Patent Docs: Will the 12-year biologic drug exclusivity period survive?

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One of the signal achievements of the Obama Administration is the healthcare law, the Patient Protection and Affordable Care Act (PPACA, commonly known as Obamacare).  One important part of this law is the Biologics Price Competition and Innovation Act (BPCIA) that, for the first time, provides a regulatory approval pathway for generic biologic drugs, also known as “follow-on biologics” or biosimilars. The latter name acknowledges what the act expressly states: the reality that generic biologic drugs are, at best, similar but not identical to the branded biologic drug (termed the “reference product” in the act) to which they correspond.
In addition to the regulatory approval pathway provisions in the act, the law also contains a complex procedural protocol for enforcement of patent protection for innovator biologic drugs, seemingly intended to reduce the complexities occasioned by the implementation of the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act) for small-molecule drugs. The BPCIA is not based on the Hatch-Waxman model in many ways, and one important difference is that the regulatory exclusivity period (during which the U.S. Food and Drug Administration will not approve a biosimilar) is 12 years, rather than the five-year exclusivity term prescribed under the Hatch-Waxman Act.
This provision was highly contested during Congressional debate over the bill, with the U.S. Federal Trade Commission arguing for no exclusivity term and economists arguing that the term needed to be 16 to 17 years in order for a return on investment (ROI) appropriate for incentivizing biologic drug development. The Obama Administration strongly supported a seven-year exclusivity term, and even risked passage of the bill trying to have the term reduced to its preferred length.
Undeterred, the Obama Administration has consistently included its preferred shorter market exclusivity period for innovator biologic drugs in every budget proposal submitted to Congress since the law went into effect (although the refusal of the Republican-controlled House of Representatives over the past four years has prevented passage of any budget, the government being funded by Continuing Resolutions).
According to the rationale contained in at least the proposed FY2014 Budget Proposal, a shorter market exclusivity period would “accelerate access to affordable generic biologics.” For comparison, the biologic drug exclusivity term in the European counterpart of the BPCIA is a total of 11 years, with a base term of eight years that can be extended for circumstances such as innovator investigation of pediatric applications.
The issue has also arisen in trade treaty talks, particularly the Trans-Pacific Partnership Agreement, or TPP, a multilateral, free-trade agreement currently being negotiated by the United States and Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam (with Canada, Japan, the Philippines, South Korea and Taiwan also expressing interest in participating in the agreement). Stakeholders and members of Congress have urged the U.S. Trade Representative to include their particularly preferred exclusivity term in this treaty; for example, last spring Sens. Max Baucus (D-Montana) and Orrin Hatch (R-Utah) in March urged the Acting U.S. Trade Representative to include the 12-year market exclusivity period in advance of the 17th round of TPP negotiations held in Lima, Peru from May 15 to 24. To date, negotiators have not come to any agreement on these provisions.
This market exclusivity term is not contained in existing trade agreements, such as the North American Free Trade Agreement (NAFTA), the U.S.-Peru Free Trade Agreement, the Korea-U.S. Free Trade Agreement, the U.S.-Singapore Free Trade Agreement and the Dominican Republic-Central American Free Trade Agreement, according to some experts. This has been the basis for the administration and commentators to argue that provisions for biologic drug exclusivity should be eliminated or reduced in negotiating the TPP and other trade treaties, to prevent inconsistencies in trade terms that would themselves create violations of other agreements such as those that established the World Trade Organization.
In his 2013 State of the Union Address, the president announced commencement of negotiations for a trade and investment agreement with the European Union, termed the Transatlantic Trade and Investment Partnership. While these negotiations are just beginning, the administration is expected to take the same position that the exclusivity term is too long. As expected, stakeholders like the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Biotechnology Industry Organization (BIO) have urged that this treaty include the 12-year term, as they have for the TPP treaty.
Proponents assert that the 12-year term is an appropriate compromise that balances the need for cheaper biosimilars with the legitimate needs of biologic drug innovators.  Whether this argument is sufficient to prevent reduction of the term in U.S. trade treaties (and the expected consequent push to reduce the term for biologic drugs in the United States) will most likely play out over the next several years, both from these and other international negotiations as well as the U.S. experience as biosimilars begin to be approved under the BPCIA.
Kevin Noonan is a partner with the law firm McDonnell Boehnen Hulbert & Berghoff LLP and represents biotechnology and pharmaceutical companies on a myriad of issues. A former molecular biologist, he is also the founding author of the Patent Docs weblog,

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