Issue Date: May 19, 2008
WITH LAWMAKERS SEARCHING for ways to maintain the solvency of the Medicare program, generic drugmakers are hoping to build support for legislation that would bring competition to some of the most expensive prescription drugs on the market.
The industry has been encouraging Congress to create a regulatory pathway that would allow the Food & Drug Administration to approve generic versions of biologics, or biogenerics, a relatively new class of medicines based on proteins made by living cells. These genetically engineered protein molecules are increasingly being used to treat diabetes, arthritis, cancer, and other serious diseases.
By their very nature, biologics differ from the chemical compounds made by traditional pharmaceutical companies and therefore require a separate set of rules. Due to their size and complexity, biologics are also more expensive to develop. And they cost patients and their insurers 20 times more than most small-molecule chemical drugs. With price tags as high as $200,000 per patient annually, biologic products are a drain on Medicare and thus are a significant contributor to the U.S.'s health care burden.
"We need to ensure that Medicare will be available for future generations," says Kathleen Jaeger, president and chief executive officer of the Generic Pharmaceutical Association (GPhA), an Arlington, Va.-based trade group that lobbies on behalf of companies that make and distribute finished generic drugs and bulk active pharmaceutical chemicals. "With total Medicare expenditures expected to increase at a faster pace than either workers' earnings or the overall economy, it's clear that we need to take steps to reduce spending," Jaeger says.
"The Medicare program has reduced program costs through the use of generics, and it could lower costs even more through the availability of biogenerics," Jaeger says. "Biogenerics would provide countless patients with access to more-affordable treatments while saving them—and the Medicare system—billions of dollars annually." In their annual report released in late March, the Medicare trustees warned that unless Congress takes decisive action, the taxpayer-supported fund that finances the federal health insurance program for the nation's elderly and disabled will be depleted by 2019.
Biologics represent big money and are the fastest growing segment of health care spending. In 2006, U.S. sales of these biotech remedies surpassed $40 billion, according to market research group IMS Health. Sales could reach as high as $90 billion in 2009. Access to this lucrative market in the U.S. is currently limited to biotech and pharmaceutical companies because an approval process does not currently exist to produce generic versions of these treatments.
Generics have been saving U.S. consumers money since 1984, when Congress passed the Hatch-Waxman Act, which created a streamlined process for generic drugmakers to put copies of chemically synthesized drugs on the market after the patents on the originals expired. The law said nothing about the large-molecule, protein-based medicines that at the time were being rolled out by the fledgling biotechnology industry.
But now, with an estimated $20 billion worth of biologic drugs expected to come off patent by 2015, pressure is building on Congress to pass legislation that would pave the way for generic versions of biologic drugs, which go by a variety of names, including biogenerics, follow-on biologics, and biosimilars.
Lobbyists for the generic drug industry argue that the increased competition will lower prices for patients, employers, and government health programs. For example, according to pharmacy benefit manager Express Scripts, the generic version of human growth hormone sells at a 25% discount compared with its brand-name counterpart in Europe, where an approval process for biogenerics was established in 2006. "As health care costs escalate, increasing consumer access to generic medicines—and biogenerics—is the right choice," Jaeger says.
SINCE TAKING CONTROL of Congress a year ago, Democrats have introduced a series of bills to help rein in soaring prescription drug prices and trim federal health care spending. But lawmakers have thus far been unable to agree on how to grant generic manufacturers access to the biologics market while adequately addressing the concerns of the research-based biotechnology industry.
Last year, there were several attempts to push through legislation to create a regulatory framework for FDA to approve lower cost versions of biologic medicines. The most promising was the Biologics Price Competition & Innovation Act (S. 1695), which was approved by the Senate Health, Education, Labor & Pensions Committee in June 2007.
However, the fragile compromise stalled when both the biotech and generic drug industries objected to several key provisions, including one that would give biotech firms 12 years of market exclusivity for a brand-name drug before generic versions could be sold. The biotech industry pressed for 14 years of exclusivity, whereas generic drug manufacturers called for five years.
In an effort to spur congressional action this year, the White House for the first time called for the creation of an approval process for generic biologics when it submitted its fiscal 2009 budget proposal to Congress in February. Lawmakers have introduced three separate follow-on biologics bills in the House of Representatives, but the Energy & Commerce Committee's Health Subcommittee, which has jurisdiction over the issue, has yet to take any action. "We are serious about seeing if we can create a pathway for generic biologics, but we want to take a look at the safety issues and hear all the different points of view," says Rep. Frank Pallone Jr. (D-N.J.), the panel's chairman.
Last month, Pallone and subcommittee ranking member Rep. Nathan Deal (R-Ga.) sent health industry stakeholders a six-page list of questions seeking input on how best to establish an approval process for lower cost versions of biologic drugs. "We have found it challenging to reach consensus on a single bill that would accomplish this goal," the lawmakers wrote.
The biotech industry is putting its support behind the Pathway for Biosimilars Act (H.R. 5629), which was introduced in March by Reps. Anna G. Eshoo (D-Calif.) and Joe Barton of Texas, the ranking Republican on the Energy & Commerce Committee. "This legislation will establish a regulatory pathway for biosimilars that will promote competition and lower prices and protect patient safety, drug efficacy, and sound science," says Eshoo, whose district is home to many Silicon Valley biotech companies.
Eshoo has made it clear that she wants the industry to have strong incentives to continue developing lifesaving therapies. "The most exciting developments in modern medical science are occurring in the field of biotechnology, and this legislation will ensure that the amazing cures and treatments biotech delivers today will continue and that more patients will have access to these revolutionary therapies," she remarks.
Like the Senate proposal, the Eshoo-Barton bill would provide 12 years of exclusivity to allow brand companies to market their products without generic competition and to recoup their research and development investment. But to encourage further testing, the biotech industry could receive two years of additional exclusivity under H.R. 5629 for a "medically significant" new use of a biologic product and an extra six months if the drug is approved for pediatric use. The bill would also permit FDA to decide whether the generic product is interchangeable, or therapeutically equivalent, with the brand-name biologic and gives the agency the flexibility to determine what clinical testing—if any—is required for approval.
"Importantly, the bill recognizes the need to protect patient safety by calling for a set of studies demonstrating the safety and efficacy of the follow-on product, including clinical and immunogenicity studies," says James C. Greenwood, president of the Biotechnology Industry Organization (BIO), which represents the makers of brand-name biologic drugs. Although the bill falls short of the 14 years of market exclusivity that the industry insists is necessary to attract the hundreds of millions of dollars needed to develop a new biotech therapy, Greenwood says the Eshoo-Barton bill would "promote continued innovation."
However, GPhA's Jaeger calls the proposal "at best, a disappointing distraction that does nothing to advance legislation." At worst, she says, "it's a step backward that puts brand company profits before patient needs." Generic drug manufacturers would like to see a shorter period of market exclusivity for brand-name biotech companies than the 12 to 14.5 years included in the Eshoo-Barton bill, which Jaeger deems "unwarranted and unprecedented."
BIO has also endorsed a bill (H.R. 1956) introduced in April 2007 by Rep. Jay Inslee (D-Wash.) that would provide the exact 14 years of market exclusivity brand-name companies are seeking. At the other end of the spectrum, a "generics friendly" proposal (H.R. 1038) offered by Rep. Henry Waxman (D-Calif.) in February 2007 provides no exclusivity period for new biological entities.
CONGRESS FACED this same dilemma when it created the regulatory framework for approving traditional generic drugs. "It worked hard to strike a balance between innovation and consumer access," Jaeger notes. "This balance provides for a reasonable five-year period of market exclusivity for novel medicines and three years for new products or new dosage forms."
As a result of the Hatch-Waxman Act, she says, millions of Americans are able to afford "safe and effective generic medicines, saving consumers and our health care system billions of dollars annually. At the same time, the brand pharmaceutical industry has continued to innovate and produce significant profits in return."
The biotechnology industry wants Congress to pass a bill this year. "We urge Congress to pass the right bill as soon as possible," Greenwood says. "It's time for all parties to work together to place patient needs before political gamesmanship."
Some speculate that generic drug manufacturers might get a better deal in 2009 if Democrats, as expected, add to their congressional majorities in the November elections. But Andrea Hofelich, director of media relations at GPhA, says the generic drug industry wants lawmakers to act "sooner rather than later" on legislation that would bring patients "safe and affordable biogenerics without needless roadblocks to access."
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