The costs of developing new drugs are astounding. Estimates put the costs of developing new drugs in excess of $900 million and often approaches nearly 2 billion dollars for each new drug. This development cost, combined with the short remaining patent lifespan after regulatory approval, is the reason for the high prices charged for most drugs. Pharmaceutical companies need to recoup these research and development costs and generate adequate profits in order to continue innovating. Development costs continue to escalate as more and more complex drugs are developed and new drugs either fail in clinical trials, or a drug that passed through the trial phase and becomes a market success is later withdrawn due to adverse events.
The majority of pharmaceutical drugs on the market are those referred to as small molecule compounds. These are drugs that are synthesized in a laboratory from basic chemical compounds using common synthetic chemical procedures. Small molecule drugs are typically formulated into various dosage forms including solid forms such as capsules and pills, and liquid forms for oral ingestion or administration via injection or infusion.
In an effort to combat the high cost of drugs, generic forms have become more and more available. Unlike an innovator drug from a large pharmaceutical company, a generic drug is a bioidentical copy of the innovator drug. Since a generic company is not required to perform the full research and development procedures as required by the U.S. Food & Drug Administration ("FDA") for approval, a generic drug can be sold at substantially lower prices. Consumers save billions of dollars a year by using low-cost generic versions of conventional drugs, which are approved by the government under a 1984 law.
The Drug Price Competition and Patent Term Restoration Act of 1984, usually referred to as the Hatch-Waxman Act, was designed to promote generic drugs while leaving intact a financial incentive for research and development by innovator pharmaceutical companies. The Hatch-Waxman Act allows generics to win FDA marketing approval by submitting bioequivalence studies (as opposed to clinical data, which is costlier to compile). The Hatch-Waxman Act also grants a period of additional marketing exclusivity to make up for the time a patented pipeline drug remains in development. This extension cannot exceed five years, and it is in addition to the 20 years exclusivity granted by the issuance of a patent. Another provision of the Hatch-Waxman grants a 30-month stay to drug companies that file suit against generic manufacturers that challenge their patents. This has become controversial in recent years, as pharmaceutical companies have used the provision to keep generics off the market by protecting their drugs with extra patents of poor quality, filing lawsuits to protect the patents even when the lawsuit will be lost, but getting the extra market exclusivity anyway.
Importantly, the Hatch-Waxman Act does not apply to an increasingly important class of drugs - "biologics" or biotech medicines. Although the FDA has jurisdiction over biologics, most biologics are governed by Section 351 of the Public Health Service Act of 1944. Biologics, which are commonly large molecules, include a wide range of medicinal products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins. Biologics can be composed of sugars, proteins, or nucleic acids or complex combinations of these substances, or may be living entities such as cells and tissues. Biologics are isolated from a variety of natural sources - human, animal, or microorganism - and may be produced by biotechnology methods and other cutting-edge technologies and are often administered by injection or infusion. Gene-based and cellular biologics, for example, often are at the forefront of biomedical research, and may be used to treat a variety of medical conditions for which no other treatments are available.
Biologics are the fastest-growing category of health spending, with sales of over $40 billion in 2006, up 20 percent from 2005, according to IMS Health, a market research company. More than 400 biotech products are in the pipeline, for more than 100 diseases, including cancer, AIDS, diabetes and Alzheimer's disease. The manufacture of biotech drugs is more complex and costly than the production of conventional medicines. But economists cite another reason for the high prices: biotech medicines generally face no competition from copycat drugs. When the first generic copy of a conventional drug becomes available, it may cost 15 percent less than the brand-name product. If several competing generic versions are available, the price often falls by 60 percent or more.
Unlike the more common "small-molecule" drugs, however, biologics generally exhibit high molecular complexity, and may be quite sensitive to manufacturing process changes. The follow-on manufacturer does not have access to the originator's molecular clone and original cell bank, nor to the exact fermention and purification process. Finally, nearly undetectable differences in impurities and/or breakdown products are known to have serious health implications. This has created a concern that generic versions of biologics might perform differently than the original branded version of the drug. As such, unlike most conventional drugs, generic versions of biologics are not authorized in the U.S. or the European Union through the simplified procedures allowed for small molecule generics. In the European Union a specially-adapted approval procedure has been authorized for certain protein drugs, termed "similar biological medicinal products" or "biosimilars." This procedure is based on a thorough demonstration of "comparability" of the "similar" product to an existing approved product. In the U.S. the FDA has taken the position that new legislation will be required to address these concerns. Such legislation is now close to being enacted.
As with traditional generic pharmaceuticals before passage of the Hatch-Waxman Act in 1984, the obstacle standing between consumers and substantial savings on biotech drugs is the articulation of a regulatory process that will enable safe, effective, FDA-approved generic versions of biotech drugs to reach the marketplace following a well-defined, scientifically based approval process. The pathway created under generic biotech legislation must enable and compel the FDA to review generic biotech drug applications in a manner that assures safety and efficacy, which does not require duplicative and expensive clinical trials, and ensures that the approval of generic products is not unnecessarily delayed by litigation or attempts to game the system by innovators. The standards for generic biotech drugs must be rigorous enough to ensure safety and effectiveness, and support consumer confidence in generic biotech drugs, but must not be permitted to require generic applicants to recreate clinical studies that simply reconstruct the scientific knowledge already available.
On September 29, 2006, Rep. Henry Waxman, one of the namesakes of the Hatch-Waxman Act, along with Senators Charles E. Schumer and Hillary Rodham Clinton introduced H.R. 6257, the "Access to Life-Saving Medicine Act," which sought to establish a process through which the FDA will be able to approve lower cost copies of biotech drugs, commonly known as biologics or biopharmaceuticals. That bill failed to advance out of both Houses of Congress.
Innovator and brand-name drug manufacturers have continued to urge Congress to require human trials before allowing the sale of any products billed as comparable or equivalent to biotechnology medicines already on the market. However, the generic industry received an unexpected boost when the chief medical officer of the Food and Drug Administration, Dr. Janet Woodcock, told Congress in March 2007 that the agency had the expertise and experience to decide what types of human and laboratory tests were needed to ensure that copies of a biotechnology drug worked as well as the original.
A new bill that paves the way for follow-on biologics in the U.S. market cleared the Senate health committee on June 27, 2007 and will give FDA authority to approve generic versions of biologic drugs which are made from living organisms rather than through chemical processes. The bipartisan bill entitled "The Biologics Price Competition and Innovation Act of 2007" would set up a regulatory pathway for the approval of follow-on biologics and would grant original makers of biological drugs a guaranteed 12 years of market exclusivity, dating to when the drug was first approved, before a generic biologic can be sold. The first such drug approved would then get one year's worth of exclusivity before a subsequent biological product could be approved.
Testing requirements will vary, depending on the drug involved. To win FDA approval, the follow-on company would have to conduct at least one clinical trial to show there were no meaningful differences between its product and the name-brand counterpart. The FDA could waive the clinical-trial requirement and rely on animal studies and other data. The FDA also could designate a copycat version as interchangeable, meaning it could be substituted for the brand-name version.
The FDA also will be able to decide whether a generic biotech product can be substituted by a pharmacist, rather than a doctor, for a prescribed brand-name drug. This is known as interchangeability and would be important in increasing the likelihood of generic substitutions.
The Generic Pharmaceutical Association opposes the 12-year period of market exclusivity, calling it "excessive and arbitrary." The Biotechnology Industry Organization prefers a 14-year period. In addition, it opposes interchangeability, except when approved by the patient's physician.
The current bill must now pass through the House and be reconciled with related bills and proposed amendments. It is believed that the bill could become law before the end of 2007. If enacted, this law will dramatically change the way biologic drugs are approved and regulated and will provide new opportunities for pharmaceutical companies. The availability of these follow-on biologic drugs is anticipated to save patients and taxpayers billions of dollars. This bill is being watched extremely closely by many - innovator pharmaceutical companies, generic pharmaceutical companies, politicians, lobbyists and consumers, many of whose lives will be enhanced and who will reap the benefits of a wider selection of more affordable drugs.
Barry J. Marenberg is Of Counsel to Sills Cummis Epstein & Gross P.C.'s Intellectual Property Practice Group and focuses on the life sciences industry. The views and opinions expressed in this article are those of the author and do not necessarily reflect those of Sills Cummis Epstein & Gross P.C.