.

So then why 12 years instead when the FTC says that it would in fact stifle innovation and encourage PhRMA to sit on their biologics and continue to reap billions of dollars over that timeframe? Why not shorten it to five years as Rep. Waxman had wanted?

The document by PhRMA states that the development costs for biologics are about 1.2 billion dollars per biologic drug, and that the time it takes to come to market is about 97 months, which is about eight years given the time frame for the market development for a traditional drug is about 90 months, and the development costs for traditional drugs are about $1.3 billion dollars. The traditional drugs have the five years’ worth of exclusivity granted to it under Waxman-Hatch. Then generics are able to come onto the market for these traditional brand-name drugs. Rep. Henry Waxman had urged that the same timeframe for data exclusivity be given to biologics under his bill, H.R. 1427, as did his counterparts in the Senate, Senators Schumer and Brown with their Senate bill, S. 726.

And now for the “ever-greening” that Rep. Eshoo says doesn’t exist in her legislationl:

“There is no ‘evergreening’ clause in my legislation. There is in fact an ‘anti-evergreening’ clause which explicitly provides no new exclusivity period would be granted for “a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength.” My amendment prohibits by its plain language exactly what Ms. Hamsher alleges it would encourage.”

However, this brings up the issue of “ever-greening” in her amendment. What “ever-greening” is that it allows for brand companies to make relatively simple and inexpensive tweaks to the older biologics, and obtain a new 12-year protection period for the modified product. And she claims that the language in her amendment below does not allow for the loop-hole of “ever-greening”:

Section 7(C): Products not eligible for 12 years exclusivity and filing moratorium.

“7(A) and (B) shall not apply to a license for or approval of-

i. a supplement for the biological product that is the reference product; or

ii. a subsequent application filed by the same sponsor or manufacturer of the biological product that is the reference product) or a licensor, predecessor in interest, or other related entity) for

(I) a change (not including a modification to the structure of the biological product) that results in a new indication, route of administration, dosing schedule, dosage form, delivery system, delivery device, or strength; or

(II) a modification to the structure of the biological product that does not result in a change in safety, purity or potency.”

Translation: Subsequent applications filed by the same sponsor or manufacturer are eligible for 12 years market exclusivity and filing moratorium for products that have a structural modification that results in either:

II) A new indication, route, dosing schedule, form, delivery system, delivery device, or strength; or

II) Improved safety, purity, or potency.

The existence of the language in the bracket “(not including a modification to the structure of the biological product)”—is what’s referred to as the loophole for “ever-greening”. Basically, if you look at the language itself as Sara Rimmington has said below, “you’ll see that changes to biologics that result in a new indication, routes, dosing schedules, delivery systems, and so on, are ineligible for another 12- year exclusivity period under the Eshoo approach only if they come about without a modification to the structure of the product.” So, “if the biologic company decides to make a change to the structure of the already approved biologic that results in a new indication or any of the other items listed, they will be eligible for a brand new 12-year exclusivity period,” according to Sara Rimmington, an attorney in patents and litigation, at the Access To Essential Medicines Project.

The reasons floated by Rep. Eshoo for the 12 years’ exclusivity don’t hold water when held up to the arguments against it from the Federal Trade Commission and coalition groups like Affordable Medicines Now, a coalition of four organizations such as the American Medical Student Association which was started in 1950 and has more than 62,000 members, including medical and premedical students, residents and practicing physicians, the Universities Allied For Essential Medicines (UAEM), which is made up of students and researchers from over 50 universities across the globe that deal with university licensing and patenting in their promoting access to medicine for underdeveloped populations, the Essential Action | Access To Medicines Project, which is a non-partisan, non-industry funded public health and corporate accountability group based in Washington, DC, and the Knowledge Ecology International, a not for profit, non-governmental organization that searches for better outcomes, including new solutions, to the management of knowledge resources. The Affordable Medicines Now has a rebuttal to the Eshoo amendment that you can find at this link here.

It’s not just the Affordable Medicines Now coalition that is opposed to the Eshoo amendment, these following groups below are also opposed to the Eshoo amendment as you can see here and here and in here and here:

American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME)
The American Medical Student Association (AMSA)
Breast Cancer Action
California Public Employees’ Retirement System (CalPERS)
Consumers Union
Center for Policy Analysis on Trade and Health (CPATH)
Department for Professional Employees, AFL-CIO
Essential Action
Health GAP (Global Access Project)
International Union, United Automobile, Aerospace & Agricultural Implement Workers of America (UAW)
Knowledge Ecology International (KEI)
Latinos for National Health Insurance
National Multiple Sclerosis Society
National Organization for Rare Disorders (NORD)
National Physicians Alliance
National Research Center for Women and Families
National Women’s Health Network
Northwest Federation of Community Organizations
OWL – The Voice of Midlife and Older Women
Public Citizen
Salud y Farmacos
Service Employees International Union (SEIU)
Universities Allied for Essential Medicines (UAEM)
U.S. PIRG (Public Interest Research Group)

And this is what Rep. Waxman had to say about Rep. Eshoo’s amendment during the committee mark-up of the health care bill:

I know that members of this committee support creation of a biosimilar pathway. I know they believe it will bring competition and reduce the high price of biologics. I endorse that, but I strongly believe that adoption of this amendment exactly the wrong way to achieve increased competition and lower prices nor will it enhance innovation.

This amendment enacts a lengthy monopoly period — twelve years — and then allows those periods to be extended indefinitely, the so-called “evergreening problem.”

The evidence is overwhelming that these open-ended monopolies will create huge obstacles to competition. To those who want competition in the biologics market, I refer people to a letter from the CEOs of the 28 major generic drug companies. They say, monopolies with this long an unpredictable period of time — that they will not even enter the biosimilar market because there is no economic incentive for them to do it.

To those who want lower cost, look to what the payers are saying and the patients group, a coalition of consumer groups AARP, unions, businesses and state and private payers strongly oppose this amendment because it will rob us of the opportunity to achieve significant cost savings for patients and payers. To those who think this is going to bring innovation look at the report from the federal trade commission which conducted a year-long investigation and concluded that monopolies this long would severely damage both competition and innovation, creating real competition in the drug marketplace is one of the best opportunities we have to control costs.

But by passing this amendment, we’re not only missing a historic opportunity to bend the cost curve. We’re guaranteeing higher drug costs for the foreseeable future.

I understand a large majority of this committee supports this amendment. I do not.

Also, Sherrod Brown is looking to bring up his amendment which reduces the number of years of data exclusivity for PhRMA from 12 to 7 years, which is what the compromise position of the WH initially was, and he wants to know if he’ll get support on his amendment, so please call his office and ask him to bring his amendment to the Senate floor.

CALL Senator Brown at (202) 224-2315!

And please sign our petition to Senator Brown to get his amendment against biologics onto the Senate floor today!

We’ll keep on fighting for what is right, and please help support our work withPOP, which is a non-profit that engages in health care advocacy. Our efforts will continue long after this health care bill is passed. Please consider making a monthly donation to support our ongoing advocacy for health care as a human right. You can become a fan of POP on Facebook as well. You also can follow me on Twitter @slinkerwink.

Update: There’s a prior diary on this issue that links to the Rep. Eshoo editorial if you want to see it.