Data exclusivity for biologics: no longer a level playing-field

Behind the headline of universal healthcare resulting from the recent Obama administration reforms, lies the simultaneous change to the regulation of biologic drugs imposed by the new legislation. The change concerns the data exclusivity period and process for follow-on biologic approval by the FDA.

The Approval Pathway For Biosimilar Biological Products, provides clarity on an important regulatory issue, permitting biologics to maintain 12 years of market exclusivity after FDA approval of the product (much longer than other drugs), and maps out how generics companies can gain approval of cheaper versions of the innovator product after the lapse of this period.

Before the passing of the bill, a range of alternative exclusivity periods were suggested; the generics industry proposed five years and President Obama proposed seven. The Biotechnology Industry Organisation’s (BIO) proposal was for 12 or more years, and the end result was therefore a significant victory for BIO.

The idea of a period of data exclusivity was first introduced in the Hatch-Waxman act of 1984, and provided that the data submitted by innovator companies for FDA approval of a product could be referenced by generic competitors five years after first market approval (or three years for minor improvements, not new products). The data exclusivity period provided a form of commercial protection and incentive for innovation additional to  normal patent protection.

So what are ‘biologics’, and why should they treated differently from small molecules? According to the new legislation, a biologic is defined as ‘a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein (except any chemically synthesised polypeptide) or analogous product, or arsphenamine or derivative of arsphenamine’. This is a pretty loose definition for something that will be of hugely significant commercial importance, and one that is not concordant with other definitions or the wider perspective of drug regulation.

As far as generics are concerned, there is a difference between biologics and small molecules in the regulatory route to approval (a singular objective of the new legislation, which it addresses). Innovator biotech companies argue that the complex chemistry of biologic products prevents simple replication, since  ‘the process is the product’. Even minor variations in the culture medium or growth conditions can have an impact on the expression or post-translational modification of the product. However, there are some biologic products which may be extensively characterized because their exact nucleotide or amino acid sequence can be determined . For these, the ‘process is not the product’. Moreover, the FDA now allows changes to the manufacturing route without performing additional clinical studies to demonstrate safety and efficacy.

The situation becomes even more complex when looking at the division between the roles of the biologic (CBER) and traditional drug (CDER) divisions of the FDA. It is actually the CDER that regulates monoclonal antibodies, cytokines, growth factors, enzymes such as thrombolytics and immunomodulators. Cytokines excepted, all of these are encapsulated in the definition of ‘biologics’ according to the new legislation.

As to why should biologics be treated differently, the argument is that the patent system only narrowly protects biological inventions, and products of this kind are open to patent-busting strategies. In a previous post, I have commented on the declining commercial exclusivity available to small molecules through the patent system. However, this aside, it is not clear that the ‘biologic’ patenting issue is similar for all the drugs falling within the definition of the code. Arsphenamine is clearly not a ‘biologic’ in any sense of the word; and there are other grey areas around immunosuppressants like cyclosporine and tacrolimus.

It is axiomatic that the right framework should exist to allow potentially all medicines to have have an adequate period of commercial protection enabling a return on R&D investment. Biologics such as those produced by fermentation are more expensive to develop because of the greater costs of  clinical supplies. It may also take longer to develop a biologic; however, the attritional risks of failure are if anything less than those of conventional small molecule R&D.

In an analysis published in Nature Reviews last year, David, Tramontin and Zemmel concluded that the internal rate of return (IRR) on small molecule R&D was only 7.5%, less than the cost of capital. By comparison the IRR for biologic R&D was significantly higher, 13%. The difference led to a net present value of over a billion dollars for a biologic relative to a negative NPV for small molecules.

From a pharmaceutical industry perspective the economics are undeniable, at least currently. The average proportion of sales from biologics (including vaccines) across 12 multinationals was around 18% in 2009, rising to 22% in 2014. This trend was set to continue and gather pace long before the new legislation came to pass.

In some cases, such as TNF antagonist therapy (e.g. Enbrel) for rheumatoid arthritis, biologic therapies have been shown to be highly effective and have rapidly gained widespread acceptance; nevertheless there remain unmet needs — they require repeated injections, are expensive, and are only effective in a subset of patients.

The difficulty with which large molecules cross biological membranes poses a limitation on the range of conditions amenable to interdiction by biologics. Most CNS diseases are unlikely to be treatable, nor are conditions requiring intracellular sites of action.

In addition to the undesirability of injections, from a patient and payer point of view, biologics leave lots of room for improvement. All of the world’s nine most expensive drugs,  costing over $200,000 per patient per year, are injectable biologics. And if the situation is not addressed, CNS disorders such as Alzheimer’s, despite presenting an enormous burden of morbidity, run the risk of becoming Cinderella diseases which are not attractive for the biotechnology and pharmaceutical industries to investigate.

In summary, the increased data exclusivity for biologics is good news for those companies with this focus; but the unequal advantage afforded to this, relative to the traditional small molecule approach to disease is not good news for patients with conditions only tractable by small molecules. And if the pharmacopeia of tomorrow is to become dominated by biologic therapies, how will the cash-strapped public (or insurer) purse, which largely pays for these treatments, afford them?

For all our sakes, should we not try to ensure there is a level playing-field?

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