GUEST BLOGGER Pat Bickley

Competition from generic drugs has substantially reduced the prices of many prescription drugs.  However, under current law, the FDA can only apply the expedited testing of a generic designation to certain classes of drugs, generally those that are chemically synthesized, small-molecule products.  Larger and more complex drugs, such as biologics, are not allowed to receive generic designations. Biologics are protein-based and produced in living cells.  They also tend to be much more expensive.  Annual costs can be as high as $48,000 for the breast cancer drug Herceptin and $20,000 for the rheumatoid arthritis drug Remicade.  Manufacturers of biologics, such as Amgen and Genentech, justify these costs as necessary to recoup their substantial investments in developing and gaining approval for the drug.

The Federal Trade Commission recently released a report on whether the price of biologic drugs could be reduced by allowing abbreviated FDA approval of “follow-on biologics,” (FOBs).  The FDA approval process for FOBs would be less extensive than the initial biologic approval process, but more extensive than that required for regular generic drugs.  The report concludes that approving an abbreviated FOB process would promote competition and drive down the costs of these drugs, but not nearly to the extent seen by the introduction of generic drugs.  Because developing and approving an FOB is still likely to take between eight and ten years and cost between $100 and $200 million, only the current biologic manufacturers are likely to become FOB competitors. Thus, the savings would not be expected to be nearly as dramatic as that seen by the allowance of generic drugs.  The FTC report predicts only a 10 to 30 percent discount in price of the FOB over the original biologic drug, but a 10 to 30 percent discount on $48,000 is substantial. Based on 2007 use, Americans would save $4 to $12 billion a year from such a reduction in the price of biologics.

At a Congressional hearing on the FTC report, biologic drug makers suggested that the FDA give the original biologic maker a 12 to 14 year period of exclusive access to the market to help them recover their costs.   Such a period would start upon approval by the FDA and run concurrently with any patent protection enjoyed by the drug.  But, because FOBs are unlikely to dramatically decrease the price of biologics, the 12 to 14 year exclusivity period being suggested by the manufacturers is not justified.  The original manufacturer will continue to earn substantial revenue from the drug even after the FOB has entered the market.  A better approach, proposed by Representative Henry Waxman, would apply the same five year period currently provided for other new drugs.  Allowing for a longer period, which may extend past the protection provided by applicable patents, would heavily benefit the original manufacturer at the expense of the public.  The incentives of patent protection, market pricing, and a five-year exclusivity period should already be enough to promote the creation of new biologic and other drugs for the public good.

Pat Bickley is a second year law student at Chicago-Kent College of Law.  He received his Bachelor of Science from the University of Toledo, where he studied Chemical Engineering, and a Masters in Business Administration from the University of Findlay.  His interests lie in new technology and intellectual property.