President Obama Reportedly Seeks to Shorten the Data Exclusivity Period for Biologic Innovators Previously Agreed to by House and Senate

In recent posts, I have discussed the data exclusivity provision included in pending follow-on biologic legislation, and explained my position that an extended 12 year data exclusivity period for innovators is justified and desirable to promote robust biologic innovation. Others argue in favor of a much shorter period, e.g. five years, including Senator Waxman, the FTC and apparently the Obama administration. Although the healthcare reform bills passed by both the House and Senate include 12 year data exclusivity periods, and one might have thought that this consensus position would have settled the issue for the time being, particularly in view of the numerous and much more pressing issues of controversy currently holding up passage of the bill, today the New York Times reported that Presdent Obama reopened the issue last week in meetings with congressional leaders in which he reportedly pushed for a shorter data exclusivity period.

A link to the New York Times article is provided here. The relevant paragraph reads:

“And even as they tried to resolve their disagreements, Congressional negotiators and the president stirred up a tempest on Friday by reopening an issue on which the House and Senate agreed — establishing procedures for federal approval of generic versions of expensive biotechnology drugs. The House and Senate bills give brand-name companies 12 years to market drugs without fear of generic competition; Mr. Obama wants generics to get to market sooner.”

Jim Greenwood, president and CEO of the Biotechnology Industry Organization (BIO) wasted no time in voicing the chagrin of biotechnology innovators - his blog post is available here.

Misplaced Fears in the Legislative Battle over Biotech Drugs

In a new article, available here , Professor David Adelman (University of Texas) and I weigh in on the controversial subject of the inclusion of an extended period of data exclusivity in proposed follow-on biologic (FOB) legislation. Both healthcare bills passed by the House and Senate, H.R. 3962 and H.R. 3590 (that is not a typo, the Senate healthcare reform bill was passed as an amendment to House Bill H.R. 3590), include provisions creating an abbreviated approval process for follow on biologics, and both incorporate a 12 year period of data exclusivity for biologic innovators. Some, including the FTC, have argued for a much shorter period of data exclusivity for biologic innovators, and some of the proposed follow-on biologic bills introduced in Congress earlier last year included shorter periods. For example, H.R. 1427 would have provided innovators with only five years of data exclusivity. In an earlier article and post, I challenged the FTC’s conclusion, pointing out what I perceive to be flaws in its arguments purportedly justifying a short-term of data exclusivity for biologic innovators.

One of the primary arguments raised by opponents of an extended 12 year data exclusivity period is that patent protection will be sufficient to provide the necessary incentive for robust investment in innovation on new biologics, rendering data exclusivity unnecessary. Prof. Adelman and I argue that there is substantial uncertainty as to whether patents will be as effective for protecting innovative biologic as they have been for conventional drugs. For example, composition of matter patents claiming the drug active ingredient have generally proven very effective in protecting conventional drugs. Other more attenuated patents covering methods of production or use, specific formulations, etc., have proven much more susceptible to circumvention and/or invalidation. Historically, composition of matter patents on the active ingredient do not have a strong track record of success in the context of biologics, where innovators have more often needed to resort to patents claiming processes and reagents used in production of the biologic, with mixed success. Biologic drugs are fundamentally different than conventional drugs, and the scope of available patent protection for biologics is unclear, particularly in view of uncertainty surrounding the scope of protection available under the enablement and written description requirement (the pending en banc Federal Circuit decision in Ariad v. Eli Lilly for example). All things considered, it would be a mistake to assume patents will be as effective in protecting biologics, and thereby incentivizing innovation, as they have historically been for conventional drugs. And in any event, the 12 year period of data exclusivity would run concurrent with the patent term, and thus should have little impact if strong and robust patent protection is in fact available for biologic.

In our article, Prof. Adelman and I consider the legal, technical and economic context of follow-on biologics and conclude that a shortened period of data exclusivity as endorsed by the FTC would provide at best nominal savings in overall healthcare expenditures in the US. It could, however, substantially impair the likelihood of a biologic innovator recouping a sufficient return on investment to justify the enormous expenditure and high risk associated with bringing a novel biologic to market. In our view, an extended period of data exclusivity, such as the 12 year period included in the current healthcare reform bills, is appropriate. More importantly, the emphasis by the FTC and others on reducing the data exclusivity period is misplaced. Society would be much better served by focusing on the development of technology and regulatory processes that facilitate marketing approval for follow-on biologics subsequent to the expiration of an appropriate period of exclusivity afforded by patents and data exclusivity.