Biogenerics and Drug Pricing: A Battle Royal

New legislation introduced byRep Henry Waxman (D, Calif)and others this fall?likely to bereintroduced next year?makes a strongcase for establishing regulatory pathwaysfor biogenerics. Equally, officials ofindustry lobbying groups, theBiotechnology Industry Organization(BIO) and the Pharmaceutical Researchand Manufacturers of America (PhRMA),argue against the proposed bill, sayingthat makers of biogenerics will not beable to meet criteria for safety, efficacy,and comparability. At the same time,biotech companies are concerned thatthe approval of biogenerics would eroderevenues earmarked for research anddevelopment (R&D) for the next wave ofnew biologics.

"Big pharma and the high cost of biologicsare up against managed careorganizations, insurance carriers, payers,[and] pharmacists," who sent letters ofsupport for Waxman's legislation, accordingto Andrew Merseth, an analystwith Decision Resources. He is the leadauthor of "Biogenerics 2006-2015: AnEmerging Reality for Biologic Brands." Inspite of the enthusiasm and broad supportfor follow-on biologics, Mersethbelieves that it will take time to implementregulatory pathways, even oncethey are passed by Congress.

"We expect Congress will enact legislationallowing biogeneric abbreviatedBLAs [biologics license applications] in2007-2008, and the first biogenerics willarrive [in the United States] no soonerthan 2009," said Merseth.

Debate over Costs

The Waxman legislation, while significantin spirit and for the support it hasgarnered, will not be voted on this year.The outcome of the midterm elections,however, and a landmark biologics pricingcase involving PhRMA, BIO, and theDistrict of Columbia have caused a dramaticshift in Congress' drug-pricingagenda. In fact, some policy analystsbelieve that much anticipated changes tothe Food, Drug, and Cosmetic Act and thePublic Health Service Act may incorporatedrug-pricing policies, including provisionsfor a biogenerics approval process.

"The generic drug industry may have apowerful ally and will push for a streamlinedFDA approval process for so-calledfollow-on biologics," said legislative andhealth care attorney Catherine P. Bennettof the Washington, DC-based law firmVenable LLP. "But it's important [that] legislationalso support ongoing drug developmentand innovation for the next waveof biologics," she added.Weighing patientand managed care needs?affordabilityand safety?as well as the needs ofindustry to innovate is at the crux of thedebate, according to Bennett, who also isa former Pfizer vice president.

The high cost of biologics has intensifiedbattles over the government's rightto control drug pricing and access tolower-cost generics. For example, severalmonths' dose of a biologic such asGenentech's bevacizumab (Avastin;used to treat colorectal cancer and alsoto help prolong life for non-small-celllung cancer patients) can cost from$55,000 to more than $100,000, includingvery high copays. In response to outcriesabout the medicine's price, inOctober, Genentech announced a$55,000/year per patient price tag forpeople with lower incomes. Avastin isexpected to be much more widely prescribed,because it is in trials for treatmentfor other forms of cancer as well.In spite of this recent price reduction,cost is still expected to provoke furtherdisagreement among biotech companies,policy makers, payers, and patients.

"Many patients are now denied accessto these important drugs, because eventhe copayments can reach thousands ofdollars a year. And the skyrocketing costof biotech medicines is imposing increasingburdens on employers, insurers, andthe federal government," Waxman saidwhen his bill was introduced in lateSeptember.

The Access to Life-Saving Medicine Actis designed to help resolve the ongoingdebate by defining a biogenerics approvalprocess for the FDA. One provisionof this bill gives the FDA the discretionto fast-track a biogeneric or requireit to undergo more extensive clinicaltrials?each on a case-by-case basis.

Safety and R&D Concerns

BIO and PhRMA, among other organizations,have filed citizens' petitions with theFDA regarding the safety of biogenerics.Waxman plans to also address prescriptiondrug safety and related recommendationsrecently made by the Institute ofMedicine. Thus the process of determiningthe safety of new medicines couldslow the approval of a number of classesof generic biologics and the definition ofregulatory pathways for these drugs.

"[The] innovator biopharmaceuticalfirms' lobbies BIO and PhRMA are strongand will delay any legislation as long asthey can hold off public pressure fromthe other side, arguing largely from aquality assurance/safety perspective,"said Fredric Cohen, MD, president ofPharma Growth Strategies LLC, a pharmaceutical strategy consultancy.

While BIO and PhRMA raise biotechcompanies' concerns about the safetyand comparability of biogenerics, theyalso are worried about the industry losingincentives to innovate and invest inR&D for biologics. The average cost ofdeveloping a new biotechnology productis $1.2 billion, according to new findingspublished in November by the TuftsCenter for the Study of Drug Development.Although this figure is similar to thecost of making a blockbuster drug, thecomplexity of these new medicines hasmade it more difficult for biotech companiesto get their biologics FDA-approved.

"Capitalization increases biopharmaceuticalcosts relative to traditional pharmaceuticalcosts, because of a longerdevelopment timeline and a higher costof capital," according to the Tufts study.

Landmark Drug Pricing Case

In the meantime, although the prospectof defined regulatory pathways forbiogenerics remains uncertain for now,the District of Columbia and such statesas West Virginia and Maine haveattempted to set or suggest price limitson biopharmaceuticals.

These efforts have led to a fierce landmarkcase currently under appeal in theDistrict of Columbia. BIO and PhRMAsued the District for interfering in thepricing of patented prescription drugs.For example, according to a statementfrom PhRMA about state and cityattempts to suggest and possibly setprice limits on prescriptions: "Under longestablishedUS patent law, a patent holderretains the exclusive right to use andsell a patented drug for a limited periodat the price determined in the market.This limited exclusivity spurs innovation,allowing inventors fair opportunity torecover the benefits of their inventionand discover new cures."

On November 6, 18 consumer groupsfiled an amicus curiaebrief in support ofthe District's effortsto suggest price limitson lifesavingmedicines, includingbiologics. BIO andPhRMA officialsargue that, by virtueof holding US patents,they can pricetheir new medicinesat their own discretionand that theyneed the revenuethey make from thesale of their drugs tofund R&D.

"The thing aboutthis case is that thelaw is written sobroadly that [dependingon the outcomeof the case] itcould allow [drug]companies tocharge whatever they want," said Jamie Love, an intellectualproperty expert and director of the Consumer Project on Technology."PhRMA has argued that there is no such thing as anexcessive price," he added.

If BIO and PhRMA win the landmark case, states may lose theright to regulate not only prescription drug prices, but also theprices of other goods and services that state regulatory boardshave monitored and controlled fordecades (eg, natural gas, phone service,water, and transportation). So stated SeanM. Fiil-Flynn, Professor of Law, Programon Information Justice and IntellectualProperty, Washington College of Law atAmerican University.

If the District of Columbia loses thecase, such an outcome could further rallylegislators such as Waxman and consumerlobbies eager to lower drug pricesto champion legislation to define regulatorypathways for biogenerics and negotiateprices for federal drug plans such asMedicare Part D.

Patents on $11.5 billion worth of biologicdrugs will have expired by the end of2006. In 2005, global biopharmaceuticalsales grew by 17.1% year on year to $56billion, according to IMS Health. Sales ofbiologics could total $90 billion in 2009, according to pharmacybenefits manager Pharmaceutical Care Management.

Ms. Christopher is a freelance writerbased in Portland, Ore.