18 March 2014
The U.S. is trying to expand protection for the makers of the world’s most advanced medicines. Some critics argue that it should not push a regulatory scheme onto other countries that has not been tested at home.
By Howard Schneider
Stung by overseas patent rulings that could undercut U.S. companies, the Obama administration is trying to expand protection for the makers of the world’s most advanced medicines through trade rules that critics argue could lead to higher global drug prices.
The effort has sparked an intense debate between pharmaceutical firms, which are looking to protect costly research investments and fund the next generation of drug development, and patient advocates and others who worry that a strict application of U.S. rules around the world could keep prices out of reach, particularly for patients in developing countries.
In the case of biotechnology, regulations are not clearly settled even in the United States. It was only under the Affordable Care Act, for example, that the U.S. government agreed to allow generic alternatives for the sophisticated and costly-to-develop drugs that are considered among the most promising ways to attack cancer and other chronic diseases.
The Food and Drug Administration continues to work out the details, and the first generics probably are years away.
Given the uncertainty — and the expense of treatments that routinely run into the tens of thousands of dollars per patient — some critics argue that the United States should not push a regulatory scheme onto other countries that has not been tested at home.
“What is optimal for the U.S. is not necessarily optimal for other countries,” said Patricia M. Danzon, a professor of health-care management at the Wharton School of the University of Pennsylvania. The broad trade-off accepted in wealthy countries — years of patent protection that keeps prices high, in order to encourage innovation, before generic competition is allowed — becomes more of a problem in poorer nations, where insurance coverage may be sparse, national health systems screen out the more expensive treatments, and patients simply do without.
U.S. Trade Representative Michael Froman said trade negotiators can square the circle — and find a way to ensure a strong research climate while also improving affordability and access in poorer countries.
Those goals “aren’t mutually exclusive propositions,” he said. “We can make sure that developing partners have the flexibilities that keep medicines affordable,” perhaps by giving some countries more time to phase in the needed regulations.
Whatever compromise may be found within TPP, it’s clear that the United States has been on the defensive — with other TPP countries opposed to adopting the U.S. proposals, and still other nations chipping away at pharmaceutical patent protections.
India has been a particular focus, with the government ordering companies to surrender patent rights and license their products to local companies. India is taking other steps it regards as necessary to lower the cost of advanced treatments for breast cancer and other diseases. Canada remains on a trade watch list after a spate of court rulings that voided patents for major pharmaceutical companies in favor of the country’s strong generics industry.
“There is a lot of concern about whether countries at similar levels of development are held to the same intellectual property standards,” said David Talbot, head of international government affairs for Eli Lilly and Co. “Otherwise, we are chasing problems from country to country, which is what we are doing now.”
The TPP has become a particular focal point as the United States presses to include in the treaty its approach to regulating “biosimilars,” the generic versions of the most complex biotechnology products.
The research and development timeline for biotech products is so long that original patents on a promising molecule may have only a few years left in their terms by the time a drug or treatment is licensed. That is not considered enough to spur the flow of investment that makes the industry tick. To extend that period of protection, the Affordable Care Act gave companies an additional 12 years of “data exclusivity” — meaning that the results of tests used in developing the drug cannot be referenced or relied on by companies trying to develop generic substitutes for 12 years after the original drug’s approval.
In the biotech development process, use of that other research is an important issue. Unlike less complex, chemically derived pharmaceuticals, biotech products are produced from living cell lines. Whereas “small molecule” drugs such as aspirin can be precisely duplicated, generic versions of advanced biopharmaceuticals can only be “biosimilar” — with similar DNA, but not duplicate DNA. The ability to rely, to some degree, on the data and tests generated in the process of approving the original substance helps to lower the cost of generic development and aid in determining if a proposed substitute should be approved.
The 12-year period was a compromise in the United States between what drug companies said they needed and the shorter span of time that patient advocates argued would speed approval of generics and lower health-care costs.
The FDA is developing the final rules for licensing biosimilars, but already the competition is lining up. Some biopharmaceuticals will begin to lose their final intellectual property protections in coming months, and other firms are planning to compete.
The blockbuster rheumatoid arthritis medication Humira, for example, loses its final protection in 2016, and at least four companies in Germany, Brazil and elsewhere have begun studying how to replicate the drug — one of a class of compounds known as monoclonal antibodies.
Michael Soldan, global head of regulatory affairs for biosimilars at Germany’s Boehringer Ingelheim, compared the process of building a monoclonal antibody to that of building a jet airplane — where simple aspirin would be akin to a bicycle, and simpler biologic compounds like a car.
But the potential rewards are mammoth: Humira is one of the top-selling drugs of all time and, at a retail price of about $30,000 a year, generated more than $9 billion in 2012 sales for its manufacturer, AbbVie, a spinoff of medical giant Abbott Laboratories.
Developing biosimilars is “the logical next step. . . . The trend is for more biosimilars. You’ll see that 20 years from now. It is clear how this is going,” Soldan said.
Whether it leads to lower prices is another matter. Europe developed a system for licensing biosimilars a few years ago. A few have come to market and, according to industry officials and studies, they have shaved 20 to 30 percent off the price of drugs — not the 80 or 90 percent savings, for example, that have helped increase access around the world to the most effective treatments for AIDS. That might make much of the current discussion moot if other manufacturers find it too difficult and too expensive to develop biosimilars and cede the market to a drug’s inventor.
But pharmaceutical industry advocates worry that without strong global rules, the drug development process will suffer.
“Access to medicines is critically important, but so is existence of the medicine,” said Stephen Ezell, an analyst at the Information Technology and Innovation Foundation. “It is the returns on one generation of innovation that finances the next generation of research.”