If a health-care reform package makes it through Congress this year, it's safe to assume it will include a defined regulatory pathway for generic biotechnology drugs. But there's one major question for which generic and brand-name drugmakers can't find a mutually agreeable answer: How long should a biotech company own the data that reveal how it created a drug?
Without access to that data, it's virtually impossible for copycats to determine how to make low-cost generic equivalents of pricey biotech drugs. This issue, known in the industry as "data exclusivity," is of particular interest to Debra Barrett, vice-president for government affairs at Teva Pharmaceuticals (TEVA), the giant Israeli manufacturer of generic drugs. Teva has been angling for a market-leading position in biotech for years, but it won't get anywhere until the U.S. government builds a roadway to the market for generic biotech drugs.
On June 24, Barrett got a boost from two White House officials, who wrote a letter suggesting that the proper period of data exclusivity should be seven years—in line with what Teva has been pushing for, and far short of the 12 to 14 years that biotech companies want. Nancy-Ann DeParle, director of the Office of Health Reform, and Peter Orzag, director of the Office of Management & Budget, sent the letter to Representative Henry A. Waxman, chairman of the Committee on Energy & Commerce, which is working on health-care reform.
President Barack Obama wants generic biotech drugs to be part of that plan. And Waxman is sponsoring legislation that argues for short exclusivity periods so generic manufacturers can speed low-cost drugs to market. "The Administration has made clear that the President does not support the lengthy monopoly periods sought by the drug industry," Waxman said in a statement responding to the White House letter.
THE BIOTECH MARKET IS GROWING 12% A YEAR
Biotech drugs—complex, protein-based molecules that treat everything from cancer to rheumatoid arthritis—are more expensive and difficult to make than standard chemical drugs. In 2008, Teva earned $2.4 billion on a record $11 billion in sales. But only $63 million in sales came from Teva's four biotech drugs, most of which are sold only overseas.
There's plenty more room for growth: The market for biotech drugs is growing at 12% a year, far outpacing the 1% annual growth of the traditional drug market. Last year, Teva expanded its biotech manufacturing capacity by buying competitor Barr Pharmaceuticals, and Teva Chief Executive Officer Shlomo Yanai has told investors he's looking for more opportunities to boost the company's biotech footprint.
The exclusivity issue could be make-or-break for Teva and its generic-biotech dreams. If innovators are allowed 14 or even 12 years of exclusivity, Barrett says, "it will be a very different game. By the time competitors are allowed in, the market will have already shifted to newer products." The biotech industry argues that preserving a company's rights to its own innovations helps preserve profits, which can then be poured into researching the next breakthrough drug. But Barrett doesn't buy it. "You're giving someone 14 years of exclusivity to incentivize innovation? Why are they going to innovate?" she asks. "They have a lock on the market."
Teva scored a lobbying pro when it hired Barrett in 2006. She had spent 15 years on the Hill as a health-care policy aide for Senators Patrick Leahy, Charles Schumer, and Chris Dodd, and as a lobbyist for the Generic Pharmaceutical Assn. Barrett believes lobbying the public is just as important as hobnobbing with senators. So in January she helped Teva launch a campaign called "The Year of Affordable Healthcare." The company released a poll showing that Americans are cutting back on prescription drugs to save money It organized roundtable discussions in Chicago and San Francisco, inviting employers, patient groups, and government officials to come in and voice their concerns about health-care access.
STRIKING A BALANCE
Barrett's lobbying has landed Teva in a pissing match with the biotech industry. Last year, Teva commissioned an economist to explore the data-exclusivity issue. He concluded that seven years would be plenty for the average biotech company to recoup all its development costs on a new drug and reward investors with double-digit returns. Tom DiLenge, general counsel for the Biotechnology Industry Organization, says that conclusion is faulty because it takes into account only the handful of biotech companies that are profitable. "The vast majority of this industry is losing money," DiLenge says. "Two-thirds of the future pipeline [of biotech drugs] will come from small, emerging companies. They don't have the capital structure of an Amgen. If you want to kill innovation, give them only seven years."
DiLenge says the industry supports an abbreviated process for the development and approval of biotech drugs. But he worries that corners will be cut at the expense of innovation and patient safety. "We have to achieve a good balance," he says. Barrett says striking that balance is difficult, but she's confident seven years is a good starting point. "It has to be a number that provides a healthy return on investment but isn't so high as to kill competition and provide no access to the product," she says. "At seven years, you break even, and everything above that is cream."
At least one other industry agrees with generic makers on that point: managed care. HMOs, prescription-drug plans, and employers would save money if they could switch patients to generic biotech drugs. The health-care system overall could shave $6 billion to $10 billion in costs over 10 years with generic biotech drugs. On June 25 the Pharmaceutical Care Management Assn., which represents pharmacy benefit managers, launched an ad campaign blasting the drug industry for trying to block generic competition. The ad, which features a photo of an adorable blonde toddler, says "Meet the first recipient of an affordable biologic for hemophilia. He'll be 66 years old when he finally gets it."
So far it looks as if Teva and its supporters are winning the argument over data exclusivity. What the final roadmap for generic biotech drugs will be, however, isn't yet clear. That will be devised over the coming months, as Congress hashes out its health-care plans.
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