Biologic drugs, biosimilars, and barriers to entry.

Author:Shepherd, Joanna M.
 
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ABSTRACT

Biologic drugs represent an important new category of drugs in the effort to improve health outcomes in this country. Yet, these cutting-edge drugs are often cost prohibitive, preventing access for many Americans. Recognizing the need for more affordable, generic substitutes for biologic drugs--or biosimilars--Congress recently created a biosimilars approval pathway that would enable these cheaper biologic drugs to obtain FDA approval and reach patients more quickly. Unfortunately, original biologies manufacturers have sought to extend their current monopoly profits by erecting various legal and regulatory barriers to entry. Their legal maneuvers take many forms, from delaying approval of safe biosimilars to abrogating previous commitments to international drug-naming protocols, and even circumventing Congressional intent for biosimilar substitution. Regrettably, these policies reduce competition in the market for biologic drugs, impede drug innovation, increase drug costs, and limit patient access to these important medications. This article explores the conflict between biologies and biosimilars, and the consequences that barriers to biosimilar entry in this market will create.

CONTENTS

INTRODUCTION I. COMPLEX MEDICINE: A HISTORY OF BIOLOGICS AND CONSUMER BENEFITS II. CURRENT BARRIERS TO BIOSIMILAR ENTRY A. FDA Resistance to a Biosimilars Pathway B. Anti-Biosimilars Lobbying in the States III. CONSEQUENCES FROM BARRIERS TO BIOSIMILARS A. Threats to Competition and Innovation B. Higher Consumer Prices and Reduced Patient Access CONCLUSION INTRODUCTION

Medications comprise a significant share of both America's economy in general, and its health care sector in specific. With annual spending over $320 billion, (1) prescription drugs consume over 10 percent of all American medical spending. (2) Spending on a relatively new category of medications, biological drugs--or biologics--is growing rapidly. In 2013, biologics comprised a quarter of drug spending, (3) rising to potentially two-thirds of drug spending by 2015. (4) These cutting-edge drugs offer patients with complicated and otherwise fatal diseases hope for remission or even an outright cure. Yet they are often prohibitively expensive, with courses of treatment for diseases from rheumatoid arthritis to breast cancer to multiple sclerosis running tens to even hundreds of thousands of dollars per patient. (5) As a result, many patients do not have access to these lifesaving treatments.

Fortunately, Congress has recognized the need for cheaper, generic substitutes for biologic drugs--or biosimilars. As part of the Affordable Care Act (ACA), Congress created a biosimilars approval pathway that would enable these cheaper biologic drugs to obtain FDA approval and reach patients more quickly. Consumers stand to benefit significantly from the new market competition between lower cost, but similarly effective, biosimilars; in fact, estimates suggest this competition could save consumers $250 billion over the next decade. (6)

Unfortunately, as with traditional brand-name pharmaceuticals and generics, original biologics manufacturers have sought to extend their monopoly profits by erecting legal and regulatory barriers to entry and use. These companies broadly resist the availability of biosimilars and have successfully lobbied both the FDA and state legislatures to obstruct the biosimilars approval pathway. (7) The legal maneuvers employed by pharmaceutical and biologics manufacturers take many forms, from delaying approval of safe biosimilars to abrogating previous commitments to international drug-naming protocols to circumventing Congressional intent for biosimilar substitution. These policies reduce competition in the market for biologic drugs, impede drug innovation, increase drug costs, and limit patient access to these important medications, thus frustrating the ACA's goals of increasing healthcare availability while controlling healthcare costs.

This analysis examines in detail the conflict between biologic drug exclusivity and patient access to biologically similar drugs, or biosimilars. Like traditional prescription drugs, potential biologics require large up-front research and development costs; these costs attend equally large product failure rates. Federal law accordingly provides biologic manufacturers with a lengthy exclusivity period to recoup these costs. But while a statutory exclusivity period prompts original manufacturers to further innovation, it comes at the expense of increased prices and reduced access to potent biologics.

Legislators and regulators must strike a careful balance between permitting certain companies to earn monopoly profits and allowing free competition and broad drug availability to patients. Lessons from economic principles, sound empirical analysis, and other countries' experiences suggest that impeding biosimilars' entry to market will harm consumers and patients with little to no corresponding benefits except to pharmaceutical monopolists.

This analysis begins by exploring the background, history, and substantial benefits behind biologics and close substitutes to biologics, with reference to the historically familiar conflict between traditional name-brand and generic prescription drugs. The analysis then turns to several proposed regulatory and legislative roadblocks on an already-enacted federal pathway for expedited approval of safe, biologically similar substitutes for known biologics. These roadblocks include recent actions by the FDA and bills enacted and proposed before multiple state legislatures. It discusses why these proposals, instead of promoting consumer safety as some advocates insist, will raise prices and decrease patient access to potent biologics, ultimately denying consumers top-quality medical care at more affordable prices. These barriers to entry not only contravene the spirit of the ACA, which provided speedier certification for substitute biologics, but also increase costs and reduce competition, all for no established benefits to patient safety or manufacturer innovation. I conclude that further attempts to increase or protect exclusivity for biologics will help only a few drug companies at the cost of healthcare markets, patient care, and the American economy at large.

  1. COMPLEX MEDICINE: A HISTORY OF BIOLOGICS AND CONSUMER BENEFITS

    Biologics both gather their name and primarily distinguish themselves from traditional drugs by their origins. They are derived from living organisms, typically proteins, though occasionally including toxins, blood, viruses, or allergens. (8) These medications include many novel and powerful tools, and are far more complex than traditional medicines. Where a traditional drug might contain between a few dozen to a hundred atoms per molecule, the complicated proteins of a biologic can include from several thousand to tens of thousands of atoms per molecule. (9) Biologics are comparatively new relative to traditional drugs: The FDA only cleared the first biologic for human use, human insulin, in 1982. (10)

    Drug manufacturers and regulators alike recognize that the inherent complexity of biologics introduces concerns not present with their traditional counterparts--biologics cannot be perfectly duplicated. Manufacturers can perfectly duplicate traditional drugs, potentially guaranteeing the "absence of a significant difference" between an FDA-approved drug and a proposed equivalent. (11) This effective duplication, or bioequivalence, defines the conventional relationship between a "brand-name" drug and a "generic" drug; generic drugs, simply put, are bioequivalent substitutes for brand-name counterparts. However, whereas bioequivalence is possible for a chemically-synthesized drug with dozens or hundreds of atoms, it is impossible to duplicate exactly complex biologics with tens of thousands of atoms per molecule; even a chemically identical biologic may produce different effects in the body because of the unique structural organization pattern of the proteins (known as "folding"). (12) In fact, biologics even vary slightly across batches from a single, original manufacturer. (13) As a result, companies looking to replicate a biologic must instead use highly similar, but slightly variant, living organisms or processes in creating a biosimilar (sometimes called a "follow-on biologic," or FOB), a substitute biologic copied from an original biologic and designed to act as a "generic biologic." (14)

    The benefits of cheaper, more widely available generic drugs were recognized in the market for traditional drugs three decades ago. As FDA drug approvals proved notoriously slow and expensive, Congress recognized the duplicative costs inherent in requiring bioequivalent drugs to undergo the full procedural rigors behind FDA approval. This prompted the Hatch-Waxman Act in 1984. (15) Hatch-Waxman crafted a framework designed to both preserve incentives for "brand-name" innovations as well as to encourage companies to create bioequivalent drugs--generics--that copy these branded drugs. Hatch-Waxman granted brand-name manufacturers a period of patent restoration, which extended a covered drug's patent length by up to five years (to a maximum of fourteen years) for half of the branded drug's clinical testing period and all time spent securing FDA approval. (16) It further conferred on branded drugs five years of brand exclusivity--that is, a prohibition against FDA approval of bioequivalent generic drugs for a limited window to ensure branded manufacturers an adequate opportunity to recoup research costs and earn risk-adjusted profits. (17) But in exchange for these new protections to brand-name manufacturers, Hatch-Waxman actively created incentives for generics to challenge brand-name patents, conferring a limited exclusivity period to the first generic challenger to a brand-name drug. (18) Critically for potential generic drugs, Hatch-Waxman created the Abbreviated New Drug...

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