Shorter Exclusivity Could Carry a Hefty Price Tag

By Mari Serebrov

Washington Editor

If successful, efforts to reduce the 12 years of data exclusivity granted under the Affordable Care Act for innovative biologics could prove to be costly for patients, payers and the companies that make the drugs.

Reducing data exclusivity to seven years, as the president and a number of lawmakers have proposed, would be disruptive to the marketplace as it would encourage at-risk launches of biosimilars and lead to unnecessary patent litigation, said Dave Fox, former associate chief counsel for drugs at the FDA and a partner at Hogan Lovells.

That litigation would put courts more at the center of biosimilar development than scientists, Fox said during a recent Hogan Lovells roundtable on the state of the industry.

More patent challenges would require biotechs to put money away to pay for litigation and possible settlements, Mary Webster, a patent attorney with Nixon Peabody, told BioWorld Insight.

That's money that could be used for R&D, she said, adding that the cost of litigation would be reflected in higher biologic prices, both for the innovator and biosimilars.

Yet those who are pushing for shorter exclusivity claim it would lower biologic prices by introducing cheaper biosimilars five years earlier. In calling for seven years of exclusivity in his 2012 budget proposal, President Barack Obama said it would produce $2.34 billion in savings by 2021. He bumped the savings up to $3.4 billion in September when he included the shorter exclusivity in his debt reduction plan. (See BioWorld Today, Feb. 16, 2011, and Aug. 15, 2011.)

Twelve years is unnecessary to promote innovation, the administration said. But its savings estimates fail to take into account the chilling effect a shorter exclusivity may have on innovators or the indirect costs of changing the steps in a complex process.

"If you can't corner your market and recoup your costs, are you going to do it?" Webster asked.

The estimates also ignore industry realities – such as the length of time it takes to develop a new biologic, the uncertainty of patents for biologics and the newness of the biosimilar regulatory pathway, Webster said.

Patents on biologics tend to be filed early on, which means much of the 20-year patent protection is gone before the product hits the market, Webster said. A longer exclusivity may extend the intellectual property protection a few years. But in many cases, a seven-year exclusivity would expire before or at about the same time as the patent.

Subsequently, having only seven years of exclusivity would nearly negate the benefit of exclusivity, Fox said, and it would come at a high price to biotechs.

"Seven years takes five years off exclusive marketing, and those out years are the most valuable years" for a drugmaker, he added.

Webster noted that patents on biologics are more uncertain in general than those for traditional drugs. Several biologic patents have been struck down over the years. And others never make it through the Patent and Trademark Office (PTO).

If the PTO approved one biologic patent a year 20 years ago, it was doing well, Webster said, because it didn't have the expertise to evaluate the patents. While more biologic patents are approved today, the uncertainty continues.

"The law is way behind the science," Webster said.

Changing the length of exclusivity also could have costly ramifications for the FDA. Since the 12-year exclusivity is a matter of law, that's the time frame the FDA is using in drafting its biosimilar guidance, preparing to review biosimilar applications and planning its inspection schedule.

Shortening that time would mean biosimilar applications would hit the agency five years earlier than it's preparing for, Mark Brown, a partner at King & Spalding and former associate chief counsel at the FDA, told BioWorld Insight. (See BioWorld Today, Sept. 21, 2011.)