Going Generic

July 05, 2007 - Red Herring

U.S. Senate takes on biologics—and companies around the world are watching.

By Amy Coombs

Biologics—drugs made from living organisms—are used to treat everything from arthritis to cancer, and Americans spent $40 billion on them last year. Now, nearly 20 years after patent protection is about to expire for many of them, the U.S. Senate wants to make them cheaper.

A bill that would pave the way for generic versions of biologics to hit the U.S. market cleared the Senate health committee on June 27. The Biologics Price Competition and Innovation Act of 2007, a compromise version of an earlier bill, would give the U.S. Food and Drug Administration authority to approve generic versions of biologic pharmaceuticals, which are produced from living cells rather than through the chemical synthesis used for conventional drugs.

The biotech industry argues that biologics are extremely expensive to develop and complex to produce. While strongly opposed to generic biologics, big pharma is somewhat reassured by the compromise version, which gives their drugs an unprecedented 12 years of market exclusivity. The market exclusivity means the FDA would not be allowed to consider or approve generic versions of the drug

Producers of generics say the current system unfairly favors biotech giants like Genentech and Genzyme, resulting in higher premiums and out-of-pocket expenses for patients. “The unfortunate part is that consumers and health insurers are paying monopoly prices on these products,” says Andrea Hofelich, spokesperson for the Generic Pharmaceutical Association (GPhA), a trade organization in Arlington, Virginia, that supported an earlier version of the bill.

Currently, the FDA has the authority to approve generic versions only for traditional chemical drugs. But generic biologic drugs are available in Europe, Australia, South America, and India, says Ms. Hofelich. Drug makers in India in particular are keeping an eye on the bill—they already produce 22 percent of the world’s generic drugs and are eager to jump into the U.S. biogenerics market.

“Right now there is no opportunity for competition in the marketplace,” says Gordon Johnston, vice president of regulatory affairs at the GPA. “This bill would allow companies to seek approval for [generic biologics], allowing for competition with [drugs] just coming out of patent protection.”

If passed, the legislation would create extraordinary opportunities not just for Indian companies. “Entrepreneurs are seizing this opportunity and thinking hard about biogenerics,” says David Mack, director of San Francisco-based investment firm Alta Partners. “I think we will see companies emerging.”.

Yet the biotech industry also raises safety concerns about generic biologics, which are created from living organisms—through cloning, protein expression, or other biotechnology methods. Slight changes in the manufacturing process can be lethal.

Biologics are also expensive to develop, and the biotech industry worries that the high costs may lead generic drug developers to sidestep necessary research.“You have to show safety and efficacy, and this is harder for biologics than small molecules,” which are chemical drugs that often have years of data validating their use, says Mr. Mack. .

The bill’s prospects are unclear. Advocates on both sides hope that the language will be clarified before it proceeds further.