Misplaced Fears in the Legislative Battle over Affordable Biotech Drugs

Much like tort reform, the debate over recently enacted legislation on biotech drugs—and particularly regulatory supplements to patent protection— has taken on a significance that dwarfs its impact on prescription drug expenditures. Under the Health Care Reform legislation, Congress enacted two major reforms: First, creation of an abbreviated Food and Drug Administration (FDA) approval process for follow-on biologics (FOBs), which are the analogues of generics for biotech drugs. Second, establishment of a twelve-year “data exclusivity” period in which clinical testing data collected by brand-name innovators can not be used by producers of FOBs to satisfy FDA testing requirements. While the abbreviated FDA approval process enjoys broad support, the data-exclusivity provision has been hotly contested, including strong opposition from the Federal Trade Commission. We argue that the debate over the duration of regulatory data exclusivity is a sideshow. Current estimates suggest that the differences in duration of the data exclusivity period that were debated, essentially between seven and twelve years, would not materially affect aggregate expenditures on prescription drugs. For this and other reasons, any potential benefit to patients that might result from a shorter period of data exclusivity are likely to be outweighed by the financial risks to the biotech industry, and particularly the negative effects on investments in research and development. * Harry Reasoner Regents Chair in Law, The University of Texas at Austin School of Law. ** Associate Professor, University of Missouri-Kansas City School of Law. This article is based in part on research conducted by Christopher M. Holman with financial support from the Biotechnology Industry Organization (BIO). The design, analysis and composition of this manuscript were independently generated by the authors, who are responsible for any errors or omissions. The views and conclusions expressed herein are those of the authors, and do not necessarily reflect the views of BIO or any of its members. 566 IDEA—The Intellectual Property Law Review 50 IDEA 565 (2010) More importantly, we believe that the focus on data exclusivity has obscured a critical flaw in the new law. Policymakers ignored the weak competition in markets for biotech drugs, which will erase much of the cost savings predicted from experience with generic versions of conventional drugs under the Hatch-Waxman Amendments to the Food, Drug and Cosmetics Act. This difference implies that the benefits of having an abbreviated FDA approval process will not be realized until policies exist that overcome the significant barriers to market entry for manufacturers of follow-on biologics—without effective competition, the pricing of biotech drugs could remain high indefinitely. We close the article by suggesting several policies to address this gap in the Health Care Reform legislation.