[Senate Hearing 108-635]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-635

                      THE LAW OF BIOLOGIC MEDICINE

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 23, 2004

                               __________

                          Serial No. J-108-85

                               __________

         Printed for the use of the Committee on the Judiciary


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                       COMMITTEE ON THE JUDICIARY

                     ORRIN G. HATCH, Utah, Chairman
CHARLES E. GRASSLEY, Iowa            PATRICK J. LEAHY, Vermont
ARLEN SPECTER, Pennsylvania          EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona                     JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio                    HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama               DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina    RUSSELL D. FEINGOLD, Wisconsin
LARRY E. CRAIG, Idaho                CHARLES E. SCHUMER, New York
SAXBY CHAMBLISS, Georgia             RICHARD J. DURBIN, Illinois
JOHN CORNYN, Texas                   JOHN EDWARDS, North Carolina
             Bruce Artim, Chief Counsel and Staff Director
      Bruce A. Cohen, Democratic Chief Counsel and Staff Director


                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     1
    prepared statement...........................................   140
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     4
    prepared statement...........................................   143
Schumer, Charles E., a U.S. Senator from the State of New York...    30

                               WITNESSES

Beier, David, Senior Vice President, Global Government Affairs, 
  Amgen, Inc., Washington, D.C...................................    21
Ben-Maimon, Carole, M.D., President and Chief Operating Officer, 
  Barr Research, Inc., Bala Cynwyd, Pennsylvania.................    24
Crawford, Lester, Acting Commissioner, Food and Drug 
  Administration, Rockville, Maryland, accompanied by Daniel 
  Troy, Chief Counsel, Food and Drug Administration, Rockville, 
  Maryland.......................................................     7
Hancock, William, M.D., Bradstreet Chair of Bioanaltical 
  Chemistry, Northeastern University, Boston, Massachusetts......    25
Schultz, William B., Zuckerman Spaeder LLP, on behalf of the 
  Generic Pharmaceutical Association, Washington, D.C............    19

                         QUESTIONS AND ANSWERS

Responses of David Beier to questions submitted by Senators 
  Hatch, Leahy, Durbin, and Schumer..............................    39
Responses of Carole Ben-Maimon to questions submitted by Senators 
  Leahy, Durbin, Schumer, DeWine.................................    60
Responses of Lester Crawford to questions submitted by Senators 
  Hatch, Durbin, Schumer, Biden..................................    64
Responses of William Hancock to questions submitted by Senators 
  Hatch and Durbin...............................................    72
Responses of William B. Schultz to questions submitted by 
  Senators Hatch, Leahy, Durbin, Schumer.........................    76

                       SUBMISSIONS FOR THE RECORD

Beier, David, Senior Vice President, Global Government Affairs, 
  Amgen, Inc., Washington, D.C., prepared statement..............    79
Ben-Maimon, Carole, M.D., President and Chief Operating Officer, 
  Barr Research, Inc., Bala Cynwyd, Pennsylvania, prepared 
  statement......................................................   107
Crawford, Lester, Acting Commissioner, Food and Drug 
  Administration, Rockville, Maryland, accompanied by Daniel 
  Troy, Chief Counsel, Food and Drug Administration, Rockville, 
  Maryland, prepared statement...................................   122
Hancock, William, M.D., Bradstreet Chair of Bioanaltical 
  Chemistry, Northeastern University, Boston, Massachusetts, 
  prepared statement.............................................   136
Schultz, William B., Zuckerman Spaeder LLP, on behalf of the 
  Generic Pharmaceutical Association, Washington, D.C., prepared 
  statement......................................................   145

 
                      THE LAW OF BIOLOGIC MEDICINE

                              ----------                              


                        WEDNESDAY, JUNE 23, 2004

                              United States Senate,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:17 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Orrin G. 
Hatch, Chairman of the Committee, presiding.
    Present: Senators Hatch, Leahy, Durbin, and Schumer.

 OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM 
                       THE STATE OF UTAH

    Chairman Hatch. Good morning. I apologize for being late. 
This morning has been a very hectic morning for me, so I 
apologize to all of you who have had to wait.
    For those of you who came here for the previously scheduled 
judicial nominations hearing, let me just say this: Boy, are 
you in for a big surprise.
    [Laughter.]
    Chairman Hatch. I just hope it is not too dull a surprise 
for you and that you enjoy a good debate over the proper reach 
of Section 505(b)(2) of the Federal Food, Drug and Cosmetic 
Act.
    Today, the Judiciary Committee will consider a complex 
subject area that involves law, economics, science and 
medicine. The purpose of the hearing is simple, although the 
law and science surrounding these issues are not. We will 
explore some of the key issues concerning the legality, 
feasibility and advisability of creating a new, abbreviated 
regulatory pathway at the Food and Drug Administration for the 
review and approval of off-patent biological products.
    First, for those of you who may not be sure what a biologic 
is, I would like to offer a simple working definition. 
Biological medicines are large, complex protein molecules 
derived from living cells often by recombinant DNA technology. 
The area of biologics is of growing medical and economic 
importance. The biotechnology market posted a total of about 
$30 billion in sales last year, which is now expected to double 
to over $60 billion by 2010.
    We will see a concurrent explosion in the numbers of 
biologics. There are now over 150 FDA-approved products on the 
market, with an additional 350 in various stages of human 
clinical testing, and over 1,000 others in the developmental 
pipeline.
    But more important than commercial considerations, it is 
the hope of many that biological products such as those that 
may 1 day be developed from embryonic stem cells could lead to 
cures to many diseases that cannot be successfully treated 
today. Biopharmaceuticals appear to represent the future of 
medicine.
    For example, now that we have mapped the structure of the 
human genome, we are in a position to unravel the mysteries of 
the function of human genes and the proteins that they encode. 
Nothing less than a revolution in our understanding of human 
health and disease is well underway. I am proud of the fact 
that scientists at the Huntsman Cancer Institute at the 
University of Utah are helping to lead the way.
    The old model of large-patient-population, small-molecule 
medicine is giving way to large-molecule, small-patient-
population therapies. The day may even come when individualized 
therapies will become common. These developments, of course, 
are not going to occur overnight, nor will they occur without 
great effort and ingenuity, and they will not be done on the 
cheap. One thing is certain. When medical breakthroughs occur, 
patients will want access to these new products and their 
families and third-party payers will want to pay as little as 
possible for them.
    Experts remind us that this new wave of therapeutic protein 
molecules is more complex to discover, manufacture and use than 
conventional small-molecule drugs. We know that many of these 
new biological products tend to be more expensive than old-
line, chemically-synthesized drugs. Some of these new wonder 
therapies cost over $10,000 per year or per course of 
treatment. For example, human growth hormone can cost $25,000 
per year.
    Cost factors alone compel a thorough examination and public 
discussion of the merits of developing a fast-track review and 
approval system that can reduce the price of biopharmaceuticals 
once patents expire. Moreover, from a regulatory reform 
perspective, it should always be the goal of Government to 
employ the least burdensome regulatory approach without 
compromising other important considerations, such as in this 
case patient safety and protection of intellectual property.
    Former Commissioner of Food and Drugs and current CMS 
Administrator Dr. Mark McClellan, who took time from his busy 
schedule last week to visit Utah and meet with Senator Bennett 
and me and other Utahns on the new Medicare drug program, has 
recognized the confluence of medical, economic and regulatory 
forces at play.
    Our society can ill afford to avoid a debate over the 
proper regulation of follow-on biologics. We simply cannot 
sustain over time programs such as Medicare unless we seriously 
explore what steps might prudently be taken to end an FDA 
regulatory system that effectively acts as a secondary patent 
for off-patent biological products.
    Patient safety and product efficacy must remain at the 
forefront of this discussion. The task before policymakers is 
to consider how to maintain product safety and efficacy as we 
consider ways to eliminate unnecessary regulatory hoops for 
off-patent biological product license applications.
    I will stipulate that it will be difficult to manufacture 
some generic equivalents of off-patent biologicals. Some 
products will, no doubt, be more difficult than others to 
reverse-engineer. There will be technical issues galore. Some 
may actually prove impossible to duplicate without trade secret 
information, but from what I have heard, many products will be 
able to be safely duplicated.
    I believe that many, if not all, follow-on biologicals will 
require at least some form of human clinical testing. I also 
believe that the Federal Government would be very wise to 
consider providing taxpayer funding for the development of 
process validation guidelines that will help establish the 
critical manufacturing steps and assay parameters for medically 
or commercially significant off-patent biological products.
    I also think it would be wise to consider commissioning or 
otherwise sanctioning studies by organizations such as the 
United States Pharmacopeia or the Institute of Medicine, in 
collaboration with the FDA and other interested parties, to 
identify and address the technical issues that need to be 
resolved in order to fast-track approvals for off-patent 
biopharmaceuticals.
    I have known and worked with Acting Commissioner of Food 
and Drugs Crawford for many years. I appreciate him and the 
service that he has given to our country.
    I look forward to working with you, Dr. Crawford, and other 
experts at the FDA on this important issue.
    I know that Dr. Crawford will make this an important 
priority, and look forward to seeing the draft guidelines when 
they are issued later this year. I trust that Chief Counsel Dan 
Troy and Deputy Commissioner Amit Sachdev and Liz Dickinson and 
Jerilyn Dupont will provide sound legal and policy advice. I 
have great faith in all of them.
    As a coauthor of the Drug Price Competition and Patent Term 
Restoration Act of 1984, I firmly believe that whatever we do 
on the legislative front should observe a principle of 
attempting to balance incentives for both pioneer and generic 
drug firms. While I am all for rolling up our sleeves to work 
to help develop an abbreviated approval system for off-patent 
biologics, we must be properly respectful of the intellectual 
property of the research-based firms because this is what 
undergirds the whole pharmaceutical enterprise.
    As we proceed into this new era of drug discovery, it is 
important to ask whether our current intellectual property laws 
relating to pharmaceutical research and development are 
adequate to promote large-molecule, small-patient-population 
medicine in the future. For example, I have long thought the 
way we treat process patents under Hatch-Waxman should be 
reexamined in this new era of patient population medicine in 
which process patents will become more important and in which 
the relative importance of such patents will increase.
    Difficult policy questions will crop up in a very difficult 
climate for the research-based pharmaceutical industry--of 
course, everybody's favorite whipping boy in an election year. 
Senator Lieberman and I have advanced an aggressive set of 
private sector incentives in our bipartisan bioterrorism bill. 
I plan to hold a hearing on the Lieberman-Hatch bioterrorism 
bill, and we urge that all interested parties review the IP 
provisions of this legislation and help us to get it right in 
every way.
    Twenty years ago, we faced many challenges in fairly 
balancing the incentives and various interests when we came 
together on Hatch-Waxman. Frankly, I recognize that many in the 
biotechnology industry believe that the creation of a fast-
track approval process for off-patient biologics is the worst 
nightmare of a highly competitive, inherently risky industry 
struggling to attract the capital necessary to bring new 
products through FDA approval and into the marketplace.
    Let me close by suggesting an alternative and perhaps 
preferable strategy to scorched earth litigation. Rather than 
just saying no, please consider engaging in a constructive 
public policy dialogue that focuses on identifying the 
legitimate scientific and legal obstacles that must be overcome 
in order to create a fast-track approval system for off-patient 
biologics. At the same time, come forward with ideas that will 
improve the legal environment for pioneer biotechnology firms. 
That is what we did back in 1984 and that is what we can do 
today if we all work together on follow-on biologics and other 
matters. If we have the right balance in the law, the American 
public only stands to benefit.
    So this is a very important hearing. The information that 
we will receive here today will go a long way, I hope, to 
helping us to resolve these problems. But this is one of 
medicine's most important areas of study and it is one of the 
most significant areas of problematic work that we have ahead 
of us. And I just hope that we can all work together to do this 
in the best possible way and that we can keep this out of the 
realm of politics and put it in the realm of doing what is 
right. If we do that, this country will continue to be the 
major leader in the world and we will do a great deal for 
people all over the world.
    With that, I apologize for taking so long, but I had to get 
these ideas out, and hopefully they will get out so that people 
can help us to do a better job here. We will turn to our 
Democrat leader on the Committee, Senator Leahy.

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Leahy. Well, thank you very much, Mr. Chairman, and 
I don't think any apologies are necessary. I think it is an 
extremely important issue and I applaud you for holding this 
hearing.
    Dr. Crawford, it is good to see you. I should note that 
Commissioner Crawford and I worked together on a whole number 
of agricultural food safety issues when I was Chairman of the 
Agriculture Committee and you were at USDA. It is good to see 
you again. It was always good to see you back then.
    I should note, Mr. Chairman, that Dr. Crawford and I were 
adding up the number--he has got one more grandchild than I do, 
but both of us put together don't begin to match you. So we 
will give you the crown on that one.
    Biologic therapies fight life-threatening diseases and 
disorders, and I think we should all understand that. In many 
cases, these therapies are orders of magnitude more effective 
than drug therapies. The most famous biologic treatment saved 
millions of lives and has eradicated epidemics which, in the 
1930's and 1940's, created mass panics each summer. Indeed, the 
first major outbreak of polio in the United States was in 
Vermont during the summer of 1894. You go around to some of our 
graveyards and you see the reference to that.
    Rather than using the powerful tools of molecular biology, 
physicians back then willy-nilly came up with therapies such as 
concocting an emulsion from the ground-up spinal cords of 
polio-infected monkeys. They added other chemicals to that 
witch's brew, but one researcher, Dr. Jonas Salk, added 
formalin to the mix and, of course, the rest is history. This 
changes the lives of people for the better all over the world. 
I am old enough to remember the summer when all the municipal 
swimming pools would close and all the rest, the little iron 
lung things to put your money in for research.
    Well, today, research for new biologic therapies is no 
longer an endless guessing game. Potent new technologies hold 
the promise to develop completely new classes of therapies to 
prevent, treat or cure otherwise inevitable or untreatable or 
incurable diseases. These new technologies are being focused on 
the horrors of cancer, cystic fibrosis, hemophilia, AIDS, 
Alzheimer's and multiple sclerosis. Those are just some of the 
many areas. For example, breakthrough biologic therapies such 
as Avastin starve cancer tumors of the blood supply that they 
need to grow. Activase greatly reduces the otherwise permanent 
disabling effects of strokes in adults.
    Biologic technologies also hold out the best hope for those 
suffering from certain rare diseases that afflict 25 million 
Americans, including 58,000 Vermonters in my little State. But 
biologic therapeutics often cost far more than traditional 
drugs. One reason is they are a lot more complex chemically and 
they are more difficult to manufacture. I think we have to 
address this approval issue now because the patents on many 
biologic therapies are going to expire in the next few years.
    With respect to drugs, Chairman Hatch and Congressman 
Waxman played crucial roles--I can't overstate what they did--
crucial roles in developing a fast-track process to get less 
expensive, safe and effective generic drug alternatives into 
the marketplace under the Hatch-Waxman law. But a clear fast-
track pathway doesn't exist for biologic therapies under our 
current law, so the critical question we face today is should 
Congress design a fast-track process for generic versions of 
these biologic innovations.
    My own answer is yes, but only if what we do is based on 
sound science, if these alternative therapies are safe and 
effective, if they will help prevent shortages, and if these 
biologics would provide less expensive but potent alternatives 
for consumers.
    I know that generic biologics are now available in Eastern 
Europe and Asia. Many point out that these biologics have been 
safe and effective and are less expensive than the original 
products in those countries. Others urge that we cannot be sure 
of the safety or legality of these products.
    It may be that a sliding-scale approach is needed for the 
U.S. Perhaps the level of scrutiny should intensify with the 
increasing complexity of the molecules involved, the 
sensitivity of the formulation process, and the risks of 
deviation from the patent process. Science has to rule this 
decision, not politics, not greed, not the cloud of powerful 
vested interests. We need to do the right thing for millions of 
affected families. They are depending upon us to do the right 
thing.
    I do want to work together to find a faster way to get more 
of these valuable therapies available at lower prices to 
consumers without sacrificing safety. The people who have these 
diseases, whether it is Alzheimer's, multiple sclerosis, or 
some of the other things I have mentioned--nobody asks whether 
they are Republicans or Democrats or independents. They are 
Americans. Throughout the rest of the world, there are so many 
millions more who are affected. We in this wonderful, great 
country can help find the cures, and we can do so much for the 
people of our own Nation and throughout the world, as we did 
with the polio vaccine.
    So I hope all the stakeholders will participate in this 
process. The testimonies of Dr. Ben-Maimon and David Beier 
present a useful point and counter-point on both sides of this 
issue. Mr. Beier also raises complex trade secret issues. The 
bottom line, of course, is you have to have a careful balancing 
of interests and recognition of patent and trade secret rights.
    We need to work together for the families who are going to 
be helped by this approach. I am glad we are beginning this. 
Again, I applaud the Chairman for starting these hearings. He 
knows and I know it could be a long road, but it is one where 
we all have to work together, for the benefits to the people of 
this great country are so huge if we do it right.
    So thank you, Mr. Chairman, for doing this.
    Chairman Hatch. Well, thank you, Senator Leahy.
    Let me welcome our distinguished witnesses here today. On 
the first panel, we will have the Acting Commissioner of the 
Food and Drug Administration, Dr. Lester Crawford.
    We welcome you to the Committee once again, Dr. Crawford.
    Dr. Crawford has a distinguished career and we value his 
leadership in protecting the public safety. Most recently, he 
worked very hard to protect the U.S. food supply from the 
threat of mad cow disease and we are all grateful for his 
efforts.
    In addition, I went to the opening ceremony for the new, 
unified FDA life sciences laboratory that is being built at the 
White Oak campus to replace the 38 different buildings 
throughout the region that are currently used for FDA offices. 
It is really a very, very impressive facility and I encourage 
all my colleagues to visit. Of course, it is just the beginning 
of that White Oak campus, but once we get that built--and that 
is pursuant to the FDA revitalization bill we passed over 10 
years ago--once we get that built, there is no place in the 
world that will be able to compare from a food and drug 
regulatory standpoint with FDA, and that is long overdue.
    I also want to extend a warm welcome to Dan Troy, who is 
accompanying Dr. Crawford this morning. Mr. Troy is the Chief 
Counsel of the Food and Drug Administration. These are two 
great public servants and I just want everybody to know it.
    So we will turn the time to you, Dr. Crawford. We really 
appreciate the service you give.

  STATEMENT OF LESTER CRAWFORD, ACTING COMMISSIONER, FOOD AND 
DRUG ADMINISTRATION, ROCKVILLE, MARYLAND; ACCOMPANIED BY DANIEL 
 TROY, CHIEF COUNSEL, FOOD AND DRUG ADMINISTRATION, ROCKVILLE, 
                            MARYLAND

    Dr. Crawford. Mr. Chairman and members of the Committee, I 
appreciate very much the opportunity to be here and to 
participate in this important hearing on the subject of follow-
on proteins.
    FDA and the Congress share a great concern for senior 
citizens and other patients who have difficulty paying for 
prescription drugs. FDA has taken a number of significant steps 
to promote greater access to affordable prescription 
medications, including unprecedented steps to lower drug costs 
by helping to speed the development and approval of low-cost 
generic drugs.
    Since its enactment in 1984, Hatch-Waxman has governed the 
generic drug approval process. In general, the law has been 
working well. Since 1984, over 10,000 generic drugs have 
entered the market and generics now account for close to 50 
percent of prescriptions filled. The agency is now approving 
generic drugs at an average rate of one per day.
    Medical innovation is a complex process, but one that can 
bring great value to patients. To realize the full benefits of 
medical innovation, it is important to adopt policies that 
protect incentives to develop new drugs and medical devices. 
Achieving this goal requires a delicate effort to strike a 
proper balance. Promoting innovation requires the right mix of 
incentives, safeguards and effective regulation to secure 
maximum benefit from safe and effective new medical 
technologies, while assuming mechanisms for broad and equitable 
access to these new treatments.
    FDA has different statutory approval mechanisms for drugs 
and most biological products. I say most biological products 
because many biological products are also drugs, as that term 
is broadly defined in the Food, Drug and Cosmetic Act.
    Traditionally, some natural-source proteins have been 
regulated as drugs, including insulin and human growth 
hormones, while other natural-source proteins such as blood 
factors are regulated as biological products. Currently, some 
proteins are licensed under the Public Health Service Act and 
some are approved under the FD&C Act.
    FDA approves new drugs, as distinguished from biological 
products, under approval mechanisms found in Section 505 of the 
FD&C Act, and licenses most biological products under Section 
351 of the PHS Act. Full, new drug applications under Section 
505 of the FD&C Act and biologics license applications under 
the PHS Act require submission of complete reports of clinical 
and animal data to support approval.
    For drugs approved under the FD&C Act, manufacturers can 
apply to FDA under Section 505(j) of the FD&C Act for approval 
of generic versions of the brand products after the patent and 
other exclusivity periods expire. This process is known as the 
Abbreviated New Drug Application, or ANDA, process.
    Section 505(b)(2) also provides for the approval of NDAs 
supported by the scientific literature or by FDA's earlier 
finding that a drug is safe and effective. Both the ANDA and 
the 505(b)(2) approval processes incorporate consideration of 
the innovator's intellectual property rights into the drug 
approval process. The ANDA process in Section 505(j) was 
established through the 1984 Hatch-Waxman amendments. This is 
an abbreviated approval mechanism for generic versions of drugs 
approved under Section 505 of the FD&C Act.
    The ANDA process does not require the drug sponsor to 
repeat costly animal and clinical research on ingredients or 
dosage forms already approved for safety and effectiveness. By 
establishing that the drug product described in the ANDA is the 
same as the innovator drug product approved in the NDA, the 
ANDA applicant can rely on the agency's finding of safety and 
effectiveness for the drug.
    The FD&&C Act provides the ANDA and 505(b)(2) abbreviated 
approval pathways for drugs approved under Section 505 of that 
Act. However, the PHS Act has no similar provisions. The 
approval of generic or follow-on protein and peptide products 
has both scientific and legal dimensions.
    First, as a scientific matter, FDA believes that for some 
protein products regulated under 505 of the Act, science has 
progressed sufficiently that we are able to assess the degree 
of similarity or identity between the innovator and a follow-on 
product. Prior to publishing a draft guidance document, FDA 
intends to have a major scientific workshop, in conjunction 
with the Drug Information Association, to explore this issue. 
FDA is still considering a separate process to address the 
legal and regulatory issues.
    Today's hearing is an important part of that discussion and 
I thank you, Chairman Hatch, for holding it.
    Chairman Hatch. Thank you, Dr. Crawford. In your testimony, 
you talk about many unanswered scientific, legal and policy 
questions about the follow-on versions of biological products 
approved under Section 351 of the Public Health Service Act 
that must be explored, and that the FDA plans on promoting 
public dialogue on these questions.
    Now, what do you anticipate some of these questions to be, 
and how will FDA promote public dialogue to find answers to 
these questions?
    Dr. Crawford. Well, what we will do is, as I announced, we 
are going to have this scientific workshop. We will be joined 
by the Drug Information Association and it will be a well-
managed workshop where questions will be posed to the 
participants, and it will be structured in such a way that we 
come out with a set of common understanding about what is 
needed in order to regulate follow-on proteins, as they are 
generally called. We also will get information from 
deliberations that the European Union has had on this same 
subject, and also from other trading partners around the world.
    But what we really need is to determine how do we go 
through the scientific and regulatory process of ascertaining 
that a product is either identical or has enough 
characteristics in terms of the active ingredient of the 
molecule to where we can declare it is, in fact, worthy of 
consideration as a generic.
    The term ``generic,'' as you know, essentially means ``the 
same,'' and we are not sure, with the kind of science that we 
have, that, in fact, we are ready for that kind of 
determination with many of these large molecules, as you put it 
in your opening statement. So we need help in this direction. 
FDA has not made its mind up about it. We need to know more 
about the science.
    We find, as you know, that we get great answers from 
industry because they are dealing with the problems everyday, 
and we look forward to involving them in this process, as well 
as the academic, medical and scientific communities.
    Chairman Hatch. As you know, the cost of prescription drugs 
has been an issue of importance to many Americans, and Congress 
has been working on various legislative proposals to try and 
address this matter. I believe that enacting the Medicare 
prescription drug law last year was a step in the right 
direction. All Medicare beneficiaries will soon have access to 
the Medicare prescription drug program, and lower-income 
beneficiaries will receive significant help and relief from 
their drug expenditures.
    The Medicare prescription drug law encourages drug plans to 
offer generic drugs to Medicare beneficiaries when appropriate, 
which is one important way to find savings. Now, in fact, in 
your testimony you state that generic drugs typically cost 50 
to 70 percent less than their brand-name counterparts, and that 
they are bioequivalent.
    Now, according to CBO, generic drugs save consumers an 
estimated $8 to $10 billion a year at retail pharmacies. I was 
told by Mark McClellan just a few days ago that actually that 
figure is even higher today as a result of Hatch-Waxman that 
consumers are saved.
    Do you believe that generic biologics, if they could be 
developed, would provide Americans with similar savings?
    Dr. Crawford. I think it is too soon to say. As I 
mentioned, the European Union is moving in sort of the same 
kind of direction, but no country or group of countries has 
experience with this to the extent that they can say what the 
savings would be.
    These are difficult molecules, as all of you know, to 
characterize, and so how many generics, if you will, once we 
work out the regulatory and scientific issues, will enter the 
market for each one that is approved as an innovator product we 
can't say at this time. We do know that some biologics are, as 
you mentioned, very costly indeed. And so even the introduction 
of one other competing product will surely lower the cost, but 
it is not possible to say whether or not it will be the same 
percentage as the 50- to 70-percent figure that we have with 
standard drugs.
    Chairman Hatch. Okay. Now, to what extent do you think 
Section 505(b)(2) of the Food, Drug and Cosmetic Act applies to 
biologics? You might want to have Mr. Troy help us with that 
one as well.
    Dr. Crawford. I would very much want to have Mr. Troy join 
me. He is our chief counsel.
    Chairman Hatch. Well, I think it would be good to have his 
testimony on that.
    Mr. Troy. Thank you, Senator Hatch. 505(b)(2) by its terms 
applies only to the Food, Drug and Cosmetic Act and to 505 
products. FDA does not believe that 505(b)(2) applies by its 
terms to products that have been approved under Section 351.
    But as Dr. Crawford mentioned, there are a variety of 
proteins, human source proteins--insulin, human growth hormone 
and others--which have been approved under the 505 pathway, in 
part some of these for historical reasons. So where the science 
and the law is there, we believe that follow-on proteins may 
perhaps be provable using 505(b)(2).
    Chairman Hatch. Well, that is helpful. Just keep helping us 
up here to understand this, okay, because this is complex to 
all of us.
    Senator Leahy, if you would care to--
    Mr. Troy. Sorry. I talk too much like a lawyer sometimes.
    Chairman Hatch. Well, I am glad to hear that, to be honest 
with you.
    Senator Leahy. You would be surprised the number of lawyers 
who show up here at all kinds of hearings, and some even on 
this side of the dais.
    Chairman Hatch. And I can say some are better than others, 
too.
    [Laughter.]
    Senator Leahy. That is true. Of course, those on this side, 
both Republicans and Democrats, are the best, but that is okay, 
although I must admit there are days when we are here that I 
miss those days in the courtroom.
    Commissioner Crawford, as I said earlier, it is good to see 
you again.
    Dr. Crawford. Thank you, sir.
    Senator Leahy. I have always enjoyed working with you.
    In your written testimony, you raise concerns about being 
able to assess the relative sameness of generic alternatives 
derived from biological sources because of the complexity of 
protein structures. But then you state, ``However, the science 
of characterization has progressed to the point where it is 
becoming possible to make such assessments for some products, 
and we expect that science will continue to progress.'' Some of 
the European and Asian countries would say they are ahead of 
the U.S. regarding developing an accelerated process to approve 
these generic biologics.
    Are you considering recommending to OMB any legislative 
proposals for Congress to review to take advantage of the 
technological advances, those that might allow scientists to 
make accurate sameness evaluations?
    Dr. Crawford. We are not at this time proposing 
legislation. As I mentioned, we are going to have this 
scientific workshop in conjunction with the Drug Information 
Association. At the conclusion of that, we will weigh what we 
have found out and determine which fork in the road to take. 
But at this point, we are not prepared to say whether or not we 
would--
    Senator Leahy. Well, after that, could you let Chairman 
Hatch and myself know where you are going with it? It would be 
nice to have us all in the same hymn book, the Congress and the 
administration.
    Dr. Crawford. Absolutely.
    Senator Leahy. At some point, there is going to be required 
some legislation. For example, David Beier's testimony raises 
some concerns about protecting the confidentiality of 
proprietary business data and trade secret information. He 
points out that the FDA recently noted that data required for 
the approval of any new product must be in the public domain.
    How do you handle trade secrets and proprietary 
information? I mean, you have to do your job, but the companies 
have to be assured, if they are spending millions of dollars on 
something, that their confidential information is kept 
confidential. How do you do that balance?
    Dr. Crawford. I am going to ask Dan to comment on that, but 
before he does, ever since I was first in the FDA, in 1975, as 
you know, we have had great difficulties as the science 
changes, and so forth, in maintaining the confidentiality. But 
FDA has always had as a top priority the maintenance of trade 
secret information, and I think our record is quite good on 
that.
    Dan?
    Mr. Troy. I want to pick up on what Dr. Crawford said. 
Congress has decreed that trade secret and confidential 
commercial information is not disclosable by us. Indeed, it is 
a crime to disclose trade secret information under an act of 
Congress.
    I think as a result of that, one of the most salutary 
aspects of FDA's culture is the care that people at FDA take 
with the very valuable business information that is entrusted 
to us. I think people really have an appreciation about how 
valuable it is. I am not saying there are never any missteps, 
but by and large there is a really good culture there of 
protecting that confidential commercial and trade secret 
information.
    The upside of that, of course, is that companies develop 
that information and can submit it to us with a fair degree of 
confidence that we are going to preserve it. Of course, as 
comes up in, for example, the whole debate about clinical 
trials, at times there are profound interests on the part of 
people in the patient community, in the medical community and 
in the scientific community who want access to that 
information.
    There is no doubt that that is a tension that we have to 
navigate, and I think that it is a tension that comes up in 
this context as well. On the one hand, if we don't preserve 
this intellectual property, then people aren't going to do the 
work to develop the new products. On the other hand, if we give 
perpetual protection to the intellectual property, then you 
will never have follow-on proteins or generic biologics.
    The brilliance of Hatch-Waxman is that it struck a balance 
between innovation and intellectual property protection and, at 
an appropriate time, a pathway for allowing products to come to 
market that are less expensive and more affordable and more 
available. So it is precisely that balance between innovation, 
which in this industry primarily manifests itself as 
intellectual property protection, and affordability that we are 
going to strive for, and we are going to work with Congress to 
strive for because I think there is pretty broad agreement that 
we are not going to be able to do this alone.
    Senator Leahy [presiding.] Thank you. Senator Hatch had to 
leave for a vote--he is coming right back--in another 
committee. I have to leave for a similar thing. You are both 
aware of how they usually try to have us on 12 different things 
at once, especially as we come close to a time as we are when 
there is going to be a break.
    So I am going to turn it over to Senator Durbin. It is all 
yours. Wreak all the havoc you want.
    [Laughter.]
    Senator Durbin. Be careful what you wish for.
    Let me thank the witnesses for being here, and especially 
thank the FDA as an agency. In the time I have served on 
Capitol Hill, I have had a good working relationship on the 
Appropriations Committee with the FDA.
    Dr. Crawford, I thank you.
    Dr. Crawford. Thank you, sir.
    Senator Durbin. Mr. Troy, we don't have a long friendship 
or relationship, but I am glad that you are here today and I 
thank you for your testimony.
    Let me try to explore an element here that I think needs to 
be discussed, and that is the market dynamic--and I think, Mr. 
Troy, you alluded to it--to protect the intellectual property 
of the company that discovers the chemical drug or the biologic 
drug, but only to a certain point at which we decide that their 
vested interest in that property becomes a public interest.
    We moved to Hatch-Waxman in 1984 with the belief that 
generic drugs are of public value because they save consumers 
money. You referred to the brilliance of Senator Hatch and I 
think he caught that as he was leaving the room, and I hope he 
did, and I want to give credit to both him and Congressman 
Waxman.
    But it is also true from your testimony, Dr. Crawford, that 
this was not an altogether smooth transition. There was some 
resistance from some pharmaceutical companies under Hatch-
Waxman which led to the 2003 directive from the FDA concerning 
how long you could test the movement from brand name to 
generic, and that had become abusive; the conduct of the 
industry had become abusive.
    So address for me, if you will, for a moment the market 
dynamic when it comes to this issue. Are we not dealing with 
the same thing that the original company that has developed the 
protein or the biologic has a market interest in maintaining 
exclusivity in terms of production as long as possible because 
it is a profitable thing, and that we understand that at some 
point it may move to a generic or follow-on at lower cost?
    You have addressed, or at least alluded to the scientific 
challenge of producing the follow-on in a product that is 
different from some chemical drugs. But speak to, as well, 
about the market aspect of this. What kind of resistance is the 
FDA running into from those who have patent on the original 
biologic and the profitability of that medicine who believe 
that moving to the follow-on is going to end their 
profitability. Is there a resistance there that is part of this 
equation?
    Dr. Crawford. Well, there is a great deal of interest in 
what we are doing here, it is fair to say. But what we have 
heard from the industry and the relevant trade associations is 
that I think there is a willingness to help FDA define through 
appropriate intercourse what it is that we need to do in order 
to ascertain that there is sufficient sameness between the 
pioneer product and the generic product to allow the process to 
move in a fair and equitable manner.
    We are going to need cooperation from industry, but also 
from manufacturing experts, the academic community, chemical 
and medical community, and so forth. So we have got to start 
this dialogue and I don't really know where it is going to end 
up, but we are going to open up with this scientific workshop 
and then that is going to lead us into other directions.
    At the same time, we are going to have a separate 
consideration of the legal and regulatory aspects, but I think 
we have got to get the science first. So to answer your 
question, I wouldn't call it resistance, but there is a great 
deal of interest in what we are doing and I think the public, 
in general, wants to be part of the process and I think that is 
a good sign.
    Senator Durbin. How important is the cooperation of the 
brand name biologic manufacturer in developing the science and 
developing the process that leads to the follow-on biologic?
    Dr. Crawford. Well, I am going to ask Dan, if I may, to 
respond to that. But, obviously, the attitude of the industry 
both in the pioneer companies and also those that are seeking 
to get a generic status--there is a tension there, and there 
also is an interchange which sometimes is dictated by the 
courts, as you know, that is very important to the process.
    Dan has had a great deal of experience over the last 3 
years dealing both in courtroom situations and also in the 
adjudication of some of these disputes. He is an expert in this 
area of the law, so I would like to ask him to comment.
    Mr. Troy. Thank you. I think it is actually a bit of a 
mistake to suggest that the innovator industry, at least from 
what I have read and what I have heard, is united on this 
issue. I think there are different camps that people fall into. 
Different companies are looking at different positions, and so 
I don't think what we are seeing is some uniform innovator 
brand company resistance fighting this issue tooth and nail. I 
think there is a recognition that sooner or later the time is 
going to come. A lot of it will depend, of course, on the 
science.
    When you say we need the cooperation ultimately--of course, 
you can pass legislation with or without somebody's 
cooperation. Normally, you get someone's cooperation to one 
extent or another. Ultimately, we do administer Hatch-Waxman, 
one might say, with the cooperation of the brand industry. They 
give us the data to approve their product. Then we can, and do, 
under Hatch-Waxman rely on that data in approving an ANDA.
    They don't play any role in that process at that point. On 
occasion, they might raise scientific or legal objections to 
what we are doing. We are pretty good, I think, at separating 
out the wheat from the chaff and recognizing when challenges 
are being raised that are frivolous or challenges that are 
raised that are real and substantial that we need to deal with.
    So I think that, as Dr. Crawford reflected, we are still at 
a very nascent stage. We are exploring. I think people are 
figuring out where they are. There is still a lot of public 
process to undergo, and a lot of scientific and legal and 
regulatory exploration.
    Senator Durbin. If I could ask one last question, Mr. 
Chairman, this is a question which relates to your agency, Dr. 
Crawford, and it relates to this issue, certainly, but many 
others.
    Having watched your agency over 20 years and watched its 
budget, I continue to marvel at how much you get done for the 
amount of money that we send out to you, and how much we rely 
on you to get it done. The approvals, as you know better than 
most, involve virtually every aspect of human life. The FDA is 
in there and involved in it.
    So when we talk about this kind of undertaking which is 
clearly going to require some of the best and brightest, and 
talk about whether or not we can develop a scientific process 
and say with some certainty that there is a follow-on biologic 
that can be trusted and is at a lower cost, where do you stand 
in terms of resources, particularly in personnel and lab space 
and whatever is necessary, to meet this challenge and so many 
others that we throw your way?
    Senator Hatch and I were on the floor yesterday talking 
about another issue which we won't go into here, but one of the 
elements of it was, well, the FDA needs more manpower, more 
people to get this job done. So in light of everything that 
Congress keeps heaping on your agency, FDA, including this, 
where are you?
    Dr. Crawford. Thank you for that question.
    [Laughter.]
    Dr. Crawford. It is certainly one that I can expand on as 
much as you like.
    Senator Hatch mentioned the White Oak campus, and the idea 
there is to get the expertise of FDA, at least on the medical 
products side, the three centers there, plus the support staff 
above, including me, located in the same place so that we can 
have a critical mass of scientists like oncologists, and in 
this case pharmacologists, people that work in biologics of all 
sorts.
    If you can get them working on the same campus instead of--
actually, we have about 38 different facilities. If you count 
the mail facilities, we have 55 in the Washington area, and it 
increases every year a great deal. That is the single greatest 
impediment to getting our job done.
    We have Committee meetings of very key people to review 
applications that involve 70-mile round trips for our 
scientists. They generally have to travel on Washington's 
Beltway system, so you can imagine managing FDA, such I am 
charged to do, and what a great difficulty that is.
    Apart from that, there is good news. We are now up to the 
largest number of personnel that we have ever had in FDA, and 
the recent increase is due in large part to the Congress 
dealing with the bioterrorism problem and providing both 
funding and personnel to deal with that. So the big increase 
has been there and not in the medical product area. In other 
words, it has been in the field forces.
    But it has helped a great deal because in the late 1970's 
we lost 10 percent of our personnel and it has taken all this 
time to get them back up to that level, and we are now even 
past it. The other good news is that Congress has allowed 
incentive pay and locality pay, so that we are able to pay 
physicians, for example, and other health care professionals 
competitive salaries. They are low-end competitive, to be sure. 
I wouldn't say that things are perfect there, but when we are 
about to lose someone to another company or even to another 
government or something like that, we are able, by aggressively 
extending the authorities vested in my office, to save a lot of 
these people.
    The turnover at FDA down through the years that I have been 
associated with it is--a healthy rate is estimated to be about 
8 percent. You need some turnover, as you well know, but what I 
need to be very careful of is whether that turnover is 
happening in key pockets. I mean, if the agency level is 8 
percent and then in key scientific areas you are losing 25 to 
50 percent a year, then you still have got just a big a 
problem. So far, so good in that respect. In the two-and-a-half 
years I have been back at FDA basically being the chief 
management officer, we have stabilized that very, very well 
indeed.
    We do have a precarious level of budgeting. It is about 
$1.8 billion, and as you would know, we have got to make really 
good use of that. We have less and less discretionary funds and 
we can't leave anything that we are charged with regulating 
high and dry. We have to retrain people, and also multiply-
train them.
    One of the things that has helped under the Bioterrorism 
Act is that we are able to commission other agencies to do 
FDA's work in key spots. In order to cover the border with 
products coming in, not just food, but drugs and other things, 
we have taken major advantage of that provision, which was a 
great boon to FDA, and we have now commissioned 7,500 Customs 
and Border Protection agents to do FDA-type work. We do that 
after training and we do that after staying in contact with 
them.
    Also, each year in the budget we try to plan for things 
like BSE, the cattle disease. And I would give my predecessors 
a lot of credit for asking for the funding that we needed in 
order to stay up to date on that and to prepare for the 
inevitability.
    I will stop there, but if you want more, you can get it.
    Senator Durbin. Well, thank you. Mr. Chairman, I think we 
all understand that as important as these discussions are, the 
implementation of our good ideas depends on the professional 
men and women at the FDA who can get the job done.
    While you were out, we lavished praise upon you for your 
work with Congressman Waxman, and your staff will verify that 
what I say is true.
    Chairman Hatch. Well, that is unusual on this Committee.
    [Laughter.]
    Chairman Hatch. While I have you here, I want to take 
advantage of this for a minute because there are a couple of 
other questions that I have that I hope will amplify.
    I know you are going to be holding a public symposium on 
follow-on biologics. I would like more details on the guidance 
your agency will be issuing on follow-on biologics. First, and 
most important, when will this be issued? Secondly, what will 
be addressed in the guidance that you will issue? This is an 
important matter, I think, not just to me, but to many people, 
and I would be interested in your thoughts on that.
    Dr. Crawford. Well, Senator Leahy while you were out also 
brought this subject up of wanting to know what we find in the 
scientific workshop. I think what would be appropriate, with 
your concurrence, would be, following the workshop, we should 
come down and brief you and your staff and the other members of 
the Committee, as appropriate and as they are interested, on 
what we do find and where we think it is going to lead us.
    Chairman Hatch. Do you know about when that would be?
    Dr. Crawford. Well, we hope to have the workshop by the end 
of the summer.
    Mr. Troy. I think in the fall, early fall.
    Dr. Crawford. Your concept of fall and mine are different, 
as a matter of fact, because you are an attorney.
    [Laughter.]
    Chairman Hatch. It is a disability, I have to admit.
    Dr. Crawford. I am pressing, Senator, to have it done maybe 
the day after Labor Day or something that, and we will come and 
see you when that does happen. When we turn that into guidance 
will actually depend on what we find out through this fact-
finding process.
    Again, we are pressing very hard to get something out, but 
I have to plead that we don't know what we will find out in the 
scientific workshop and so I can't project. We may find out--
you know, we are open-minded about this--that the science is 
still lagging in terms of characterization of these products, 
and so we need to fund some research projects or something like 
that. So I have to answer it that way.
    Chairman Hatch. Well, we will be interested in what kind of 
policy you come out with in that.
    Dr. Crawford. Thank you.
    Chairman Hatch. Let us know as soon as you can.
    Could you give us more details on major policy decisions 
that we would face in devising a system to regulate follow-on 
biologics? And then Senator Leahy mentioned trade secrets. 
Could you or Mr. Troy amplify on that and the other major 
issues that we will all be facing?
    Dr. Crawford. Yes. I would like to ask Dan to handle that 
part.
    Chairman Hatch. Okay.
    Mr. Troy. I guess I am not quite sure I understand what the 
question is, to address what the trade secret issues are?
    Chairman Hatch. Yes.
    Mr. Troy. We talked about that a little bit while you were 
gone. Congress has prohibited us from revealing trade secrets, 
and we are very protective of trade secrets and confidential 
commercial information.
    That said, at a certain point information becomes sort of 
generally known, and generally known in the scientific 
community. Part of the challenge is figuring out at what point 
does information kind of cross over. Obviously, if there is 
literature about something, then that is easy.
    But I think it is fair to say that the agency has always 
been extremely protective of intellectual property. That is one 
of our key missions. It is a key part of our culture and the 
challenge in going forward, which you are well aware of because 
that is what you did in Hatch-Waxman, is to strike a balance 
between the intellectual property protections and making 
products accessible and affordable.
    Chairman Hatch. Well, one other thing. This Committee will 
be holding a reimportation hearing in the near future. I would 
like you to be ready to come to that. We are going to need your 
testimony on that.
    Dr. Crawford. Well, we look forward to that. As you know, 
this has been something FDA has been heavily involved in for 
some time and we look forward to some reasonable solution to 
it. As you also know, our concern by statute and also by the 
thing that drives us to be public servants is the safety and 
effectiveness of these products. So we have concerns about 
that. We would be very pleased to share that with the Congress, 
this Committee and anyone else who is working in that 
particular area.
    Chairman Hatch. Well, thanks, Dr. Crawford. For the record, 
one of the questions that we may submit in writing--and I will 
keep the record open until the end of the day for any questions 
any member of the Committee has in writing--we would like you 
to not only comment on trade secrets, but also any other major 
factors that will be discussion points on how to regulate 
follow-on proteins, if you could do that for us.
    Dr. Crawford. We will be happy to respond to the question 
in writing if we could.
    Chairman Hatch. If you could, I would appreciate it.
    Dr. Crawford. Thank you.
    Chairman Hatch. We appreciate both of you being here. We 
think you are both great public servants and you have been 
doing tremendous work out there. I can't wait until you not 
only have that central campus so that the administrators don't 
have to travel all over 38 different places all over this area, 
but you will have the highest and the best scientific 
instrumentation and facilities to work with, which is something 
that we owe to you and that you need to have done. So I hope 
you will keep the pressure on Congress to finish the White Oak 
campus.
    Dr. Crawford. Thank you for all your support, sir.
    Chairman Hatch. Thank you. It is good to have both of you 
here.
    [The prepared statement of Dr. Crawford appears as a 
submission for the record.]
    Chairman Hatch. At this time, I would like to introduce our 
second panel. First, we will have Mr. Bill Schultz, who is 
testifying on behalf of the Generic Pharmaceutical Association. 
Mr. Schultz is a partner with Zuckerman Spaeder, who practices 
in food and drug law, complex civil litigation, products 
liability and appellate litigation. Mr. Schultz also was the 
Food and Drug Administration's Deputy Commissioner for Policy 
and was responsible for overseeing the development of all FDA 
policies and regulations and FDA legislation.
    Most of us remember Bill when he was the FDA counsel to the 
former Chairman of the Health and Environment Subcommittee of 
the House Energy and Commerce Committee. While working for 
Congressman Waxman, he did assist greatly in the development of 
food and drug and other health care legislation.
    I have great respect for you, Bill, and we are glad to have 
you here and welcome you here.
    Second, we will have David Beier.
    David, we are glad to see you again and glad to have you 
helping us on this Committee.
    David is the Senior Vice President of Global Governmental 
Affairs for Amgen. Mr. Beier was former Vice President Gore's 
chief domestic policy adviser, and prior to that position he 
was Vice President of Government Affairs and chief lobbyist for 
the biotech company Genentech, where he developed expertise in 
intellectual property, taxation, health care and other issues. 
Mr. Beier also worked for the House Judiciary Committee under 
former Congressman Pete Kastenmeier, of Wisconsin.
    We are delighted to have you here and I have appreciated 
your advice through the years.
    Our next witness is Dr. Carol Ben-Maimon. She is the 
President and Chief Operating Officer of Barr Research. Dr. 
Ben-Maimon is responsible for all aspects of Barr's proprietary 
product research and development activities. She is also 
responsible for managing the company's expansion into 
biologics.
    Prior to joining Barr in 2001, Dr. Ben-Maimon served as 
Senior Vice President for Science and Public Policy-North 
America for Teva Pharmaceuticals USA, where she coordinated 
Teva's U.S. and Canadian research and development efforts, 
product selection and global integration. Dr. Ben-Maimon joined 
Lemon, owned by Teva, in 1993 and served as Vice President of 
Medical and Regulatory Affairs from 1991 until 1993. Dr. Ben-
Maimon was Director of Clinical Pharmacology with Wyeth-Ayerst 
Research.
    So we are grateful to have you take the time to be with us 
as well.
    Our final witness on this panel is Dr. Bill Hancock. Dr. 
Hancock is Bradstreet Chair in Bioanalytical Chemistry, Barnett 
Institute and Department of Chemistry and Chemical Biology, of 
Northeastern University in Boston, Massachusetts. Prior to 
joining Northeastern University, Dr. Hancock was the editor-in-
chief for the Journal of Proteomic Research of the American 
Chemical Society. He was also Director of Analytical Chemistry 
at Genentech and a visiting scientist at the FDA in the mid-
1980's.
    Dr. Hancock has received numerous awards and honors, 
including the American Chemical Society Award in Separation 
Science, in 2003, and the Martin Gold Medal in Separation 
Science in the year 2000. Dr. Hancock has contributed to 
numerous industry publications and organizations.
    The good news is this hearing is a unique opportunity to 
see a former Gore domestic policy adviser debate a former Nader 
disciple. The bad news is that our topic is so esoteric that 
only a handful of people listening will have any idea what they 
are talking about.
    [Laughter.]
    Chairman Hatch. Of course, that is not unusual for those 
two candidates anyway, you know.
    [Laughter.]
    Chairman Hatch. I am only kidding. Seriously, I look 
forward to hearing all of the witnesses' testimony today and we 
are very grateful that you have taken time to come and help us 
to understand these things better on the Committee. This is an 
area where we all need to work together in the best interests 
of our people and of people throughout the world because if we 
are successful in this area, we may very well be able to 
transcend anything we have been able to do up until now.
    So we will start with you, Mr. Schultz. We will go to Mr. 
Beier, then Dr. Ben-Maimon, and then finally wind up with Dr. 
Hancock.

  STATEMENT OF WILLIAM B. SCHULTZ, ZUCKERMAN SPAEDER LLP, ON 
 BEHALF OF THE GENERIC PHARMACEUTICAL ASSOCIATION, WASHINGTON, 
                              D.C.

    Mr. Schultz. Thank you very much, Chairman Hatch. I 
appreciate this opportunity to testify on behalf of the Generic 
Pharmaceutical Association, the trade association whose 120 
members produce more than 90 percent of all generic drugs in 
the United States. We owe our existence to you and to the 
Hatch-Waxman Act which was passed 20 years ago and which has 
been such a tremendous success.
    In 1984, we were at a crossroads. The brand industry was 
flourishing, and yet FDA had no regulatory pathway and no 
system which provided for generic versions of most of these 
brand products. So even after their patents expired, brand 
companies continued to sell their products at monopoly prices 
because they had monopolies. Congress responded and enacted the 
very successful Hatch-Waxman Act.
    Today, we are at a similar crossroads, Mr. Chairman, only 
this time it is for what we call biopharmaceuticals, as opposed 
to the traditional pharmaceuticals. As you said in your opening 
statement, biotechnology products account for something like 
$33 billion in pharmaceutical sales, and the sales are growing. 
Many of the large-selling biotech drugs have come off patent 
already or they will soon. More important, in contrast to the 
traditional drugs, these have exceedingly high costs, in the 
thousands of dollars per patient per year. So the potential 
savings and the stakes for the health care system are enormous.
    It is also significant that other countries are actively 
implementing such a program, including countries in the EU, 
Asia and Latin America. In fact, the EU issued guidance 3 years 
ago to assist the industry in bringing generic 
biopharmaceuticals to the market. As the world leader in 
pharmaceutical development, the U.S. should take on a 
leadership role in the development of a viable framework for 
generic biopharmaceuticals.
    I now would like to address several specific questions. 
First of all, does the FDA have the legal authority to approve 
generic biopharmaceuticals? We believe the answer is clearly 
``yes''. As explained in my testimony, the FDA can adjust data 
requirements for generic biopharmaceuticals.
    Second, if the FDA can act in this area, is there any need 
for Congress to do so? The answer here is ``yes'', as well. 
FDA, left to its own accord, could take years to resolve the 
questions of its legal authority and to promulgate regulations. 
And years of litigation will follow that, inevitably. Our 
health care system cannot afford to lose this precious time, 
especially given the fact that there are, as Senator Hatch 
said, already 150 biopharmaceutical products on the market, 
with more to come in future years. It is just like 1984, Mr. 
Chairman. Congress needs to step in. It is appropriate for it 
to do so.
    Third, should Congress wait for all the scientific issues 
to be resolved before it acts? This seems to be some of the 
band industry's argument. The answer here is ``no''. As former 
commissioner Mark McClellan recognized this year--and this is a 
quote--``We do believe that the science may be adequate now to 
proceed on several relatively simple biologics.'' In other 
words, Mr. Chairman, the science is already there for some 
biologicals.
    In my written testimony, we have given examples of 
situations where FDA has already reduced data requirements for 
certain biotech products that match ones previously approved. 
It may be some time before we can do this for other products. 
Yet, Congress should give FDA the legal authority and the 
direction to solidify a generic biopharmaceutical approval 
program.
    For each product, it will be FDA, not Congress, that will 
be charged with determining what the approval criteria will be 
and what will be necessary to support a generic product. Simply 
put, sound science must drive the system, but there is no 
reason to wait to legislate in this critical field.
    There is one telling example which by itself rebuts the 
brand companies' argument that interchangeability between the 
generic and the brand is not possible. GlaxoSmithKline sells a 
Hepatitis B vaccine called Energix-B that is made through 
biotechnology. Merck sells a similar product called Recombivax 
HB. The FDA-approved labeling for both products states that 
these vaccines are interchangeable with each other, and that 
either may be used to create the vaccination course initiated 
with the other. Importantly, FDA has allowed this 
interchangeability to be established without anything like a 
full set of data.
    The fourth question: Would it be unconstitutional for FDA 
to rely on the brand drug's approval? Would it be a taking of 
property without just compensation? Don't worry. I am not going 
to spend the time that is really needed to engage in a 
constitutional debate here, and the Association will be 
submitting shortly an analysis of this issue.
    But I believe that it is clear from the Supreme Court 
jurisprudence in this area that the Court has gone nowhere as 
far as is often claimed by the industry. Government agencies 
rely on information submitted by companies and permit other 
companies to rely on agency action based on this information 
all the time.
    FDA, for example, regulates food additives by regulation. 
After a company submits its data, FDA issues a regulation, and 
the next company can rely on that regulation to get its 
approval. Of course, it has to wait for patents to expire and 
other intellectual property protection, but it can rely on the 
approval. It is not taking the data; it is relying on the 
approval.
    We have a similar system for over-the-counter drugs. We 
have a similar system for medical devices. The first company 
gets its approval. If the second company's product is 
substantially equivalent, it can get its approval as well. 
These systems have been in place for many, many years and no 
one has ever argued there is an unconstitutional taking.
    Fifth, what should be the regulatory system that permits 
FDA to approve generic biopharmaceuticals? What should such a 
system look like? There are several important parameters. 
First, the system needs to allow FDA the flexibility to tailor 
pre-clinical and clinical data requirements for 
biopharmaceutical products. The complexity of these products 
varies along a continuum. Some are very close in complexity to 
chemical drugs and some are much, much more complex.
    FDA should have the authority to establish the appropriate 
requirements based on a scientific risk/benefit approach. 
Congress needs to, however, require FDA to impose only those 
regulatory requirements that are necessary to ensure safety and 
efficacy. We faced this issue in 1984. There was a lot of 
concern that FDA would over-regulate. Congress was very careful 
in the statute and was very successful in ensuring that didn't 
happen. This is something to keep in mind here, but we want 
full regulation to ensure safety and efficacy.
    We urge Congress to direct FDA to be very active in 
advising generic companies about how to comply with study 
design, data requirements and other issues. And we urge 
Congress, once it enacts legislation--and I believe it is 
inevitable that Congress will enact this legislation--to 
periodically monitor FDA and perhaps require FDA to issue 
regular reports back to Congress.
    In conclusion, Mr. Chairman, we ask for your help. As a 
result of the 1984 Hatch-Waxman Act, the generic drug industry 
now includes highly sophisticated and substantially capitalized 
companies that are ready to enter this market. A significant 
number of today's biopharmaceuticals are ready for generic 
versions. An effective and efficient generic biopharmaceuticals 
program will result in tremendous untapped cost savings to this 
Nation's health care system.
    In other words, today the case for legislative action is as 
strong as it was in 1984. The problem demands your attention. 
We thank you for this hearing and the generic industry stands 
ready to assist you in any way that we can.
    [The prepared statement of Mr. Schultz appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you so much. We appreciate that 
excellent testimony.
    Mr. Beier, we will turn to you. We are glad to have you 
here.

    STATEMENT OF DAVID BEIER, SENIOR VICE PRESIDENT, GLOBAL 
       GOVERNMENT AFFAIRS, AMGEN, INC., WASHINGTON, D.C.

    Mr. Beier. Good morning, Chairman Hatch. On behalf of 
Amgen, the world's largest biotechnology company, I come before 
you this morning with a simple message: Put patients first and 
sound policy will follow. We believe there may be a role for 
follow-on biologics in the marketplace if patient safety is 
assured and innovation is encouraged and protected.
    Everyday, over 80 Americans discover that they have 
leukemia. In the past hour, 150 Americans learned that they 
have diabetes. For each of these patients, there is only one 
issue before them: hope for access to safe, new cures and 
treatments. The best and brightest hope for breakthroughs for 
these patients comes from the United States biotechnology 
industry.
    Almost half of the new medicines approved by the FDA last 
year were biological products, and over 300 biotechnology 
products are currently available in Phase III trials. As 
Kenneth Shine, the head of the Institute of Medicine, said, the 
20th century was the century of physics and astronomy. The 21st 
century is going to be the century of biology and life 
sciences.
    Let me be perfectly clear. Biological products are not the 
same as drugs. As the picture on the chart demonstrates, they 
are very different--very, very different in terms of their size 
and complexity. Biological products are immensely more 
complicated to manufacture, and therefore to reproduce by 
another manufacturer. That is why there needs to be a unique 
model for the approval of follow-on biologics.
    My colleague, Bill Schultz, referred to 1984 and claimed 
that it was an analogous situation. In 1984, there were 
hundreds of profitable pharmaceutical companies, tens of 
thousands of drugs, and one-third of the leading 200 drugs were 
already subjected to generic competition. The FDA had 
previously issued a scientific regulation outlining the 
circumstances for the approval of a generic product.
    In 2004, there are 1,100 biotech companies. Only a handful 
of them make money. There are only 155 products on the market 
and there is no regulatory pathway, no scientific basis for the 
approval of follow-on products until and unless a process like 
the one Commissioner Crawford outlined takes place.
    As the FDA recognized this spring in its Critical Path 
Report which analyzed trends in drug innovation and 
development, there is a substantial risk that the promise of 
biological breakthroughs will not fully bear fruit in part 
because of increased complexity and expensive development. With 
these increased risks comes the need for strong incentives for 
innovation.
    Mr. Chairman, as the author of Hatch-Waxman and as a 
supporter of innovation through other mechanisms such as orphan 
drug and pediatric exclusivity, you know firsthand the power of 
strong but fair patents, data exclusivity and trade secrets to 
spur investment, innovation, and ultimately for breakthroughs 
for patients. As the Supreme Court said in the Benito vote 
case, the intellectual property system is a carefully crafted 
bargain, much like the one you crafted in 1984, Mr. Chairman.
    This morning, we start and end with patients. Patients 
benefit profoundly when there are balanced incentives to 
innovate. Patients are also benefitted when they know, after a 
complete public and science-based process, that medicines they 
take are completely safe and completely effective.
    Current law does not provide the FDA with authority to 
approve follow-on biologics. We welcome the invitation from 
this Committee to begin a dialogue about a regulatory pathway 
for follow-on biologics. We believe that Congress must protect 
innovation before the FDA proceeds with the first steps toward 
a rulemaking or even a public process leading to guidance on 
science issues.
    What do I mean by protection for innovation? In sum, it is 
the combination of patents, data exclusivity and trade secret 
protection. Billions of dollars of reasonable, investment-
backed expectations rest on the maintenance of these rights. 
These rights benefit patients by promoting research and 
development for new breakthroughs. They protect the invention, 
usually in the form of a product patent, or, often for biotech 
products, the process. They also protect the pre-clinical and 
clinical trial data created by an innovator at the cost of 
hundreds of millions of dollars. This data exclusivity is an 
integral component of innovation protection. Finally, the 
proprietary formulas, especially the detailed manufacturing 
specifications, are protected under Federal law as trade 
secrets.
    As an innovator, Amgen does not seek to extend our legal 
rights beyond the metes and bounds of existing innovator 
protections. On the other hand, we would be concerned if the 
FDA seeks to rely on our proprietary data to approve a follow-
on product.
    To respond to Mr. Schultz' comments, it is true that the 
FDA in other analogous regulatory systems relies on the 
approval of other products. But as he carefully noted, they do 
not rely on the underlying data of the innovator. Our concern 
is about whether the agency would pierce our trade secrets and 
knowledge of our manufacturing process and use that information 
to approve a follow-on product.
    Finally, let me briefly address a topic not directly before 
the Committee; that is, what are the appropriate regulatory 
rules that would permit the approval of a follow-on product.
    In the main, we believe that pre-clinical data, clinical 
trials to demonstrate safety and efficacy and robust post-
approval safety surveillance measures will be necessary. I 
stress these points because some of the other witnesses before 
you today indicate that they want to look to precedents in 
either China or Lithuania. Those systems do not have those 
elements and in some instances don't protect the intellectual 
property of the innovators.
    While the exact standards for follow-on products will vary 
from product to product, there need to be some irreducible 
minimum data standards before an approval can be granted. Why 
do we take this view? First, we believe that significant or 
major manufacturing changes in biologic products made by 
anyone, including the innovators, need robust data submissions.
    Second, because biologics, especially complex proteins like 
the one outlined on the chart, are unique mixtures of active 
species, it is literally impossible for a second manufacturer 
to copy or duplicate the original product. Significant changes 
in cell lines and the manufacturing process to produce these 
products thus require a profound level of investigation, which 
can include pre-clinical and clinical data, before any 
reasonable regulatory authority can assess the safety and 
efficacy of these products.
    In closing, we welcome this invitation and express our 
continued interest in working with you, Mr. Chairman, and the 
Congress and the FDA to fashion reasonable rules for follow-on 
biologics, including the protection of innovator rights and 
measures to assure patient safety.
    Thank you.
    [The prepared statement of Mr. Beier appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you so much.
    Dr. Ben-Maimon, we will take your testimony.

   STATEMENT OF CAROLE BEN-MAIMON, M.D., PRESIDENT AND CHIEF 
     OPERATING OFFICER, BARR RESEARCH, INC., BALA CYNWYD, 
                          PENNSYLVANIA

    Dr. Ben-Maimon. Thank you for inviting me here today. My 
experience as a physician and in both generic and propriety 
drug development provides me, I think, a unique perspective on 
the pharmaceutical industry. It really is this perspective that 
truly appreciates the value and contributions of the Hatch-
Waxman Act. It also provides a perspective that makes me an 
advocate for a legislative process permitting the timely and 
efficient introduction of more affordable generic versions of 
biotech drugs.
    The issues before this Committee today are not unlike those 
20 years ago, when Congress created a legislative pathway for 
efficient and timely approval of generic drugs. Indeed, many of 
the arguments opposing Hatch-Waxman are being made and will 
continue to be made during this debate, namely the generic 
companies lack the scientific sophistication to operate in this 
complex arena, that it is impossible to adequately characterize 
the innovator products, and that the safety and efficacy of 
generic biotech products cannot be assured. I would like to 
assure you that this is not the case.
    Today, I would like to make three points. First, America is 
at risk of losing its leadership position in 
biopharmaceuticals. Second, the science exists to support an 
abbreviated approval process. And, third, the economics for 
generic biopharmaceuticals are compelling, and without them 
consumers will lose billions in savings while citizens of other 
countries realize the benefits of competition.
    To say that generic biotech products cannot be made flies 
in the face of the facts. The truth is it is already being done 
in other parts of the world. Biogenerics are being developed, 
produced and sold in countries such as Poland, China and 
Lithuania. The loss of a leadership position threatens that 
other countries will be dictating standards for regulatory 
approval and the quality of the products that ultimately end up 
in the United States. In addition, American scientists will 
lose the opportunity for the high-quality jobs that a robust 
American generic biopharmaceutical industry could bring to the 
United States.
    The marketing of generic biotech products in other 
countries clearly demonstrates that products are comparable and 
that safety is not an issue. The exposure of thousands of 
patients without untoward effects demonstrates that these 
products are effective and safe. There are also a number of 
biotech products that already multi-source in the United 
States.
    Insulin and human growth hormones are good examples. Each 
of these products required full development programs. A generic 
biopharmaceutical approval process must not require generics to 
re-create unnecessary clinical and pre-clinical data. The 
argument is made that biotech drugs are so complex that they 
cannot be characterized. This ignores the fact that advances 
over the past 20 years in analytical methods and validation 
techniques have allowed companies to characterize their 
biological drug products such that the impact of changes in 
processes and cell lines can be evaluated, and biologic drug 
products can be kept constant. The fact is that generic 
companies are no less capable than brand companies of applying 
state-of-the-art science in manufacturing and product 
development.
    The argument is made that there is a magic process. This 
may have been true when manufacturing processes were not 
validated and analytical methods were not advanced enough to 
characterize the final product. This is no longer the case. If 
it were, many of the products made by the various biotech 
manufacturers would not be available today. The regulatory 
system allows for the flexibility needed to make the necessary 
changes to processes, and even cell lines, required that 
enables them to supply these important drug products. In 
reality, biotech firms routinely justify process and site 
changes.
    Finally, the need for generic versions of 
biopharmaceuticals is compelling. America's pharmaceutical 
biotechnology industry is one of the most successful and 
fastest growing segments of the U.S. health care system. Ten 
years ago, revenues for this industry were approximately $8 
billion. According to IMS, the pharmaceutical biotech industry 
enjoyed in 2003 a revenue growth in excess of 22 percent, 
compared to 11 percent of the total market. By 2010, analysts 
estimate that biotechnology product sales will exceed $60 
billion.
    Generic competition is essential to control costs and to 
continue to stimulate innovation. If Congress does not act now, 
Americans will continue to face escalating drug costs. We urge 
Congress to create legislation that will clearly define a 
pathway that enables FDA to review and approve generic 
biopharmaceutical products in a timely manner. We urge Congress 
to ensure that requests for FDA approval are based on science 
and FDA does not place requirements on generic companies to re-
create already established science, thus resulting in 
significantly increased expense and limited access.
    In summary, we recognize the investment made by the biotech 
industry and the need for them to recoup their investment. But 
as has been proven under the Hatch-Waxman Act, generic 
competition fuels future innovation. Now is the time to provide 
the balance of competition to keep America's biotech innovators 
strong and growing.
    Thank you.
    [The prepared statement of Dr. Ben-Maimon appears as a 
submission for the record.]
    Chairman Hatch. Thank you, Doctor. We appreciate it.
    Dr. Hancock, we will take your testimony now.

    STATEMENT OF WILLIAM HANCOCK, M.D., BRADSTREET CHAIR OF 
   BIOANALYTICAL CHEMISTRY, NORTHEASTERN UNIVERSITY, BOSTON, 
                         MASSACHUSETTS

    Dr. Hancock. Chairman Hatch, I would like to thank you very 
much for the opportunity to appear here and to discuss these 
very interesting and challenging scientific issues.
    At the onset, I would also like to apologize that with the 
short notice I had and with the complexity of the issues, I did 
not submit full testimony. But I am willing to update that 
after the hearing, if that should prove helpful.
    Chairman Hatch. We will be happy to have you do that.
    Dr. Hancock. So, now, when you introduced me, you went 
through some of my career. I think I have been fortunate that I 
have been able to experience academia and the biotechnology 
industry in the early days, and then the instrument companies 
Hewlett-Packard and ThermoElectron, because I was interested in 
devising new analytical instrumentation. Now, I have closed the 
circle and I am back in academia. So I have really seen the 
issue from all sides, as it were.
    In this situation, I am well aware that discussing the 
technology can become very eye-glazing. So rather than descend 
into the detail, what I would like to do is just to go through 
some of the issues and experiences that can illustrate the 
complexity of biological drugs and the follow-on products.
    I was actually interested to note that one of my colleagues 
here used aspirin as an example of a small molecule. I actually 
have chosen that, too, perhaps subconsciously with the thought 
that the complexity of this issue would leave us all with a 
headache. But we will see what happens.
    If we compare aspirin with, say, insulin, the smallest of 
proteins, we see with insulin that it is a much more complex 
molecule and a change in a single amino acid can result in 
diabetes. So very subtle changes can have profound medical 
effects, and this is true much more so as we go to even more 
complex proteins. Also, we know that certain proteins are 
species-specific, again showing that one amino acid can make a 
total difference in the activity of the protein.
    Then I mention the composition, that biologics can be 
composed of millions of atoms versus, say, 60 or 100. When I 
was at Genentech, we characterized Activase and we showed that 
Activase contained 300,000 different molecular forms. So 
although Activase was pure, what we were faced with was 
producing Activase as a constant or consistent mixture that had 
desirable and effective properties in the patient, but it was a 
very complex mixture. And that was produced in mammalian cells.
    If we move on to manufacturing and product quality, 
obviously biotechnology is different. Rather than doing a 
chemical synthesis, we will take typically an insertion of DNA 
into bacterial or mammalian cells, and that is our 
manufacturing process.
    Now, at Genentech we were proud that we took growth hormone 
and we forced E. coli to produce 25 percent of its protein as 
growth hormone. One-quarter of the cell was growth hormone. The 
bacteria was unhappy with that situation. It fought back. It 
would get rid of the excess genes, it would mutate and would 
try and lower the level of growth hormone expressed by reducing 
the number of plasmid copies. So nature does fight back, and 
that is true for all these engineered cells. So it requires the 
manufacturer to be on top of what is going on in the test tube 
or fermenter, as it were.
    So I think as a general comment here, what we rely on is 
that the manufacturer puts in a lot of very good-quality 
science and process, and then, of course, the FDA very well 
regulates to check that the company is really controlling all 
of these things.
    In the area of quality and good manufacturing practice, as 
an example, here I would like to note, of course, that blood is 
a biologic. So while we don't use blood as a raw material, many 
of the raw materials to make the cell grow well are from a 
complex source. So there are instances of contamination. The 
BSE scare, mad cow disease--they remind us, then, that a 
natural source is not necessarily safe.
    Unfortunately, we continue to discover things. We may 
discover new viruses, so that a raw material that we think is 
safe today may not be in the future. So, again, we need good 
science and good, I think, regulatory interactions to 
consistently stay on top of things.
    I think we are looking at manufacturing in an international 
perspective. So, for example, a drug may be manufactured in 
Europe, and we notice that water, for example, in Europe is 
different from here. So I could go on with these different 
things, but I think the issue is that the process is very 
important here. We must regulate the process. We cannot just 
regulate through final product testing.
    I also note that product variance can be recognized by the 
immune system in the body. So, for example, a diabetic may have 
some function of the pancreas. Although they have some 
function, they get a boost from insulin. If we have product 
variance, the immune system can produce antibodies to insulin 
and destroy the remaining pancreatic functionality. So we have 
actually made the patient worse rather than better. And, of 
course, you can have other situations where there is immune 
disease.
    In conclusion, I would like to note, that I think there are 
major unresolved scientific hurdles, presently and in the near 
future, that are going to require very close cooperation 
between the manufacturers and the regulatory authorities. We 
are going to need animal testing and clinical trials so that at 
the end of the day we don't get to the situation where there is 
a surprise in the market.
    I think ultimately if we don't do our job well--that is, in 
the analytical production and the testing--it is the patient 
population that will be the final tester and will pick up the 
side effects when the product is marketed. So I encourage the 
Committee to consider this interaction between the FDA and the 
manufacturers. Currently, we have a very strong process with 
full testing for new drug approvals. So I think as we move 
forward, it is important that this is not diluted, and that the 
science and regulation continues to be very strong.
    Thank you.
    [The prepared statement of Dr. Hancock appears as a 
submission for the record.]
    Chairman Hatch. Well, thank you. I thank all of you for 
your testimony here today.
    Let me start with you, Dr. Ben-Maimon. On average, how much 
will consumers save in the cost of pharmaceuticals by the 
presence or generic biologics?
    Dr. Ben-Maimon. I think as stated earlier, it is difficult 
to quantify and I think it was a very good point that was made 
by Dan Troy that really it depends on how many companies can 
enter the marketplace.
    I think what is significant is when you look at the generic 
drug process, the savings are really reaped in two very 
specific areas; first, in the area of R&D, where the pathway is 
abbreviated enough that the investment is more limited, and 
obviously then what needs to be charged at the other end can be 
substantially decreased.
    I think the second is in the sales force. Generic companies 
sell essentially to pharmacies and wholesalers, whereas the 
brand industry promotes their products to doctors who are all 
over the country. Today, there are really a limited number of 
chain drug stores and wholesalers. So whereas a generic company 
can have a sales force of maybe ten sales reps, a brand company 
can have thousands of sales reps visiting doctors. That 
translates ultimately into cost savings because obviously the 
cost of promoting the products is less.
    So I think that as the process is constructed, the savings 
are substantial. Even though the investment will probably be 
greater initially for generic companies to get into the 
biotechnology area, the savings will be substantial and people 
have estimated that the savings will be at least 50 percent. 
But, again, I think that depends a lot on how many other 
companies are out there.
    I would also say, Senator Hatch, that early on it may be 
more expensive than as we get through the process and the 
systems are in place. Finally, I think it is important to note 
that even today Barr, for instance, is developing a vaccine for 
the Department of Defense. So some of the processes are already 
going to be in place at certain companies, and that should 
provide a saving to some extent as well.
    Chairman Hatch. Well, you mentioned that under the current 
system innovator biotech companies may make changes to the 
manufacturing process of a biologic and establish safety and 
effectiveness for efficacy without conducting full-scale 
clinical trials by using what I think you referred to as a 
comparability protocol.
    You suggested that manufacturing generic companies could 
use a similar process, namely the use of surrogate markers, 
under the comparability protocol to establish the safety and 
effectiveness of generic biologics. However, when an innovator 
company makes changes to the manufacturing process, they also 
have access to the original cell chain. Companies manufacturing 
generic biologics, on the other hand, do not, which seems to me 
a problem.
    Given that the production of biologics is dependent on a 
number of variables, including the manufacturing process and 
the host cell chain, how could the producer of generic biologic 
ensure that the product is safe and effective, given the number 
of variables that differ from the production of the original 
biologic, without conducting new clinical trials?
    Dr. Ben-Maimon. I think it is an important point and I 
think it is essential to recognize that as a physician, safety 
and efficacy are critical. And I think the generic industry is 
just as committed to the safety and efficacy of its biotech 
products as it already is to its generic drug products.
    I also think we have to differentiate between post-approval 
changes and pre-approval changes. When you talk about prior to 
approval, I think the generic industry--and I will speak for 
Barr, not for the generic industry, but at least at Barr we 
recognize that there will be some clinical trials required. 
Clearly, this will vary depending on the complexity of the 
product.
    But what is submitted to the agency is a package of 
information and it should be reviewed and evaluated as a 
package. There will be multiple analytical methods, multiple 
assessments of the actual molecular structure and, again, 
comparability. And then with all likelihood, depending upon the 
product, there will need to be some clinical trials done, but I 
would venture to say that they could be done on surrogate 
markers such as hemoglobin, white blood cells, glucose, rather 
than actually trying to re-create the wheel and looking at 
long-term morbidity and mortality, as some of these other 
products were early in the development programs for the 
innovators.
    So I think what we are asking for is a process that could 
be put in place that would allow us to discuss the requirements 
with the agency on a product-by-product basis that would look 
at each product as a continuum, as exists with generic drugs 
today. I mean, it is a continuum from the very simple to the 
very complex in the drug area, as well as in the biotech area. 
Really, the differentiation shouldn't be whether it is biotech 
product or a drug, but how complex that product is and what the 
requirements should be to ensure that it is safe and effective.
    Chairman Hatch. I notice Senator Schumer is here. I will 
finish this question with you and then I will turn to Senator 
Schumer, who would like to make a statement, and then I have 
questions for each of the rest of you as well.
    Dr. Ben-Maimon, you stated that you believe some products 
have been misclassified under the PHSA and that they should be 
rightly classified under the Food, Drug and Cosmetic Act, given 
that 351 of the PHSA currently speaks to the approval of 
biologics.
    What type of products do you believe were misclassified 
under the PHSA, and also why do you believe that the Food, Drug 
and Cosmetic Act should govern the approval of biologics?
    Dr. Ben-Maimon. I am not an attorney, so I will speak as a 
physician reading the language in the law, which may not be the 
appropriate way to do things, but that is only position I can 
come from.
    The broader of the two laws is the FD&C Act, and it is 
clear that at least for manufacturing requirements and GMPs and 
a lot of the manufacturing changes, and even now today with the 
merger of CBER and CDER, the FD&C is the broader of the acts 
and applies to--and I think it even was stated by the FDA this 
morning that biotech products actually qualify as drugs even 
though the counter may not be true.
    In addition to that, when you look at the PHSA Act, it is 
very clear from the language that they are talking about 
viruses, products that induce antitoxins, products that induce 
immunogenicity or allergens. And then there is this term ``and 
analogous products.''
    Biotech drugs, at least the ones we are talking about 
today, are the products that are made through recombinant 
technologies, and those products really are not viruses. They 
are not antitoxins, they are not arsenic. They really don't 
meet any of the very specific definitions listed in that 
definition in the legislation, and they have been sort of put 
there under analogous products.
    So I just question whether that was a convenient place to 
have put them rather than really where they belong, and whether 
they really belong in the drug arena because they really act 
and perform as drugs and that FD&C regulates them as well.
    Mr. Beier. Mr. Chairman, can I comment on that question?
    Chairman Hatch. Sure.
    Mr. Beier. I think the attempt to read the Public Health 
Service Act in that manner is frankly wrong. The FDA has 
construed the term ``analogous'' to include biotech products 
for more than 20 years. And to suggest an abrupt change of this 
nature would likely be struck down by courts as not having gone 
through the appropriate process. I would be glad to submit 
something for the record on that question.
    Chairman Hatch. That would be fine. Thank you. I am going 
to turn to Senator Schumer for his statement and then I would 
like to get back to the final questions.
    Senator Schumer. I have questions, as well, Mr. Chairman, 
but I will defer those until after yours.
    Chairman Hatch. Okay.

 STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE 
                       STATE OF NEW YORK

    Senator Schumer. Thank you, Mr. Chairman, for holding this 
hearing on an issue that I care a great deal about, and many of 
us do, and that is affordable biologic medicines. As everyone 
knows, in 1984, Chairman Hatch, you authored a piece of 
legislation which has proven to be one of the most pro-consumer 
laws in our time. Hatch-Waxman helped millions of people save 
billions and billions of dollars on prescription drugs over the 
past two decades. And, of course, I have been actively involved 
in making it stronger.
    I believe that biologics are the next frontier in our 
desire to make generic drugs as widely available as possible, 
to make cheaper drugs as widely available as possible. In 
recent years, we have had lots of changes, and biologics are a 
$30 billion industry. They account now for 12 percent of the 
total of pharmaceuticals. And the industry is growing at 20 
percent, so every year they increase their percentage of the 
drug market. This is where we should be placing our focus now.
    Products with $10 billion in sales are expected to come off 
patent in the next several years, and that presents a real 
opportunity. The bottom line is from the perspective of those 
of us who fought for improvements in the generic drug law, 
biologic medicines are no different. While the biotech industry 
benefitted from the patent restoration side of Hatch-Waxman, 
the law did not explicitly set up a fast-track generic approval 
system for all biologics at that time because the industry was 
so new. Well, it is no longer new. Patents have been extended 
and we ought to get to work on it. That is why I am so glad, 
Mr. Chairman, that you have held this hearing.
    Now, obviously, there are differences between chemical 
drugs and biologic drugs. Biologic drugs are extremely complex 
and expensive to produce. Patients who use them spend tens of 
thousands of dollars a year for a single treatment, with the 
most expensive therapy costing around $200,000. But they are 
critical in many instances. They are life-saving drugs treating 
diseases like cancer and diabetes and MS and rare diseases, and 
the technology holds the promise of finding cures for things 
like Alzheimer's disease and Parkinson's disease.
    But even more than in the chemical drug area, the 
exorbitant cost of the drugs often means that people can't 
afford to take them. Though the world of biologic medicines is 
an extremely complex business, we have no choice but to seize 
this opportunity to do the right thing for consumers, to find a 
way using cutting-edge science to ensure that safe, affordable 
alternatives are brought to market as soon as possible. Of 
course, we have to find a way to do this without cutting 
innovators off at the knees.
    Companies are already marketing safe, effective and 
affordable biologics in Eastern Europe, Russia, Asia and Latin 
America. They are not yet available in the EU, which has a 
system of drug regulation similar to ours. But the EU has 
issued guidance on how biologics could be done. They issued 
that several years ago and they are well on their way to 
approving several follow-on biologic products.
    So, unfortunately, in this area America lags sadly behind 
many other countries. Surely, if the science is adequate to 
produce these products elsewhere, especially in Europe where 
the system of regulation, as I mentioned, is similar to ours, 
we can do it here. So we have got to get the process rolling.
    I was encouraged by what seemed to be an eagerness on the 
part of the FDA under Commissioner McClellan to issue a draft 
scientific guidance to begin to lay out what is known and what 
is not known about the science of producing affordable 
biologics. But, unfortunately, the process may be slowing.
    I had some questions for the FDA. I couldn't be here. I had 
a conflict, but I would ask unanimous consent to submit them in 
writing and get them to answer them.
    Chairman Hatch. We have allowed the record to be open until 
the end of the day.
    Senator Schumer. So we hope the process is not slowing, but 
it seems it has in the FDA. Certainly, part of this process 
should be a vibrant public debate. But the FDA has done a whole 
lot of thinking on the science behind this and the agency 
should issue its guidance now so we can get going on the drugs 
we do know something about.
    With biologic drugs being extremely complex, it is my 
understanding that there is still a full spectrum of complexity 
among marketed products. There are some that are easier to do 
and some that are harder to do, and you don't have to solve the 
most difficult problem before getting guidance on some of the 
easier problems. The FDA has said it has the authority to 
approve the follow-on products for those drugs that were 
originally approved under the Food, Drug and Cosmetic Act, and 
some of these drugs are less complicated on the spectrum.
    We may not be able to jump head-first into this with a one-
size-fits-all system that works for every drug on the market, 
but we have got to begin somewhere and we have got to begin 
now, and I hope this hearing will prod the FDA to move forward 
more quickly.
    I thank you, Mr. Chairman, for holding the hearing.
    Chairman Hatch. Thank you, Senator.
    Mr. Schultz, in your testimony you refute many of the 
arguments made by the brand name companies that they have 
expressed in opposition to a system for the approval of follow-
on biologics, such as that it would amount to a taking of their 
property without just compensation. You also state that you 
believe the FDA currently has the legal authority to approve 
generic biopharmaceuticals, and we all agree. This is one of 
the great strengths of this country, is the innovation in the 
health care industry.
    How would you envision maintaining incentives for 
innovation in the biotechnology industry?
    Mr. Schultz. Well, I think the first step is to look at the 
incentives that are there, the patent system, and so forth. The 
products that are coming off patent, just roughly looking at 
it, have been on the market for 10, 12 or more years, and the 
question is: is there some problem in terms of their 
profitability?
    I think there is a very strong case that the incentives are 
already there and once the products have been on the market for 
the period of the patent life, when the patents expire, they 
ought to be available for generics. Obviously, the brands are 
free to make a case that there are inadequate incentives, but I 
don't hear them making it. I don't hear them making that case.
    Chairman Hatch. I will ask this series of questions to both 
you and Mr. Beier, if you would care to comment.
    Mr. Beier. Mr. Chairman, the existence of incentives to 
support risky inventions is something that you know firsthand. 
You know that because you were the author of orphan drug 
exclusivity and, working with Senator DeWine, pediatric 
exclusivity. So the opportunity to use market forces to create 
cure capital--that is, investments in start-up biotech 
companies--is a profound one.
    The United States has 1,200 biotech companies. About 30 
percent of those are publicly traded. But as I indicated 
before, an overwhelming majority, well over 90 percent of those 
companies, lose money every year. They make massive investments 
in R&D. The way in which their investments are protected is a 
combination of three things--patent protection, data 
exclusivity, and trade secret protection. Let me go through 
them in a series.
    First, with respect to patent protection, as Senator 
Schumer noted correctly, the biotechnology industry is covered 
in part by Hatch-Waxman, but it is not covered with respect to 
process patents. And as a result, none of the patent listing or 
the litigation protections and procedures that were offered by 
Senator Schumer and Senator McCain and others last year apply 
to the biotechnology industry.
    The second way in which the biotechnology industry has 
innovator rights is data exclusivity; that is, the rights they 
have in the case report forms and other clinical data. The 
question that is posed before this Committee and ultimately the 
whole Congress will be what are the rules with respect to that 
kind of data.
    And then the third kind of exclusivity is trade secret 
protection, usually contained in the CMC section of an 
application to the FDA; that is the cell lines, the master cell 
lines, the fermentation methods, all the process quality steps 
that are necessary for complex proteins. That third category of 
information is hugely important and a subject of a lot of 
investment by biotech companies. So when Mr. Schultz says it is 
fine when the patent expires that you can use all the data, I 
think that doesn't answer the complete question. You have to 
look at the other components, both data exclusivity and trade 
secret protection.
    Let me also make one other point. I would like to submit 
for the record some rebuttal to Mr. Schultz' comments about OTC 
and food additives, because I don't think they are particularly 
apt in this case.
    Chairman Hatch. Without objection, we will take that in the 
record.
    Let me just ask both of you this question. The recent 
example of Pure Red Cell Aplasia, which is associated with the 
use of EPO, erythropoietin--is that the way you pronounce it?
    Mr. Schultz. EPO is good enough for me.
    Chairman Hatch. EPO is good enough for me, too.
    This highlighted a number of antibody-mediated reactions 
associated with biopharmaceuticals. The cause for this serious 
side effect appears to be due to a subtle change that occurs 
during the manufacturing and reformulation process or in the 
handling and distribution process. It is now clear that nearly 
all biopharmaceuticals induce antibodies with the possibility, 
as mentioned by Dr. Hancock, of these serious immune reactions 
by two mechanisms--the classical reaction and the new mechanism 
of breaking immune tolerance.
    How does this risk attributed to a subtle change in the 
molecule due to a manufacturing or formulation change affect 
the issue of ensuring patient safety in the manufacture of 
generic biopharmaceuticals?
    Mr. Beier. Mr. Chairman, I think the best place to start is 
we looked at the public domain literature on manufacturing 
changes. It is important to make a distinction between 
manufacturing changes made by a company that has access to the 
trade secrets and the manufacturing data; that is, an innovator 
company making changes to their own process is quite a 
different thing from a follow-on company who would be 
necessarily using a different cell line, different 
fermentation, a whole series of other things.
    If you look at the publicly available literature, the 
potential safety risks for patients include immune response 
that you have noted with respect to the Eprex situation in 
Europe, potential allergic reactions, differences in 
glycosylation--that is, the sugar residues around the 
products--and a decrease in potency.
    These changes can result from either changes in 
manufacturing sites or methods, changes in cell lines, changes 
in excipients, changes in storage or in transportation, or in 
scale-up differences between manufacturers. All of those things 
need to be taken into account because for complex proteins, the 
FDA is regulating not just the product, but the process of 
manufacture.
    So as the FDA proceeds with the science-based effort that 
they have got underway with DIA, they are going to be looking 
at manufacturing experts, academic experts, and we fully expect 
to cooperate completely with them, as we are with European 
regulators, in providing our best professional judgment about 
what is necessary to assure patient safety.
    Mr. Schultz. Could I comment? The FDA is charged with 
regulating a wide range of very, very tricky products, and 
everyday it is making these important scientific decisions. And 
this is true for the first biological to come on the market 
just as it will be true when the second one and the generic one 
comes on the market.
    But this is why it is so important that in the legislation 
Congress give the FDA the flexibility to make the right 
scientific decision. And I think it is important, whether you 
are talking about the brand product or the generic. Dr. Ben-
Maimon actually knows something about the science and she would 
like to comment on this as well.
    Chairman Hatch. Sure.
    Dr. Ben-Maimon. I think in this situation it is exactly 
what I spoke about before. You have to separate post-approval 
changes from pre-approval changes. And in this situation, the 
changes that you are referring to occurred after approval and 
should have required additional work. They were also changes, 
as I understand it, in the formulation itself, with the 
deletion of what probably should have been considered a major 
component.
    Quite honestly, this whole issue of the process is 
essential from the standpoint of the biotech industry. But the 
generic industry and the drug industry are actually much more 
experienced and much more sensitive to changes in formulation 
that ultimately impact things like stability. So I think when 
you talk about biotech generics and you are talking about pre-
approval issues, you will have clinical data in the application 
that will have been discussed and worked out with the agency to 
allow you to look at the safety and efficacy of the product at 
the time of approval.
    What occurs post-approval is dictated by all kinds of 
regulations with prior approval, and you have heard in some of 
the testimony that was written changes being affected and some 
others. But, clearly, prior to approval, whatever the 
development process is will be tested clinically in patients. 
So the agency will be basing its decision not on changes, but 
on the data contained in the application, which is dramatically 
distinct from the Eprex circumstances which happened post-
approval.
    Chairman Hatch. Dr. Hancock.
    Dr. Hancock. I have a concern that this discussion makes it 
sound easier than it really is. The changes are so subtle that 
I think often, even within the company, one cannot quite 
understand what happened to the product when a particular resin 
or purification or whatever changed. So I just want to 
emphasize for the Committee that these changes are very subtle 
and very wide-reaching, and we need to be very careful as we 
move forward.
    Chairman Hatch. Thank you all. I appreciate you. I have a 
number of questions I am going to submit in writing because 
this is a complex area, and I would appreciate your sending 
back your answers as quickly as possible. My time is up.
    Senator Schumer, I have got to leave in about 5 minutes.
    Senator Schumer. I will be quick, Mr. Chairman. I would 
first ask unanimous consent to submit a whole lot of questions 
in writing.
    Chairman Hatch. Without objection.
    Senator Schumer. For Mr. Schultz, again, it is my 
understanding that the FDA had planned to issue draft guidance 
this summer laying out the scientific parameters relevant to 
the creation of follow-on biologics. Is that correct?
    Mr. Schultz. It was widely anticipated. That was my 
understanding, too.
    Senator Schumer. Right, okay. Now, it seems this guidance 
is being delayed and they are having this public symposium 
first. At least it seems to me that the FDA has tremendous 
scientific expertise here. They have already said they have 
authority to approve follow-up products, at least for some of 
the drugs.
    Wouldn't it make sense from your point of view and from the 
consumer's point of view for the FDA to issue its guidance now 
so we can get going on products we know something about?
    Mr. Schultz. Particularly since the guidance that it was 
going to issue was a draft for comment. That is, it was going 
to be its first cut at it and there would have been a public 
discussion anyway. Now, I gather that is all being pushed back 
for a symposium.
    Senator Schumer. The public discussion doesn't have a root, 
a basis. It sort of floats out there in the ether, I guess. Do 
you have any idea why they delayed it?
    Mr. Schultz. No, I don't.
    Senator Schumer. Does anyone here?
    No, okay.
    Does anyone disagree that the FDA should move forward now? 
I am sure there would be some people maybe at the ends of the 
table.
    Dr. Hancock. I will take the bait, Senator. I do represent 
the coast; maybe it is the end of the table, too. I 
participated in the first consensus forum meeting the FDA held 
right at the beginning of biotechnology, which related to the 
approval of insulin. And I really think it is a very good 
process. It brought together all of the various biotech 
companies in the world at the time and international experts, 
and I think drove a consensus together. I really think that did 
speed up the FDA.
    I can understand your concern for not having further delay, 
but I think the best way to speed things up is to hold this 
meeting quickly and for the FDA then to pass its comments on to 
you. I would really support that process.
    Senator Schumer. But what would be wrong with doing it the 
inverse, as Mr. Schultz sort of alluded to--put out their 
guidance first, then have the big discussion, because they are 
going to have to have comments anyway?
    Mr. Beier. Senator, I think the advantage to having a 
public forum before the issuance of a draft guidance is seen by 
the fact that the FDA frequently adopts that particular point 
of view. I would be glad to submit for the record the ten or 
more instances in which they have done this in the last 10 
years.
    The most recent one was the issuance of a draft guidance on 
pharmacogenomics, an equally complicated scientific endeavor--
the opportunity for targeted medicine like Gleevec and other 
things that we all celebrate everyday that bring cures to 
people with cancer. The development of this targeted therapy is 
of huge public health consequence. But before issuing the draft 
guidance, the FDA had several public forums, laid out all the 
appropriate scientific issues. As a result, when they finally 
came out with a document, it was more robust and there was a 
greater consensus.
    In the long run, consumers benefit by having confidence 
that the agency has engaged in a science-based, transparent 
public process, not just that several people in Rockville or 
elsewhere have thought about something and issued draft 
guidance.
    Senator Schumer. Mr. Beier, no one is disputing that. The 
question is whether they could have issued the guidance and 
then had some discussion based on it and then reacted to what 
the public had to say.

    Mr. Beier. The example, Senator, is if you look at what has 
happened in the European Union, the European Medicines 
Evaluation Agency came up with guidance in December. The agency 
is now struggling, because they did not have a public forum, 
did not bring in experts, about what exactly it means on a 
particular product basis. So an incomplete record can produce 
either unintended consequences or can place patients in a 
situation where they may lack confidence in the appropriate 
regulatory authority.

    Senator Schumer. Mr. Schultz.

    Mr. Schultz. There is a famous quote from Samuel Jonson, 
``nothing focuses the mind like a hanging.'' Well, nothing 
focuses the FDA like a directive from Congress. This where we 
are in the early 1980's. The FDA was talking about an ANDA 
program. It would have been many, many years before it got 
there if it weren't for the 1984 Hatch-Waxman Act. This is 
where they were in the late 1980's with regard to nutrition 
labeling. There again, Congress stepped in and it got done. I 
personally believe that this issue demands Congressional 
attention if your desire is to get it done.

    Senator Schumer. I agree with you completely, Mr. Schultz 
and I am going to focus on this and push the FDA to move 
forward because I agree. Sometimes, not always--and who knows 
in this case--having all these forums without anything concrete 
just leads to more forums and takes too long a time. I don't 
see the contradiction in having guidance and then having 
discussion and still solving the problems that Mr. Beier 
mentioned.

    You can get the last word from my questions, Dr. Hancock, 
because I am always mindful of my Chairman's schedule.

    Chairman Hatch. He is never mindful of my schedule, never, 
not once in the whole time he has been on this Committee.

    Senator Schumer. That is one of the nicest things he has 
said about me in quite a while.

    [Laughter.]

    Chairman Hatch. Actually, I have said one or two other nice 
things about you.

    Senator Schumer. Yes, you have; yes, you have, Mr. 
Chairman.

    Chairman Hatch. Actually, I appreciate my colleague. He is 
a very thoughtful, very aggressive, very hard-working 
colleague, and I appreciate him.

    Senator Schumer. Dr. Hancock.

    Dr. Hancock. I realize that I am between the Committee and 
lunch, so I would agree that Congress should really push all of 
us to be very vigorous in this area. I support that a hundred 
percent, but I would encourage you to give the FDA access to 
the international body of science. These are very difficult 
issues.

    I am actually working with the Human Proteom Organization, 
and it is amazing when you have a group of international 
scientists together what they come up with. I think we would 
move faster by assisting the FDA with as much outside help as 
we can, and I think the academics and government scientists 
stand ready to do that.

    Thank you for the last word.

    Chairman Hatch. Well, thank you. Let me just say, Mr. 
Schultz, I agree with you. It is inevitable that there will be 
legislation with regard to follow-on biologics. It is my hope 
that this hearing today will be a help to build a solid 
foundation so that we can do the job here, and it will be 
wisely done, in developing that legislation. In that regard, I 
would ask each of you and others in the audience as well and 
those who watch this on television to give us the best ideas 
you can so that we can proceed and get this all done.

    Finally, I just had one more question for you, Mr. Beier, 
that struck me as something I should ask before we finish, and 
this will be the last question. You stated in your submitted 
testimony that follow-on biologics cannot be considered 
therapeutically equivalent to the innovator product.

    How do you reconcile that argument with the 1995 FDA 
decision or finding--I guess it was a finding regarding Avanex, 
which was a biogen product for the treatment of relapsing forms 
of multiple sclerosis, that two cell's lines could be unique 
and yet comparable? This is the way I interpreted that.

    Mr. Beier. The testimony that I submitted indicates that we 
believe that follow-on products should not be therapeutically 
substitutable, which is you shouldn't have a patient on one 
particular product and then switch it to a follow-on product 
because that may produce a different immune response. So that 
is the answer to your first question.

    With respect to the specific case that you are talking 
about, it is a very highly unusual fact pattern involving an 
American company and a German company who collaborated who had 
a contract. Both companies had access to trade secret 
information and manufacturing data. The two companies then had 
a business disagreement and the submission of data from one of 
the dissatisfied parties did rely on the data from the other 
company, but there had been previous access to this 
information. So I think it is a relatively unique set of 
circumstances that led to that particular approval.

    Chairman Hatch. Well, thank you. I appreciate your comments 
on that. We will submit some further questions in writing. I 
think this has been a very interesting hearing.

    I am sorry, Dr. Hancock, that I ran out of time. I had some 
questions for you, as well, but I will submit them in writing 
and I know that you will more than adequately answer them.

    We are very grateful to all of you. We have learned a lot 
here today, and we challenge all of you and others in the 
scientific community to help us with regard to what I propose 
will be follow-on legislation. Thanks so much.

    With that, we will recess until further notice.

    [Whereupon, at 12:23 p.m., the Committee was adjourned.]

    [Questions and answers and submissions for the record 
follow.]

    [Additional material is being retained in the Committee 
files.]

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