Biogenerics and Drug Pricing: A Battle Royal

DECEMBER 01, 2006
Abby Christopher

New legislation introduced by Rep Henry Waxman (D, Calif) and others this fall?likely to be reintroduced next year?makes a strong case for establishing regulatory pathways for biogenerics. Equally, officials of industry lobbying groups, the Biotechnology Industry Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA), argue against the proposed bill, saying that makers of biogenerics will not be able to meet criteria for safety, efficacy, and comparability. At the same time, biotech companies are concerned that the approval of biogenerics would erode revenues earmarked for research and development (R&D) for the next wave of new biologics.

"Big pharma and the high cost of biologics are up against managed care organizations, insurance carriers, payers, [and] pharmacists," who sent letters of support for Waxman's legislation, according to Andrew Merseth, an analyst with Decision Resources. He is the lead author of "Biogenerics 2006-2015: An Emerging Reality for Biologic Brands." In spite of the enthusiasm and broad support for follow-on biologics, Merseth believes that it will take time to implement regulatory pathways, even once they are passed by Congress.

"We expect Congress will enact legislation allowing biogeneric abbreviated BLAs [biologics license applications] in 2007-2008, and the first biogenerics will arrive [in the United States] no sooner than 2009," said Merseth.

Debate over Costs

The Waxman legislation, while significant in spirit and for the support it has garnered, will not be voted on this year. The outcome of the midterm elections, however, and a landmark biologics pricing case involving PhRMA, BIO, and the District of Columbia have caused a dramatic shift in Congress' drug-pricing agenda. In fact, some policy analysts believe that much anticipated changes to the Food, Drug, and Cosmetic Act and the Public Health Service Act may incorporate drug-pricing policies, including provisions for a biogenerics approval process.

"The generic drug industry may have a powerful ally and will push for a streamlined FDA approval process for so-called follow-on biologics," said legislative and health care attorney Catherine P. Bennett of the Washington, DC-based law firm Venable LLP. "But it's important [that] legislation also support ongoing drug development and innovation for the next wave of biologics," she added.Weighing patient and managed care needs?affordability and safety?as well as the needs of industry to innovate is at the crux of the debate, according to Bennett, who also is a former Pfizer vice president.

The high cost of biologics has intensified battles over the government's right to control drug pricing and access to lower-cost generics. For example, several months' dose of a biologic such as Genentech's bevacizumab (Avastin; used to treat colorectal cancer and also to help prolong life for non-small-cell lung cancer patients) can cost from $55,000 to more than $100,000, including very high copays. In response to outcries about the medicine's price, in October, Genentech announced a $55,000/year per patient price tag for people with lower incomes. Avastin is expected to be much more widely prescribed, because it is in trials for treatment for other forms of cancer as well. In spite of this recent price reduction, cost is still expected to provoke further disagreement among biotech companies, policy makers, payers, and patients.

"Many patients are now denied access to these important drugs, because even the copayments can reach thousands of dollars a year. And the skyrocketing cost of biotech medicines is imposing increasing burdens on employers, insurers, and the federal government," Waxman said when his bill was introduced in late September.

The Access to Life-Saving Medicine Act is designed to help resolve the ongoing debate by defining a biogenerics approval process for the FDA. One provision of this bill gives the FDA the discretion to fast-track a biogeneric or require it to undergo more extensive clinical trials?each on a case-by-case basis.

Safety and R&D Concerns

BIO and PhRMA, among other organizations, have filed citizens' petitions with the FDA regarding the safety of biogenerics. Waxman plans to also address prescription drug safety and related recommendations recently made by the Institute of Medicine. Thus the process of determining the safety of new medicines could slow the approval of a number of classes of generic biologics and the definition of regulatory pathways for these drugs.

"[The] innovator biopharmaceutical firms' lobbies BIO and PhRMA are strong and will delay any legislation as long as they can hold off public pressure from the other side, arguing largely from a quality assurance/safety perspective," said Fredric Cohen, MD, president of Pharma Growth Strategies LLC, a pharmaceutical strategy consultancy.

While BIO and PhRMA raise biotech companies' concerns about the safety and comparability of biogenerics, they also are worried about the industry losing incentives to innovate and invest in R&D for biologics. The average cost of developing a new biotechnology product is $1.2 billion, according to new findings published in November by the Tufts Center for the Study of Drug Development. Although this figure is similar to the cost of making a blockbuster drug, the complexity of these new medicines has made it more difficult for biotech companies to get their biologics FDA-approved.

"Capitalization increases biopharmaceutical costs relative to traditional pharmaceutical costs, because of a longer development timeline and a higher cost of capital," according to the Tufts study.

Landmark Drug Pricing Case

In the meantime, although the prospect of defined regulatory pathways for biogenerics remains uncertain for now, the District of Columbia and such states as West Virginia and Maine have attempted to set or suggest price limits on biopharmaceuticals.

These efforts have led to a fierce landmark case currently under appeal in the District of Columbia. BIO and PhRMA sued the District for interfering in the pricing of patented prescription drugs. For example, according to a statement from PhRMA about state and city attempts to suggest and possibly set price limits on prescriptions: "Under longestablished US patent law, a patent holder retains the exclusive right to use and sell a patented drug for a limited period at the price determined in the market. This limited exclusivity spurs innovation, allowing inventors fair opportunity to recover the benefits of their invention and discover new cures."

On November 6, 18 consumer groups filed an amicus curiae brief in support of the District's efforts to suggest price limits on lifesaving medicines, including biologics. BIO and PhRMA officials argue that, by virtue of holding US patents, they can price their new medicines at their own discretion and that they need the revenue they make from the sale of their drugs to fund R&D.

"The thing about this case is that the law is written so broadly that [depending on the outcome of the case] it could allow [drug] companies to charge whatever they want," said Jamie Love, an intellectual property expert and director of the Consumer Project on Technology. "PhRMA has argued that there is no such thing as an excessive price," he added.

If BIO and PhRMA win the landmark case, states may lose the right to regulate not only prescription drug prices, but also the prices of other goods and services that state regulatory boards have monitored and controlled for decades (eg, natural gas, phone service, water, and transportation). So stated Sean M. Fiil-Flynn, Professor of Law, Program on Information Justice and Intellectual Property, Washington College of Law at American University.

If the District of Columbia loses the case, such an outcome could further rally legislators such as Waxman and consumer lobbies eager to lower drug prices to champion legislation to define regulatory pathways for biogenerics and negotiate prices for federal drug plans such as Medicare Part D.

Patents on $11.5 billion worth of biologic drugs will have expired by the end of 2006. In 2005, global biopharmaceutical sales grew by 17.1% year on year to $56 billion, according to IMS Health. Sales of biologics could total $90 billion in 2009, according to pharmacy benefits manager Pharmaceutical Care Management.

Ms. Christopher is a freelance writer based in Portland, Ore.