While all the headlines have focused on whether we will have Health Care Reform, Governor Patrick was the first signature on a letter signed by 12 Governors last week that supported the enactment of protectionist provisions in the Health Care Reform bill seeking to create 12 years of market exclusivity (and monopoly pricing) for pharmaceutical and biotechnology products in addition to the substantial and strong patent protection already afforded companies that invent and patent new cures. Representative Markey also voted in favor of similar provisions when voting in favor of Health Care Reform legislation at the Energy and Commerce Committee, opposing the principled and progressive positions of Chairman Waxman in the House, Senator Schumer in the Senate and President Obama who are seeking to establish a workable regulatory pathway for biogeneric products. Our legislators and the Governor need to hear from us. There is still time to fix the bills in conference.
Here is a short summary of the pending bill and the issue at stake. Most biotechnology products are biologic products, as opposed to chemical drugs, and are regulated by the FDA under a different law than drugs. Today, the FDA has the power, when the patents expire for drugs, to approve generic drugs and providing for affordable and accessible products as the mature. The process works well in that it allows companies that discover new cures to patent their inventions, develop their products, earn a significant return on investment. Then after the patents expire, the brand product faces significant price competition. This keeps the cost of drugs in check. More importantly, it creates a substantial incentive for pharmaceutical companies to invest in real innovative breakthrough products that cure new diseases rather than just making a 2nd or 3rd version of an existing therapy because the innovative cures typically receives stronger and longer patent protection to allow for a reward for their investment.
The first generation of biotechnology products from the early 1990s is now reaching the end of their patent lives. Biologics, unlike chemical drugs, are not eligible for approval by the FDA as generic biologics. This is because until recently the science for demonstrating safety and equivalence of biologics was not ready. Now the FDA has requested statutory authority to approve biogenerics, and Henry Waxman proposed legislation 2 years ago to do just that. It is estimated by ExpressScripts based on its knowledge of pharmacy practices, that in just the next 10 years alone, consumers and our insurers would save $71 Billion from biogeneric savings with the passage of a workable follow-on biologics bill.
The biotechnology industry and the pharmaceutical industry marshaled their forces and opposed the bill. They did so by proposing competing legislation that on its face provides the FDA authority to approve biogenerics, but contains provisions, like 12 additional years of market exclusivity, but also a series of other provisions that make it effectively impossible for a biogenerics company to finance the development of safe, affordable biogeneric alternatives.
The arguments made by Governor Patrick last week in his letter are very disappointing. He parrots the industry lobbyists by asserting that without the additional 12 years of exclusivity, the industry will not have sufficient incentive to invest in new discoveries. His argument ignores the facts of the last 30 years on the drug side of the business. The facts are that if a biotechnology or pharmaceutical company has this automatic 12 year period of exclusivity for any new drug approved (and as drafted, for minor improvements to a drug as well that may not offer any significant clinical advantage), they will have far less reason or incentive to invest in patentable new cures, and will have every reason to invest in low risk, incremental development of existing products to reap (without taking risk) the same profitable rewards. In the short term, some of our local companies may like this protection of their products, but over the long term, as we fail to incent investment in new discovery research, our biotechnology edge will decline and the rest of the world will pass us by as they invent the next generation of products. I feel like the Governor has not thought this though. We should be encouraging innovation by granting patents, and encouraging affordable and safe generic competition as products mature and patent rights expire.
It is troubling that our Governor and our legislators in Massachusetts may be making the same mistake in Washington that their Michigan colleagues made in the 1990s relating to the auto industry. Back then when it was clear to progressives that mileage caps were warranted to encourage innovation, Congressional pressure kept them off the table. The argument made was that if we took away short term profits from SUV and truck sales, the automakers could not invent the next generation of cars. Well 15 year later, it became clear that the higher profits were not invested in fuel efficient cars, and our industry either neared or declared bankruptcy. Is this the future we want for Biotech?
Let’s hope our Governor and our legislators do not make the same mistake by fighting for short term profits that will not lead to long term success of our biotechnology industry. Compared to 15 years ago, our biotechnology industry is already struggling to raise capital to fund discovery research and early stage clinical research as larger companies seek to find products to market. If this new law passes and is not revised, it may get even worse as the incentive to invest in innovation declines and the reward for incremental improvement increases. If the right law passes and facilitates biogeneric competition, it will encourage higher risk research into the discovery of new cures, which is just what built our biotech industry in the first place.
If you would like our biotechnology industry to remain a global leader in research and development, I would encourage you to let the Governor and your legislators know that they should support a follow-on biologics bill that does not grant excessive exclusivity (President Obama recommends 7 years, the Federal Trade Commission 0 years, Schumer and Waxman 5 years), that authorizes the FDA to approve biogeneric products using its best scientific judgment, that does not impose obstacles to challenge improvidently granted patents filed to prevent competition.