Re: Emerging Health Care Competition and Consumer Issues – Comment, Project No. P083901 (Federal Register, September 3, 2008, Volume 73, Number 171, pp. 51479-51482, “Notice of Public Workshops and Roundtables and Opportunity for Comment”)
The Biotechnology Industry Organization (BIO) thanks the Federal Trade Commission (FTC) for the opportunity to respond to FTC’s questions regarding competition provided by developing a regulatory approval pathway for follow-on biologic (FOB) drugs. BIO represents more than 1,200 biotechnology companies, academic institutions, state biotechnology centers and related organizations across the United States and in more than 30 other nations. BIO members are involved in the research and development of innovative healthcare, agricultural, industrial and environmental biotechnology products, thereby expanding the boundaries of science to benefit humanity by providing better healthcare, enhanced agriculture, renewable sources of energy, and a cleaner and safer environment.
A. Regulatory Exclusivities and Follow-on Biologic Drug Competition A1. What is the likely competitive effect of the market entry of a follow-on biologic competitor? Are there empirical models that predict the nature of this competition based on existing biologic drug product competition? How has competition developed between referenced and follow-on products in European markets? Would referenced product manufacturers lower their prices, offer discounts, and/or engage in enhanced marketing activities?
The Congressional Budget Office (CBO) has estimated the savings to the federal government of S. 1695, the Biologics Price and Competition and Innovation Act of 2007, to be $5.9 billion over the 10-year scoring window. The findings of the study confirm many of the points made below in further response to this question. The CBO score can be found at: http://www.cbo.gov/ftpdocs/94xx/doc9496/s1695.pdf.
While BIO has not, itself, analyzed what the competitive nature of a follow-on biologics market may look like, we believe that a framework developed by Henry Grabowski and the Analysis Group can help to inform this question.1 This paper explains that the competitive effect of the market entry of follow-on biologic competitors will reflect the impact of an expedited approval process on both prices and utilization of each affected reference biologic product. While there is considerable heterogeneity among these innovator biologics, the paper identifies a number of critical factors that will drive these market outcomes:
The timing of patent expiry for these products and the nature of their intellectual property protection
The time required to develop a United States (U.S.) Food and Drug Administration (FDA) regulatory scheme, testing requirements, and any product-class guidelines following passage of any legislation
The time required for FOB manufacturers to obtain regulatory approval (three to five years for pre-clinical and clinical testing, and one-and-a-half to two years for FDA review and approval) and to bring manufacturing capacity on-line (four to six years, likely developed concurrently with product development schedule)
The evolution of utilization of currently approved biologics, driven by:
o Demographics, disease incidence, medical practice, and regulatory and reimbursement practice
o The pace and extent of uptake of next generation patent-protected products in markets where follow-on biologics have entered (limiting longer-term uptake of follow-on biologics in markets with unmet medical need)
The nature of the competitive model in markets for biologics that experience entry by follow-on biologics (likely to be driven by the marketing of branded, proprietary products rather than the “commodity” competition based on price alone seen among generic small molecule generic drugs), and its effect on:
o The pace and extent of uptake of follow-on products for currently marketed branded products (likely slower and less extensive than for many small-molecule drugs, or 10% to 45% follow-on product share)
o The price impact of entry by follow-on products (limited discounts of 10% to 30% off brand, due to fewer likely market entrants than in generic drug market2, among other factors)
The paper concludes that, with respect to cost savings in the federal budget, the magnitude of such savings is highly uncertain and very sensitive not only to the specific legislative language that emerges, but also to a range of critical assumptions about scientific, regulatory, and clinical issues, the nature of competition in markets for specific biologics, as well as future intellectual property protection, and related litigation and the development of case law.
For more detailed information, the study can be found at: http://bio.org/healthcare/followonbkg/Federal_Spending_of_followonbkg200.... In addition,
BIO has critiqued two studies (PCMA and Express Scripts) that claimed large cost savings from a follow-on biologics pathway. The studies overestimated the savings due to, among other factors:
Misguided estimates of the timing when savings would begin to accrue Unreasonable assumptions on interchangeability Mathematical errors
BIO’s critique may be found at: http://www.bio.org/healthcare/followon/20070222.pdf. A more recent study by Sonecon, which also suggested large savings, suffers from many of the same issues as the studies by PCMA and Express Scripts. Further, it contains a methodological error that results in an overestimate of savings of at least 110%. The discussion above focuses on the short term. In the long run, the savings estimates are more difficult to make and depend on a number of factors, including scientific advancement. Concerning, “How has competition developed between referenced and follow-on products in European markets,” the European experience to date may be of only limited value in informing what the U.S. experience will be due to the fact that very little time has elapsed since the introduction of the first biosimilar in Europe and the different ways that reimbursement occurs in Europe versus the U.S. Concerning the final part of the question, “Would referenced product manufacturers lower their prices, offer discounts, and/or engage in enhanced marketing activities?,” as a trade association BIO cannot and does not discuss the strategic marketing and pricing decisions that individual member companies may or may not make.
A2. What is the likely impact of a follow-on biologic product being designated “interchangeable” (i.e., receiving an approval that would permit pharmacists, without physician authorization, to fill a prescription for the referenced product with the follow-on product)? What are the prospects for the use of “authorized follow-on biologics” in these circumstances? Do the answers to these questions differ based on the type of biologic product involved?
The degree of competition and potential cost savings arising from a follow-on biologics approval pathway is likely to be dependent on numerous factors, including product quality, cost of production, price discounting, market penetration, number of market entrants, potential market size for any given product, etc. For more detail, please see our answer in response to Question # 1 above. With respect to designations of interchangeability, it is BIO’s position that patients and their physicians should decide the proper course of treatment, including which medicine to take. All biologics should be dispensed as written and prescribed by brand name. We are urging Congress to ensure this approach in any legislation. Indeed, FDA recently stated:
With protein products, as of today, the FDA has not determined how interchangeability can be established for complex proteins.
The complex nature of biological manufacturing methods means that the manufacturing process used by a follow-on manufacturer will be different from the manufacturing process of the innovator. Because a follow-on manufacturer can never exactly duplicate the innovator's process, differences in process may result in differences in the protein product and, significantly, different effects in the clinic. In fact, even when innovator companies make changes in their own manufacturing processes, unanticipated changes in the product can and have occurred. For specific examples of such situations, please see our comments to the European Medicines Agency (EMEA) and FDA, available at http://www.bio.org/healthcare/followon/ (e.g., BIO Comments to 2004N-0355, “Scientific Considerations,” December 13, 2004, pp. 18-37). Based on the experience of innovators, BIO agrees with FDA that it has not been determined how interchangeability can be established for complex proteins made by separate manufacturers. If pharmacists were able, without physician authorization, to substitute the follow-on product for the reference product, patients might not only be dispensed a follow-on biologic rather than the prescribed biologic, but they might be switched back-and-forth among several products over time. Although switching among the innovator small-molecule drug and its generic versions normally raises few concerns, switching among biologics that are “similar” – rather than the same – involves particular risks.
As FDA notes: For many follow-on protein products – and in particular, the more complex proteins – there is a significant potential for repeated switches between products to have a negative impact on the safety and/or effectiveness. Therefore, the ability to make determinations of substitutability for follow-on protein products may be limited.
EMEA and certain member states of the European Union likewise have recognized the fundamental differences between drugs and biologics with respect to substitutability. Recently, EMEA issued a statement that “[s]ince biosimilar and biological reference medicines are similar but not identical, the decision to treat a patient with a reference or a biosimilar medicine should be taken following the opinion of a qualified healthcare professional.” BIO believes that, consistent with the policies of EMEA and many European countries, patients should receive the product expressly prescribed by a physician. It is important to note that substitution has been a problem for certain small molecule generics. For example, levothyroxine, the generic form of certain medications treating hypothyroidism, is only safe and effective at a very narrowly defined dose. The American Thyroid Association has issued a public statement noting that patients should be alerted by their physicians or pharmacists that their levothyroxine preparation might be switched at the pharmacy, that patients should ask to remain on their current levothyroxine preparation, and that they should inform their physicians if their thyroid hormone is changed to a generic preparation because, following such a switch, thyroid function should be re-checked. This concern is even more relevant for biologics, which are often hundreds or thousands of times larger and more complex than traditional chemical drugs. The kinds and sizes of studies that would have to be done to address doubts about substitutability – including the risks of switching – would be so large that the dataset presented for approval would likely be larger than that required to be presented by an innovator. As Secretary Leavitt noted in a letter to Senator Kennedy:
[I]n light of the current scientific limitations on the ability to make determinations for interchangeability, and because it is critical to protect patient safety, the Administration believes that patients should not be switched from the innovator biological product to a follow-on biological product (or vice versa) without the express consent and advice of the patient’s physician, and legislation should not allow for determinations of interchangeability at this time.5 Finally, we caution that the term “interchangeability” is not defined by FDA and has no settled legal or regulatory meaning at this time. We note that some use this word to describe products that are not "substitutable" or “therapeutically equivalent,” but which, under a physician's supervision, could be used to treat the same disease or condition in the same patient. Concerning the question, “What are the prospects for the use of `authorized follow-on biologics’ in these circumstances?,” as a trade association, BIO cannot and does not discuss the strategic marketing and pricing decisions that individual member companies may or may not make.
A4. How would the prospect of competition from follow-on biologic drugs influence research and development for new biologic drugs, improvements to existing biologic drugs, and the timing and rollout of new and/or improved biologic drugs? Does the market experience with non-biologic generic pharmaceutical drug products provide insights into these issues?
When discussing future innovation, it is helpful to understand what biotechnological innovation has accomplished to date. Biotechnology has created hundreds of new therapies and vaccines, including products to treat cancer, diabetes, HIV/AIDS and autoimmune disorders, and many other rare and unmet medical conditions. In fact, between 1995 and 2005, 160 different medicines were approved to treat rare diseases that affect 200,000 or fewer patients. Biotechnology also is responsible for hundreds of medical diagnostic tests that keep the blood supply safe and detect other conditions early enough to be successfully treated.
This spectacular innovation depends on an environment where companies can attract the capital needed to continue massive research and development (R&D) investment. Over the past 25 years, the average R&D intensity (R&D spending to total firm assets) for biotechnology was 38%. By comparison, the average R&D intensity for all industries was only about 3%.6 According to Ernst and Young, “Global Year in Review 2006,” the biotechnology industry has increased the amount of money it devotes to R&D by more than 120% since 1994.7 Biotechnology is one of the most research-intensive industries in the world. The U.S. biotech industry spent $19.8 billion on research and development in 2005 alone.
In this regard, it bears emphasis that the biotechnology industry in the U.S. is still relatively nascent and largely unprofitable: the companies that comprise it are primarily small, private start-ups heavily reliant on venture capital and years away from product commercialization. It is these small companies – many of which will never see a product come to market or turn a profit – that are undertaking the bulk of early development gambles, challenging the boundaries of current medical knowledge toward new and exciting mechanisms of disease treatment amid overwhelming odds. In fact, small biotechnology companies (all biotechnology companies but the top 10) account for two-thirds of the industry’s future clinical pipeline.8 This enormous reservoir of biotech innovation is critically important to the future of healthcare, the U.S. economy, the biotechnology industry, and, of course, patients. Thus, in crafting a follow-on biologics approval pathway, it is important to err on the side of incentivizing innovation, particularly in light of the unique elements of the biotechnology industry. These companies already bear enormous costs and a very high degree of uncertainty, not only in product development and manufacturing, but also in raising the necessary capital to fund innovative research – which is particularly difficult in the current economic environment. Thus, as compared to the broader pharmaceutical industry, biotechnology companies are more vulnerable to the type of changes in investment incentives that could result from a poorly-crafted follow-on biologics regime.
The statistics speak to the challenges this emerging industry faces. Biologics research and development is a high-risk endeavor, with higher capital costs, higher material costs, greater manufacturing costs and uncertainties, longer development times, and lower late-stage success rates than compared to small molecule drugs. In fact, from 2001–2005, the success rate of a Phase III trial for the average biotechnology product was just slightly more than 50%.9 These failures occur at the last stage of product development – after years of research and hundreds of millions of dollars may have been spent.