[Ip-health] Forbes: Why Biologics Remain Expensive

[Malini Aisola]

http://www.forbes.com/2009/12/03/kramer-health-care-intelligent-investing-pharmaceuticals.html

Why Biologics Remain Expensive

By Hilary Kramer
December 4, 2009


At a time when Americans are shopping for bargains and desperately
learning how to live on a budget, it hardly seems appropriate for
Congress to be keeping our health care costs high. But that's exactly
what some congressional leaders are planning to do.

One of the undercards of the health care battle is the issue of
affordable biotech drugs. It hasn't gotten as much attention as the
overall health care reform topic, but it should. One in every 10 health
care dollars is spent on prescription drugs, according to the Centers
for Medicare and Medicaid. So how drugs are priced has a meaningful
impact on our total health care costs.

Pharmaceuticals of particular importance are biologic drugs--those
created using biological rather than chemical properties--because they
represent an increasing share of the drugs used to treat illnesses. The
number of new biologic drugs is growing at two times the rate of new
chemical-based, traditional pharmaceuticals, according to a study
published in Health Affairs, an industry magazine.

Biologics are not only significant in terms of the number of drugs being
invented, but also in the types of illnesses for which they provide
therapy. Life-threatening illnesses like multiple sclerosis, anemia,
hemophilia, cancer, diabetes, HIV and rheumatoid arthritis are typically
treated using biologic drugs. As one can imagine, these serious
illnesses also have treatment regimens with equally serious costs behind
them. Biologic drugs can cost up to 22 times more than traditional
medications--some as much as $400,000 a year.

Congressional leaders know this. Yet there are some who continue to
favor legislation that would keep the costs of biologic drugs high.

Most pharmaceutical treatments offer both branded and cheaper generic
alternatives. But thanks to Congress, there are no generic versions of
biologics that are legally available in the U.S. That's because
congressional leaders like Rep. Anne Eshoo of California and the late
Sen. Ted Kennedy sponsored legislation granting excessively long
exclusivity to biologic drug makers that's completely separate from the
protection already afforded by the current patent system. So while the
landmark legislation that created the generic drug industry (the Hatch
Waxman Act of 1984) provides other drugs with five years of exclusivity
protection, biologic drugs have over twice that in exclusivity--12
years.

This monopolistic exclusivity has forced out competition from the market
by eliminating any economic incentives for the development of generic
biologic drugs.

Debra Barrett, senior vice president of government affairs for Teva
North America, the world's largest generic drug maker, put it this way:
"Washington is stifling competition, and this is hurting patients by
saddling them with higher drug costs. Congress is missing an enormous
opportunity to decrease the health care costs of Americans by refusing
to allow a competitive biologics marketplace."

The savings potential is significant. A study by Dr. Robert Shapiro, a
Harvard-trained economist, estimated that enabling generic options on
just the top 12 categories of biologic treatments with expired patents
would save Americans between $236 and $378 billion over 20 years--an
average of some $31 billion a year.

That's big money at a time when Americans could certainly use it.
Unfortunately, Big Pharma throws around big money too. Despite the Obama
administration's laudable public stance restricting the influence of
special interest groups, lobbyists for the drug manufacturers have been
active in Washington. In the first half of 2009, pharmaceutical industry
groups spent $110 million in lobbying--roughly $600,000 a day--to
further guarantee that the exclusivity they enjoy on biologic drugs is
unaffected by current health care reforms. These are the health care
reforms that ironically are intended to decrease costs to patients.

Individual legislators have benefited from Big Pharma's largesse too.
Rep. Eshoo's congressional district, home to Allergan, has received over
$1.4 million in political contributions from pharmaceutical and
biotechnology companies, including from Amgen, Johnson & Johnson and
Roche, the parent company of Genentech. Ted Kennedy's Senate library
received $5 million from Amgen--one of the largest donations in history.

The weight of this money and influence is now causing the Obama
administration to stay silent on its prior support of opening up the
drug market to competition from generic biologics. It couldn't come at a
worse time. With the economy needing competitive companies with fresh
products and consumers needing a break on their spending, the impact of
this aspect of health care reform is far-reaching.

But unless congressional leaders vote because of the money they could
save patients rather than because of the money spent by lobbyists, the
average American will continue to face unnecessarily serious costs for
treatment of the most serious of diseases.


--
Malini Aisola
Knowledge Ecology International
1621 Connecticut Avenue NW, Suite 500, Washington DC 20009
malini.aisola@keionline.org|Tel: +1.202.332.2670|Fax: +1.202.332.2673