Healthcare Reform Gave Biotech Everything It Wanted, and More
And so we embark on a new era of healthcare—one that may take many years to fully reach its potential for good or ill. But there are two small bits in the Patient Protection and Affordable Care Act that are immediately relevant and timely for the biotechnology industry. One provides tax breaks for smaller biotechnology companies, while the other simplifies some aspects of the regulatory landscape and adds some complicated wrinkles.
The Therapeutic Discovery Project Credit provides “an amount equal to 50 percent of the qualified investment for such taxable year with respect to any qualifying therapeutic discovery project,” permitting some of the costs for pre-clinical research, clinical trials and other research protocols to be reduced. It appears that it will be limited to organizations with fewer than 250 employees. The total amount of the credit is $1 billion.
A billion dollars is not chump change but could disappear pretty rapidly when clinical trials are included. This credit will be helpful for the right companies but it seems to be a one-time shot in the arm.
The noteworthy part of the legislation, Approval Pathway For Biosimilar Biological Products, provides real clarity on an important regulatory issue. This section permits biologics—the complex therapeutics produced by most biotechnology companies—to maintain 12 years of market exclusivity after FDA approval of the product.
The biotechnology industry breathed a sigh of relief with this section’s passage because this clearly delineated time frame could have been much different.
The Federal Trade Commission had felt that no additional period of exclusivity was required. The Generic Pharmaceutical Association (GPhA) wanted only a five year period. President Obama wanted seven years. The Biotechnology Industry Organization (BIO) wanted at least 12 years. In the end, BIO got exactly what it wanted.
This uncertainty has been eliminated. Biotechnology companies now have a known period of market exclusivity post-approval, one that is independent of patent time frames. This will provide investors with the predictability they crave when they project product sales far into the future for biotech drugs in development.
The generic companies may be happier with another part of this section, though. As the title suggests, it describes the approval process for follow-on biologics—biological copycat molecules that have similar activities to innovative therapeutics already on the market. Until this legislation, there was no practical way for a generic company to make a “biosimilar” drug without incurring many of the same costs as the original innovative biologic. This new route to the market could be very helpful to the generic makers, but only if they can navigate the treacherous pathway known as the FDA approval process.
Regular generic drugs, which are copies of synthetic chemical compounds, are often much cheaper than the original brand names. Development costs are substantially lower and there are few marketing costs for these generics. That will seldom be the case for follow-on biologic drugs, whose complexities present novel difficulties. Generic companies will have to navigate several of the normal aspects of FDA approval, such as pre-clinical data and large clinical trials. Since they are often produced in living cells, manufacturing and production processes for follow-on biologics will also present challenges, increasing development costs. It seems likely that follow-ons will also require marketing expenses not seen with normal generics.
These barriers will limit the entry of large numbers of follow-on biologics into the marketplace. However, there is one more worrisome hurdle that this legislation places in front of anybody who wants to make a follow-on biologic that could compete with an innovator’s product.
Upon application for FDA approval, the company developing the follow-on biologic has to turn over all the relevant documents to the company that owns the original reference therapeutic. Not upon approval, but upon application. To its direct competitor.
That means lawyers at multiple organizations now get to examine all the confidential data and determine whether there are any patent infringements. This seems to be much greater disclosure of confidential information than what is seen today with generic drugs.
As a former VP at a biotechnology company, I would be concerned handing all the information and data required for approval of a product over to my direct competitor before I even have it on the market. All the information is supposed to remain confidential. However, even with legal remedies, lots of damage could potentially be done. Is it worth the risk?
Perhaps I might be misreading the relevant paragraphs. If so, maybe someone could assuage my concerns.
Biotechnology companies developing reference therapeutics should be ecstatic with the legislation. They get 12 years of exclusivity for their products and a first look at any competitor who might produce a follow-on biologic.
On the flip side, companies interested in developing a follow-on biologic may be much less sanguine. They must spend a lot of money generating data for a product that cannot be sold while any market exclusivity still remains – data their direct competitor gets to examine before the follow-on biologic is even approved.
They might ask themselves, “Why not just develop an innovative biologic instead?” The costs will not be much greater, there are 12 years of exclusivity and no one but the FDA gets the data.
I guess time will tell if this legislation really produces a lot of follow-on biologics that help lower the price of drugs. But it certainly helps biotechnology companies.