Obama Hates Your Drugmaker

• Report this Comment On February 15, 2011, at 3:48 PM, fishguidejoel wrote:

  Teva is my drugmaker and health care stock of choice. Even though I will make money on Obama's plan if this fiasco goes through, I would not vote for it. If companies were rewarded with longer patents for innovative drugs, more conditions would be cured. Even 12 years is not long enough to justify costs of searching for a cure for many rare diseases.

• Report this Comment On February 15, 2011, at 3:54 PM, TheDumbMoney wrote:

  fishguide, I totally agree with you. Here we are today with multiple drugmakers, including Pfizer, not quite able to replace drugs coming off patent even after a longer period of time. Maybe they've just done bad research, but particularly since the regulatory burden of actually getting a new drug approved is getting longer and longer and more expensive, this is nonsense. Who is going to develop the drugs of tomorrow? I'm not anti-Obama, but if cutting the patent period isn't a case of "killing the future" to "save today" or whatever his phrase was about other stuff, then I don't know what is. You pass this and you reduce the deficit in the short term, and in the long term millions more people die and suffer because of the drugs that were not developed..., or they get developed far from the U.S. and, initially, from its markets. Boneheaded in the extreme.

• Report this Comment On February 15, 2011, at 4:18 PM, bsrdavid wrote:

  This design of biosimilar legislation -- particularly the 12-year rule -- dates back to the Bush Administration. That's when all important aspects of biosimilar segments of the PPACA were negotiated with BIO and PhRMA. (Look those trade associations up on Google if you don't know who they are.)

  The 12-year exclusivity is a love letter to biotech companies compared to the 5 years available to pill companies under Hatch-Waxman.

  Furthermore, whereas a pill manufacturer has to only show chemical equivalance, it is highly likely biosimilar manufacturers will have to show functional equivalence in humans -- at least PK/PD if not efficacy -- a radically different approach.

  This IS an issue for investors, but the companies you mention as examples make no sense.

  In the case of SGEN, brentuximab vedotin's (SGN-35) patent life goes well into the 2020s. Peak sales are projected to happen THIS decade. This means the PPACA's biosmilar rules don't apply and certainly won't "kill peak year sales."

  Benlysta's patent life extends at least to 2023, not including subsequent method patents, and I'm guessing HGSI investors hope peak sales come THIS decade. So again, the PPACA's biosimilar rules don't apply to "killing peak year sales."

  I scanned NVS patent expirations through 2015 and saw no biologics on the list. I'd be interest to see SPECIFICALLY what NVS biologics you're referring to here.

  TEVA might have issues, which theoretically leaves you one for four. In my view, TEVA is more likely to benefit from biosimilar legislation opening up new generic opportunities than they are to be adversely affected by the biosimilar sections of the PPACA.

  For that matter, Novartis is also looking to become a biosimilar manufacturer.

  It's fashionable among certain political persuasions to ascribe anything related to healthcare to PRESIDENT Obama, but it would be nice if you took a half second to get your facts right on this issue. I suggest some content corrections and a change to your misleading headline.

  David Miller

  Biotech Stock Research, LLC.

• Report this Comment On February 15, 2011, at 6:47 PM, newageinvestor wrote:

  @David. Thank you for this information, I really appreciate especially when there is so much disinformation out there any time Obama even opens his mouth.

  Personally, I would be happy to invest in manufacturers of generic drugs, and subscribe to Dean Baker, an economist with CEPR, that these patents are actually bad, not good, for business.

• Report this Comment On February 15, 2011, at 8:02 PM, TMFHelical wrote:

  David,

  The 12 year exclusivity period is certainly long in comparison to the overly restrictive 5 year period for small molecule drugs, but it is hardly a love letter. It is based on pharmacoeconomic research such as that done by Henry Grabowski.

  http://fds.duke.edu/db?attachment-25--1301-view-503 (a summary article).

  It takes time for companies to make back investment, and continue to invest in new therapies. Shortening that time only makes drug companies charge more in their smaller window and limits their ability to justify important post market (such as label extension) clinical studies.

• Report this Comment On February 15, 2011, at 10:08 PM, bsrdavid wrote:

  TMFHelical --

  It takes a drug with no patent life and previously only a Hatch-Waxman 5-year period of exclusivity and changes it to 12 years.

  Any biotech company who cannot make their investment back plus more than enough to fund the next R&D drug with 12 years data exclusivity probably shouldn't be in the drug development business.

  There's a reason BIO and PhRMA are happy with these provisions and have told Tea Party and GOP lawmakers not to screw with this part of the PPACA.

  Let's also be clear here. Neither this aspect of the PPACA nor Hatch Waxman shorten patent life. These provisions apply only to drugs at the end of their patent life and extend data/market exclusivity for a bonus number of years after regular patent protection would have expired. Typically, only drugs with VERY checkered development histories end up having to rely on these extensions.

  Occasionally, you'll see a drug that has just been "lost" in an academic system get resurrected and make use of these extensions, but they are rare. With pharma, biotech, and hedge funds scouring university tech license programs for drugs to take to market, few drugs of any worth get lost in this way.

  The Avastin example in your link above (Box 2, page 3) is a good example. VEGF was discovered in 1989, with key data linking it to cancer in 1993. Genentech humanized an antibody in 1996 and got FDA approval in February 2004. This 15-year development cycle looks terrible next to a 17-year patent life or a 12-year data exclusivity grant under the PPACA.

  However, the patent for Avastin expires in 2017 or 13 years after first approval. PPACA has no effect on this 13 years of patent protection.

  I understand and agree with Grabowski's core thesis as long as his thesis operates in the vacuum of an academic exercise. Unfortunately, his thesis ignores how IP strategies actually work in biotech and implies the need for longer protections is greater than it actually is.

  The generic protections under the PPACA are better than pharma gets anywhere else in the world and are certainly not damaging to these companies. If anything, they provide a bonus to companies whose drugs have had tortured development pathways with multiple delays.

  HARDLY an indication President Obama "hates your drugmaker" . Again, I'd hope MF corrects the errors and omissions in the story and changes the headline.

  David

• Report this Comment On February 16, 2011, at 7:52 AM, TMFHelical wrote:

  David,

  You are correct that the acts do not affect patent life. But patents aren't quite such simple entities, and in the case of small molecules, the chemical space can be tight. Knowing a lawyer who consults on such matters, deals are often passed on due to less than ideal IP. Generic companies have very little to lose challenging IP, so pharma companies are reluctant to develop any small molecule that does not have ironclad composition of matter claims (and even then assume a challenge).

  The trend toward longer development time erodes the utility of patent lifetimes as well. If you rely on patents alone, some promising therapies simply won't be developed.

  And Grabowski has some commentary here as well.

  http://levine.sscnet.ucla.edu/archive/grabow-patents_innov.p...

  TMFHelical

  Home Coverage Fool

  (remote freelancer)

• Report this Comment On February 16, 2011, at 1:04 PM, stan8331 wrote:

  Our healthcare system is well along in the process of bankrupting the country, but anytime anyone makes even a very modest attempt to introduce cost moderation into the system, the howls begin. "Obama hates your drugmaker" being an excellent example of the phenomenon. No matter which area you try to change, vested interests always retort that vast cost savings are always easily found in <i>other</i> vague, non-specific areas, but any changes to their industry will wreak unimaginable havoc.

  Healthcare has become an over-bloated drag on our entire economy, in the same way that our financial sector exploded far beyond its natural, healthy size. It may take another 10 - 20 years to play out as more and more baby boomers retire, but any drug company (or any healthcare company in general) whose business model needs the status quo to remain viable is doomed.

  The money we pour into healthcare <i>is</i> going to be reduced. If it doesn't start happening gradually now, the future involuntary cuts will be draconian in nature because our ability to keep paying exponentially increasing costs will not last forever.

• Report this Comment On February 16, 2011, at 1:28 PM, boogaloog wrote:

  bsrdavid,

  1st: Thank you for introducing facts into a conversation started with a blog title which has no place in an environment which is supposed to enrich, educate, and amuse. "Obama Hates Your Drugmaker" serves only to inflame and divide, but gets kudos for achieving the disgustingly infantile level displayed by some of the mainstream media.

  2nd: I am confused by your statement "this IS an issue for investors" because the tone of your argument seems to be that there will be minimal impact for a variety of reasons. Can you clear this up?

  3rd: The complexity of the arguments on both sides makes me think I would do myself a favor by sticking to trying to learn about this industry and leave investing in it up to others!

• Report this Comment On February 17, 2011, at 2:41 PM, bsrdavid wrote:

  Booga (booqa?) --

  Investors would be interested in companies who want to do biosimilars because the PPACA creates a pathway to biosimilars that did not exist before.

  Investors might also be interested in companies who have found "lost" drugs or who've run into problems during development.

  The wildcard here is how pharma can extend biologic patent life through the use of technologies like anti-body drug conjugates (see SGEN and IMGN, which I own and my company covers). Without a biosimilar pathway, there was no reason to advance these drugs. Now there (at least in theory) is. This is also of interest to investors.

  And thanks for the kind words. I, like many others with some level of expertise on these matters, sat on the sidelines as the HCR debate was twisted with distortions and outright falsehoods. We assumed reason and facts would win out in the end, but they didn't. I promised myself I wouldn't sit on the sidelines again. And while there is not enough time in the day to combat all of these, in environments like here at MF where people are generally reasonable I think it's worthwhile to call out bad examples when they show up.

  @TMFHelical

  I don't disagree with you here. If anything, these PPACA provisions help drugmakers by providing an extension beyond patent life if things get really hairy during development.

  My patent attorney calls patent litigation the "sport of Kings" because of the cost involved. Ideas are being tossed around for tort reform as a pathway to lower healthcare costs. Perhaps we should put some plaintiff risk in the patent litigation game, too.

  It would be nice if your editors did something about that headline and factual problems in the article.

  David

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