Will Generic Biologics Get Special Treatment?

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While the rest of the market was lost in the financial meltdown last week, a little-noticed report discussing some of the biopharmaceutical bills going through Congress was released.

Sponsored by generic drugmaker Teva Pharmaceutical (Nasdaq: TEVA  ) , a professor at Boston University released a very well-written report titled “Stimulating Innovation in the Biologics Industry: A Balanced Approach to Marketing Exclusivity.” This report describes the potentially profound effects that four bills currently being debated in Congress could have on the biopharmaceuticals industry.

Biopharmaceuticals (or biologics) are therapeutic drugs derived from biological sources. Currently there is no easy way for generic (often called biosimilar) versions of these compounds to be approved for marketing by the FDA, unlike non-biologic drugs.

Over the coming years, though, biologics with billions of dollars in annual sales -- like Biogen Idec’s (Nasdaq: BIIB  ) Avonex and Genentech’s (NYSE: DNA  ) Rituxan -- will see their key patents expire. Potential generic biologic drugmakers like Teva, Novartis (NYSE: NVS  ) , and Momenta Pharmaceuticals (Nasdaq: MNTA  ) want to have their shot at producing generic (or at least somewhat similar) versions of these drugs.

While all four Senate and House bills going through Congress will provide a pathway for the FDA to approve biosimilars, these bills also provide varying degrees of extra protection to newly approved branded biologics that these compounds don’t currently enjoy.

Currently, newly approved, branded drugs are eligible to have up to five years of their patent lives restored to make up for some of the protected marketing time lost while the drugs went through clinical trials and waited for FDA regulatory approval. The amount of this "patent restoration" depends on how long it took after the patent application was filed before the FDA approved the drug. The restoration allows a drugmaker to sell the drugs free of generic competition for at least a little while, even if there is no remaining patent protection left.

However, the rules would be different for biologics under three of the four bills being debated in Congress. These bills will give biologics an even longer amount of marketing exclusivity, up to an additional three to 12 years -- again, depending on the time between patent application and FDA approval -- on top of any patent restoration they would be eligible to receive.

So for instance, if a biologic languishes in clinical testing and regulatory purgatory for 20 years and its patents expire, two of these proposals will still give the biologic’s developer 17 years of marketing exclusivity before generic drugmakers can take a stab at trying to get biosimilar versions of the compound approved.

No matter what your opinion is on the issue of drug patent and marketing protections, that’s potentially very good news for the branded biopharmaceutical industry and very bad news for biosimilar drug developers.

Momenta is a pick of our market-beating Rule Breakers newsletter. Biogen Idec is a Stock Advisor pick. Try any of our Foolish newsletters today free for 30 days.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has an A+ disclosure policy.

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  • Report this Comment On September 23, 2008, at 3:01 PM, quiact wrote:

    From a knowledgeable layperson:

    Many experts on red biotechnology should be the apex of the debate regarding biosimiliars- unbiased and experienced in the production of biologics that require a tweaked living organism for thier production.

    Yet another issue of similiar importance is the cost of biologics in general. There is a reduced value issue when one considers some if not many biologics extend the human lifespan by only a few months, added to the fact that, with oncology therapeutics, the patients have to still remain on chemotherapy treatment, so quality of life may not be improved for patients who take some if not many biologics that may cost over 100,000 dollars a year. It raises the question of is it worth it for payors or patients to consume and purchase these certain therapies. This is stated with the knowledge that it costs over a billion dollars a year to produce a biologic therapeutic agent. I mention both issues to posit that competition may or should reduce the cost of these innovative therapies that should continue to be developed and explored in other disease states, as I am relieved that innovation has appeared to have been resurrected with red biotechnology, which benefit very sick patients.

    Carbon-based small molecule medicinal treatment has failed to impress for some time now, yet have over-saturated particular classes of these medications that differ little from older classes that treat particular disease states, yet embellish thier delusional differences with statistical gymnastics from questionable data created by the makers of such drugs.

    Let's have science settle such debates, and not lawmakers and politicians.

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