By
Donald Zuhn —

In
a report originally published by the American Enterprise Institute for Public
Policy Research (AEI) late last year, the nonpartisan public policy group advocated
for a 12 to 14-year exclusivity period, concluding that "the social losses
from providing for fairly long exclusivity periods (twelve to fourteen years)
would be small compared to what are likely to be substantial social gains from
exclusivity."  The report,
which was authored by AEI Resident Scholar Dr. John Calfee,
was one of 58 past articles that the AEI collected as part of its Health Policy
Outlook series (see "AEI Believes Advantages of
Longer Data Exclusivity Period Outweigh Disadvantages").  Today, we focus on another article in
that series, "Facing Reality on Follow-On Biologics,"
which was also written by Dr. Calfee.

For
those suggesting that significant health care cost savings can be obtained through
the implementation of a follow-on biologics regulatory pathway, Dr. Calfee (at left) counters
that "[t]here is no reason to expect a reasonable follow-on biologic law
to bring dramatic cuts in health-care spending as claimed," and warns that
if Congress is not careful, "it will interrupt long-term drug research
programs and reduce incentives to develop new biologics."  Dr. Calfee explains that the factor
that allowed generic small molecule drugs to go from less than 20% of the prescription
market in 1984, when the Hatch-Waxman Act was passed, to more than 50% by 2000,
does not apply to biologic drugs.  That
factor is "interchangeability based on bioequivalence."  Because biologics are more complex than
small molecule therapeutics, "the 'generic' that comes from a new biologic
manufacturing facility may not work the same way as drugs that patients have
been using for years."  As a
result, a follow-on biologic "will have to be supported by far more data
than is required for small-molecule generics."

In
addition to issues regarding interchangeability, Dr. Calfee notes that "doctors
have always been the toughest sell for generic drugs," explaining that
"[w]hen choosing between a branded pioneer biologic and a quasi-generic of
uncertain bioequivalence, doctors have been exceptionally reluctant to
switch."  Other factors that
Dr. Calfee believes will preclude large cost savings include higher
manufacturing costs, fewer generic versions of a particular biologic, and
modestly reduced biosimilar pricing. 
Dr. Calfee therefore predicts that "[g]iven the vast differences
between traditional generics and FOBs, there is little reason to think that
legislation to create a new regulatory pathway for biologics will significantly
cut health-care costs in the near future."

Dr.
Calfee concludes the report with a discussion of intellectual property
issues.  Noting that the small
molecule regulatory schemes in the U.S. and EU provide 5 and 10 years of data
exclusivity, respectively, he contends that "[i]n both cases, the data
exclusivity clause is an escape valve designed to preserve research and
development (R&D) incentives in case patents do not do the job."  Dr. Calfee argues that such an
"escape valve" would be relevant for follow-on biologics, since the patents
that protect biologics are, like the drugs themselves, more complex than their
small molecule counterparts, and therefore, "may also be more susceptible
to challenge than traditional small-molecule patents."