Don’t Legislate Away Biopharmaceutical Innovation

Don’t Legislate Away Biopharmaceutical Innovation

The U.S. economy thrives on innovation. According to the U.S. Patent and Trademark Office, industries that intensively rely on intellectual property (IP) protections, which includes the biopharmaceutical industry, account for nearly 40 percent of the U.S. economy and are responsible for an outsized share of our overall economic growth.

Beyond the growth benefits, innovations improve our lives in countless ways. From mobile technologies inaptly called “mobile phones” to cutting-edge medicines that treat formerly incurable diseases, innovation helps us live better lives.

Within this context, it is unfortunate that, while not the intention, a bill proposed by Senator John Cornyn (R-TX) and Senator Richard Blumenthal (D-CT) would risk future innovation.

The bill (the Affordable Prescriptions for Patients Act of 2019) is supposed to address abuse of the patent system by the biopharmaceutical industry. According to Senators Cornyn and Blumenthal, rampant abuses of the patent system are fostering an anti-competitive environment.

Such an assessment misdiagnoses the problem. In 2017, 90% of all prescriptionsdispensed were for generic drugs, generating over $265 billion in savings for the U.S. health care system. These are the medicines that are typically dispensed from a pharmacy, and clearly, these patented medicines face robust competition.

Compared to this well-developed competitive landscape, competition for biologic medicines is lacking – biologic medicines, or biologics, are expensive “large molecule” drugs that are typically administered in a clinical setting. It is in response to this less robust competitive space that the Act has been proposed.

The proposed reforms would empower the Federal Trade Commission (FTC) to determine if a company had “anticompetitive intent” when it filed for additional patents on an approved therapy. If the FTC determines that a company had anticompetitive intent, then the agency would have the power to impose steep penalties on that company. And, this is the crux of the Act’s misdiagnosis of the problem.

Developing therapies is a long and arduous process that is full of failure. On average, it costs around $2.6 billion and 10 to 15 years to develop one new medicine. While not all drugs make it to the clinical trial stage, of those that do, only 12 percent will be approved for marketing.

This expensive research and development process does not stop simply because the medicine has been approved for marketing. Just like most other industries, whether it is the iPhone or a Ford F-Series truck, the developers of a new biologic medicine do not stop investing in their products simply because the medicine has been approved and is being sold on the market.

In the case of new biologic medicines, these new investments are dedicated toward improving the efficacy or diminishing the adverse side effects of the medicines. These improvements sometimes lead to the creation of extended release formulations of the drugs, or it could lead to the creation of combination products that increase the drugs’ efficacy or convenience for patients. These additional investments could also help researchers demonstrate the medicines’ efficacy to treat other diseases, thereby extending the drugs’ benefits to even more patients. Just as important, the new research will also improve our understanding of the medicines’ impact on their original indications.

Often, these investments result in new intellectual property that, in order to allow the investing companies an opportunity to recoup their costs, should be patented. The justification for these additional patents is no different than the justification for the original patent.

The Affordable Prescriptions for Patients Act of 2019, if implemented, would make the patents on these research efforts less secure. Without secure patent rights, the incentive to risk the large sums of money companies spend to improve their medicines is severely diminished.

With fewer incentives, there will be less investment. And, not just less incentive to improve the medicines that have already been developed. The incentive to develop new medicines will also be lessened to the detriment of patients and economic growth.

Despite the diminished incentives to innovate, the Act will not effectively increase competition for biologics, either.

Instead of empowering government agencies to create market competition, a better strategy for creating competition is to empower market competitors; in this case, remove the barriers thwarting the development of a robust biosimilar market in the U.S.

Unlike in Europe where biosimilars have reached $2 billion in annual sales and price discounts are expected to reach between 25% and 70% below the originator biologic, barriers in the U.S. are inhibiting the development of a robust biosimilars market.

Reforms that eliminate these barriers will enable a stronger biosimilar market that would drive drug prices down through competition, not by empowering more government agencies. These reforms including increasing provider education about biosimilars, eliminating the contracting biases against biosimilars, and removing market disincentives that discourage the use of biosimilars instead of the more expensive originator biologic.

Instead of trying to strengthen the biosimilar market to improve competition, the Affordable Prescriptions for Patients Act of 2019 weakens the incentives to develop the original medicine. This approach will harm patients as fewer medicines and potential cures are developed in the future. However, because the U.S. economy thrives on innovation, the adverse consequences will likely extend beyond the health care sector. This Act sets an anti-growth precedent that is disconcerting for the IP driven U.S. economy.

Click to read more . . .