Follow-On Biologics: Economic, Innovation and Policy Reflections The Fuqua School of Business Duke University

1. Follow-On Biologics: Economic, Innovation and Policy Reflections The Fuqua School of BusinessDuke University November 6-7, 2008

2. Charles DiLiberti V.P. Global Pharmacokinetics and Bioequivalence, Barr Laboratories, Inc.

3. “Commercial Opportunities and Challenges for Follow-on Biologics”

4. Presentation Overview • Generic Biologics • Commercial Opportunities & Savings • Science & Technology Challenges • Regulatory & Intellectual Property Issues • Summary

5. Commercial Opportunities & Savings

6. Benefits of Generic Competition • Significant Cost Saving Opportunities • Savings for consumers and taxpayers • Generic Competition Will Fuel Innovation • Brand companies will have the incentive needed to vigorously pursue new biologics

7. Increasing Significance of Biologic Products • US Biologic Revenues • 1997: $17.4 Billion • 2007: $ 65.2 Billion* • 400 Biologics & Vaccines Currently in Clinical Trials Targeting >200 Diseases** • Between 2003 and 2006, biologics represented 24% of all new chemical entities approved by the US*** • Sales of biotech products in the US showed an annual growth rate of 20% between 2001 and 2006 compared with 6% to 8% in the pharmaceutical market*** * Ernst & Young ** Biotechnology Industry Organization *** Journal of American Medical Association, October 22, 2008

8. High Cost of Brand Biologics Annual Cost per Patient Enbrel (Arthritis)$20,000* Cerezyme (Gaucher Disease) $200,000** Remicade (Arthritis) $35,000-$66,000*** Generic Competition Will Reduce These Costs *Baltimore Sun January 28, 2007 **Bloomberg January 11, 2007 ***Philadelphia Inquirer September 19, 2006

9. Significant Cost Savings Opportunity Generic Biologics Represent Significant Cost Savings Opportunities and Stimulate Innovation • Epogen • Market Before Generic Launch: $2.5 Billion* • Brand/Year Today: $9,000** • Generic Savings/Year assuming 50% savings: $4,500 • Enbrel • Market Before Generic Launch: $2.7 Billion* • Brand/Year Today: $20,000*** • Generic Savings/Year assuming 50% savings: $10,000 *ABN AMRO February 2008 **National Journal February 10, 2007 ***Baltimore Sun January 28, 2007

10. Generic Competition Price Drops as Number of Manufacturers Increases

11. Market Size for Select Biologic Products Source: ABN AMRO February 2008

12. Market Size for Select Biologic Products Source: ABN AMRO February 2008

13. Perspective:Historical Growth in Substitution Source: IMS Health, Banc of America Securities LLC estimates

14. Generic BiologicsOpportunity • Generic Pharmaceuticals - A Vital Part in Health Care System • Approximately 67% of the Prescriptions Dispensed in the US Are Generics* • Biologics • Worldwide Market Estimated around $75 Billion* • Per Patient Cost for Biologic Products Can Exceed $100,000 Per Year • Generic Biologics • US Consumers Could Save $43 Billion Between 2011 and 2020** • Estimated Value of Biologics that have already lost Patent Protection: $10 Billion*** • Estimated Value of Biologics to lose Patent Protection in the Next Ten Years: $20 Billion*** * IMS Health **Citizens Against Government Waste (CAGW) Release, May 2, 2007 ***ABN AMRO February 2008

15. Science & Technology Challenges

16. Scientific Challenges for Generic Biologics • Characterization • Safety Assessment • Therapeutic Equivalence • Manufacturing Controls

17. Generic Biologics • Generic biologics, sometimes called follow-on biologics (FOBs), are protein products that are pharmaceutically and therapeutically equivalent • Generic biologics do not utilize the reference product’s proprietary process, specifications or clinical data • For established products, therapeutic equivalence can be demonstrated using • In vitro studies and/or • Pharmacokinetics and/or • Surrogate markers and/or • Clinical outcomes depending on the characteristics of the protein

18. rDNA Technology Drugs: Filgrastim (G-CSF) 2659 atoms Chemical Drug: Azithromycin 124 atoms Monoclonal Antibody 21112 atoms Interferon 2804 atoms Biologics Size Does Matter...

19. Misinformation Campaign About Generic Biologics Myth: • Raw materials of biologic origin are hard to source and only brand biotechs know where to find them. Reality: • Raw materials are available today for many generic biologics including insulin, G-CSF, erythropoietin, interferons, etc.

20. Misinformation Campaign About Generic Biologics Myth: • Biologics are too complicated to be characterized. Reality: • Numerous highly sophisticated analytical methods have been developed, permitting complete characterization. More advances will be achieved each year.

21. Misinformation Campaign About Generic Biologics Myth: • Generic companies lack the medical, scientific, and technical ability to produce safe and effective biotech products. Reality: • Generic companies can and do make safe and effective biologics. Many safe and effective biologics currently are made in controlled environments and marketed by generic companies outside the U.S.

22. Generic Biologics (Biosimilars) in the EU • The ability to make generic biologics is far from a theoretical possibility. • In 2004 EU issued EMEA Draft Guidelines for four classes of generic biologics, referred to as biosimiliars in the EU. • Since 2004, the EU has approved several biosimilar products.

23. EU Biosimilar Approvals DRUG EU MARKET AUTHORIZATION DATE • Sandoz’s Omnitrope® (somatropin) April 12, 2006 • BioPartners’ Valtropin® (somatropin) April 24, 2006 • Sandoz’s Binocrit® • Medice’s Abseamed® • Hexal Biotech’s Epoetin alfa Hexal® (recombinant human erythropoietin alfa) August 28, 2007 • Stada Arzneimittel’s Silapo® • Hospira’s Retacrit® (epoetin zeta) December 18, 2007 • Teva’s Tevagrastim® • Ratiopharm’s Ratiograstim® • Ratiopharm’s Filgrastim ratiopharm® • CT Arzneimittel’s Biograstim® (human G-CSF) September 15, 2008 current through September 25, 2008

24. FDA Approves Sandoz’s Omnitrope • There has been some movement in the US to approve generic biologics. • FDA approved Omnitrope in May 2006. • FDA stated, however, that this approval does not create a pathway for all generic biologics. Omnitrope referenced a brand product (Genotropin) approved under the FDCA.

25. Misinformation Campaign About Generic Biologics Myth: “The Product is the Process.” Reality: “Old models and mantras are inhibiting progress – the product is no longer the process.” (Statement of Mathias Hukkelhoven, Ph.D., Senior V.P., Global Head, Drug Regulatory Affairs, Novartis, Sept. 14-15, 2004).

26. Misinformation Campaign About Generic Biologics Reality (continued): Biotech products can be fully characterized and compared analytically. Biotech Firms routinely justify their own process changes via FDA approved comparability protocols.

27. Development of Generic Biologics • Strictly Controlled Process (Validated) • Extensive Analytical Comparability (Characterization) • Comparable Biological Activity (In Vitro/In Vivo) • Non-Clinical Comparability (Safety, Immunogenicity...) • Comparable pharmacokinetics (blood concentration profile) • Comparable Clinical Efficacy and Safety

28. Development Considerations • Product Complexity • From Development To Clinical • Characterization • Biosynthesis, In-Process and Finished Product • Nomenclature • Lack of Strict Definition, INN Issue • High Cost of Development • Marketing Requirements and Cost • Post-Marketing Safety Surveillance • IP Strength

29. Regulatory & Intellectual Property Issues

30. Challenges for Generic Biologics • Regulatory • Congress needs to create an abbreviated approval pathway • Intellectual Property • Brand exclusivity • Generic exclusivity • Resolution of patent litigation prior to generic launch

31. Regulatory Issues • Regulatory Framework Complicated By Existence of Two Laws For Biologics • FDCA for NDA Products • PHSA for BLA Products • NDA Products • Generic Pathway Exits, But FDA Implementation Is Unclear • BLA Products • Three Issues Need To Be Resolved • Mechanics of Approval Pathway Need To Be Defined • Brand/Generic Exclusivity • An Efficient Patent Dispute Resolution Mechanism

32. Abbreviated Generic Pathway Under PHSA • A Generic Pathway Should: • Give FDA Authority To Decide Approval Requirements For Generic Products • Adopt Exclusivity Provisions No Greater Than Those Found In Hatch-Waxman • Permit Pre-Launch Adjudication of Certain Patent Disputes

33. Abbreviated Generic Pathway Under PHSA • FDA should be permitted to decide what tests/data are necessary for approval as a comparable or interchangeable generic. • Congress should not impose unnecessary barriers to generic approvals, e.g., mandatory guidance or rule-making requirements; mandatory clinical trials; requirement that generics seek approval for all approved brand uses.

34. Abbreviated Generic Pathway Under PHSA • Congress should carefully consider any new, additional exclusivities awarded to brand biologics. • Considerable incentives already exist for brand biotech companies.

35. Existing Incentives for Brand Biotech Companies

36. Abbreviated Generic Pathway Under PHSA • If Congress decides to give additional exclusivities to brand companies, Hatch-Waxman establishes the maximum length and number of exclusivities that can be justified: - 5 years for truly new, innovative products - 3 years for certain improvements to already-approved brand products

37. Abbreviated Generic Pathway Under PHSA • Unlike the incentives that already exist to develop new brand biologics, no incentives exist to develop generic biologics. • Generic biologics legislation should include an incentive, just as Hatch-Waxman does for small molecule drugs, for the development of generic biologics.

38. Abbreviated Generic Pathway Under PHSA • Effective generic biologics legislation will include a mechanism for expeditious resolution of patent disputes. • Hatch-Waxman has shown that patent mechanisms can be abused to delay generic market entry.

39. Abbreviated Generic Pathway Under PHSA • Only those patent disputes that would cause the generic company to delay launch should be litigated simultaneously with the FDA approval process. • Disputes over any other patent that the brand owns should wait until the generic company actually launches.

40. Abbreviated Generic Pathway Under PHSA • Such a process ensures that brand companies cannot use weak or suspect patents to delay generic market entry. • At the same time, the process protects all legitimate patent rights – it allows litigation over all patents, but controls when that litigation can start so that generic marketing isn’t unduly delayed.

41. Regulatory IssuesU.S. Proposed Legislation • Negotiations Are Ongoing • Much Momentum Gained in Debate • Optimistic for Ultimate Resolution

42. Summary

43. Generic Biologics in US • Significant Momentum in US Congress • Failed to Pass in 2007-08 Session; Likely to Be On Legislative Agenda in 2009 • Strong Consensus for Generic Biologics Among Payers, Consumer Groups • Debate Centers On Three Issues • Mechanics of Pathway • How to Resolve IP Issues • Exclusivity Issue

44. Broad, Bipartisan Support for a Workable Pathway for Generic Biologics State Governors