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Opinion

Obama's fiscal cliff drug 'reform' idea will backfire

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Opinion,Op-Eds

As part of the fiscal cliff negotiations, the White House has trotted out a deeply misguided healthcare idea. The President has his allies want to loosen "intellectual property" protection for an advanced class of pharmaceuticals called "biologics."

This is a mistake. Including this plan in any federal budget deal would inevitably undermine drug innovation, compromise care for millions of American patients, and -- ironically -- drive up long-term healthcare costs.

Unlike traditional chemical drugs, biologics are derived from living organisms. This makes them incredibly complex -- and uniquely effective. Biologics are one of the most promising modern healthcare technologies. Drug firms have already created breakthrough biologic treatments for some of the country's most prominent diseases, including HIV/AIDS, Alzheimer's and various forms of cancer.

A report from the research firm Credit Agricole predicts that six of the top twenty best-selling drugs next year will be biologics. Within five years, it's estimated biologics will comprise roughly half of the top 100 bestselling drugs in the country.

There are knock-off equivalents to biologics. They're called "biosimilars" or "follow-on biologics." However, unlike, say, that aspirin in your bathroom cabinet, a biologic can't be perfectly replicated. It's just too complex. A "follow-on" biologic will have some differences from the original.

It is possible to create a version of an innovator biologic that's close enough to the original to have basically the same therapeutic effects.  Given this fact, traditional patent protections aren't sufficient to foster innovation.

This is why biologics need an additional layer of intellectual property protection. And that's where data exclusivity comes in. This statute prevents outside firms from accessing the research data behind a new biologic for a preset period of time. This way, the original inventor has a limited market monopoly, during which they can try to recoup their development costs in sales. The 12 years of exclusivity granted under the Affordable Care Act, while still less than the 14 allowed in Europe, is a good compromise.

Mounds of research shows that data exclusivity should be set at around 12 years to give the average biologic a chance to at least break even.  The White House wants to scale back that period.

A recent deficit deal crafted by the administration included a provision that would scale back the period of data exclusivity granted to biologics from 12 to 7 years. The idea is that allowing lower priced biosimilars to flow into the market sooner will drive down costs for public insurance programs and generate major savings for the federal treasury.

While shortening biologic data exclusivity could generate some short-term financial gains, it will ultimately reduce the rate of medical innovation and deprive American patients of life-saving new treatments.

The brute reality is that if data exclusivity drops to seven years, many biologic innovators won't have enough time to make back their original investment before biosimilars flood the market and siphon away their profits.

After all, creating a biologic is an incredibly expensive, time-consuming, and risky endeavor. The average biologic costs well over a billion dollars to develop. For every 10,000 compounds tested in the lab, only one will wind up getting federal approval and making it to market. And simply making it to market is no guarantee of profit. Only about three out of every ten new pharmaceutical medicines will ever recoup back its development costs in sales.

If the government reduces the exclusivity window for biologics, many drug firms will actually end up losing money on that massive investment. That leaves less capital to pour into new drug research operations. And outside investors will be less willing to underwrite new research initiatives given that their chance of even breaking even on a new treatment has dropped significantly.

Ultimately, that means fewer new drugs for American patients.

The Obama administration and its allies need to drop this push to scale back data exclusivity protections for biologic drugs. These treatments have proven to be highly effective at improving patient health and saving lives. Diluting the intellectual property rights protecting biologics will slow down the rate of innovation and choke off the flow of new treatments.

Peter J.  Pitts, a former FDA Associate Commissioner, is the president of the Center for Medicine in the Public Interest.

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