Introduction
Newscom.com/Ken James
Dark horse. Might Rep. Anna Eshoo save the day for follow-on biologics with a compromise bill in the US House of Representatives?
As 2007 came to a close, the US biotech industry began absorbing the impact of new safety powers handed to the US Food and Drug Administration in the reform bill that passed at the eleventh hour last fall, the FDA Amendments Act (FDAAA, or PDUFA IV as it's known in the industry). The good news for drugmakers is that the latest regulatory powers don't appear as stringent as first thought. Nonetheless, only time will tell how certain aspects of the law will fall into place.
Another important issue left unresolved last year relates to follow-on biologics, for which an approval pathway remains unclear after legislators backed off from including language on the issue in FDAAA. The drive to overhaul and weaken patent law could also strike at biotech's innovative heart.
As the Bush administration takes the final curtain, the high likelihood of a Democratic victory could bring new challenges for the biotech industry. On the plus side, a Democratic administration would likely loosen the reigns on federal money for human embryonic stem (ES) cell research (Box 1), but it could also trigger a tougher FDA environment and could introduce measures to reduce healthcare costs that, down the line, could trim drug revenues. And fresh executive power might also steer the follow-on biologics issue if an agreement is not reached this year.
Wrangling over follow-ons
With the FDA reform bill in the rearview mirror, members of the US Congress may turn their attention back to follow-on biologics this year. The issue seemed to gain momentum last year, but when it was left out of the FDAAA, the push to find an agreement fizzled. Going into the new year, members of both the Senate and House of Representatives have reaffirmed their desire to finish the job.
Many of the biotech companies producing brand products also say they want to resolve the issue this year, as do parties in the generic camp. But both sides accuse the other of slowing things down, so it's not clear whether an agreement will be reached. What is certain is that the debate over follow-ons will occupy a lot of minds.
Legislation for follow-ons continues to spark disagreement. The ongoing fight centers on a few key provisions, namely the duration of data exclusivity—the period in which the FDA would not be able to approve a follow-on based on an innovator's data—and questions about immunogenicity and interchangeability, which relate to the sameness of a pioneer biologic and a follow-on. FDA officials have repeatedly said that current technology does not provide answers, so the potential for immunogenicity precludes determinations of interchangeability, which otherwise would allow pharmacists to substitute a brand product for a follow-on.
One proposed bill (H.R. 1956, Patient Protection and Innovative Biologic Medicines Act), introduced in the House by Rep. Jay Inslee (D-Wash.), has received praise from Washington, DC's Biotechnology Industry Organization (BIO) and its allies for including 14 years of data exclusivity, opposing interchangeability and mandating clinical trials for follow-ons. Another House measure (H.R. 1038, Access to Life-Saving Medicine Act), from Rep. Henry Waxman (D-Calif.), offers no data exclusivity protection and allows interchangeability. However, Waxman told a generic industry audience last fall that he believed five years of data exclusivity to be sufficient, a period akin to protection offered under the generic framework for chemically synthesized compounds in the Hatch-Waxman Act of 1984.
In the middle lies a Senate bill (S. 1695, Biologics Price Competition and Innovation Act) that cleared a vote last June in the Health, Education, Labor and Pensions Committee (HELP), which is chaired by the biotech-friendly Sen. Edward Kennedy (D-Mass.). Also sponsored by three of his colleagues, Sens. Hillary Rodham Clinton (D-NY), Mike Enzi (R-Wyo.) and Orrin Hatch (R-Utah), the bill calls for 12 years of data exclusivity, gives the FDA flexibility on interchangeability to allow for an evolution of technology to eventually determine sameness, and provides the agency leeway on clinical trial requirements for follow-ons.
This measure has generally been hailed as both a compromise and a breakthrough in advancing the debate, but for one sticking point, the duration of data exclusivity.
Jim Greenwood, the president and CEO of BIO, says he is "not wild about" it, noting that BIO would not back off its demand for 14 years, claiming that anything less would ward off investors. Those on the other side of the fence claim this is a red herring, noting that the inception of the generics industry 20 years ago did not squelch the brand-name drug industry; instead it helped spur development of new products because of a more competitive environment.
But generics manufacturers haven't been supportive of the Senate bill either, largely because they think 12 years is far too long. Instead, legislation that "scales back dramatically" the exclusivity provision would produce the most savings, according to Mark Merritt, the president and CEO of the Pharmaceutical Care Management Association (PCMA) in Washington, DC. He suggests that five years, plus an additional three for biologics with alterations made to improve their quality, should suffice. Kennedy's press secretary, Melissa Wagoner, says the House really needs to act to jump-start bicameral conversations, to get a bill that both chambers can support.
The lack of consensus in the House, with its mix of divergent bills and at least one more expected, has Tony Clapsis, a policy analyst in Washington, DC's Lehman Brothers, doubtful that the issue will get resolved this year. "There's no agreement there," he argues. But a bill to establish a middle ground could come from Rep. Anna Eshoo (D-Calif.), several sources say, and based on her past statements, it might end up similar to the Senate compromise.
Mandating clinical testing to avoid immunogenicity problems is among the top concerns of David Beier, senior vice president for global government affairs at Thousand Oaks, California-based Amgen. Furthermore, he cautions that slowing down legislative action to argue about data exclusivity would obscure the need to remain focused on immunogenicity, pointing to the European system that requires clinical trials to allow follow-ons to be marketed. Beier says it does not make sense to craft language that would permit the FDA to eventually judge sameness, given its current inability to do so.
"Let's look at this from a patient point of view," he argues. "Patients really ought to care about safety standards, both pre-approval and post-approval."
BIO's Greenwood guesses that generic interests might continue to stall action this year in the hope that Clinton or another like-minded advocate might move into the White House next year, providing more leverage with Democrats likely retaining a congressional majority.
Merritt says he and other follow-on advocates would prefer to resolve the matter this year, but agreed that they could find themselves in a better position a year from now as "political pressure" moves toward fewer years of data exclusivity. But Greenwood has said he would not "take a bad deal now to avoid that risk," later adding that BIO would rather have legislation in place "sooner than later, but we'd rather not have it done if it's not going to be done well."
Patent reform
This year will also see efforts to carry forward an overhaul of the US patent system. Proposed reforms represent the biggest changes to IP law since legislation was first passed in 1952, though drugmakers dodged a bullet last fall when a federal court prevented the US Patent and Trademark Office (USPTO, Washington, DC) from enacting new rules that would have limited the number of continuations that could be filed (Nat. Biotechnol. 25, 1333–1334, 2007). But new legislation, no matter how well intentioned in trying to ease the patent office's workload and limit the power of so-called patent trolls, could prove equally damaging to the industry by introducing uncertainty into the IP environment.
The House reform bill, which passed last year (H.R. 1908, Patent Reform Act), introduced by Rep. Howard Berman (D-Calif.) aimed to improve patent quality and harmonize the US system with international patent law. But a somewhat different bill in the Senate, introduced by Sen. Patrick Leahy (D-Vt.) was "thankfully bogged down," says Greenwood, after passing in the relevant committee with the support of large information technology companies. Greenwood attributes the holdup to a lack of readiness on the part of the full body.
BIO and other groups, including the American Intellectual Property Law Association in Arlington, Virginia, are pushing for changes to several provisions, including one that would allow post-grant patent challenges through the patent office into infinity. Challenges currently are heard in court or are undertaken through patent office reexamination procedures. But the bill's proposed open-ended administrative mechanism could make investors reluctant, according to Thomas Cawley, Jr., a partner in Pillsbury Winthrop Shaw Pittman's law office in McLean, Virginia. He says this provision could prove especially problematic for small to mid-sized biotech companies because it would allow patents to be overturned at nearly any point in their life. Opponents instead support challenges after patent granting with a finite period to provide companies and their backers the assurance that their IP will stand.
Another provision in the bill would limit the apportionment of damages, calculating them by determining the improvement over prior art accomplished by an inventor. Cawley calls such a calculation "very nebulous"; Greenwood says it would encourage would-be infringers, as their punishment would only be "pennies on the dollar." Cawley suggests damages should instead remain based on lost profits and/or a reasonable royalty.
A third issue relates to reforming 'inequitable conduct' charges. Cawley is critical of the legislative proposals for failing to seriously limit this defense used by infringers, which is used in almost all biotech patent infringement actions. Greenwood feels that patentees found to have withheld information upon receiving their IP—a discovery that might be revealed in a challenge to a patent's validity—should be fined rather than have their IP nullified in its entirety as a result.
In addition, the bill would codify the rules the USPTO tried to effect last fall to limit the number of continuations, which Cawley criticizes as having the potential to "severely curtail biotech companies' ability to protect inventions to which they're entitled."
Reimbursement belt-tightening
With the reining in of healthcare spending on the minds of many legislators, more restrictive reimbursement policies represent another potential challenge for the industry in the coming year. Some feel this issue is particularly moot in light of a continuing inclination on the part of the US Centers for Medicare and Medicaid Services (CMS) to assert its authority to control access to medicines. Increasingly desirous of evidence, the agency is expected to undertake comparative effectiveness studies to try to make determinations on coverage decisions. In fact, companies should be wary of a comparative effectiveness mandate written into broad Medicare-related legislation (H.R. 3162, Children's Health and Medicare Protection Act) that would also stave off a cut in physician payments. Introduced by Rep. John Dingell (D-Mich.), the wide-reaching measure's comparative effectiveness language could empower payers to limit coverage. The House passed it last summer and the Senate was expected to take action late last month.
The consensus is that CMS is becoming more aggressive in terms of its coverage decisions, exemplified by last year's move to restrict payments for erythropoietin-
(EPO) in the wake of a safety flap that engulfed the red blood cell boosters and resulted in new black box warnings from the FDA. Amgen, of Thousand Oaks, California, launched a formal appeal, and Rep. Eshoo introduced a bill (H.J. Res. 54, Providing for Congressional Disapproval ... Relating to Medicare Coverage for the Use of Erythropoiesis Stimulating Agents) to overturn that particular decision. But even though critics claim the agency is intruding deeper and deeper into private medical practices, the net effect will be to move closer to the bipartisan goal of lower healthcare costs—and thus observers expect to see the trend continue.
Private insurers generally have not followed CMS in curtailing EPO coverage, though they often do in such cases. But according to Michael Werner, president of Washington, DC–based consulting firm The Werner Group, perceptions that CMS and the federal government are making decisions on access to drugs, rather than physicians, worry investors who fear losing out on maximum returns. What's more, he suggests that sweeping coverage decisions conflict with notions of personalized medicine, by which treatments would be more tailored on a patient-by-patient basis.
"The way for the industry to respond," Werner says, "is to demonstrate the value of its products, because at the end of the day, if the industry can show that its products change people's lives and reduce downstream costs or other healthcare expenses, then it's going to be difficult for any payer to deny reimbursement or coverage."
Companies should keep eventual coverage decisions in mind as they develop their products ahead of FDA approval, according to Werner. Nearly gone are the days when securing marketing clearance signals a revenue stream to come. Werner advises drugmakers to collect pharmaco-economic data along with clinical outcomes during product testing phases to prepare packages for payers and regulators alike.
Fuzzy FDAAA implementation
Much work remains to be done to shape parts of the new FDAAA, according to BIO's Greenwood, particularly with regard to its safety provisions. With a framework now in place for a database monitoring system to correlate prescribing decisions and treatment outcomes, "the real hard work" would center on building a system "that actually works and provides information, not just noise."
Drugmakers succeeded in staving off one-size-fits-all distribution and use restrictions for all new products. But even though the FDA does not seem inclined to impose risk-mitigation programs on all new drugs, questions remain as to their future frequency, says lawyer Scott Lassman, a partner in the Washington, DC, office of WilmerHale. An overly prescriptive environment could certainly limit access to biotech products by relegating them to specialists, who can be hard for some patients to reach.
Some FDA officials have indicated that they would ask for risk-monitoring strategies in rare instances, as they did in the past under the RiskMAP (risk-minimization action plans) system, which linked certain approvals with certain additional requirements, such as detailed labeling, targeted education and outreach (e.g., medication guides and training programs), reminder systems (e.g., consent forms and special data collection systems) and restrictions on distribution (limitations on prescribing or dispensing). Lassman notes, however, it does not yet seem certain how often the FDA will impose such requirements. He also points to "uncertainty" in applying the new authority to already approved drugs, as the law appears unclear as to whether to use new risk-mitigation strategies on products with existing RiskMAPs or more broadly on those with package inserts or medication guides.
Implementing other provisions of the new law is raising additional questions. New FDA powers to make post-approval label changes quickly—within 30 days of a company's response—could potentially 'short-circuit' the frequently successful dialog that companies and the agency have previously held on such issues, Lassman argues. Before this, a company had 30 days to respond to an FDA label change request, after which the agency had an indefinite period to contemplate the company's counter. Furthermore, he says the FDA seems to be struggling with when the new labeling authority would apply. Lassman also points to post-approval study commitments as another vague area, with agency power in getting drugmakers to "voluntarily" conduct such testing potentially conflicting with a new authority to mandate the trials. He cautions that new fines for failing to comply could serve as an incentive to use the power more broadly.
It's worth noting that there is a late March deadline for FDA officials to shape many of their new post-approval safety authorities.
Fostering small biotech
BIO continues to fight for a more agreeable interpretation of eligibility for awards under the Small Business Innovation Research (SBIR) program. Companies with majority venture capital ownership have in recent years been excluded from the grants, but House members last year passed a bill (H.R. 3567, Small Business Investment Improvements Act) that changed the definition of small businesses to include them. It's another story in the Senate, though, with opposition to SBIR eligibility for venture-backed companies led by Sen. John Kerry (D-Mass.), who heads the Small Business Committee that oversees the SBIR program.
For small public companies, another battle also continues as efforts to secure less burdensome requirements under the Sarbanes-Oxley Act of 2002 have not yet produced optimal results in Greenwood's eyes. He expresses disappointment with changes made by the US Securities and Exchange Commission (SEC) to auditing rules under section 404 of the law, following input from its Public Company Accounting Oversight Board, as they "have not provided the relief that we seek." The SEC's revised auditing standards only mildly improved the situation of overly burdensome compliance costs for small companies and also failed to objectively define small companies' sizes.
Instead, BIO supports defining small companies as those with market caps under $700 million and annual revenues less than $250 million and is asking that the issue be better examined from a cost-benefit perspective. So the organization is continuing to work with the SEC and also is engaged with lawmakers to come up with a legislative fix.
White and green biotech on the agenda?
BIO is continuing its work to persuade the US Congress to further fund the development of pilot plants for cellulosic ethanol, which Greenwood believes "constitutes the best chance" for the US to reduce dependence on foreign fuels and cut greenhouse gases, while at the same time providing income to farmers.
An energy bill that was written into law in 2005 provided research funds and grants for six pilot plants for cellulosic ethanol to help manufacturers meet new renewable fuel standards, but a new energy bill (Energy Independence and Security Act) that was nearing completion last month would create even higher targets for biofuels. On this front, advocates are focused on ensuring a viable market for cellulosic ethanol.
In terms of food and agricultural issues, BIO continues to fight against legislation that would require labels to identify food from cloned animals or their progeny. Rep. Rosa DeLauro (D-Conn.) is behind a measure (H.R. 992, Cloned Food Labeling Act) that would institute such a mandate to ensure that consumers are apprised of the origins of their food, a bill introduced soon after the FDA ruled in December 2006 that milk and meat from some cloned farm animals was safe to eat and would be allowed for sale in the US.
The proposal, which was referred to the Subcommittee on Specialty Crops, Rural Development, and Foreign Agriculture, part of the House Agriculture Committee, did not elicit a hearing last year. But it could surface this year in the context of improving the FDA's oversight of food safety.
Meanwhile, in the EU, time is up on the genetically modified (GM) crop ban, but action by member states belies any real intention to comply with the World Trade Organization's suggestions to resolve the issue (Box 2).
