[Ip-health] FTC Releases Report on “Follow-on Biologic Dr ug Competition”

[Judit Rius Sanjuan]

The FTC report is available here: http://www.ftc.gov/os/2009/06/P083901biol=
ogicsreport.pdf

PRESS RELEASE
http://www.ftc.gov/opa/2009/06/biologics.shtm

For Release: 06/10/2009
FTC Releases Report on “Follow-on Biologic Drug Competition”

Providing FDA With Authority to Approve Follow-on Biologics Would be
an Efficient Way to Bring Them to Market, Lowering Consumers’ Health
Care Costs

The Federal Trade Commission today released a report entitled “Follow-
on Biologic Drug Competition”which examines whether the price of
biologic drugs – products manufactured using living tissues and
microorganisms – could be reduced by competition from so-called
“follow-on biologics” (FOBs). FOBs are like generic drugs, but with
significant differences. Biologics are increasingly used to treat
arthritis, cancer, diabetes, and other diseases. No pathway currently
exists for such FOBs to enter the market and compete with their
pioneer counterparts. The FTC’s Report concludes that providing the
U.S. Food and Drug Administration (FDA) with the authority to approve
such FOBs would be an efficient way to bring these lower-priced drugs
to market.

“If Congress creates an efficient pathway to follow-on biologic drugs
and, at least as important, ends ‘pay-for-delay’ pharmaceutical
settlements that delay entry of traditional generic drugs, it will be
taking a major step forward for both health care reform and affordable
drugs for all Americans,” said FTC Chairman Jon Leibowitz.

Biologic drugs are quite expensive – even more than branded versions
of most traditional “small-molecule” drugs. For example, the annual
treatment with the biologic drug Herceptin (a breast cancer treatment)
can cost $48,000. FOBs, if brought to market, could reduce the
estimated $40.3 billion a year consumers spend on biologic drugs. The
FTC’s Report examines how this might occur.

The Commission’s Report summarizes the findings of a public roundtable
the agency held in November 2008 to examine how FOBs could enter the
market, and what competition between FOBs and pioneer biologic drugs
likely would look like. The FTC also solicited two rounds of public
comments on the issue of biologic drug competition and accepted
additional expert analysis in reaching its findings and developing
forward-looking recommendations.

In large part, the Report compares potential entry and competition by
FOBs with entry
and competition by small-molecule pharmaceuticals. In 1984, to
encourage generic competition in the small-molecule drug market,
Congress passed the Hatch-Waxman Act. The Act, among other things,
gives the first-filing generic drug manufacturer a 180-day marketing
exclusivity period after it introduces its product. The goal was to
encourage innovation and generic drug entry by providing a period in
which the first-filer would have no competition from other generic
firms. As the price of generic drugs is often significantly less than
their branded counterparts, generic entry can significantly reduce
health care costs for consumers. In fact, after several generic
competitors enter the market, prices for a particular drug can be
reduced by up to 80 percent.

In recent years, “pay-for-delay” patent settlements, in which
manufacturers of brand-name drugs pay potential generic competitors to
stay out of the market, have delayed consumer access to lower-cost
generic drugs. Last week, U.S. House Energy and Commerce Committee’s
Commerce, Trade, and Consumer Protection Subcommittee passed the
Protecting Consumer Access to Generic Drugs Act of 2009 (H.R. 1706),
which would prohibit such anticompetitive settlements and, ultimately,
could significantly lower prescription drug costs.

The Commission’s Report states that competition by FOBs is unlikely to
be similar to branded-generic drug competition because:

     * The substantial costs to obtain FDA approval, plus the
substantial costs to develop manufacturing capacity, will limit the
number of FOB competitors;
     * The lack of automatic substitution between an FOB drug and a
pioneer biologic drug will slow the rate at which FOBs can acquire
market share;
     * An FOB drug also may have difficulty gaining market share due
to concerns about safety and efficacy differences with the pioneer
biologic drug;
     * Biologic drugs currently are not reimbursed according to
strategies that insurers often use to encourage the use of lower-
priced drugs;
     * As a result of these factors, FOB entry, although important,
will be less-dramatic than generic drug competition. FOB entry is
likely in biologic drug markets larger than $250 million in annual
sales. Only two or three FOB manufacturers are likely to attempt entry
for a given pioneer drug product. These entrants are unlikely to
introduce their drugs at discounts any larger than between 10 and 30
percent of the pioneer product’s price;
     * The effect on pioneer manufacturers also will be different.
They are expected to respond and offer competitive discounts to
maintain market share and are likely to retain 70 to 90 percent of
their market share and will continue to reap substantial profits, even
after FOB entry.

Based on these findings, the Report concludes that patent protection
and market-based pricing will promote competition by FOBs, as well as
spur biologic innovation. It states that legislation to put a process
in place for the abbreviated FDA approval of FOBs is likely to be an
efficient way to bring FOBs to market, because of the time and cost
savings it would provide.

In addition, the Report states that the 12- to 14-year regulatory
exclusivity period is too long to promote innovation by these firms,
particularly since they likely will retain substantial market share
after FOB entry. The Report concludes that special procedures to
resolve patent issues between pioneer and FOB manufacturers before FDA
approval, which are not needed,
could undermine patent incentives and harm consumers. Finally, the
Report states that FOB manufacturers are unlikely to need additional
incentives – such as a 180-day marketing exclusivity period – to
develop interchangeable FOB products.

The Commission vote approving issuance of the Report was 4-0. It can
be found on the agency’s Web site at http://www.ftc.gov/os/2009/06/P08390=
1biologicsreport.pdf

The FTC’s Bureau of Competition works with the Bureau of Economics to
investigate alleged anticompetitive business practices and, when
appropriate, recommends that the Commission take law enforcement
action. To inform the Bureau about particular business practices, call
202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the
Office of Policy and Coordination, Room 394, Bureau of Competition,
Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC
20580. To learn more about the Bureau of Competition, read
“Competition Counts” at http://www.ftc.gov/bc/edu/pubs/consumer/general=
/zgen1.shtm
.

MEDIA CONTACT:
     Mitchell J. Katz,
     Office of Public Affairs
     202-326-2180
STAFF CONTACT:
     Michael Wroblewski,
     Office of Policy Planning
     202-326-2435

(FTC File No. P083901)
(Biologics.final.wpd)

Judit Rius Sanjuan
Attorney
Knowledge Ecology International / Essential Information
www.keionline.org / www.cptech.org
Phone: +1.202 332 2670, ext 18