How Long Should the Data Exclusivity Period for Pharmaceauticals Last?

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How Long Should the Data Exclusivity Period for Pharmaceauticals Last?

Introduction

Currently there is a huge debate regarding whether the United States should have universal healthcare. This debate seems to have energized both sides of the argument. However, there is a sub-argument that is often overlooked by the usual participants: should there be a short or long exclusivity period for biosimilars (also called follow-on biologics).

After reading many articles and listening to the pundits of cable news regarding healthcare reform, I noticed that the arguments tended to always center on the pharmaceutical industry. This is because the pharmaceutical and healthcare industries share a symbiotic relationship such that as one goes, so will the other. The future of the pharmaceutical industry lies with biotechnology.

Biotechnology related drugs account for around ten to fifteen percent of the current pharmaceutical market. Moreover, biotechnology is outperforming the pharmaceutical industry as a whole in terms of growth, because much of the biotechnology sector revolves around biosimilars. Biosimilar is the term coined for protein drugs that are similar, but not identical to, an existing pharmaceutical product. Biosimilars are different because a single protein can exist in many forms because of a protein’s ability to change conformations. A single protein can react one way when it is in one conformation, and totally differently when the conformation is changed. For example, as pharmaceutical companies do not disclose the techniques that they use to create the biosimilars, it is almost impossible for a generic drug producer to use a process identical to the process responsible for creating the original drug. Since the drugs created by biosimilars are essentially different from the original drug, they are able to obtain patents on their own merits. In addition to patent protection, companies who create biosimilars are given an additional exclusivity period on their data.

Today there are two schools of thought regarding the data exclusivity period. There is what I will call the “Howard Dean School” where it is argued that the exclusivity period should be between twelve and fourteen years and the “Obama School” which advocates that the exclusivity period should be seven years. I will try to sum up the two schools and explain why I believe that Howard Dean is right and the President is wrong.

How long should the exclusivity period be?

Howard Dean wrote an op-ed for TheHill.com where he advocated for a long exclusivity period for biosimilars (around 12 to 14 years). His argument centered on the fact that the longer exclusivity period supports strong intellectual property protections that guarantees research, development, and innovation. Dean also argued that the exclusivity period should begin running when the FDA approves the drug rather than when the application is filed. This is also the argument made by pharmaceutical companies. The arguments are along the line that exclusivity is the main incentive for companies investing billions of dollars into creating drugs. It would be a disincentive to allow a “copy-cat” company to make a cheaper form of the drug after investing very little into its creation. Furthermore, public health would be compromised because of the additional relative cost.

In an article published by the New York Times, reporter Andrew Pollack explained that those arguments are not as important as Dean and the pharmaceutical companies suggest. Mr. Pollack explains that “whatever the exclusivity period, biologic drugs would also continue to be protected by patents”. This is because in many cases, the patent protection would last longer than the exclusivity period, making the “innovation” argument moot. Regarding the cost, Pollack notes that based on Congressional Budget Office estimates, generic biologics might save the government about ten billion in the next ten years. This would be nominal when compared to the cost of healthcare reform.

In stark contrast to what Dean suggests, President Obama’s view is that seven years is a sufficient exclusivity period. He believes that seven years would be an appropriate balance between protecting innovators and the public. Proponents of a seven year exclusivity period also argue that a shorter exclusivity period allows companies to develop cheaper ways to create the drug, and thus, save money for consumers. These arguments tend to be the same ones in favor of the public option in healthcare reform.

Conclusion

I believe that the “Dean School” got it right. Companies spend large amounts of money and time to develop novel drugs because they know that they will have ample time to market and profit off of the drug that they create. There would be no incentive to invest so heavily if the return will be marginal. A long exclusivity period is consistent with patent policy as well as with free market economics. As long as drug companies know that they will profit from their hard work they will continue to develop innovative drugs. When the government intervenes with policy, innovation is immediately stifled.

To illustrate this lets look at Europe. Europeans used to control the biotechnology world. This domination stopped when their focus was placed on price controls so that they could pay for their public system. Eventually, there was little investment in innovation and everyone moved to the United States. If healthcare reform was allowed, the government would have to control the profits of pharmaceutical companies in order to pay for the system. One way to control prices is to have minimal exclusivity so that “copy-cat” companies can make cheaper drugs from the research garnered by another company. Such a move would destroy the biotech industry in the United States. I cannot imagine how this would be good for the American economy. If more citizens paid attention to the debate on the exclusivity of biosimilars, there would be no need to discuss healthcare reform.

Tyrone N. Watson