Biosimilars and Pay-for-Delay Addressed in White House Budget Proposal

A budget document released by the Obama administration details plans to restrict pay-for-delay agreements and reduce biologic product exclusivity terms.

The White House’s budget plan, released on April 10, 2013, contains a number of proposed policies designed to help lower drug costs for consumers and the government. These proposals, contained in a document titled “Reducing the Deficit in a Smart and Balanced Way,” include restricting “pay-for-delay” deals and reducing the exclusivity period for biologics from 12 years to 7 years.

According to the administration’s proposal, restricting “pay-for-delay” agreements would “increase the availability of generic drugs and biologics” and would produce $11 billion in savings to federal health programs over the next 10 years. In addition, the Federal Trade Commission would be authorized to stop companies from entering into these types of agreements.

In addition to reducing the exclusivity period for brand-name biologics, the proposal would “prohibit additional periods of exclusivity for brand biologics due to minor changes in product formulations, a practice often referred to as ‘evergreening.’” Restricting the exclusivity period for expensive biologics would produce $3 billion in savings to consumers and taxpayers, the proposal estimated.

Despite the savings these initiatives may indeed generate, reducing the exclusivity period for biologics may open up other provisions of the Biologics Price Competition and Innovation Act (BPCIA) to alteration, argues Brian J. Malkin of the FDA Lawyer’s Blog. “As with Hatch-Waxman, any modification to the BPCIA could be viewed as an opportunity to adjust features of the BPCIA that may be discouraging applicants to file biosimilar applications,” he wrote.

The Biotechnology Industry Organization has responded to some of the administration’s proposals in a press release. “Pay-for-delay” deals should not be prohibited, it asserts, as patent settlements promote “earlier generic entry, save patients and payers money, and ease congestion in our courts.” “Patients are overwhelmingly pleased with Medicare Part D, and the private competition between various drug plans keeps costs to patients down,” BIO wrote. “We should not disrupt this properly working benefit by making unnecessary changes.”

BIO also argued that the proposed shortened exclusivity period would stifle innovation by drug developers, “jeopardize much needed job growth in the United States and threaten to curtail our nation’s global leadership in biotech innovation.” The Pharmaceutical Research and Manufacturers of America agreed with this sentiment, saying in a press release that “the President’s budget would jeopardize medical advances and economic growth by reducing the incentives to invest in the development of new biologic medicines.”