[Ip-health] Follow-on Biologics: The Coming Sea Change In The Pharmaceutical Industry

[Mike Palmedo]

http://www.metrocorpcounsel.com/pdf/2007/September/48.pdf

Follow-on Biologics: The Coming Sea Change In The Pharmaceutical Industry

Barry J. Marenberg
Sills Cummis Epstein & Gross P.C.
September, 2007

[Barry J. Marenberg is Of Counsel to Sills Cummis Epstein & Gross P.C.'s
Intellectual Property Practice Group and focuses on the life sciences
industry. The views and opinions expressed in this article are those of
the author and do not necessarily reflect those of Sills Cummis Epstein
& Gross P.C.]

The costs of developing new drugs are astounding. Estimates put the
costs of developing new drugs in excess of $900 million and often
approaches nearly 2 billion dollars for each new drug. This development
cost, combined with the short remaining patent lifespan after regulatory
approval, is the reason for the high prices charged for most drugs.
Pharmaceutical companies need to recoup these research and development
costs and generate adequate profits in order to continue innovating.
Development costs continue to escalate as more and more complex drugs
are developed and new drugs either fail in clinical trials, or a drug
that passed through the trial phase and becomes a market success is
later withdrawn due to adverse events.

The majority of pharmaceutical drugs on the market are those referred to
as small molecule compounds. These are drugs that are synthesized in a
laboratory from basic chemical compounds using common synthetic chemical
procedures. Small molecule drugs are typically formulated into various
dosage forms including solid forms such as capsules and pills, and
liquid forms for oral ingestion or administration via injection or infusion.

In an effort to combat the high cost of drugs, generic forms have become
more and more available. Unlike an innovator drug from a large
pharmaceutical company, a generic drug is a bioidentical copy of the
innovator drug. Since a generic company is not required to perform the
full research and development procedures as required by the U.S. Food &
Drug Administration ("FDA") for approval, a generic drug can be sold at
substantially lower prices. Consumers save billions of dollars a year by
using low-cost generic versions of conventional drugs, which are
approved by the government under a 1984 law.

The Drug Price Competition and Patent Term Restoration Act of 1984,
usually referred to as the Hatch-Waxman Act, was designed to promote
generic drugs while leaving intact a financial incentive for research
and development by innovator pharmaceutical companies. The Hatch-Waxman
Act allows generics to win FDA marketing approval by submitting
bioequivalence studies (as opposed to clinical data, which is costlier
to compile). The Hatch-Waxman Act also grants a period of additional
marketing exclusivity to make up for the time a patented pipeline drug
remains in development. This extension cannot exceed five years, and it
is in addition to the 20 years exclusivity granted by the issuance of a
patent. Another provision of the Hatch-Waxman grants a 30-month stay to
drug companies that file suit against generic manufacturers that
challenge their patents. This has become controversial in recent years,
as pharmaceutical companies have used the provision to keep generics off
the market by protecting their drugs with extra patents of poor quality,
filing lawsuits to protect the patents even when the lawsuit will be
lost, but getting the extra market exclusivity anyway.

Importantly, the Hatch-Waxman Act does not apply to an increasingly
important class of drugs - "biologics" or biotech medicines. Although
the FDA has jurisdiction over biologics, most biologics are governed by
Section 351 of the Public Health Service Act of 1944. Biologics, which
are commonly large molecules, include a wide range of medicinal products
such as vaccines, blood and blood components, allergenics, somatic
cells, gene therapy, tissues, and recombinant therapeutic proteins.
Biologics can be composed of sugars, proteins, or nucleic acids or
complex combinations of these substances, or may be living entities such
as cells and tissues. Biologics are isolated from a variety of natural
sources - human, animal, or microorganism - and may be produced by
biotechnology methods and other cutting-edge technologies and are often
administered by injection or infusion. Gene-based and cellular
biologics, for example, often are at the forefront of biomedical
research, and may be used to treat a variety of medical conditions for
which no other treatments are available.

Biologics are the fastest-growing category of health spending, with
sales of over $40 billion in 2006, up 20 percent from 2005, according to
IMS Health, a market research company. More than 400 biotech products
are in the pipeline, for more than 100 diseases, including cancer, AIDS,
diabetes and Alzheimer's disease. The manufacture of biotech drugs is
more complex and costly than the production of conventional medicines.
But economists cite another reason for the high prices: biotech
medicines generally face no competition from copycat drugs. When the
first generic copy of a conventional drug becomes available, it may cost
15 percent less than the brand-name product. If several competing
generic versions are available, the price often falls by 60 percent or more.

Unlike the more common "small-molecule" drugs, however, biologics
generally exhibit high molecular complexity, and may be quite sensitive
to manufacturing process changes. The follow-on manufacturer does not
have access to the originator's molecular clone and original cell bank,
nor to the exact fermention and purification process. Finally, nearly
undetectable differences in impurities and/or breakdown products are
known to have serious health implications. This has created a concern
that generic versions of biologics might perform differently than the
original branded version of the drug. As such, unlike most conventional
drugs, generic versions of biologics are not authorized in the U.S. or
the European Union through the simplified procedures allowed for small
molecule generics. In the European Union a specially-adapted approval
procedure has been authorized for certain protein drugs, termed "similar
biological medicinal products" or "biosimilars." This procedure is based
on a thorough demonstration of "comparability" of the "similar" product
to an existing approved product. In the U.S. the FDA has taken the
position that new legislation will be required to address these
concerns. Such legislation is now close to being enacted.

As with traditional generic pharmaceuticals before passage of the
Hatch-Waxman Act in 1984, the obstacle standing between consumers and
substantial savings on biotech drugs is the articulation of a regulatory
process that will enable safe, effective, FDA-approved generic versions
of biotech drugs to reach the marketplace following a well-defined,
scientifically based approval process. The pathway created under generic
biotech legislation must enable and compel the FDA to review generic
biotech drug applications in a manner that assures safety and efficacy,
which does not require duplicative and expensive clinical trials, and
ensures that the approval of generic products is not unnecessarily
delayed by litigation or attempts to game the system by innovators. The
standards for generic biotech drugs must be rigorous enough to ensure
safety and effectiveness, and support consumer confidence in generic
biotech drugs, but must not be permitted to require generic applicants
to recreate clinical studies that simply reconstruct the scientific
knowledge already available.

On September 29, 2006, Rep. Henry Waxman, one of the namesakes of the
Hatch-Waxman Act, along with Senators Charles E. Schumer and Hillary
Rodham Clinton introduced H.R. 6257, the "Access to Life-Saving Medicine
Act," which sought to establish a process through which the FDA will be
able to approve lower cost copies of biotech drugs, commonly known as
biologics or biopharmaceuticals. That bill failed to advance out of both
Houses of Congress.

Innovator and brand-name drug manufacturers have continued to urge
Congress to require human trials before allowing the sale of any
products billed as comparable or equivalent to biotechnology medicines
already on the market. However, the generic industry received an
unexpected boost when the chief medical officer of the Food and Drug
Administration, Dr. Janet Woodcock, told Congress in March 2007 that the
agency had the expertise and experience to decide what types of human
and laboratory tests were needed to ensure that copies of a
biotechnology drug worked as well as the original.

A new bill that paves the way for follow-on biologics in the U.S. market
cleared the Senate health committee on June 27, 2007 and will give FDA
authority to approve generic versions of biologic drugs which are made
from living organisms rather than through chemical processes. The
bipartisan bill entitled "The Biologics Price Competition and Innovation
Act of 2007" would set up a regulatory pathway for the approval of
follow-on biologics and would grant original makers of biological drugs
a guaranteed 12 years of market exclusivity, dating to when the drug was
first approved, before a generic biologic can be sold. The first such
drug approved would then get one year's worth of exclusivity before a
subsequent biological product could be approved.

Testing requirements will vary, depending on the drug involved. To win
FDA approval, the follow-on company would have to conduct at least one
clinical trial to show there were no meaningful differences between its
product and the name-brand counterpart. The FDA could waive the
clinical-trial requirement and rely on animal studies and other data.
The FDA also could designate a copycat version as interchangeable,
meaning it could be substituted for the brand-name version.

The FDA also will be able to decide whether a generic biotech product
can be substituted by a pharmacist, rather than a doctor, for a
prescribed brand-name drug. This is known as interchangeability and
would be important in increasing the likelihood of generic substitutions.

The Generic Pharmaceutical Association opposes the 12-year period of
market exclusivity, calling it "excessive and arbitrary." The
Biotechnology Industry Organization prefers a 14-year period. In
addition, it opposes interchangeability, except when approved by the
patient's physician.

The current bill must now pass through the House and be reconciled with
related bills and proposed amendments. It is believed that the bill
could become law before the end of 2007. If enacted, this law will
dramatically change the way biologic drugs are approved and regulated
and will provide new opportunities for pharmaceutical companies. The
availability of these follow-on biologic drugs is anticipated to save
patients and taxpayers billions of dollars. This bill is being watched
extremely closely by many - innovator pharmaceutical companies, generic
pharmaceutical companies, politicians, lobbyists and consumers, many of
whose lives will be enhanced and who will reap the benefits of a wider
selection of more affordable drugs.

Please email the author at bmarenberg@sillscummis.com with questions
about this article.

--
Mike Palmedo
Research Coordinator
Program on Information Justice and Intellectual Property
American University, Washington College of Law
4910 Massachutsetts Ave., NW Washington, DC 20016
T - 202-274-4442 | F 202-274-0659
mpalmedo@wcl.american.edu