Critical Condition

NRO’s health-care blog.

Don’t Stifle Innovation


The Washington Post is aligning itself with anti-innovation liberals in arguing that Congress should shorten the time frame in which companies that develop new biologic drugs can recoup their investments. The Obama administration has favored a seven-year period in which the companies would have “market exclusivity,” and the Post editorializes that “any additional protection would be not only unnecessary but harmful.” 
But one of the few good provisions in the Affordable Health Choices Act making its way through Congress is a provision that would create a twelve-year market exclusivity period for brand-name biologic drugs. 
American lawmakers should take heed of the lessons Europe has learned about protecting intellectual property rights with these new medicines that are likely to produce the ground-breaking cures of the 21st century. When it comes to ensuring innovation and investment in these revolutionary medicines, the Europeans have created a regulatory policy that provides the proper incentives. 
Biologic drugs are highly complex pharmaceuticals grown in living organisms, like plant and animal cells. The difference between a conventional drug and a biologic is like the difference between a Matchbox car and a Ferrari. An Aspirin molecule has around 21 atoms. A biologic can have up to 25,000. That higher complexity means higher efficacy. Biologics have shown unprecedented promise in treating an array of diseases, including cancer, rheumatoid arthritis, and anemia. Biologic sales in America exceeded $40 billion in 2007 and are expected to grow 20 percent annually. Worldwide biologic sales increased 12.5 percent last year to $75 billion. 
Understandably, generic-drug manufacturers are eager to jump into this burgeoning market; but unlike conventional generic drugs, which can be exact copies of the original, generic versions of biologic drugs are not identical to their brand-name counterparts. Biologics are far too complicated — both in their chemical makeup and their manufacturing process — to duplicate exactly. That’s why they’re known as “follow-on biologics.” 
As clinical researchers Simon Roger and Ashraf Mikhail recently explained in Canada’s Journal of Pharmacy & Pharmaceutical Sciences, “Biologics require hundreds of specific isolation and purification steps. It is thus impossible to produce an exact copy of a biopharmaceutical, as changes to the structure of the molecule can occur with changes in the production process.” Roger and Mikhail went on to note that the “structural differences in the final product may lead to differences in efficacy and, more importantly, in their ability to trigger damaging patient immune responses.” In other words, even if a biologic has proven itself safe and effective in clinical trials, its follow-on could cause harm. 
The European Medicines Agency (EMEA) — the European Union’s equivalent of the FDA — recognizes this and regulates accordingly. The EMEA requires that follow-on biologics go through separate safety trials before they’re approved. And it monitors them after they’ve entered the market, checking for relevant therapeutic differences with the original that might not have been discovered during the initial trials. 
The EMEA also grants twelve years of what’s known as “data exclusivity” to biologic innovators. Data exclusivity prevents follow-on firms from gaining access to a biologic’s research data for a pre-specified period of time. This is equivalent to patent protection and is essential to maintaining the integrity of biologic innovators’ intellectual property and to creating the financial incentives needed for investment in the next generation of biologics. 
Biotechnology companies need investors, and investors need assurances that they’ll get a return on their investment. Biologic research is tremendously expensive and requires an enormous amount of capital. Investors need to know that other firms won’t bring their follow-on products to market before the creator of the drug has recouped its investment. 
According to a study by Duke University economist Henry Grabowski, the average biologic requires 12.9 to 16.2 years of market monopoly simply to break even. So as Washington considers legislation for follow-on biologics, lawmakers could assure that the U.S. remains a market leader in research and development of new biologics by guaranteeing at least 12 years of exclusivity. 
By following Europe’s lead in respecting the special status of this new genre of medicines, American lawmakers could ensure that our drug supply remains safe and make certain that biotechnology companies have the incentives they need to continue developing these new medicines.

– Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free-market solutions to health reform.


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