By Kevin E. Noonan —

Policy arguments based solely on outcome rather
than process are rarely effective when put into practice.  This is because the desired benefits of
the outcome blind the policymaker to the question of whether the desired outcome
can be achieved without considering the effects (intended or otherwise) by the
process.  This effect can be seen,
for example, in the Federal Trade Commission's crusade to ban "reverse
payment"-containing settlements of ANDA litigation.  The desired outcome is cheaper drug
prices as soon as possible.  However, against the "per se" illegal stance of the FTC,
several regional Courts of Appeal, as well as the Federal Circuit, have
assessed the reasonableness of such settlements and found instances where such
agreements are, and are not, anticompetitive — something an outright ban cannot
accommodate.  Indeed, according to
some of these analyses, generic drug entry would be delayed, and unnecessary
drug costs incurred, by the ban advocated by the FTC.

The same type of goal-oriented thinking is
evidenced in an Op-Ed piece (where else?) in The New York Times ("Biologics Boondoggle").  (The Times has previously voiced its
objections to the length of the data exclusivity period; see "Follow-on Biologics News Briefs – No. 11").  Today's piece was written by Anthony D.
So, director of the Program on Global Health and Technology Access at Duke
University, and Samuel L. Katz, a professor and chairman emeritus of Duke's Pediatrics
department.  Their goal, like the
FTC's, is to hasten the availability of generic drugs, in their case biologic
drugs, to increase patient access and reduce costs.  And, like the FTC, they have a "simple" solution —
limit the data exclusivity period of biologic drugs to 5 years, the same period
"enjoyed" by conventional, small molecule drugs.  But this position ignores most of the
evidence that this is not a sufficient period to maintain innovation in
biologic drug development, and reduces to greed (never expressly stated) the
motivations of the biotechnology industry in advocating for the 12-year period
contained in both the House and Senate versions of the healthcare reform bill.

The position also ignores the evidence, ironically
in a peer-reviewed scientific paper (not an op-ed piece) by their colleague,
Professor Henry Grabowski, that the "proper" data exclusivity term is
between 14 and 17 years (see "Professor Grabowski's Economic Analysis of data Exclusivity for Follow-on Biologic Drugs"), and that the 12-year period is a compromise from the
term that the data indicates is necessary.  It also ignores the current situation, where the data
exclusivity period is unlimited since there are no follow-on biologic
provisions under current U.S. law.  Also ignored is the reality that the data exclusivity period is one of
the few provisions of the two versions of the healthcare bill that are in
agreement (a fault shared with
President Obama; see
"Snatching
Defeat from the Jaws of Victory?"), or that the term could be easily reduced if it turns out to
be longer than necessary.

Further, unlike other entrants in this debate (even
the FTC), the article contains no compelling economic arguments.  Besides bemoaning the high costs of
biologic drugs, the only mention in the piece about the economics of biologic
drugs, generic or otherwise, is the assertion that biologic drugs cost about
the same to bring to market as conventional drugs (without any citation to the
basis for this statement other than "according to studies cited by the pharmaceutical
industry's own trade association").  There is also reference to
the high prices of these drugs, such as Herceptin® for breast cancer, Humira®
for Crohn's disease, and Cerezyme® for Gaucher's disease.  The prices are high, but these drugs
are used to treat life-threatening illnesses (in the Gaucher's disease example,
a lethal childhood disease); while there may be a debate to be had on whether
our society can afford to treat these diseases (or ethically afford not to),
their cost is not the best way to frame the debate (and, according to the FTC's
report, the savings achieved by follow-on biologic drugs won't be that
significant anyway, reducing the costs by no more than 30%, in contrast to the
80-90% reductions seen with conventional drugs; see "No One Seems Happy with Follow-on Biologics According to the FTC").

Also not ignored are allegations about excessive "monopoly
protection" (using a buzzword that always signals an intent to inflame
rather than illuminate), or that biologic drug makers can extend their "monopoly"
by making minor changes in the drugs (which would not preclude the generic
biologic drug maker from using the innovator's data to obtain approval for the
original version of the drug), or that the 12-year data exclusivity period for
biologics will be used to bootstrap a longer data exclusivity period for conventional
drugs (again, with no attribution except a statement that "GlaxoSmithKline
has already called for 14 years of exclusivity for conventional drugs";
regardless of anything GSK might wish, changing the data exclusivity period for
conventional drugs is not part of any follow-on biologics legislation
introduced either as stand-alone legislation (H.R. 1427 or 1548 or S. 726 ) or
as part of the healthcare bill (H.R. 3590)).  As such, the suggestion is an irrelevancy, except to once
again increase the sense of "urgency" the writers seem to want to
engender to provoke the public to adopt their position.

That position is clearly expressed in the
last paragraph of their piece:

Congress should allow biologics no more
than five years of protection.  That would provide drug makers plenty of
incentive for innovation, and still protect consumers from the high prices that
extended monopolies allow.  Striking the right balance will ensure that
Americans can afford the most effective medicines available.

Providing cheaper drugs is an admirable goal, for
many reasons — improved access to these drugs, sound economics, or just plain
thrift.  But cheaper drugs come
with a price in the real world, and part of that price is to make drug
development less attractive for investment and investors.  That may sound cold-blooded, but anyone
who has a 401k account wants her investments to be profitable, so the public
should understand the need for some assurance of a return on investment.  The current economic downturn cannot
blind us to the folly of killing the golden goose of biologic drug development,
and nothing will cook that goose more quickly and more certainly than creating
a climate inimical to investment in these drugs.  That isn't a goal anyone wants.