On June 9, 2016, European Bioplastics (EUBP) announced the support of a European Parliament (EP) report emphasizing the role of bioplastics in the creation of a circular bioeconomy. The report, produced by Italian MEP Simona Bonafè¨, outlines legislation that is needed to use waste more efficiently to create bio-based materials. Increasing the value of waste by promoting its use to create other bioproducts will help shift the linear bioeconomy to a circular, more efficient, bioeconomy. The report suggested defining composting and anaerobic digestion of organic waste as recycling, and requiring the collection of biowaste by 2020 in order to increase organic recycling of biowaste to 65 percent by 2025. On June 15, 2016, the EP debated possible new definitions of litter, with the intent of reducing both land and marine based litter by 50 percent by 2030.
Tag: biotech
Ariosa v. Sequenom: In Search of Yes After a Decade of No
The Federal Circuit this Wednesday declined to reconsider its June decision in Ariosa v. Sequenom, a closely watched medical diagnostics case involving patents on cell-free fetal DNA testing. Biotech companies, investors, and patent lawyers alike should expect a prompt petition for certiorari, and should hope that the Supreme Court grants it. (Disclosure: I was one of twenty-three law professors who submitted an amicus brief urging the Federal Circuit to grant en banc rehearing.)
In the last decade, the Supreme Court has suggested in case after case that the inventions they were considering were not merely unworthy of patent protection because they were, say, not inventive enough or useful enough or disclosed in enough detail. Rather, the Court in these cases gave us information about the very boundaries of the patent system—by placing the disputed inventions outside those boundaries altogether. But they have not yet told us what is just inside those boundaries.
This legal uncertainty has a significant chilling effect on investment in innovation, one that we are increasingly able to quantify. As USPTO Chief Economist Alan Marco and I explained in a 2013 paper in the Yale Journal of Law and Technology, when a court issues a decision resolving the legal uncertainty over whether a patent was valid, that newfound certainty actually moves the market as much as the initial patent grant does. In other words, the unpredictability of courts forces the market to discount—by as much as half—how much trust to put in the legal rights that the Patent Office issues.
Patent holder Sequenom certainly experienced the downside of that uncertainty, as Wednesday’s rehearing denial sent its stock price tumbling over 14% in just two days. Others have taken a hit as well, such as the large-cap DNA analysis firm Illumina, which has pursued Ariosa in a separate patent litigation and whose stock price fell 7% across the same two-day period.
The reason for this uncertainty is that we are effectively back in the late 1970s, when the Court was prominently rejecting inventions as patent-ineligible subject matter—Gottschalk v. Benson in 1972 and Parker v. Flook in 1978—without saying anything concrete about what was eligible. Relief would come only after Diamond v. Chakrabarty in 1980 and Diamond v. Diehr in 1981, when the Court finally produced binding precedents going the other way.
The result is that today’s patentees can only try to run away from the settlement risk mitigation patent in Alice Corp. v. CLS Bank (2014), the breast cancer genetic diagnostic patent in AMP v. Myriad (2013), the thiopurine dosage monitoring patent in Mayo v. Prometheus (2012), the energy futures risk hedging patent application in Bilski v. Kappos (2010), and, although they were never definitively adjudicated, the vitamin deficiency diagnostic patents in LabCorp v. Metabolite (2006). There is no case yet to run toward.
Ariosa v. Sequenom could have been that case and still can be, if the Court grants certiorari. Certainly the Federal Circuit order has framed the issue well. The per curiam order denying en banc rehearing was accompanied by three opinions that addressed in different combinations both the reach and the wisdom of the Supreme Court’s recent precedents.
Judge Dyk’s concurrence concluded that the precedents, particularly Mayo and Alice, do apply to the present facts and that those precedents are generally sound. He invited “further illumination” from the Supreme Court only on whether the all-important inventive concept must come at the second step of the two-step Mayo test (application of the natural law or abstract idea) or may also come at the first step (discovery of the natural law). Meanwhile, Judge Newman’s dissent concluded that the precedents, particularly Mayo and Myriad, do not apply here, for the facts “diverge significantly.” She found the Sequenom patent’s subject matter to be eligible and would have proceeded to more specific patentability analysis under §§ 102, 103, 112, etc.
Their midpoint and the best argument for certiorari was Judge Lourie’s concurrence, which agreed that Mayo controls, with “no principled basis to distinguish this case from Mayo”—but which also urged that Mayo and the Supreme Court’s other precedents from Bilski onward are an increasingly unsound basis for differentiating between natural laws and abstract ideas on the one hand, and applications of those laws and ideas on the other hand. Echoing a previously expressed position of the Patent Office, he favored the “finer filter of § 112” for issues of indefiniteness or undue breadth (rather than what the agency’s post-Bilski Subject Matter Eligibility Guidelines called the “coarse filter” of § 101).
He also pushed back directly against a argument that the Supreme Court frequently invokes to express its preference for flexible standards that foster over predictable rules that can be manipulated: the draftsman’s art. Decisions from Flook and Diehr to Mayo and Alice have rested in part on the suspicion that patent lawyers may at any time evade substantive doctrinal limitations through clever claim drafting. To this Judge Lourie’s opinion aptly responded that “a process, composition of matter, article of manufacture, and machine are different implementations of ideas, and differentiating among them in claim drafting is a laudable professional skill, not necessarily a devious device for avoiding prohibitions.”
In these regards, Judge Lourie’s approach may well represent the “center” of the Federal Circuit on subject-matter eligibility. He was in the en banc majority in Bilski and authored the panel opinion in Mayo. He authored both panel majority opinions in Myriad (before and after the Supreme Court’s GVR order). And he authored the five-judge en banc plurality opinion in Alice, whose analysis was ultimately consolidated and endorsed in the Supreme Court’s opinion in that case.
With the issues so well framed and the recent subject-matter eligibility precedents so well synthesized, then, there is reason to be optimistic that a decade of hearing “no” from the Supreme Court may finally give way to a “yes” and better orient us on the true boundaries of our patent system.
© Copyright 2015 Texas A&M University School of Law
Health Officials’ Latest Tool in Tool Box – Whole Genome Sequencing
In late October, the Food and Drug Administration (FDA), Centers for Disease Control and Prevention (CDC), along with state and local officials investigated an outbreak of E. coli infections linked to food served at a major fast-casual restaurant chain. Much of the underlying information documenting the outbreak has been derived from an advanced laboratory technique called “whole genome sequencing” (WGS). This is a fairly new instrument in the CDC toolbox. WGS reveals the complete DNA make-up of an organism, thereby enabling health officials to better understand variations both within and between potentially pathogenic species. Such information can then be compared with clinical isolates from sick patients, and, if they match, there may be a reliable link established between the illness and the pathogen. This new technique has the potential to define the scope of a foodborne illness outbreak more quickly and ideally will help to prevent additional cases. Traditionally, this analysis has been done via a process known as pulse-field gel electrophoresis (PFGE). But PFGE has a shortcoming in that it is unable to differentiate between related species of organisms, which can be critical when health officials are trying to delineate the specific source of the outbreak, and want to know whether to recall a product or not.
The FDA cites numerous examples of how it has used WGS: 1
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To differentiate sources of contamination, even within the same outbreak;
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To determine which ingredient in a multi-ingredient food harbored the pathogen associated with an illness outbreak;
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To narrow the search for the source of a contaminated ingredient;
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As a clue to the possible source of illnesses; and
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To determine unexpected vectors for food contamination.
The use of techniques such as WGS reflects FDA’s shift toward a broader preventative-centric approach to food safety. This approach can be associated the Food Safety Modernization Act (FSMA), signed into law on January 4, 2011, which requires comprehensive, science-based preventive controls across the food supply.2 FSMA provides the FDA with new enforcement authorities designed to achieve higher rates of compliance with prevention-based and risk-based food safety standards, and to better respond to and contain problems when they do occur. Lastly, the law also gives the FDA important new tools to hold imported foods to the same standards as domestic foods and directs FDA to build an integrated national food safety system in partnership with state and local authorities.
WGS also has been employed in the context of recent illness outbreaks associated with products regulated by the Food Safety and Inspection Service (FSIS), which oversees the safety of meat and poultry. In some circumstances involving FSIS, the regulated industry has found itself on the receiving end of confusing scientific input, as regulatory recommendations based upon PFGE analysis were subsequently negated by WGS data.
A shift to WGS may allow health officials to more quickly and more precisely connect the dots during an outbreak, and use of this tool may also benefit the regulated community. The enhanced precision of WGS may provide the regulated community with a new ability to prevent being falsely labeled as the source of the outbreak. Under the prior testing regime, PFGE tests were often unable to differentiate between related species of organisms, and as a result, regulators were at times forced to cast an overly wide net to capture the source of an outbreak. The new WGS technique provides authorities with a more precise and accurate tool. But, as circumstances with FSIS suggest, companies may also encounter confusion over growing pains associated with the movement from one generation of technology to another. We will continue to monitor the development and use of new tools and techniques the FDA, FSIS, and other federal agencies are using to prevent and respond to food safety issues.
1 Food and Drug Administration, Examples of How FDA Has Used Whole Genome Sequencing of Foodborne Pathogens For Regulatory Purposes, (last visited Nov. 9, 2015).
2 FDA Food Safety and Modernization Act, Pub. L. No. 111-353, 124 Stat. 3885 (2001).
FDA’s Proposed Naming Convention for Biologics
On August 27, 2015, the Food and Drug Administration (FDA) released draft guidance on nonproprietary naming of biological products. The agency’s draft guidance proposes that the core nonproprietary name for originator biological products, related biological products, and biosimilar products be appended with a unique, four-letter suffix designated by the FDA in order to distinguish each product and minimize inadvertent substitution of products that are not interchangeable.
A New Naming Convention
The proposed framework for the naming convention includes the nonproprietary name — otherwise known as the proper name — of the originator biological product along with a designated four-letter suffix attached to the core name with a hyphen. Importantly, a related, biosimilar, or interchangeable product will share a core name with the originator biological product, but will also include a distinct four-letter suffix. This convention will indicate a relationship among the products while highlighting the unique identification of each product.
For example, two products sharing the core name of replicamab might have the following nonproprietary names:
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replicamab-cznm
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replicamab-hixf
The FDA has not yet decided whether the nonproprietary name for an interchangeable product should also include a unique four-letter suffix or whether it should be assigned the same proper name and suffix as its reference product. The draft guidance notes that the agency is seeking comment on these alternative approaches.
Which Products Are Covered?
The FDA’s proposed naming convention would apply both prospectively and retrospectively to biological products licensed under sections 351(a) and 351(k) of the Public Health Service Act, although the agency is still considering how the convention should apply to interchangeable products. As indicated in the draft guidance, the FDA believes that the designated suffix is warranted for both newly and previously licensed biological products in order to advance a number of goals, including (1) ensuring that patients only receive the biological products intended to be prescribed to them, (2) facilitating manufacturer-specific pharmacovigilance, (3) encouraging the routine use of designated suffixes, and (4) avoiding any inaccurate perceptions of the safety and effectiveness of biological products based on their path to licensure.
Designating a Suffix
Applicants and current license holders may propose their own suffix, which should consist of four lowercase letters devoid of any meaning. Proposed suffixes should not be promotional, include any abbreviations commonly used in clinical practice, contain or suggest the name of any drug substance, or look too similar to the name of a currently marketed product or another product’s suffix designation. The FDA will evaluate a proposed suffix and notify the applicant of its determination. Given the FDA’s previous selection of “sndz” for Sandoz’s Zarxio (filgrastim-sndz), it will be interesting to see the approach and development of these suffixes.
Comments and suggestions on the draft guidance are due by October 27, 2015, at www.regulations.gov. (Docket No. FDA-2013-D-1543).
Relatedly, the FDA issued a proposed rule to be published in the Federal Register on August 28, 2015, that would designate “the official names and the proper names” for six biological products that qualify as either a reference product, a related biological product, or a biosimilar product. As the agency explains, its proposed action with respect to the six products covered by the rule is meant to encourage the routine usage of designated suffixes.
© 2015 Foley & Lardner LLP
Life Sciences: Protecting the Crown Jewels
An innovator or owner of patent rights or other technology in the life sciences arena is often unable, because of lack of financial or other resources, to develop or commercialize a pharmaceutical product covered by such intellectual property rights. In these cases, the innovator/owner (the licensor) will frequently out-license the invention to a third party (the licensee) for development and commercialization by such licensee. The resulting license agreement can be a complicated document. In this article, I will address some of the important licensing considerations that a licensor should take into account before executing a license agreement.
Consider the Exclusivity v. Non-exclusivity of the License Grant
An initial consideration in a license agreement is whether the license grant will be exclusive or non-exclusive to the licensee. If the license grant is exclusive, then the licensor typically agrees not to grant a license to any third party. If the license grant is non-exclusive, then the licensor typically is permitted to grant further licenses to third parties. Even in an exclusive license, however, the licensor may want to retain certain rights for itself. For instance, the licensor may want to preserve for itself the right to enter into certain geographical markets or fields of use. The parties should be very clear in the license agreement as to whether or not the licensor is permitted to exercise any R&D, commercialization or other rights during the term of the license agreement.
Whether a license is exclusive or nonexclusive will set the tone for the associated rights and obligations of the parties set forth in the remainder of the license agreement. For example, an exclusive licensee is usually subject to “diligence” obligations, requiring it to exploit the licensed technology in order to maintain the license grant; a non-exclusive licensee is usually subject to limited or no such obligations. Also, an exclusive licensee usually has more rights than a non-exclusive licensee with respect to the prosecution, maintenance, defense and enforcement of patent rights.
Also Consider the Scope of the “Field of Use” and “Territory”
Other important initial considerations in the license agreement are the scope of the licensed field of use and the scope of the licensed territory. A “field of use” defines the field in which the licensee may exercise the licensed rights and may take one of many forms. For example, the field of use may be all encompassing (“any and all fields and applications”), may be limited to only therapeutic or only diagnostic products, may be limited to only biologics or only small molecule products, or may be limited to a specific medical indication (e.g., cardiac indications). Especially in the case of an exclusive license (and based on the nature of the licensee), it is sometimes better for the licensor to limit the field of use. Then the licensor would be permitted to grant subsequent rights to other parties in the non-licensed fields. Alternatively, if the field of use is broad, the licensor should require that the licensee actually exercise its rights in certain specified fields in order to maintain such rights. If the licensee fails to exercise its rights in a specified field of use within a certain period of time, the licensor’s remedies could include the right to terminate the license agreement in its entirety, the right to terminate the license agreement with respect to one or more specific fields and/or the right to convert an exclusive license grant in such field to a non-exclusive grant.
Considerations regarding the “territory” are very similar to the considerations regarding the field of use. Often, in order to maintain an exclusive worldwide territory grant, the licensee is required to exploit the licensed technology in specified countries. For example, the licensee may be required to develop and commercialize a product covered by the licensed technology (licensed products) in the United States and at least one other “major market country” (e.g., Japan, France, Germany, Italy, Spain and the United Kingdom). Again, the licensor’s remedies for the licensee’s failure to satisfy this obligation could be similar to the remedies set forth above for field of use.
Maximize the Royalty Payments
Pursuant to the terms of the license agreement, the licensee will most likely be required to pay to the licensor a royalty based on sales of licensed products. Although the determination of the amount of royalty is in large part a business decision and takes into consideration, among other things, the scope and strength of the licensed patent and other intellectual property rights, the breadth of the field of use and territory, whether the licensed product is a therapeutic product (typically a higher royalty rate) or a diagnostic product, and whether the license grant is exclusive or non-exclusive, there are many important legal nuances that the licensee could and should consider. One such nuance is the calculation of “net sales.”
The amount of royalty owed by the licensee is normally calculated by multiplying the royalty rate by the amount of sales of the licensed products. The royalty rate does not need to be a flat rate and could be graduated, for example, with a rate change as sales increase. In determining the “sales” portion of the royalty calculation, it is more advantageous to the licensor that sales be based on amounts invoiced (as opposed to amounts received) by the licensee, thus keeping the risk of bad debt (i.e., a sales amount is invoiced but not actually received by the licensee) with the licensee. Also, although “net sales” (as opposed to “gross sales”) is the usual royalty base, the licensor should restrict the deductions taken into account to determine such net sales. For example, although the “net sales” calculation frequently includes deductions from gross sales for governmental taxes and charges, customer credits and rebates, and transportation, storage and insurance expenses, the licensor should avoid less typical deductions such as sales commissions owed by the licensee or a catch-all deduction for “other reasonable deductions.”
Ensure That the Inventions Are Fully Exploited
Once a licensor licenses its invention to a third party in an exclusive license arrangement, the licensor will lose much control over the day-to-day use of the technology. It is imperative that the licensor requires the licensee to actually exploit the technology in a timely manner and devote sufficient time, money and resource to such exploitation. Almost all exclusive patent or technology license agreements contain a “diligence” provision requiring the licensee to employ certain efforts with respect to the research, development and commercialization of licensed products. Generally, the diligence requirement provides that the licensee must use “commercially reasonable efforts” to advance the product through the pipeline and sale process. However, the meaning of “commercially reasonable efforts” is not precise and the two parties to the contract could interpret the phrase, and the corresponding diligence requirement, quite differently.
A prudent licensor defines the diligence requirement more exactly. Ideally, the diligence requirement would be accompanied by diligence milestones, contractually obligating the licensee to reach certain developmental, regulatory or sales milestones by certain target dates or to spend a certain dollar amount on the licensed product in a given time period. Additionally, different diligence standards could apply with respect to different jurisdictions. If the licensee fails to meet its target, the licensor would be entitled to one or more remedies such as a financial payment from the licensee or a right of termination.
Maintain Control over Patent Prosecution
In an exclusive patent license arrangement, the licensee usually pays for the costs associated with patent prosecution and maintenance. Even in a non-exclusive arrangement, the licensee could be required to pay for a portion of such amounts. Though the licensor bears some or all of the patent prosecution and maintenance expenses, the licensor should ensure that it ultimately has control. Ideally, the license agreement should provide that the licensor controls the prosecution and maintenance, perhaps with counsel reasonably acceptable to the licensee. The licensor could allow the licensee to provide input into where (which jurisdictions) the licensor will prosecute and maintain the patents. However, the licensor should have the final say as to the scope and jurisdiction of the patent filings. In order to address a licensee’s concern that it would be required to pay for expenses in jurisdictions where the licensee does not deem patent coverage to be necessary or desirable, the license agreement could provide that the licensee may notify the licensor that the licensee will not pay the patent costs in a particular jurisdiction – in which case the licensee would probably lose its license rights (or at least its exclusivity, in the case of an exclusive license grant) with respect to such jurisdiction.
Carefully Consider Termination Provisions
A license agreement includes customary termination provisions. For example, each party usually has the right to terminate the agreement in the case of an uncured material breach by the other party. Additionally, the licensee typically has the right to terminate the license agreement for convenience (without cause) following some notice period (e.g., 90 days). Following termination of the license agreement, the licensor may want to either resume R&D or commercialization efforts on its own or re-license the technology to another suitable third party. In order to avoid the need to duplicate efforts (and expenditures) of the first licensee, the licensor should give careful consideration to the termination provisions in the license agreement. Ideally, if the licensee terminates the license agreement for convenience (i.e., the licensee walks away from the technology) or the licensor terminates the license agreement because of an uncured material breach by the licensee, the licensee would be required to automatically assign to the licensor, for no additional consideration or for some agreed upon payment, all of the results, know-how and intellectual property generated by or on behalf of the licensee under the license agreement and all regulatory files, regulatory approvals and other rights related to the licensed product. Thus, the licensor or its new licensee would be able to capitalize on the past work performed by the licensee, expedite timelines and reduce expense.
All or some of the points described above could be very important to a licensor. Although the interrelation of these and various other provisions in a license agreement are complex, by understanding the unique issues and concerns that arise when analyzing and negotiating a license agreement, the licensor is better able to protect its invention and ultimately increase its profit.
OF
This article appeared in the February 2015 issue of The Metropolitan Corporate Counsel. The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect those of Sills Cummis & Gross P.C. Copyright © 2015 Sills Cummis & Gross P.C. All rights reserved.”
Wind Farms and Eagle “Take” Permits – Litigation is Coming Over the New “30-Year” Permit Rule
The U.S. Fish and Wildlife Service (FWS) recently changed its eagle “take” permitting rules to allow wind developers to apply for 30-year take permits; previously, such permits, which allow the incidental killing of eagles, were available for a maximum of just five years. Wind developers had lobbied for the rule change based on concerns that shorter permitting periods inhibit their ability to obtain financing. But now, a bird conservation group, the American Bird Conservancy (ABC), is threatening litigation to overturn the “30-Year” rule.
How strong are ABC’s claims?
Not especially strong, because the FWS has powerful responses to each of ABC’s contentions. The FWS will also be protected by the deferential standard of review that typically applies in this type of lawsuit. And even if ABC were to prevail on its claims, the end result is less likely to be wholesale revocation of the rule than some delays in implementing it. That is because ABC’s claims are largely procedural in nature, not substantive.
ABC’s claims are summarized in an April 30 letter to the U.S. Department of the Interior and the FWSannouncing the group’s intention to file suit over the 30-Year rule. The letter contends that the FWS committed three legal errors when it extended the maximum take permitting period from five years to 30 years. According to ABC, the FWS violated: (1) the National Environmental Policy Act (NEPA), by failing to prepare an environmental impact statement or environmental assessment for the 30-Year rule; (2) the Endangered Species Act (ESA), by allegedly failing to ensure that the rule is not likely to jeopardize the continued existence of endangered species; and (3) the Bald and Golden Eagle Protection Act (BGEPA), which is the statute that authorizes take permits, by prioritizing the concerns of wind developers over those of the eagles the statute is designed to protect.
The problem for ABC – and the good news for wind developers – is that FWS has strong defenses to ABC’s assertions. First, the NEPA claim will almost certainly turn on whether the FWS correctly concluded that the 30-Year rule falls within a “categorical exclusion” from NEPA’s requirements. In its letter, ABC quibbles with the FWS’s conclusion, but courts generally review such conclusions under a highly deferential standard of review. Indeed, agencies often prevail on such claims simply by offering a facially plausible explanation of why NEPA does not apply. Here, the FWS has done that. The agency’s NEPA implementation regulations permit the FWS to forego NEPA analysis for rules that have broad or speculative impacts, provided that those impacts will be analyzed on a case-by-case basis in the future. The FWS contends that is the situation here – it will conduct a NEPA analysis on a permit-by-permit basis in the future. Courts have rejected NEPA claims under similar circumstances in the past.
The FWS has a similar defense to ABC’s ESA claim. That claim turns on whether the FWS had a duty to engage in internal consultation about the potential impact of the 30-Year rule on endangered species or critical habitat. ABC’s letter insists that the FWS was subject to that duty and failed to comply with it. But the FWS previously concluded, in 2009, that the eagle take permitting rule as a whole would not have any impact on endangered species. That leaves the FWS in a strong position now, because the 30-Year rule does little more than change the maximum available permitting period under the existing permitting rule. The FWS will also likely argue that, contrary to ABC’s assertions, the 30-Year rule does not affect endangered species because all it does is authorize the issuance of permits, it does not itself grant any developer permission to undertake any activity. In sum, the FWS will likely argue that the proper time for ESA consultation is in the context of specific permit applications in the future, not in the context of this more general rulemaking that is not project-specific.
Finally, although ABC insists that the FWS should not have privileged the interests of wind developers over the protection of eagles, that is probably not enough to establish that the 30-Year rule violates the BGEPA. The BGEPA expressly allows the FWS to permit eagle takes “for the protection of . . . other interests in any particular locality.”
ABC will likely wait 60 days before actually commencing litigation, so as to comply with the ESA’s citizen suit provision. In the interim, the FWS will surely be evaluating the merits of ABC’s contentions and considering what options it has for addressing them. Wind developers may want to make their voices heard during that 60 day period, and may want to consider intervening to defend the 30-Year rule in the event this matter does in fact proceed to litigation.
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Clash Of Titans over Biosimilars at Federal Trade Commission (FTC) Workshop
On Tuesday, February 4, the Federal Trade Commission (FTC) conducted an all-day public workshop at its headquarters in Washington, D.C. on competition issues involving biologics and biosimilars.1 During highly informative presentations and roundtable discussions, the FTC and various stakeholders, including top-level representatives from originators of biologics (Pfizer and Amgen), biosimilars developers (Sandoz, Momenta and Hospira), payors (Aetna), prescribers (CVS and Express Scripts) and academia (Harvard Medical School), analyzed the likely impact of recent state substitution laws and naming conventions on biosimilars.
No one denied nor debated that the future of the drug industry lies in the robust and dynamic area of biologics. In 2010, 4 of the top 10 drugs were biologics and it is anticipated that in 2016 biologics will account for 7 of the top 10 drugs worldwide.2 At the same time, all panelists were concerned that the costs associated with biologics are rising at a staggering rate and are therefore not sustainable for patients nor payors, and that many patients will be unable to afford biologics if competition is not introduced.
According to Harry Travis, Vice President at Aetna, patients currently spend about $1 a day on non-specialty medication (traditional drugs) whereas they spend roughly $100 a day for specialty medication (biologics).3 He stated that only 1% of Aetna’s customers use specialty products, which account for 50% of Aetna’s total drug spending. This trend was confirmed by Steve Miller, Chief Medical Officer at Express Scripts, who underlined that specialty products (biologics) currently account for 30% of total drug spending, but this number will rise to 50% in 5 years.
It is thus not surprising that all participants urged for FDA-approved biosimilars in order to improve access to biologics while at the same time protecting public health and safety. Participants were also virtually unanimous in their recommendations that fostering public confidence in biosimilars will be crucial to their success and that unnecessary obstacles to substitution may restrict competition.4
The following points were discussed, relying on a large amount of data and comparative studies between countries:
- Competition between originators of biologics and biosimilars developers: Panelists agreed that competition is not expected to have the same effects on the biologics industry as it has had in the small-molecule drugs space when generics penetrated the latter. Because the dynamics are completely different, the entry of biosimilars is unlikely to result in either steep price discounting or rapid acquisition of market share by manufacturers of biosimilars.5
- Premature state biosimilar substitution laws: 18 states have already decided to introduce bills to regulate biosimilars, and 4 of them have enacted laws, all of which may seem slightly premature given that the FDA has yet to approve a biosimilar. Certain provisions of these substitution laws appear controversial as they place onerous requirements on the substitution of biosimilars for branded biologics. Of particular concern are certain substitutions laws requiring pharmacists to promptly notify patients and/or prescribers when dispensing a biosimilar, and to keep special records. These state-level restrictions not only deter substitution by imposing on pharmacists burdensome recordkeeping and additional communications with the physician, they also contradict federal law, namely the Biologics Price Competition and Innovation Act (BPCIA), which expressly provides for substitution.6 These state laws are arguably inconsistent with the BPCIA and could undermine the attractiveness and access to more affordable biologics.
- Impact of naming on biosimilars: There was debate as to whether biosimilars should bear different non-proprietary names and whether such a requirement would have anticompetitive effects. Some argued that requiring distinct non-proprietary names is simply an effort to cause doubt and distrust among physicians and patients by making biosimilars appear different from biologics. As noted by Bruce Leicher, General Counsel at Momenta, the Biotechnology Industry Organization opposes GMO labelling on genetically modified foods precisely for the same reason – requiring a different name for biosimilars would communicate a different (and perhaps suspicious) product and would therefore grant a competitive advantage to branded biologics. Other panelists argued that names and other types of identifiers were justified by the need for an effective pharmacovigilance system, while some speakers expressed the need for distinguishable naming or other identifiers for purposes of linking a responsible product to a specific adverse event in the event of product liability.
The FTC did not express its own views on the effect of state-level restrictions and naming conventions on competition in the biosimilars market, but did note that securing more prescribing physicians on the panel might have added to the debate.
We will continue to monitor federal and state activities in the regulation of biosimilars.
1 The Food and Drug Administration defines biologics as medical products made from a variety of natural sources (human, animal or microorganism). Moreover, a biological product may be demonstrated to be “biosimilar” if data show that, among other things, the product is “highly similar” to an already-approved biological product.
2 As presented by Steve Miller, Senior Vice President and Chief Medical Officer at Express Scripts.
3 More alarming to Mr. Travis is that the cost of biologics increased by approximately 15% annually, as compared to the approximately 5% increase in the cost of small molecule drugs.
4 Substitution, by allowing the pharmacist to automatically substitute an interchangeable biosimilar for the branded biologic without the intervention of the physician, provides a strong incentive to use biosimilars.
5 According to Dr. Sumant Ramachandra, Hospira’s Senior Vice President and Chief Scientific Officer, it takes approximately $5 million and 2-3 years for a generic manufacturer to bring a small molecule drug to market, whereas it takes over $100 million and 8-10 years for a biosimilar manufacturer to bring a biosimilar to market.
6 The BPCI provides that “the [interchangeable] biological product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.”
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