The Importance of Federal Biogenerics Legislation to States

1. The Importance of Federal Biogenerics Legislation to States National Legislative Association on Prescription Drug Prices Spring Meeting March 27, 2009 Sarah Rimmington, Attorney Essential Action, Access to Medicines Projectwww.essentialaction.org/access

2. What is a biologic? • Biologics (also known as biotech drugs) are made from living organisms or the products of living organisms, as opposed to traditional chemical (“small molecule”) drugs. • Examples: vaccines, products made from blood & blood components and therapeutic proteins. Some biologics are manufactured using biotechnology methods such as genetic engineering. • Biologics have many therapeutic uses but are particularly important in the treatment of cancer and autoimmune disorders like severe arthritis and psoriasis. • Key biologics in the pipeline are aimed at treating more than 200 diseases including Alzheimer’s, various cancers, MS and HIV/AIDS.

3. Key Challenge: FDA Cannot Approve Generic Biologics • Large numbers of biologics are off-patent or are about to go off-patent, but there is not regulatory process available to approve low-cost generic substitutes for most biologics. • The FDA’s approval process available for traditional pharmaceuticals (1984 Hatch-Waxman Act) does not apply to most biologics. • What you already know: Price competition from generics is the most important means to reduce the price of medicines. • A Congressional Budget Office study shows shows that after generic versions of conventional drugs enter the U.S. market, prices fall on average between 40 and 80 percent, depending on the number of firms entering the market. • Generics represent 69% of the total prescriptions dispensed in the United States, but only 16% of all dollars spent on prescription drugs. (Generic Pharmaceutical Association)

4. High Stakes in the Biogenerics Debate • Biologics are the fastest growing portion of the nation’s prescription drug bill. • Biologics were 15% of all U.S. prescription sales by 2006. • U.S. spending on biologics grew by 127% between 2001-2005. • Worldwide sales grew by 12.5% in 2007 to more than $75 Billion, almost double the rate for traditional drugs, a) • Sales growth for biologics in the U.S. is much higher than the global rate - 20% in 2006. The U.S. is more than 56% of global biologics market. • (Source: IMS)

5. The need for Generic Biologics is Heightened • Biologics are 8-100 times more expensive than traditional drugs. (IMS) • Prices in the range of $5,000-10,000 annually are commonplace. In some cases, prices exceed $100,000 per patient, per year. • The five top-selling biologics in 2006 constituted 30% of Medicare Part B spending. (Engel & Novitt LLP report to the PCMA, Jan. 2007). • IMS predicts that by 2010 biologicswill be almost 50% of all new approved pharmaceuticals.

6. Cost of Select Top-Selling Biologic Pharmaceuticals in the U.S. (2006)(Source: AARP)

7. Biogenerics = Cost Savings for All Drug Purchasers • A conservative estimate predicts $6-10 Billion in savings to Federal Programs like Medicare and Medicaid over the next decade and $25 Billion to consumers as a whole. SCHIP was not included in the analysis. (Congressional Budget Office) • A pharmaceutical benefit management company estimated savings of up to $71 billion over a decade. (Express Scripts Inc., 2007) • Savings will be greater over time if we adopt a streamlined approach, with few hurdles and delays to generic approvals.

8. One Key Legislative Challenge: Unprecedented Data Exclusivity Period = Delayed Cost Savings • When a generic company seeks approval from the FDA for a generic drug, it performs tests to show that its product is the same as a brand-name product. It then relies on, but does not repeat, the clinical tests (for safety and effectiveness) performed by the brand-name drug-maker. • Data exclusivity is a monopoly on the clinical trial data, granted for a set period of years upon receiving FDA marketing approval. • Data exclusivity prohibits the generic firm from relying on the clinical test data for a set period of time, effectively barring the generic competitor from the market during that time period, and sometimes extending the monopoly period past the date of patent expiration. • Data exclusivity can DELAY the introduction of generic competition -- keeping prices high longer -- for drugs that are not able to obtain patent protection, or for which the patent term has expired.

9. Why is Data Exclusivity a problem for Biogenerics? • Brand-name biotech and pharma companies are seeking almost double the amount of data exclusivity for biologics than traditional drugs get under Hatch-Waxman • Hatch-Waxman grants brand-name chemical drugs 5 years, with possibility of 3-year extension if drug approved for additional new indications/uses (Total of 8 years) • Industry is seeking 14 years minimum for biologics

10. Justification for Data Exclusivity: To provide an incentive for brand-name companies to undertake research and development (R&D) and to ensure that they are not placed at unfair disadvantage as against ‘free-riding’ generic firms. • But: Brand-name biotech companies already have large incentives under the patent system to conduct R&D – 20-year patents, which allow innovators to set a price that will allow them to recoup all of their costs plusearn substantial profits. • And: There is no evidenceto support arguments that a substantially lengthier exclusivity period is warranted for biologic products : The brand-name industry frequently cites published studies that report the cost of producing brand-name conventional drugs and biologic drugs is almost identical ($1.2 billion versus $1.3 billion) {Study by DiMasi JA, Grabowski HG}

11. Legislative Landscape • 2 Bi-Partisan Bills in the House of Representatives: • H.R. 1427: Chairman Henry Waxman (D-CA) & Ranking Member of Health Subcommiytee Nathan Deal (R-GA) = Up to 9 years of Data Exclusivity (Base = 5 years) • H.R. 1548: Representatives Anna Eshoo (D-CA) and Joe Barton (R-TX) = Up to 14.5 years of Data Exclusivity (plus administrative and litigation hurdles/delays) • The Waxman bill is much better overall (not just on the data exclusivity issue): It offers a much more streamlined approach to the regulatory pathway and patent litigation, encouraging much more timely access to safe, effective, affordable biogenerics.

12. Soon to be Two Bi-Partisan Bills in the Senate • Just yesterday Senators Chuck Schumer (D-NY), Susan Collins (R-ME), Sherrod Brown (D-OH), Mel Martinez (R-FL), Debbie Stabenow (D-MI) and David Vitter (R-LA) announced they has reached agreement on introducing a Senate Companion to the Waxman Bill (up to 9 years of data exclusivity). • Senator Ted Kennedy (D-MA), who is the HELP Committee Chair, and Senator Orrin Hatch (R-UT) are expected to introduce a competing bill that offers up to 12 years of data exclusivity.

13. What Can You Do? • Ask your Congresspersons to co-sponsor (or at least to support) the Waxman/Deal& Schumer/Collins Bills (alone or with colleagues). Letters, phone calls, meetings. • It is most urgent to reach out to those sitting on the House Committee on Energy & Commerce (esp. the Health Subcommittee) and the Senate Committee on Health, Education, Labor and Pensions (HELP). • Ask you Governor/Mayor to support the bills. • Initiate Resolutions at the State/Local level in support of the issues/bills.

14. Anything else? • NLARx to write letter of endorsement for the Waxman and Schumer bills? • If you are connected to stakeholder groups who could also endorse the bills/lobby federal legislators, contact me and share that information. • Share information with me if you know what your State/Locality is spending on these drugs, or if you have contacts with patients who are taking the drugs. • Sign-up for Essential Action’s soon to be established list-serv to be kept abreast of information and key opportunities to take action.

15. For More Information • Contact Sarah Rimmington at (202) 387-8030 or srimmington@essentialinformation.org • You can find materials on biogenerics at: www.essentialaction.org/access