Generic Biologics

Gene transfer, cell transplantation, monoclonal antibodies, enzyme replacements, tissue engineering all have great potential to improve health care. But will we be able to afford them? Various economists have shown that a large proportion of health care cost inflation is attributable to new technology, and the significant costs of development and production for drugs involving genes, cells, and large proteins- what regulators call "biologics"- provide grounds for concern that new biotech products will break the bank.

Questions about the affordability of biotech drugs are heating up in DC as Congress takes a look at generic biologics. Under current policy, there are no regulatory pathways for approving generic versions of biologics. This effectively means that companies that develop biologic drugs have a monopoly on them long after patents expire. Representative Henry Waxman, who previously sponsored legislation creating a pathway for generic drugs, is presently spearheading efforts to establish a way of reviewing and approving generic biologics as well.

The policy and economic issues here are profoundly complex, and much of the debate about legislation revolves around the issue of "data exclusivity." Briefly, this refers to the period after drug approval during which generic competitors are barred from using data from the innovator's clinical trials to apply for generic approval. In the U.S., for example, generic drug companies cannot file applications with FDA until five years after the new drug is approved by FDA. The aim of exclusivity is to reduce the economic impact of free rider generic companies that depend on trial data collected by the innovator.

The biotech industry, and many economists, argue that much longer periods of data exclusivity are required for biologics. They argue that without longer exclusivity periods (like 12 to 14 years), companies will have insufficient incentive to develop new biologics. Consumer advocates often argue otherwise, citing the mouth dropping costs associated with using many new biologics.

It remains to be seen who will prevail in this debate, but Waxman and the Obama administration appear inclined toward the consumer advocates, with the former urging a 5 year period, and the latter endorsing a "compromise" of 7 year exclusivity.

At stake is not simply question of markets and economics, but also one of ethics. Namely, should how should health care economies balance the need of current patients (who can ill afford expensive biologics) against those of future patients (who might benefit from greater innovation should exclusivity periods be extended)?

Sound ethical analysis must discount benefits accruing to future patients and consider the justice implications of excluding current patients from otherwise available treatment so that others in the future might benefit from new drugs. If implemented, the Obama administration's plan for generic biologics promises to reduce an important hurdle in ensuring an equitable future for cutting edge therapies. (photo credit: shazam791, a true generic brand, 2008)