Obama Tweaks Signature Health Law In Deficit Plan, Shrinks Biologics Exclusivity Window To Seven Years

Prior to the Affordable Care Act, there existed no expedited pathway for approving generic versions of brand name biologic drugs — a new class of “wonder drugs” that contain living organisms and could one day help treat everything from cancer to Parkinson’s disease. The ACA sought to strike a compromise that could lower costs through generics while giving brand-name manufacturers the patent protection to continue researching and developing new medicines, ultimately granting generics the opportunity to enter the market “after a brand-name biologic enjoys exclusivity for 12 years.” Today’s deficit plan proposed by President Obama changes all that. It modifies the law by accelerating access to generic biologics and shrinks the exclusivity window from 12 to 7 years, yielding savings of 3.5 billion over 10 years, the administration predicts:

The Administration’s proposal accelerates access to affordable generic biologics by modifying the length of exclusivity on brand name biologics to encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products. Beginning in 2012, this proposal would award brand biologic manufacturers seven years of exclusivity rather than 12 years under current law and prohibit additional periods of exclusivity for brand biologics due minor changes in product formulations, a practice often referred to as “evergreening.”

Reducing the exclusivity period increases the availability of generic biologics to encourage faster development of generic biologics while retaining appropriate incentives for research and development for the innovation of breakthrough products. The Administration’s proposal strikes a balance between promoting affordable access to medications and encouraging innovation to develop needed therapies. The proposal will result in $3.5 billion in savings over 10 years to Federal health programs including Medicare and Medicaid.

During House Energy and Commerce Committee’s mark-up of the health care bill, Rep. Henry Waxman (D-CA) “had pushed to shield biologics for no more than five years — the same amount of time that traditional pharmaceuticals” receive, and Obama himself had originally suggested a 7-year exclusivity provision as a possible compromise. Lobbyists for the pharmaceutical industry ultimately prevailed, however, and a 12-year period was included in the final law. The industry even began lobbying the Food and Drug Administration (FDA) for “an additional 12 years of exclusivity if manufacturers alter an existing product to improve safety or potency.”

All along, the government argued that the 12-year period was too long and the additional time unnecessary. A Federal Trade Commission report released last year, for instance, found that “the 12- to 14-year regulatory exclusivity period is too long to promote innovation by these firms, particularly since they likely will retain substantial market share after FOB [generic drugs'] entry” and recommended against establishing an exclusivity period. Brand name drugs are “expected to respond and offer competitive discounts to maintain market share and are likely to retain 70 to 90 percent of their market share and will continue to reap substantial profits, even after FOB entry,” the report concluded.