[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
   SAFE AND AFFORDABLE BIOTECH DRUGS: THE NEED FOR A GENERIC PATHWAY

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 26, 2007

                               __________

                           Serial No. 110-43

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                      http://www.house.gov/reform


                    U.S. GOVERNMENT PRINTING OFFICE
40-874                      WASHINGTON : 2008
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001

             COMMITTEE ON OVERSISGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
TOM LANTOS, California               TOM DAVIS, Virginia
EDOLPHUS TOWNS, New York             DAN BURTON, Indiana
PAUL E. KANJORSKI, Pennsylvania      CHRISTOPHER SHAYS, Connecticut
CAROLYN B. MALONEY, New York         JOHN M. McHUGH, New York
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             MARK E. SOUDER, Indiana
DANNY K. DAVIS, Illinois             TODD RUSSELL PLATTS, Pennsylvania
JOHN F. TIERNEY, Massachusetts       CHRIS CANNON, Utah
WM. LACY CLAY, Missouri              JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California          MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts      DARRELL E. ISSA, California
BRIAN HIGGINS, New York              KENNY MARCHANT, Texas
JOHN A. YARMUTH, Kentucky            LYNN A. WESTMORELAND, Georgia
BRUCE L. BRALEY, Iowa                PATRICK T. McHENRY, North Carolina
ELEANOR HOLMES NORTON, District of   VIRGINIA FOXX, North Carolina
    Columbia                         BRIAN P. BILBRAY, California
BETTY McCOLLUM, Minnesota            BILL SALI, Idaho
JIM COOPER, Tennessee                ------ ------
CHRIS VAN HOLLEN, Maryland
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont

                     Phil Schiliro, Chief of Staff
                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
                  David Marin, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on March 26, 2007...................................     1
Statement of:
    Allen, Geoffrey, Ph.D, president, chief executive officer, 
      chairman of the board, Insmed Inc.; Theresa Lee Gerrard, 
      Ph.D, president, TLG Consulting, Inc. (Biopharmaceutical 
      Consultants formerly with Amgen and FDA'S Center for 
      Biologics); Bill Schwieterman, M.D., president, Tekgenics 
      Corp. (Biopharmaceutical Consultants formerly with FDA'S 
      Center for Biologics); Inger Mollerup, vice president for 
      regulatory affairs, Nova Nordisk A/S; and Ganesh 
      Venkataraman, Ph.D, senior vice president, research, 
      Momenta Pharmaceuticals, Inc...............................    57
        Allen, Geoffrey..........................................    57
        Gerrard, Theresa Lee.....................................    63
        Mollerup, Inger..........................................    84
        Schwieterman, Bill.......................................    72
        Venkataraman, Ganesh.....................................   102
    Brown, Yvonne, for the National Multiple Sclerosis Society; 
      Mary Nathan, for the National Organization for Rare 
      Disorders [NORD]; Nelda Barnett, board member, AARP; Priya 
      Mathur, vice chair, health benefits-Board of 
      Administration, California Public Employees' Retirement 
      System [CALPERS]; Scott D. McKibbin, special advocate for 
      prescription drugs, State of Illinois; Henry Grabowski, 
      Ph.D, professor of economics, director, Program in 
      Pharmaceuticals and Health Economics, Duke University; and 
      Jonah Houts, senior analyst, Express Scripts, Inc..........   127
        Barnett, Nelda...........................................   137
        Brown, Yvonne............................................   127
        Grabowski, Henry.........................................   161
        Houts, Jonah.............................................   257
        Mathur, Priya............................................   146
        McKibbin, Scott D........................................   154
        Nathan, Mary.............................................   129
    Woodcock, Janet, M.D., Deputy Commissioner for Operations and 
      Chief Medical Officer, Food and Drug Administration........    19
Letters, statements, etc., submitted for the record by:
    Allen, Geoffrey, Ph.D, president, chief executive officer, 
      chairman of the board, Insmed Inc., prepared statement of..    60
    Barnett, Nelda, board member, AARP, prepared statement of....   139
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............   268
    Davis, Hon. Danny K., a Representative in Congress from the 
      State of Illinois, information concerning biotech drugs....   265
    Davis, Hon. Tom, a Representative in Congress from the State 
      of Virginia, prepared statement of.........................    11
    Gerrard, Theresa Lee, Ph.D, president, TLG Consulting, Inc. 
      (Biopharmaceutical Consultants formerly with Amgen and 
      FDA'S Center for Biologics), prepared statement of.........    65
    Grabowski, Henry, Ph.D, professor of economics, director, 
      Program in Pharmaceuticals and Health Economics, Duke 
      University, prepared statement of..........................   163
    Houts, Jonah, senior analyst, Express Scripts, Inc., prepared 
      statement of...............................................   259
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................    16
    Mathur, Priya, vice chair, health benefits-Board of 
      Administration, California Public Employees' Retirement 
      System [CALPERS], prepared statement of....................   148
    McKibbin, Scott D., special advocate for prescription drugs, 
      State of Illinois, prepared statement of...................   157
    Mollerup, Inger, vice president for regulatory affairs, Nova 
      Nordisk A/S, prepared statement of.........................    86
    Nathan, Mary, for the National Organization for Rare 
      Disorders [NORD], prepared statement of....................   132
    Schwieterman, Bill, M.D., president, Tekgenics Corp. 
      (Biopharmaceutical Consultants formerly with FDA'S Center 
      for Biologics), prepared statement of......................    74
    Venkataraman, Ganesh, Ph.D, senior vice president, research, 
      Momenta Pharmaceuticals, Inc., prepared statement of.......   104
    Waxman, Chairman Henry A., a Representative in Congress from 
      the State of California, prepared statement of.............     4
    Woodcock, Janet, M.D., Deputy Commissioner for Operations and 
      Chief Medical Officer, Food and Drug Administration, 
      prepared statement of......................................    22


   SAFE AND AFFORDABLE BIOTECH DRUGS: THE NEED FOR A GENERIC PATHWAY

                              ----------                              


                         MONDAY, MARCH 26, 2007

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 a.m., in room 
2154, Rayburn House Office Building, Hon. Henry A. Waxman 
(chairman of the committee) presiding.
    Present: Representatives Waxman, Kucinich, Davis of 
Illinois, Yarmuth, Norton, Van Hollen, Hodes, Welch, Davis of 
Virginia, Burton, Issa, Bilbray, and Sali.
    Staff present: Phil Barnett, staff director and chief 
counsel; Kristin Amerling, general counsel; Karen Nelson, 
health policy director; Karen Lightfoot, communications 
director and senior policy advisor; Andy Schneider, chief 
health counsel; Sarah Despres, senior health counsel; Ann Witt, 
health counsel; Robin Appleberry and Rachel Sher, counsels; 
Earley Green, chief clerk; Teresa Coufal, deputy clerk; Caren 
Auchman, press assistant; Zhongrui ``JR'' Deng, chief 
information officer; Leneal Scott, information systems manager; 
Robin Pam, staff assistant; David Marin, minority staff 
director; Larry Halloran, minority deputy staff director; 
Jennifer Safavian, minority chief counsel for oversight and 
investigations; Susie Schulte, minority senior professional 
staff member; Kristina Husar, minority professional staff 
member; Patrick Lyden, minority parliamentarian and member 
services coordinator; Brian McNicoll, minority communications 
director; and Benjamin Chance, minority clerk.
    Chairman Waxman. The meeting of the committee will please 
come to order.
    More than 20 years ago the Congress enacted the Hatch-
Waxman Act. That law has taught us three things: genetic drugs 
are good for patients, both medically and financially; with a 
little help, the market works, generic competition lowers drug 
prices; and generic competition does not bankrupt the brand 
name drug industry or slow innovation.
    Maybe some big drug makers still dispute these lessons, but 
no one else does. But there is still no generic competition for 
one of the fastest-growing and most expensive categories of 
drugs, biologicals, those drugs produced from living cell 
cultures rather than from chemical synthesis.
    Some of these drugs are near miracles for people with 
cancer, metabolic diseases, and immune disorders. They can stop 
disability and, in some cases, save lives. People need them. 
But some of these drugs cost each patient tens of thousands of 
dollars a year. Some can cost hundreds of thousands per year. 
Many people cannot get access to these near miracles, and even 
when people can get them the prices drive up the cost of 
Medicare, Medicaid, and health insurance overall.
    Why isn't the market helping? It is not because of the 
patent system that biologicals are protected from the 
competition that might lower prices. Biologicals, like other 
drugs, do enjoy patent protection. This allows manufacturers to 
enjoy a monopoly period during which they can get a significant 
return on their investments. But patents, or many of them, have 
already expired, and other patents are just about to expire.
    And it is not the science of these drugs that protects them 
from competition. The technology is already here to make a safe 
and effective copy of some biotech drugs. Moreover, the 
technology is getting better every year, and we can make 
progress even faster if we allow companies to use it to make 
generics.
    Instead, the monopoly on each of these drugs is perpetuated 
by the lack of a clear pathway for FDA to approve competing 
versions.
    The Hatch-Waxman Act does not reach most of them. This 
costs all of us--taxpayers, insurance premium payers, and 
patients--billions of dollars. It also means that some very 
sick people simply cannot get the drugs they need.
    I know that the science of these drugs is not simple. I 
take the questions of research, safety, and efficacy very 
seriously. The only way we can succeed in establishing robust 
competition for biotech drugs is with drugs the doctors and 
patients know they can count on, so we need to be sure that the 
FDA has the discretion to require the studies that are needed 
to establish that a copy of a biotech drug is equivalent to the 
brand name drug in safety and effectiveness. That is one of the 
things we hope to learn more about today.
    But the big brand name companies have gone beyond 
legitimate concern and have thrown up a defensive smoke screen 
around biologicals. They say there will be problems of safety, 
decreased innovation, and limited savings. When discussing 
creating generic competition, they say things like, ``Such 
action may also save consumers a few dollars here and there, 
although that is by no means assured, but whatever short-term 
savings may be achieved will come at an enormous long-term cost 
to the public. Focusing solely upon short-term, lower prices, a 
cheap drugs policy will inevitably reduce research and hinder 
our public health efforts.''
    Well, these arguments have a familiar ring to them. That is 
because the words I just read were the formal testimony that 
the Pharmaceutical Manufacturers Association gave to the House 
in 1983 when they were opposing Hatch-Waxman, and now 
manufacturers are using these same arguments again. But they 
were wrong then. Hatch-Waxman has saved patients billions of 
dollars and dramatically improved their access to drugs, and 
Hatch-Waxman did not reduce research or hinder public health.
    And they are wrong now. A new path for FDA to approve 
generic biologicals will save patients billions in the future 
and will improve access to treatments and cures, and a new path 
will improve competition, while preserving the market's strong 
incentive for research.
    For the sake of patients, their families, public and 
private health insurance, and taxpayers, we must find a way to 
introduce competition to this market. When a patent expires, we 
owe it to consumers to find a way through competition to lower 
prices and still deliver a safe and effective product. When a 
patient expires, they no longer need the product, so the price 
will make no difference.
    I look forward to the testimony of the witnesses today and 
learning more about the scope of the problem, the science, and 
the potential solutions.
    [The prepared statement of Chairman Henry A. Waxman 
follows:]

[GRAPHIC] [TIFF OMITTED] T0874.001

[GRAPHIC] [TIFF OMITTED] T0874.002

[GRAPHIC] [TIFF OMITTED] T0874.003

[GRAPHIC] [TIFF OMITTED] T0874.004

[GRAPHIC] [TIFF OMITTED] T0874.005

    Chairman Waxman. Mr. Davis.
    Mr. Davis of Virginia. Thank you, Mr. Chairman, for holding 
today's hearing to consider the implications of creating a 
regulatory pathway for approval of follow-on biologics. It is a 
very important subject, and certainly your leadership is 
appreciated and worthy of this committee's consideration.
    Mr. Chairman, you have long been a leader in improving 
access to pharmaceutical drugs. Indeed, there is near universal 
agreement that the Hatch-Waxman Act has been extremely 
effective in allowing generic drugs to come to market and 
compete with brand name drugs. This competition has benefited 
countless citizens, as well as the Federal Government, by using 
natural market economics to bring down the price of 
prescription medicine. You are to be commended for your 
leadership in improving access to these life-saving 
medications.
    It is my understanding you have recently introduced 
legislation that would, in fact, create a regulatory pathway 
for the FDA to approve follow-on biologics. We have been 
reviewing the legislation with interest, and we expect it will 
inform today's discussion.
    I look forward to exploring your proposal further. For now, 
let me just offer a few preliminary thoughts on this very 
complex subject.
    The first principle guiding this effort should be to foster 
innovation and the discovery of new cures. After all, there is 
no new therapeutic, by definition there can be no follow-on. 
Accordingly, we need to protect the intellectual property of 
innovative firms. Given the high cost of research, development, 
manufacturing, and regulatory approvals, IP protections are 
clearly a critical factor for biotech startups when they are 
securing venture capital and pursuing partnerships with larger 
firms.
    Today we will hear from economist Henry Grabowski, who will 
explain that increased patent uncertainty and IP litigation 
would have a significant negative effect on capital market 
decisions for emerging private and public biotech firms. He 
will explain that if the Federal Government either weakens 
patent protections or increases the chance of litigation there 
will likely be a corresponding decrease in investment, and 
therefore less research and development of biologics. It would 
be tragic if legislation intended to increase access to 
medicine would have the unintended result of stifling 
innovation, preventing the discovery of cures of presently 
terminal diseases.
    I hope you would agree with me, Mr. Chairman, about the 
importance of fostering a vibrant and innovative culture where 
we encourage our brightest minds and daring entrepreneurs to do 
the research, provide the investment so that we may some day 
discover the cure for cancer or Lou Gehrig's disease.
    Reflecting on the Hatch-Waxman Act, you got it right when 
you recognized the importance of balancing the twin goals of 
bringing generic drugs to market while at the same time leaving 
intact the financial incentive for research and development.
    One of the keys to this successful balance in that 
legislation was the guarantee of 5 years of market exclusivity 
for innovative companies. Incidentally, European Union 
regulators currently provide 10 years of market exclusivity for 
European drugs for innovative drugs. Some amount of market 
exclusivity for the innovator is necessary under any regulatory 
pathway for follow-on biologics.
    The second imperative is to provide a mechanism so the FDA 
is able to guarantee the safety and efficacy of follow-on 
biologics. To do so we have to recognize the fundamental 
differences between biologics and chemical-based 
pharmaceuticals. What has proven to be successful in the case 
of traditional drugs is not necessary transferrable to the 
science of biologics. For instance, it is currently possible to 
know the complete character of a small molecule drug. This 
knowledge enables the FDA to approve generic drugs with the 
same characteristics as the innovator drug without requiring 
generic companies to test and prove the drug's efficacy and 
safety again. However, current science has not advanced 
sufficiently to give us the same confidence that a follow-on 
biologic is identical to a previously approved biologic based 
on molecular structure, alone.
    Unlike traditional drugs, which are chemically based, 
biologics are made from living organisms. Even minor variations 
in manufacturing processes can have a significant impact on the 
final character and consistency of the biologic and its effect 
on the human body.
    This diagram on the board comparing a biologic used to 
treat anemia and a traditional drug that treats peptic ulcers 
disease demonstrates the difference between traditional 
chemical drugs and biological therapies. As you can see, the 
biologic is significantly more complex than a traditional drug, 
having a molecular weight of 30,000 versus 351. This is a 
critical distinction between traditional generic drugs and 
follow-on biologics. Any regulatory pathway must take full 
account of this distinction, which for now seems to point to 
the inescapable conclusion that clinical trials on some level 
will be essential to ensure the safety and efficacy of follow-
on biological products.
    Again I want to thank you, Mr. Chairman, for spurring a 
discussion on this important subject. I look forward to hearing 
from our distinguished panel of witnesses.
    [The prepared statement of Hon. Tom Davis follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.006
    
    [GRAPHIC] [TIFF OMITTED] T0874.007
    
    [GRAPHIC] [TIFF OMITTED] T0874.008
    
    [GRAPHIC] [TIFF OMITTED] T0874.009
    
    Chairman Waxman. Thank you very much, Mr. Davis.
    Without objection, all Members will be permitted to enter 
an opening statement in the record. Do any Members wish, 
however, to make any comments before we hear from our 15 
witnesses? Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman. I will be brief. I will 
put my formal statement in the record, particularly because it 
sounds an awful lot like Mr. Davis'. The view is somewhat the 
same, and that is that it is very clear that we know a great 
deal about chemical compounds and we can say a chemical is a 
chemical, but, for example, Mr. Chairman, would you want to 
have these two oranges substituted as though there were no 
difference? Would you accept that a Florida orange is the same 
as a California orange if you have to peel it, Mr. Chairman? 
And, for Mr. Sali who is not here today, do you really think 
that any Russett potato is an Idaho potato and should be 
interchanged and have no value, no second testing of whether or 
not it makes a good french fry?
    Now, clearly we know how to make grain alcohol, and if I am 
buying grain alcohol, Mr. Chairman, it is very clear that I 
know that it is alcohol plus about 3 percent water that just 
gets in if you get the air to it. But, Mr. Chairman, do you 
really think that a $90 bottle of California wine that says 
Merlot is equal to this fine boxed Merlot? And would you want 
to go to the dinner table or the hospital and have them 
interchanged without your prior approval, or perhaps a little 
taste?
    This is biologics. These are made by process. Mr. Chairman, 
they may both be a Merlot, but as a Californian, I am sure that 
you would not want them interchanged without your prior 
approval.
    With that, I yield back.
    [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.010
    
    [GRAPHIC] [TIFF OMITTED] T0874.011
    
    Chairman Waxman. Mr. Davis.
    Mr. Davis of Illinois. Yes, Mr. Chairman, I would like to 
make a brief statement.
    Chairman Waxman. Before I recognize you for that purpose, I 
would like to inquire if you have any props. [Laughter.]
    The gentleman is recognized.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman. I 
shall, indeed, be brief. But first of all let me thank you for 
calling this hearing.
    In 1984 the landmark Hatch-Waxman Act provided a cost-
effective alternative to branded drugs with the creation of a 
traditional generic pharmaceutical industry. Today's hearing 
marks yet another landmark as we are being called upon to 
address escalating biopharmaceutical costs.
    This issue is near and dear to me, one, as a former health 
administrator, but also because my congressional district has 
more hospitals and more hospital beds than any other 
congressional district in the country. Illinois has about 200 
hospitals, most of them nonprofit. State hospitals are losing 
money, and another third are barely breaking even, 
notwithstanding cuts in Medicare and Medicaid.
    According to Crane's Chicago Business, on February 13, 
2006, while the State of Illinois has implemented prescription 
drug assistance programs like the Senior Care Pharmaceutical 
Program, State Pharmaceutical Assistance Plan, All Kids Program 
that provides health insurance coverage and prescription drugs 
to children across all socio-economic groups, they help to 
buffer costs.
    However, the sad reality is that cuts in Federal spending 
tend to shift costs to insured patients and their employers. By 
definition, health care is eating up a piece of our income, 
which is especially bad news for the 26 percent of Chicagoans, 
including 164,203 with full-time jobs and 43,876 with at least 
a college education who lack health insurance. These data are 
particularly disturbing when you take into consideration the 
median household income for Chicago is $38,625 a year.
    With this in mind, I welcome today's distinguished 
panelists and look forward to their insight and recommendations 
on how we can buildupon the foundation of generic competition 
for our consumers laid some 23 years ago under the Hatch-Waxman 
Act toward the attainment of a pathway to safe and affordable 
biotech drugs.
    I guess if I was to have any kind of prop, I'd just take 
this water, which is pretty pure, and be delighted to have it.
    Again, thank you, Mr. Chairman, for having this hearing.
    Chairman Waxman. Thank you very much, Mr. Davis.
    Does any other Member wish to be recognized for an opening 
statement? Mr. Yarmuth.
    Mr. Yarmuth. Mr. Chairman, two things real briefly. First 
of all, I hope that Mr. Issa would accept an amendment to his 
list in saying that no self-respecting Kentuckian would accept 
Tennessee sour mash whiskey for a Kentucky bourbon.
    Mr. Issa. Now that is bipartisan if I ever saw it.
    Mr. Yarmuth. Thank you.
    Also, I would like to say that I think the chairman and Mr. 
Davis have very accurately expressed and illuminated the 
conflicting issues that we have to deal with on this topic.
    I would also mention the fact that we have to recognize 
that much of the research that leads to the development of 
these drugs and these medications, both pharmaceutical and also 
these biologics, are funded by taxpayer dollars initially, so 
that we have an overriding mandate to do what is best for the 
taxpayer, who is paying for most of this research at the very 
foundational levels.
    Thank you, Mr. Chairman.
    Chairman Waxman. Thank you very much.
    We will now hear from our witnesses today. Our first 
witness I am pleased to welcome is Dr. Janet Woodcock. She is 
the Deputy Commissioner for Operations and Chief Medical 
Officer of the Food and Drug Administration.
    Since you are standing, I will have you continue to stand 
because it is the practice of this committee to put all 
witnesses under oath.
    [Witness sworn.]
    Chairman Waxman. The record will indicate that you answered 
in the affirmative.
    We are delighted to have you here. We will put your full 
statement in the record. If it is possible, we would like to 
ask you to keep to around 5 minutes.

  STATEMENT OF JANET WOODCOCK, M.D., DEPUTY COMMISSIONER FOR 
      OPERATIONS AND CHIEF MEDICAL OFFICER, FOOD AND DRUG 
                         ADMINISTRATION

    Dr. Woodcock. Thank you. Mr. Chairman and members of the 
committee, I am Janet Woodcock, Deputy Commissioner and Chief 
Medical Officer of the Food and Drug Administration. I thank 
you for the opportunity to testify about the scientific and 
regulatory framework surrounding follow-on biologics.
    In considering the complex scientific issues at hand, I 
have relied not only on my experience leading the Center for 
Drug Evaluation and Research for over a decade, but also on my 
8 years of experience working in the Center for Biologics 
Evaluation and Research [CBER]. While in CBER I served as 
Acting Deputy Center Director and as Director of the Office of 
Therapeutics, in which capacity I oversaw the approval of 
biotechnology products to treat serious illnesses such as 
cancer, multiple sclerosis, and cystic fibrosis.
    The success of FDA's generic drugs program has spurred 
interest in considering abbreviated application pathways for 
more-complex molecules. Currently there are over 9,000 approved 
therapeutically equivalent generic drugs on the market. They 
constitute about 60 percent of prescriptions written in the 
United States. FDA's Office of Generic Drugs currently approves 
generics at the rate of more than one per calendar day.
    The success of the program has stimulated competition. For 
the last decade, the rate of submission to the Office of 
Generic Drugs has rapidly increased. Submissions doubled 
between 2002 and 2006, to a current rate of about 793 
applications per year.
    The office has implemented numerous process improvements, 
have improved increased efficiency of the review process, and 
recently, as part of FDA's initiative on pharmaceutical quality 
for the 21st century, OGD instituted the question-based review. 
Eventually it is hoped this change will decrease submission of 
manufacturing supplements by about 80 percent, and thus free up 
more time of the reviewers to deal with this increased 
submission rate.
    While the generics program has been very successful for 
small molecules, scientific challenges remain. We do not have 
good bio-equivalents methods for inhaled or many topical 
medications, and must require clinical trials to demonstrate 
equivalence. This has inhibited consumer access to generic 
versions of these types of products.
    In addition, a number of drugs are made from complex 
molecules. In these cases, it can be difficult to tell whether 
a proposed generic version is structurally identical to the 
innovator product.
    Recently, as part of its critical path initiative, FDA has 
been evaluating the science needed to address these issues for 
generic drugs and is planning to lay out the scientific 
research that is needed to improve the process, as we did a 
number of years ago for innovator medical products.
    The topic for discussion today is variously referred to as 
follow-on proteins, follow-on biologics, generic biologics, as 
well as other labels. Many of these terms are very imprecise 
and confusing, and I hope we can discuss terminology.
    Largely, these terms are intended to refer to biotechnology 
produced protein products. In the United States, such products 
are regulated either as drugs under the Food, Drug, and 
Cosmetic Act, or as biologic products under the Public Health 
Service Act. Whether regulated as drugs or biologic products, 
proteins fit into the category of complex molecules that can be 
difficult to fully characterize.
    Copies of protection products that are regulated as drugs 
may be considered for the abbreviated applications pathways 
that exist under section 505. The very simplest peptide 
products may be able to demonstrate that they contain the same 
active ingredient as the innovator product, and thus may be 
considered under 505(j), what is commonly regarded as the 
generic drug pathway.
    In contrast, copies of approved protein products that are 
drugs would currently be considered for abbreviated 
applications under 505(b)(2), and the reason for this is that 
scientific techniques are not available to demonstrate sameness 
of these types of molecules.
    The degree to which any abbreviated pathway could be used 
for any given protein depends on many factors, including its 
physical complexity, the availability of functional assays to 
characterize it, and its clinical use.
    An abbreviated pathway does not exist for copies of protein 
products approved under the PHS Act. FDA has approved several 
follow-on proteins under 505(b)(2), including a recombinant 
hyaluronidase and recombinant version of human growth hormone.
    We are currently preparing a guidance document on the 
general scientific framework for preparation of abbreviated 
applications for follow-on proteins under 505(b)(2). We expect 
to follow this with guidance on technical issues such as 
immunogenicity, dealing with immunogenicity of proteins and 
physical characterization methods.
    I will be pleased to answer your questions regarding these 
complex issues.
    [The prepared statement of Dr. Woodcock follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.012
    
    [GRAPHIC] [TIFF OMITTED] T0874.013
    
    [GRAPHIC] [TIFF OMITTED] T0874.014
    
    [GRAPHIC] [TIFF OMITTED] T0874.015
    
    [GRAPHIC] [TIFF OMITTED] T0874.016
    
    [GRAPHIC] [TIFF OMITTED] T0874.017
    
    [GRAPHIC] [TIFF OMITTED] T0874.018
    
    [GRAPHIC] [TIFF OMITTED] T0874.019
    
    [GRAPHIC] [TIFF OMITTED] T0874.020
    
    [GRAPHIC] [TIFF OMITTED] T0874.021
    
    [GRAPHIC] [TIFF OMITTED] T0874.022
    
    [GRAPHIC] [TIFF OMITTED] T0874.023
    
    [GRAPHIC] [TIFF OMITTED] T0874.024
    
    [GRAPHIC] [TIFF OMITTED] T0874.025
    
    [GRAPHIC] [TIFF OMITTED] T0874.026
    
    [GRAPHIC] [TIFF OMITTED] T0874.027
    
    [GRAPHIC] [TIFF OMITTED] T0874.028
    
    [GRAPHIC] [TIFF OMITTED] T0874.029
    
    Chairman Waxman. Thank you very much, Dr. Woodcock.
    As you mention in your testimony, for over 10 years FDA has 
allowed brand name manufacturers of biotech drugs to make 
certain changes in the process by which they manufacture their 
products, but without repeating all the original clinical 
trials, under something called comparability protocols. I am 
interested in understanding the scientific rationale for 
allowing brand name manufacturers to make process changes 
without new clinical trials. I am also interested in its 
applicability to follow-on and biogeneric products.
    What was the scientific basis for FDA's conclusion that 
clinical outcome trials are not necessary to assess the effects 
of certain biological product changes?
    Dr. Woodcock. Manufacturing changes and process changes are 
undertaken for all pharmaceutical products, whether drugs or 
biologics. In each case we have to determine whether or not the 
change could result in any clinically significant change in the 
product, whether it is a small molecule or whether it is a 
large, complex molecule of some kind. FDA has a long history of 
quality regulation, putting into place procedures, both 
physical characterization of the new product and comparing it 
to the old product, functional characterization of a new 
product compared to the original product, and sometimes 
clinical characterization of a new product. It depends on, as I 
said in my oral testimony, how much science we have available 
to assess these changes.
    If we can be sure, based on a structural characterization, 
which we often can for a drug, then that would be sufficient 
for a small molecule drug. If that structural characterization 
isn't enough to assure that the new version is similar to the 
old version, then other types of tests might be necessary. And 
in some cases we might even require clinical tests.
    For example, with small molecule drugs, when the 
formulation is changed we may require new bioequivalent 
studies.
    Chairman Waxman. So that is completely within your 
discretion based on whether you think it is appropriate to have 
further evaluations, further studies?
    Dr. Woodcock. Yes. There are multiple scientific issues 
that come into play in any given manufacturing change.
    Chairman Waxman. I know most of these comparability 
decisions involving biotech drugs or any other drugs are 
confidential, but with the biotech drug Avonex the information 
is public. I assume you are familiar with that case?
    Dr. Woodcock. Yes.
    Chairman Waxman. What kinds of process changes did FDA 
permit in that case without repeating the original safety and 
effectiveness trials?
    Dr. Woodcock. In that case the original cell line that had 
been used to manufacture the product that was used in the 
clinical trials was no longer available, so the manufacturer 
had to go back and redo all of that and duplicate the 
manufacturing process that had been used for the original 
product. That is well described publicly. They made some 
original attempts. Those weren't successful.
    They made some subsequent attempts and then an extensive 
number of comparisons were made between the original product 
and the second version of the product, both the kinds I just 
described, both physical/chemical comparisons, functional 
comparisons, and so forth, so that at the end of the day it was 
decided that the products were similar enough that FDA could 
extrapolate from the clinical data that was derived for the 
first product to the new product.
    Chairman Waxman. Were the changes between the two products 
significant?
    Dr. Woodcock. The products were very similar, ended up 
being very similar.
    Chairman Waxman. I meant the process changes. Were they 
significant?
    Dr. Woodcock. The manufacturer attempted to duplicate the 
similar process that was originally done with the first 
product, but it was in a different site, in a different scale, 
and so forth, so there were differences. It was not the 
identical cell line. It wasn't the identical product that had 
been made, and so forth.
    Chairman Waxman. Are these changes similar to the kinds of 
changes that might be required to manufacture a follow-on 
product?
    Dr. Woodcock. The difference between that example and the 
instance where a new manufacturer would attempt to manufacture 
a follow-on product would be that in the Avonex case. The 
manufacturer had access to all the information about the 
process of manufacturing the first product. That is very 
important information, because it has information on all the 
intermediate steps and what happens during the manufacturing 
and purification process, and so on.
    Chairman Waxman. Thank you.
    Mr. Davis.
    Mr. Davis of Virginia. We will start with Mr. Issa.
    Chairman Waxman. Mr. Issa.
    Mr. Issa. Thank you. Thank you, Mr. Chairman, and thank 
you, Ranking Member Davis.
    Avonex appears to be an example sort of--I will use a 
different wine than the one here, but you are talking if the 
Rothschilds trying to duplicate after they have had to clear 
their grapes away and put a new crop in. You have the same 
maker with the same wine masters--in this case scientists--
trying to duplicate what they had already made. Is that roughly 
correct? You may not be a California wine drinker, so I know it 
can be challenging.
    Dr. Woodcock. I love California wine.
    Mr. Issa. You won't love the one here in this box. Trust 
me.
    Dr. Woodcock. Yes. As an analogy, that is quite reasonable.
    Mr. Issa. OK. So the next step that the chairman's 
legislation or the legislation we are hearing here today would 
attempt to do is to say that, even though you had to sort of 
teach or go through a process, a re-learning process, even with 
the original designer, you are going to try and transfer this 
to a different winery, and they are going to try to set up, but 
they are not going to have the right to every trade secret, if 
you will. Not every nuance of the process is, in fact, in the 
public domain. Is that correct?
    Dr. Woodcock. That is correct. We face that now with our 
generic drug program.
    Mr. Issa. OK. And you mentioned earlier that you have had 
chemical equivalents that didn't work out so well when they 
went generic, so to speak, even among name manufacturers. When 
an insurance company does a formulary and says this is equal to 
this, that is not always right, is it? There are side effects 
that are unanticipated often?
    Dr. Woodcock. The generic drugs that we approve are fully 
interchangeable with the innovator drugs. They are 
therapeutically equivalent.
    Mr. Issa. You have never had a side effect?
    Dr. Woodcock. We have numerous reports of side effects; 
however, we investigate those and we have extraordinarily 
rarely found any instance where there would be therapeutic 
inequivalence between a generic drug and an innovator drug.
    Mr. Issa. Now, when we get to biological and follow-on 
immune problems that occur, that is a different problem that 
you are not presently seeing as much in small cells but you do 
see it in biologics, don't you?
    Dr. Woodcock. Yes. Proteins are what is called immunogenic. 
They produce often an immune response in people when they are 
administered.
    Mr. Issa. So if there are two otherwise the same biologies, 
the original and the follow-on, one could very much have a 
different immune response that would lead somebody who had 
successfully fought a disease to somehow develop a resistance; 
is that correct?
    Dr. Woodcock. The immune response to a protein can cause 
many things. It can cause what you just said, which is 
neutralizing the effect, the beneficial effect of the protein.
    Mr. Issa. And then you could find yourself unable to deal 
with either drug. In other words, you could make that change 
and find yourself opted out of the cure or the treatment?
    Dr. Woodcock. That is true, and there are difficulties, for 
example, with insulin sometimes.
    Mr. Issa. So, given that you have this history, wouldn't, 
in the case of follow-on biologics, at least until this problem 
can be quantified, wouldn't you have a bias, an almost 
exclusive bias toward clinical trials, even if we gave you the 
jurisdiction and the right to shortcut those, limit those, 
eliminate them? From a standpoint of unsettled science, 
wouldn't it be proper to have clinical trials to ensure that is 
not happening when, in fact, it can take someone who is 
surviving and put them in a position where they can no longer 
survive?
    Dr. Woodcock. Currently--and, of course, I can only address 
the proteins that we are looking at under the 505, under the 
FD&C Act.
    Mr. Issa. Right, and you admit those are, by definition, 
less likely to be unknowns than the ones we are going toward; 
is that right?
    Dr. Woodcock. No. That is where the terminology I think is 
very confusing. We have approved proteins under the Food, Drug 
and Cosmetic Act provisions under 505(b)(2), and in those 
cases, for those recombinant proteins we have looked at the 
immunogenicity in people.
    Mr. Issa. OK, but you have looked at them?
    Dr. Woodcock. Yes.
    Mr. Issa. So, again, my one final exit question here in 
this short time: clinical trials are the only way to know 
whether substantially similar, substantially identical follow-
on biologics are, in fact, going to have differences in the 
immune response, or whatever term is appropriate; is that 
right?
    Dr. Woodcock. Yes. We have a very limited understanding of 
the basis of an immune response, and we are not able to fully 
predict immunogenicity in humans right now from non-clinical 
data.
    Mr. Issa. And this could be dangerous?
    Dr. Woodcock. The immunogenicity must be evaluated.
    Mr. Issa. Thank you, Mr. Chairman.
    Chairman Waxman. Thank you, Mr. Issa.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    Dr. Woodcock, some in the brand name industry argue that 
any process for approving copies of biologics should follow the 
European Union model. The EU's governing directive, which is 
comparable to a statute, is extremely flexible and gives 
regulators great discretion to set procedures and standards and 
so forth.
    The drug regulatory body there, the EMEA, has also 
established very particular procedures and approval standards 
to implement those directives. You are nodding, so you are 
obviously familiar with that process or that model?
    Dr. Woodcock. Yes.
    Mr. Yarmuth. And the biotech industry seems to like that 
public process that is used there for establishing and setting 
guidelines that contain the data requirements for biosimilars 
because the data gathering process allows those companies to 
help dictate what data their competitors must produce, and, of 
course, that would take a lengthy period of time.
    Is the FDA required to undertake a public process for 
establishing data requirements?
    Dr. Woodcock. No. We are not required to.
    Mr. Yarmuth. Do you think it is scientifically necessary 
for FDA to engage in a public guideline process to establish 
the data requirements for a follow-on protein product?
    Dr. Woodcock. What FDA does currently is engage with the 
manufacturer in discussions--of course, those are not public--
to provide advice on any manufacturer interested in pursuing a 
follow-on under the 505(b)(2) process. But we often write 
scientific guidance for manufacturers because it provides 
better predictability and it provides, as you said, 
transparency.
    We are in the process of writing overall guidance on the 
process of scientific approach to follow-on proteins under 
505(b)(2).
    Mr. Yarmuth. Do you think that the process the European 
Union uses, if we adopted that system here, would have the 
effect of freezing science at all? Is that a risk in doing 
that?
    Dr. Woodcock. I am really not able to comment on that.
    Mr. Yarmuth. Thank you, Mr. Chairman. I yield back.
    Chairman Waxman. The gentleman has a couple minutes, would 
you yield your time to me?
    Mr. Yarmuth. I would be happy to yield my time to the 
distinguished chairman.
    Chairman Waxman. Thank you.
    I just wanted to point out that the questioning by my 
colleague, Mr. Issa, about how you might need to have clinical 
trials to understand possible concerns, that is legitimate. FDA 
does now at the present time allow some changes in the process 
without requiring clinical trials, but I do want to point out 
that the legislation that I have introduced would allow FDA to 
decide, when they think clinical trials are appropriate, to 
require clinical trials.
    I do want to ask you this. In the use of comparability 
protocols limited to simple proteins, can the manufactures of 
more complex proteins make changes in their products without 
repeating the original clinical trials?
    Dr. Woodcock. Yes, they can, if the science is there. It is 
very desirable for manufacturers of pharmaceuticals of any kind 
to make continuous improvements in their manufacturing process 
to maintain the quality of the pharmaceuticals as soon as 
possible and the efficiency of the process as good as 
scientifically possible. So FDA has adopted procedures, as I 
said, that allow manufacturers to make changes to their 
manufacturing process or perhaps open up new plants, say, if 
there is a demand for the product, and the amount of data that 
has to be generated really depends on the complexity of the 
product, how well we can physically characterize the product, 
and how confident we are that physical characterization will 
extrapolate to the same performance. But we may require many 
additional steps, up to and including clinical studies now, 
particularly of immunogenicity.
    Chairman Waxman. Well, do you and other FDA scientists feel 
confident that comparability assessments provide adequate 
protection to patients from unsafe or ineffective biotech 
drugs?
    Dr. Woodcock. The comparability assessment puts the burden 
on the manufacturer. The manufacturer must show to FDA's 
satisfaction that the change has not introduced anything that 
would be detrimental to the clinical performance of the drug. 
So how much evidence is needed after a manufacturing change 
depends on how well the manufacturer can demonstrate that 
product is going to perform the exact same way as the original 
product did in the clinical testing.
    Chairman Waxman. And as science evolves, you will know 
better whether the comparability requires clinical tests or 
not; is that correct?
    Dr. Woodcock. The ability to physically characterize 
protein molecules and other complex substances has evolved and 
is continuing to evolve, and so over time we are going to be 
able to do a better and better job of controlling the quality 
of these products and allowing for continuous improvement.
    Chairman Waxman. Thank you very much.
    Mr. Davis.
    Mr. Davis of Virginia. I finally have my comparison up 
there. We talked before about how complex these are. This 
diagram up there, as you see, compares a biologic used to treat 
anemia and a traditional drug that treats peptic ulcers. It 
demonstrates the difference between the traditional chemical 
drugs and biological therapies.
    Dr. Woodcock. Yes.
    Mr. Davis of Virginia. As you can note on this, the 
biologic is significantly more complex than a traditional drug.
    Dr. Woodcock, you highlight in your testimony the 
importance of ensuring that facilitating the development of 
follow-on products through abbreviated pathways doesn't 
discourage innovation and the development of new biological 
products, and you refer to Hatch-Waxman as a balanced approach. 
Do you think an extended period of data exclusivity as well as 
certain patent protections like Hatch-Waxman would help 
encourage innovation and development with biological products?
    Dr. Woodcock. Sir, I am a doctor and a scientist, and that 
is really outside of my area of expertise.
    Mr. Davis of Virginia. OK, so you don't want to make the 
economic or policy determinations on that?
    Dr. Woodcock. No.
    Mr. Davis of Virginia. OK. You also state in your testimony 
that demonstrating the similarity of a follow-on protein 
product to a reference product is more complex and would 
require new data. Does this mean FDA would require clinical 
safety data for follow-on biologics?
    Dr. Woodcock. There is a very large range of complexity. 
All right? The erythropoietin molecule that you have here is a 
pretty complex example. There are very, very small biologic 
drugs of different kinds. So the amount of assurance and the 
amount of data that would be needed is really based on how 
complex something is and how well it can be characterized in 
different ways.
    Mr. Davis of Virginia. But a slight alteration could have, 
you know, significant clinical manifestations, wouldn't it?
    Dr. Woodcock. FDA would not approve a follow-on product or 
a generic drug that we were not confident would have the same 
performance as the innovator drug.
    Mr. Davis of Virginia. What level of clinical safety data 
would be necessary for approval, ball park?
    Dr. Woodcock. Well, to talk about this we have to get into 
terminology a little bit. Please bear with me.
    The abbreviated application process for 505(b)(2), for 
example, may rely on some fact of the approval of a prior 
product. All right?
    Mr. Davis of Virginia. Yes.
    Dr. Woodcock. But we may approve a product using an 
abbreviated application where some of the data, maybe some of 
the clinical trials or animal studies do not have to be 
repeated. However, that resulting of proof product is not 
considered substitutable for the other product. In other words, 
each of them stand alone and they can't be switched at the 
pharmacy, or it is not recommended they would be. That is one 
level.
    Another level would be for a manufacturer to seek 
interchangeability, full interchangeability. So far the 
proteins that we have approved all stand on their own. They 
have had abbreviated applications but they are not considered 
interchangeable with any of the other proteins in that class. 
For example, human growth hormone or hyaluronidase.
    Mr. Davis of Virginia. You testified that the science and 
technology isn't sufficiently advanced to allow for comparison 
of complex protein products. How close are we to discovering 
those technology methods; 5 years; 10 years?
    Dr. Woodcock. It is going to be a continuum, and right now 
we are very short peptides, which are as small as the ranidine 
molecule you are showing there, for example, or in the same 
ball park. We can do it now, but those are very, very small 
compared to the erythropoietin molecule, so it is going to be a 
step-wise progression over a decade or so.
    Mr. Davis of Virginia. Are there any non-clinical tests or 
technology that could fully substitute for studying the safety 
of biotech products in humans?
    Dr. Woodcock. As I said, right now we do not have the 
science around the immune system to adequately predict the 
human immune response fully to any given product.
    Mr. Davis of Virginia. You listed two examples, omnitrope 
and--I can't pronounce the other one. Hyaluronidase?
    Dr. Woodcock. That is pretty good.
    Mr. Davis of Virginia. Neither was rated by FDA as 
therapeutically equivalent or substitutes for other biologics 
on the market. Many believe interchangeability or substitution 
is where the most cost savings would occur. Of course, the 
balance here is safety versus efficiency and speed to market.
    When do you think the FDA will be able to rate a biologic 
product as interchangeable? And do you think the FDA needs this 
authority if the science isn't developed yet?
    Dr. Woodcock. For the 505(b)(2) drugs, which is what I can 
comment on, manufacturers would need to do additional clinical 
studies that would demonstrate interchangeability, and that is 
a further step. That is a higher bar than simply getting on the 
market, an abbreviated application. Does that make sense to 
you?
    Chairman Waxman. Thank you, Mr. Davis.
    Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    Some of the drug companies have said that when a biotech 
product is derived from a specific cell line, any copy of the 
product will have to begin with a different cell line. They are 
arguing, as I understand it, that this change is so significant 
that all the clinical trials, all the clinical trials must be 
repeated to ensure that the change has not altered safety and 
effectiveness. Obviously, we are concerned about safety, but we 
also want to get the benefit and not have this argument about 
safety be used to deny us the benefit.
    My question to you is: is it true that a change in a cell 
line will always necessitate repeating the original clinical 
trials?
    Dr. Woodcock. No. We do not believe that. Again, any 
manufacturing change, whether the cell line, the DNA construct, 
the manufacturing process, the way the drug is purified, any of 
these could affect safety and effectiveness, and therefore data 
has to be submitted and a very careful look has to be taken to 
make sure that it hasn't. The amount of data that we would need 
or that anyone would need to make that evaluation depends, 
again, on the complexity of the product.
    Mr. Welch. All right. So the bottom line here is that you 
believe that you do not need, for safety, to repeat the entire 
clinical trial?
    Dr. Woodcock. In some instances the manufacturer may not be 
able to show enough similarity and they may have to repeat much 
of the clinical program. In other instances they may be able to 
show an extreme amount of similarity, a very great similarity 
to prior product, and therefore would have very much smaller 
clinical trials needed, perhaps of immunogenicity.
    Mr. Welch. And that is an evaluation that you would feel 
confident, based on the information that you had at hand, that 
you could make?
    Dr. Woodcock. Yes. FDA has a long history, as I said, of 
controlling the access to market after manufacturing changes 
for a very wide number of products for all pharmaceuticals on 
the market, and this is another example of that.
    Mr. Welch. I was going to ask another question, but you are 
starting to answer it. What scientific developments have 
allowed FDA to feel that confidence you are describing, that 
manufacturers of existing biologics can change cell lines, 
manufacturing facilities, and/or the fermentation processes 
without having it conduct those clinical trials?
    Dr. Woodcock. Yes. And, as I said, sometimes they do and 
sometimes they don't. It really depends. The burden is on them, 
the manufacturer, to show through scientific data that the 
performance of the product after the change process is going to 
be the same as the performance of the product before the 
change.
    Mr. Welch. And are clinical trials always the most 
sensitive studies for detecting changes in safety or 
effectiveness due to process changes?
    Dr. Woodcock. No. No, I think that is a common 
misconception. Clinical trials may be insensitive to certain 
types of changes, adverse effects, for example, that are rare 
or uncommon.
    Mr. Welch. Yes.
    Dr. Woodcock. And we really need to use the scientific tool 
to assess the change in the product that is appropriate. It 
might be physical characterization or it might be a functional 
test. It might be evaluation of the purity of the product.
    Mr. Welch. Thank you. I yield the balance of my time.
    Chairman Waxman. Thank you for yielding. You have another 
minute left on your time, so if the gentleman would permit I 
will take that minute if he will yield to me.
    Dr. Woodcock, if FDA were given broad authority to require 
any studies necessary for approval of follow-on versions of PHS 
Act approved protein products, are you comfortable that the 
agency could use its discretion to ensure that only safe and 
effective products were made available to patients? I think you 
have answered that question several times, but let me just put 
it very clearly.
    Dr. Woodcock. I think that FDA must do that. All right? We 
do not currently approve generic products unless they have 
absolutely met our standards and were follow-on products under 
505(b)(2). We must maintain the confidence in our program and 
also our own scientific integrity.
    Chairman Waxman. Based on your experience with the 
comparability guidance, can you give the committee a 
perspective on how often companies must do clinical outcome 
trials, not just PK or PD studies, to support a product or 
process change after approval of its BLA? Are large clinical 
outcome studies scientifically essential to support the 
approval 1 out of 10 post-approval product changes, 1 out of 20 
post-approval changes, or 1 out of 50 changes?
    Dr. Woodcock. I would say that the factor that is most 
important here is the magnitude of the change; however, it is 
probably more in the 1 in 50 range than the 1 in 10, or 
whatever. But don't forget there are many different types of 
changes that occur all the time to manufacturing processes. If 
you included all of those, then requiring clinical studies of 
outcomes would probably be quite rare.
    Chairman Waxman. Thank you.
    Mr. Bilbray.
    Mr. Bilbray. Mr. Chairman, I would like to yield my time to 
the gentleman from the Northwest Territory, but I would first 
like to clarify that, as a native Californian as opposed to Mr. 
Issa who is an immigrant, I was outraged at the concept of 
bringing a bottle of Merlot to this table and having it 
chilled. [Laughter.]
    The only thing worse than that is to take it from the table 
and take it back to his office after he presented it.
    But at this time I would like to yield to Mr. Burton.
    Mr. Burton. I thank the gentleman for yielding. I am from 
the Midwest, not the northwest.
    Mr. Bilbray. Well, the Northwest Territory.
    Mr. Burton. Ohio, the Northwest Territory. You are going 
back a long way.
    First of all, let me preface my remarks by saying the 
pharmaceutical industry and FDA working together has created 
probably the highest quality of life in the history of mankind, 
and I appreciate that and I think everybody in America does. 
There are some questions, though, that I have to ask about the 
process.
    You said it is a judgment call on whether or not this 
product comes to market. Who makes the judgment? Who makes the 
call?
    Dr. Woodcock. The FDA.
    Mr. Burton. Don't they have advisory committees that review 
the process, review the product, review the results, and then 
they make a recommendation to the FDA?
    Dr. Woodcock. Yes. Advisory committees are frequently 
utilized, particularly on clinical decisions. Here we are 
talking about scientific characterization of the product in a 
wide variety of ways. Most often, that is something that the 
FDA scientists do.
    Mr. Burton. But the FDA does have advisory committees for 
almost all of the products?
    Dr. Woodcock. Yes.
    Mr. Burton. When I was chairman I asked--I don't believe it 
was you, but I asked one of your coworkers who was a leader at 
the FDA how many times has an advisory committee recommendation 
been turned down by the FDA.
    Dr. Woodcock. You are asking me?
    Mr. Burton. Yes.
    Dr. Woodcock. I don't know the answer to that.
    Mr. Burton. I will tell you what it was before. It was 
never. The advisory committee, I was told by the people who 
were doing the investigation for my committee when I was 
chairman, was that the advisory committee recommendations were 
always accepted.
    Now, the other thing I would like to know is: the people on 
the advisory committee, do they file financial disclosure 
reports?
    Dr. Woodcock. Yes, they do.
    Mr. Burton. We looked at some of the financial disclosure 
reports when I was holding hearings on this when I was chairman 
and we found that many of the people in the advisory committees 
did not file financial disclosure reports. And we found that 
some on the advisory committees had a conflict of interest. The 
RotoShield virus was one of those. The head of the advisory 
committee had an interest in a company that was going to make a 
RotoShield virus vaccine, which was put on the market at his 
advisory committee's recommendation, and FDA approved it based 
upon the recommendation. One or two children died and several 
people were injured and they pulled it off the market within 12 
months.
    I bring this up because this is a very important issue we 
are talking about today, and I would just like to ask that 
these advisory committees, when they make recommendation, that 
there is a thorough judgment made after the advisory committee 
makes its determination, and that the FDA does not always 
accept their results or their recommendations, and that there 
are complete financial disclosure reports.
    The reason for that is pretty obvious. If a person is on an 
advisory committee and their recommendation is accepted and 
they have a financial interest in a pharmaceutical company that 
is going to manufacture a product like that or a like product, 
they are liable to have their judgment tainted just a little 
bit. It has happened in the past and I hope it doesn't happen 
in the future.
    The cost of biotech drugs increased 17 percent from 2005 to 
2006, and that was compared to 5.4 percent increase for 
traditional pharmaceuticals, which are much more expensive here 
than in some other countries, in most cases. Why was that 
increase so much? Do you know?
    Dr. Woodcock. My understanding is that some of the new 
biotech products on the market that are very highly effective, 
you know, are very expensive to purchase, as some of the 
members already alluded to. But I don't have any complete 
analysis of this.
    Mr. Burton. I have a couple more questions, but I will 
wait.
    Chairman Waxman. We will have another round.
    Mr. Burton. I will catch it next time.
    Dr. Woodcock. May I?
    Chairman Waxman. Yes.
    Dr. Woodcock. The FDA has recently published new guidance 
on advisory committee conflicts of interest, and it lays out 
very explicit and transparent guidance on how people will be 
evaluated for their conflicts of interest.
    Mr. Burton. That is very good news. I appreciate hearing 
that. That is a great step in the right direction. Thank you.
    Chairman Waxman. Thank you, Mr. Burton.
    Mr. Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    Dr. Woodcock, I have always tried to understand--and if you 
could enlighten me it would be very helpful to me--the real 
difference between generic drugs and the brand name drugs. If 
they do essentially the same thing or if the level of 
effectiveness is essentially the same, why do we pay so much 
more for one as opposed to the other? I have never been able 
to, in my own mind, feel that I had a real understanding of 
that.
    Dr. Woodcock. Well, if I may, if you look at the diagram--
it is gone now, but there was a diagram of the molecule up 
there, a small molecule. We know exactly everything how that 
molecule is structured. We know everything about it. And so 
what we do in the generic drug program is we require an exact 
copy of that molecule to be the generic drug and then we make 
sure that molecule gets into the body the exact same way that 
the innovator molecule gets into the body. So then we say if it 
does that it is going to have the same effect on the body 
because it is circulating around in the body the same way as 
the innovator drug. So that is what a generic drug is.
    The problem with the proteins is it is very difficult to 
say we have the exact same molecule because it is such a 
complicated molecule.
    Mr. Davis of Illinois. The effectiveness or the impact, are 
we saying that we would expect a different level of impact or 
effectiveness using one as opposed to the other?
    Dr. Woodcock. For the generic drugs that FDA approves we 
expect the exact same performance. Now, that means the exact 
same good effects and the exact same side effects as the drug 
it is a copy of.
    Mr. Davis of Illinois. Do you know then how the price or 
cost differential emerges or is determined?
    Dr. Woodcock. Well, while the innovator drug is patent 
protected or protected by exclusivity, there are no other 
copies available to be prescribed. During that time the price 
is quite high. Once generic versions get in the market, the 
price of the various generic copies becomes only a fraction of 
what was charged by the innovator.
    Mr. Davis of Illinois. Are you aware or familiar with any 
consumer studies that would indicate whether or not consumers 
have a greater level of confidence, for example, in the more 
popular pharmaceuticals than the generics?
    Dr. Woodcock. Certainly the generics are not advertised and 
certainly there is some brand name loyalty that I have heard 
of. I have certainly talked to many, many consumers over my 
lifetime about this issue. There is some residual concern still 
about the generics and whether are they as good because they 
are not the brand name product; however, I think in the last 10 
or 12 years of our generic drug program, confidence, both by 
the health professionals--the pharmacists, the doctors--as well 
as the consumers has really risen, and most people in this 
country are used to taking generic versions.
    Mr. Davis of Illinois. And so then one could probably 
reasonably assume that marketing plays a great role in shaping 
our attitudes and thoughts about the drugs that we would most 
likely prefer using?
    Dr. Woodcock. I can't comment on that directly, but that is 
one of the purposes of advertising.
    Mr. Davis of Illinois. And so I would assume that it 
probably works fairly well and that it does, in fact, skew 
one's thinking. And if we are talking about having the most 
cost-effective health care, then it just seems to me that the 
more enlightened consumers become, that will probably have as 
much impact on cost effectiveness in health care as anything 
that we are going to regulate or anything that we are going to 
do.
    I thank you very much for your answers.
    Dr. Woodcock. At the request of Congress, we had an 
education program, outreach program, on the generic drug 
program. It has been very effective.
    Mr. Davis of Illinois. Thank you. Thank you very much.
    And thank you, Mr. Chairman. I yield back.
    Chairman Waxman. Thank you, Mr. Davis.
    Mr. Burton was using Mr. Bilbray's time, and he said he had 
a few more questions, so before we go to a second round I yield 
to you your first-round 5 minutes.
    Mr. Burton. Thank you. I just have a few more questions.
    Dr. Woodcock, I think you have been very helpful, some of 
your answers today. I really appreciate that.
    The pharmaceutical industry deserves to get some of their 
money back or all of their money back when they spend a lot of 
money on research and development, and that is why the patents 
are there, and then when it expires, of course, it can be a 
generic drug and they should have recovered their investment.
    Are other countries working to develop these biotech drugs?
    Dr. Woodcock. Yes. As was alluded to earlier, the European 
Union has published a directive and is implementing a program 
on what they call biosimilars. By that generally they mean 
biotech drugs.
    Mr. Burton. If they produce a biotech drug and there is a 
similar biotech drug that has been produced here in the United 
States, because of the differences, the scientific differences 
that you were talking about when we saw the slide a while ago, 
the FDA probably would not allow that drug to be imported into 
the United States until it was approved by the FDA, even though 
it did the same thing or pretty much the same thing?
    Dr. Woodcock. Yes. The law doesn't allow drugs to be 
imported in the United States unless they are approved.
    Mr. Burton. Let me ask you one more question. If we had 
reimportation or importation of the pharmaceuticals that are 
approved by the FDA, would the prices of those pharmaceuticals 
be lower?
    Dr. Woodcock. Again, this is beyond my area of expertise. I 
apologize.
    Mr. Burton. I will just followup by saying that everybody 
wants free enterprise to succeed and they want the 
pharmaceutical industry to make a lot of money so that they can 
do continued research, but when my first wife had cancer--and I 
have talked about this before--we went to have her chemotherapy 
and the tamoxifen that one woman was taking, she was 
complaining about the cost being about $300 a month, and 
another lady said I'm getting the same thing from Canada for 
$50 a month, so it was six times less.
    There are a number of us in Congress that would like to see 
the FDA working with their counterparts in other countries and 
the pharmaceutical companies working with their counterparts in 
other countries and the governments of other countries to find 
out some way to level the playing field so that Americans are 
paying a comparable price for their pharmaceutical products as 
they do in other countries. It just doesn't seem fair to go to 
Germany or France or Spain or Canada and find that the very 
same product is being sold for much less, and Americans are 
paying actually a great deal more for the research and 
development and the advertising than is being paid elsewhere.
    That is just a suggestion. I appreciate very much your 
candid answers.
    I yield to the chairman.
    Chairman Waxman. Thank you very much for yielding. The 
gentleman has a minute and a half, so I will be glad to take 
it.
    If a statute were passed giving FDA broad authority to 
review abbreviated applications for follow-on proteins, and if 
companies were ready to begin submitting applications as soon 
as the statute became law, is it reasonable to assume that FDA 
would be able to begin reviewing those applications as soon as 
they were submitted, assuming, for the purpose of this 
question, that the statute did not require FDA to issue 
regulations or guidance as a prerequisite to the review of 
applications?
    Dr. Woodcock. FDA is currently, as I said, reviewing 
applications and also inquiries from companies and so forth, 
providing guidance for drugs under the 505(b)(2) regimen. So we 
have the technical expertise to perform these functions.
    Chairman Waxman. Thank you.
    Mr. Hodes.
    Mr. Hodes. Thank you, Mr. Chairman.
    Dr. Woodcock, I want to focus for a moment on the issue of 
comparability.
    Dr. Woodcock. Yes.
    Mr. Hodes. It is my understanding that biologics as a group 
are so diverse and in some cases so incompletely understood 
that there is today no one-size-fits-all set of studies that 
can demonstrate comparability. Is that true?
    Dr. Woodcock. Absolutely. Biologics, as opposed to biotech 
proteins, range from everything from gene therapy to cells, 
living cells of different types, to tissues--a huge range of 
different kind of products.
    Mr. Hodes. And am I correct that biopharmaceutical products 
often undergo changes after approval and that pre-change and 
post-change products will be comparable, as opposed to 
identical?
    Dr. Woodcock. Yes. As we were discussing before, 
manufacturers need to continue to improve their process or they 
may need to open up new plants or increase the level of 
production, the scale of production. There are a lot of changes 
that have to be made. After each one of those changes, we must 
assess whether or not the performance of the product has 
changed.
    Mr. Hodes. And the FDA establishes boundaries and batches. 
Different batches have to fall within established boundaries 
for that product?
    Dr. Woodcock. Yes. Any product, whether it is a small 
molecule or drug, has slight variations lot to lot in any kind 
of testing parameter that you would put on it, so the 
traditional approach is to establish boundaries within which a 
product can vary, but it can't go outside of those limits.
    Mr. Hodes. Now, just as the science is evolving on the 
manufacturing side--certainly from the FDA's standpoint 
techniques for assessing the structure and activity of 
biologics are evolving rapidly--and our understanding of 
biological structure and activity is improving all the time; is 
that correct?
    Dr. Woodcock. That is correct.
    Mr. Hodes. If Congress were to tell the FDA what specific 
types of clinical data must always be required for approval of 
follow-on biologics based on today's science, could such 
clinical data requirements become obsolete?
    Dr. Woodcock. Certainly, from my point of view, flexibility 
in enabling us to incorporate the new science into the 
regulatory process as that science evolves and becomes 
available is in the best interest of the public as well as the 
agency and the industry.
    Mr. Hodes. And if a follow-on statute required a clinical 
trial in every case, could it end up requiring perhaps 
unnecessary and therefore potentially unethical trials in the 
future?
    Dr. Woodcock. Where trials aren't needed, it is, you know, 
of questionable ethics to repeat them. So use of human subjects 
for trials that are not needed or done simply to check a box on 
a regulatory requirement are not desirable.
    Mr. Hodes. Let me ask you a question about the EU system. 
The EU regulations, as I understand them--imperfectly, I might 
add--require post-market surveillance; is that correct?
    Dr. Woodcock. I can't speak exactly. The Europeans have the 
ability to require post-marketing surveillance for any approved 
pharmaceutical.
    Mr. Hodes. Does the FDA currently have any requirements for 
post-market surveillance?
    Dr. Woodcock. We very frequently request post-marketing 
studies be performed at the time of approval, and those are 
agreed to by the firms.
    Mr. Hodes. So it is the manufacturers who are conducting 
the post-market surveillance?
    Dr. Woodcock. Yes.
    Mr. Hodes. The FDA relies on the manufacturers for that 
post-market surveillance; the FDA doesn't do any of its own?
    Dr. Woodcock. Right. The FDA conducts the adverse event 
reporting system, which is an adverse event reports from 
doctors and companies, and we do some limited studies, but in 
general we do not have the capacity to do post-marketing 
surveillance as you are describing.
    Mr. Hodes. Do you believe with biogenerics developing as 
rapidly as the field is developing, there should be expanded 
requirements for post-market surveillance?
    Dr. Woodcock. All pharmaceuticals when they are approved 
for the first time have a fair amount of uncertainty still 
surrounding them about their performance, and particularly, as 
we have discussed already, any protein product that would be 
approved would continue to have questions about immunogenicity 
and perhaps other side effects that would probably need to 
continue to be looked at in the post-marketing period.
    Mr. Hodes. Can the FDA require post-marketing studies?
    Dr. Woodcock. What we do is say to the company: you need to 
agree to conduct this study, and if you do then that is part of 
the approval the company agrees to do.
    Mr. Hodes. So, if I understand your answer, the answer is 
yes, the FDA does have the authority to require post-market 
studies?
    Dr. Woodcock. At the time of approval.
    Mr. Hodes. And what proportion of post-market studies that 
you require are completed?
    Dr. Woodcock. That is a complicated question. There are 
many different types of studies that are requested, and some of 
them go on a long time, so there isn't a really high 
proportion. I don't know the exact number, because it depends 
on what analysis you are doing, but many of these studies are 
not completed.
    Mr. Hodes. And if you were the last word on this, thinking 
about where the science is going with biogenerics, do you see a 
need for increased requirements for post-market studies of 
these biogenerics, none of which will ever be identical, either 
in batch or in actual structure, to the original?
    Dr. Woodcock. I believe it would be likely in many cases, 
but, as I said, this is going to be case-by-case because of all 
the differences in the different products. In many cases FDA 
would need to have post-marketing surveillance or post-
marketing studies done to resolve remaining uncertainties.
    Mr. Hodes. And, last question, does the FDA have an 
enforcement mechanism to require completion of any post-
marketing studies that you have required of the manufacturers?
    Dr. Woodcock. We can publicize the fact that the studies 
have not been done, and we could take the drug off the market.
    Mr. Hodes. So the enforcement mechanism is the possible 
removal of the drug from the market for lack of completion?
    Dr. Woodcock. Yes.
    Mr. Hodes. Has that ever been done?
    Dr. Woodcock. Not to my knowledge.
    Mr. Hodes. Thank you.
    I yield back. Thank you, Mr. Chairman.
    Chairman Waxman. Thank you. That is called the guillotine, 
except it is never used.
    Dr. Woodcock, I understand that it is quite a bit more 
complicated to establish interchangeability of two protein 
products than to establish their comparable safety and 
effectiveness. Would it be possible to demonstrate that a copy 
of a well-understood protein is interchangeable with the brand 
name drug if there are no limits on what studies can be 
required?
    Dr. Woodcock. We believe so. The situation in health care 
right now is that products that are interchangeable, they may 
be repeatedly switched back and forth. All right? And where you 
have a situation where you have a number of similar products on 
the market, the same indication, and they are very similar, it 
might be that they can be switched back and forth among one 
another multiple times for a given patient, depending on the 
plan and who they contract with and so on. In that situation 
either the innovator product could cause antibodies to the 
follow-on product or vice versa. We think we would have to test 
that in people to make sure, but we think it would be feasible 
to do those tests.
    Chairman Waxman. Is our understanding of protein structure 
and activity likely to evolve in a way that will make it 
possible to establish interchangeability in the foreseeable 
future, at least for some of these proteins, that may not be 
obvious at the present time?
    Dr. Woodcock. It may not be the protein, itself, that 
causes the immune response, but it could be different 
contaminants that are co-purified from the cell line or during 
the manufacturing process, or it can be changes that happen 
late in manufacturing or during storage or so forth, so it is 
really a very complicated situation.
    Chairman Waxman. For very simple, well-understood proteins, 
what kinds of studies might be required to establish 
interchangeability?
    Dr. Woodcock. Well, a study that actually performs that 
activity, which changes the patient back and forth from one 
version of the product to the next and follows the immune 
response.
    Chairman Waxman. Would that be a difficult study?
    Dr. Woodcock. No. In some cases there might be ethical 
issues that we would have to address very carefully. We would 
not want to set any patient up for harm.
    Chairman Waxman. Might the study requirements lessen over 
time as the molecules are better understood?
    Dr. Woodcock. Yes.
    Chairman Waxman. Do you think that the FDA would ever 
declare a copy of a biotech drug regulated under Hatch-Waxman 
to be interchangeable if the agency had doubts about whether it 
could be safely substituted for the brand name product?
    Dr. Woodcock. No. I mean, we believe that our finding of an 
A rating of interchangeability is our word. We are saying that 
scientifically we believe those products would be 
interchangeable, and we would not do that unless we believed 
that were the case and it was substantiated with scientific 
data.
    Chairman Waxman. Do you think that the FDA could be trusted 
to make appropriate interchangeability determinations for 
protein products if the agency were given statutory authority 
to approve copies of biologics under the PHS Act?
    Dr. Woodcock. I believe that the FDA can be trusted to 
carry out its mandate from Congress, whatever that might be.
    Chairman Waxman. And if we gave you an additional mandate, 
you feel you would be able to live up to it?
    Dr. Woodcock. Yes. I believe we have scientific expertise. 
As we have already discussed, we have been managing 
manufacturing changes for all pharmaceuticals on the market for 
a very long time.
    Chairman Waxman. Thank you.
    Let me see if any Member wishes additional time for 
questions?
    [No response.]
    Chairman Waxman. If not, let me thank you very much for 
your presentation and your willingness to answer these 
questions. I think it has been very helpful for us in our 
understanding of this issue. Thank you very much.
    Dr. Woodcock. Thank you.
    Chairman Waxman. The Chair would like to now call forward 
our second panel.
    Dr. Geoffrey Allan is the president, CEO, and chairman of 
the Board of Insmed Incorporated located in Richmond, VA. 
Insmed is a biopharmaceutical company focused on the 
development and commercialization of drugs for the treatment of 
metabolic diseases and endocrine disorders with unmet medical 
needs.
    Dr. Theresa L. Gerrard is now the president of TLG 
Consulting, Inc., where she assists pharmaceutical and 
biotechnology companies in product development and regulatory 
strategy. Prior to that she spent 11 years as a Division 
Director in FDA's Center for Biologics Evaluation and Research, 
and she has also previously served as director of development 
for Amgen.
    Dr. Bill Schwieterman is a physician and scientist by 
training who now acts as an industry consultant to major 
biotech pharmaceutical companies on product clinical 
development issues. Dr. Schwieterman started his career at NIH 
and subsequently moved to FDA, where he worked for 10 years and 
served as the Chief of Immunology and Infectious Disease Branch 
within FDA's Center for Biologics Evaluation and Research.
    Inger Mollerup has been the vice president for regulatory 
affairs at Nova Nordisk A/S since 2004. Nova Nordisk is a 
pharmaceutical company which focuses on diabetes care, as well 
as hemostasis management, growth hormone therapy, and hormone 
replacement therapy.
    Dr. Ganesh Venkataraman is co-founder and senior vice 
president of research at Momenta Pharmaceuticals. Momenta 
Pharmaceuticals, Inc., is a biotechnology company located in 
Cambridge, MA focused on the treatment of disease through an 
understanding of sugars and complex biomolecules.
    We are pleased to welcome all of you to our hearing today. 
We appreciate your being here.
    It is the custom of this committee to put all witnesses 
under oath. You are not being singled out. I would like to ask 
you to please stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Waxman. The record will reflect that each member 
answered in the affirmative.
    We will make your prepared statements part of the record in 
its entirety. We would like to ask, if you would, to try to 
limit the oral presentation to around 5 minutes.
    Why don't we start with Dr. Allan, and then we will move 
right down the line. You see we do have a timer. Dr. Allen.

STATEMENTS OF GEOFFREY ALLEN, PH.D, PRESIDENT, CHIEF EXECUTIVE 
   OFFICER, CHAIRMAN OF THE BOARD, INSMED INC.; THERESA LEE 
        GERRARD, PH.D, PRESIDENT, TLG CONSULTING, INC. 
 (BIOPHARMACEUTICAL CONSULTANTS FORMERLY WITH AMGEN AND FDA'S 
  CENTER FOR BIOLOGICS); BILL SCHWIETERMAN, M.D., PRESIDENT, 
 TEKGENICS CORP. (BIOPHARMACEUTICAL CONSULTANTS FORMERLY WITH 
FDA'S CENTER FOR BIOLOGICS); INGER MOLLERUP, VICE PRESIDENT FOR 
REGULATORY AFFAIRS, NOVA NORDISK A/S; AND GANESH VENKATARAMAN, 
PH.D, SENIOR VICE PRESIDENT, RESEARCH, MOMENTA PHARMACEUTICALS, 
                              INC.

                  STATEMENT OF GEOFFREY ALLAN

    Mr. Allan. Good morning, Chairman Waxman, Ranking Member 
Davis, and members of the Oversight and Government Reform 
Committee. I am delighted to have the opportunity to testify 
before your committee. The focus of my discussion will be the 
role of small, innovative biotechnology companies in the 
current debate regarding the development of a regulatory 
pathway for approving biogeneric drugs.
    My name is Geoffrey Allan, and I currently serve as the 
chief executive officer of Insmed, Inc. Insmed is a small 
biotechnology company focused on the development and 
commercialization of drugs for the treatment of metabolic and 
endocrine disorders where there are clear unmet medical needs.
    We received FDA approval for our lead product, IPLEX, at 
the end of 2005. IPLEX is a therapeutic protein which is 
approved for the treatment of children suffering from a rare 
growth disorder. We are currently continuing to develop IPLEX 
for several major medical illnesses such as myotonic muscular 
dystrophy and medical complications associated with HIV 
infection.
    I am here today to talk about biogeneric drug development 
and the regulatory path forward. I believe our experience with 
IPLEX is very illustrative of the scientific and technical 
issues confronting biogeneric drug developers, issues such as 
comparability testing and the nature and extent of clinical 
trials needed to support characterization of a generic 
biologic. Our experience tells us that these issues can be 
addressed using sound, readily available scientific approach.
    Insmed has developed significant intellectual capital 
focused toward protein characterization and purification. We 
have invested in building a facility required to manufacture 
quality proteins. The biogenerics business is a business in 
which we would like to specialize. The combination of our 
proprietary protein platform with a biogeneric protein platform 
meets our goal to sustain innovation, along with the ability to 
provide safe and affordable drugs to address a growing economic 
issue.
    It is my belief that there are a number of my colleagues in 
similar-sized companies that are also interested in providing 
the scientific expertise to meet the challenges of producing 
biogenerics. I believe that I am representing the interests of 
many smaller biotechnology companies and large contract 
manufacturing companies. I believe H.R. 1038 provides for a 
fair balance between reward and innovation in creating a timely 
approval pathway in commercialization of biogenerics in the 
marketplace; therefore, passing this bill would be a positive 
step for the biotech industry and continue to fuel the cycle of 
innovation.
    As the chief executive officer of a small biotechnology 
company, I hope my testimony will provide a different 
perspective on this important issue and bring to light some of 
the important reasons why this bill is the correct model to 
create a robust, competitive, and innovation biopharmaceutical 
marketplace.
    IPLEX is a recombinant protein product. In fact, it is a 
combination of two different recombinant protein molecules. It 
is a relatively large molecule, larger than insulin, growth 
hormone, the interferons, and Epogen, and certainly no less 
complex in its structural characteristics. As a new drug, along 
with the demonstration of safety and efficacy in the target 
population, structural characterization of the protein and the 
development of a quality manufacturing process was our central 
focus during the development of the product.
    During the course of the development of this product, we 
modified the manufacturing process several times. We changed 
cell lines. We changed purification procedures. We changed raw 
material sources. And on more than one occasion we changed the 
facilities where this product was manufactured. At all times, 
good analytical methodology was the bedrock of our 
comparability testing to ensure that we produced a consistent, 
highly purified protein.
    Analytical methodology to allow structural characterization 
of proteins has evolved enormously over the years. It is 
sophisticated and has exquisite sensitivity. For example, we 
use a battery of sensitive and analytical tests. More than 10 
of these tests are used, one of which is a technology called 
mass spectroscopy. This technique has such high resolution that 
on certain molecules we can detect changes as small as a single 
proton within the molecule. This is essentially not a crude 
science.
    During the development of IPLEX we worked closely with the 
FDA. They clearly used their discretion to decide what tests we 
needed to support our scientific approach as we made changes to 
our manufacturing processes. Their recommendations were 
rational and certainly not onerous. On the occasion that we 
changed the site of manufacture of the drug, moving our process 
from a U.K. facility to our own facility in Colorado, we 
conducted a simple pharmacokinetic study in human volunteers to 
establish the equivalence of the products after the facility 
change. We established very quickly, within 1 month, that the 
amount of drug in the bloodstream was consistent, regardless of 
where the drug was manufactured.
    IPLEX was being developed for use in children, and as such 
both we and the FDA knew that safety at all times was paramount 
and was certainly never jeopardized. For example, FDA was 
concerned that immunogenicity of the product could vary as we 
changed the process. We established surveillance procedures to 
address this issue, and we continue to monitor for signs of 
immunogenicity today.
    I have only given you a very brief overview of the type of 
scientific and technical issues we had to address in the 
development of this product, IPLEX; however, these issues are 
at the heart of what a biogeneric manufacturer would have to 
confront. The science has reached a level of sophistication to 
make this endeavor entirely possible. All we need now is the 
regulatory go-ahead.
    The proposal introduced by Chairman Waxman is extremely 
appealing as a next step in stimulating competition in order to 
address an ever-increasing economic problem facing our health 
care system. Based on our company's experience with the FDA 
during the approval process of IPLEX, I am confident that this 
legislation is based on sound science and progressive insight 
into where the market should be in the coming years.
    Once again, thank you for this unique and important 
opportunity to share my experience and views. I look forward to 
your questions.
    [The prepared statement of Mr. Allan follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.030
    
    [GRAPHIC] [TIFF OMITTED] T0874.031
    
    [GRAPHIC] [TIFF OMITTED] T0874.032
    
    Chairman Waxman. Thank you very much, Dr. Allan.
    Dr. Gerrard.

                  STATEMENT OF THERESA GERRARD

    Ms. Gerrard. Good morning, Chairman Waxman, Ranking Member 
Davis, and members of the committee. My name is Theresa 
Gerrard. Thank you for allowing me the opportunity to testify 
this morning on the importance of establishing a science-based, 
abbreviated approval pathway for biogenerics.
    From 1984 to 1995 I was with the FDA and was a Division 
Director with responsibility for IND and BLA review of hundreds 
of biotech products. I chaired licensing committees for Amgen's 
Neupogen, Genentech's Actimmune, and was involved in the review 
of beta Interferon from Chiron and Biogen.
    After leaving FDA, I was director of development for Amgen 
in Boulder, CO, where I had oversight of development of several 
biotech products. For the past 9 years I have worked as a 
consultant, where I have worked with many companies, primarily 
brand biotech companies.
    The purity of biotech products and the sophistication of 
analytical testing that exists today allowed the production of 
safe biotech drugs. Analytical testing consists of multiple 
sophisticated tests that are used to assess the physical, 
chemical, and biological characteristics of the product. Many 
more tests are used to assess a biologic than are typically 
used to assess a drug, because biotech products are more 
complex than drugs.
    These tests set the product specifications or goalposts, if 
you will, for every batch of biotech product that must fall 
between these goalposts. This is because no two batches of 
biotech products are identical. There are always minor 
variations.
    The advances in analytical characterization for well-
characterized biologics allowed FDA to develop scientific 
policy officers on comparability in the early 1990's. This gave 
brand manufacturers the ability to change the manufacturing 
processes without the need for redoing the original clinical 
outcome trials if the product generated by the new process was 
shown to be comparable to product made by the old process.
    Now, when we speak of biologic, the focus is on 
comparability. Why? Because no two batches of biologic product, 
whether brand name or generic, will ever be identical. 
Therefore, biologics are and should always be discussed in the 
context of comparability. Yes, small changes in manufacturing 
could have an impact on the final product, but we have known 
this for more than a decade and can detect these changes.
    For the past 15 years, FDA has gained substantial 
experience and expertise in assessing manufacturing changes and 
comparability data for a large number of protein products. The 
underlying scientific principles that guided comparability 
policy are still valid and can and should be adopted for 
generic biopharmaceuticals. Why? Because the types of post-
approval brand product changes are reflective of the issues 
biotech and generic companies will face in bringing generic 
biotech products to the market.
    The primary premise of comparability is that analytical 
testing is the most sensitive method to detect differences 
between two products. Clinical trials are rather insensitive in 
detecting product differences because the variation among 
people and their responses to a biopharmaceutical do not allow 
one to detect subtle product differences. Analytical testing, 
by itself, will not be sufficient in every case to demonstrate 
that a generic will have the same safety and efficacy as the 
brand name biotech product. In those cases, FDA can require 
additional data such as animal studies, human pharmacokinetic 
studies, or even clinical trials. There is not a one-size-fits-
all model, but FDA can determine the amount of data needed 
based on the complexity of the product, the history of the 
clinical use, and the extent of analytical characterization to 
determine its comparability with the brand name product.
    Before concluding, the question of immunogenicity has been 
raised in the discussion of both brand name and generic 
biopharmaceuticals, and I would like to take a moment to just 
briefly touch on this topic.
    Immunogenicity means the body generates antibodies to a 
specific foreign substance, such as bacteria, and it is a 
normal response in keeping people healthy. People routinely 
make antibodies to many different substances and experience no 
negative effects. Some biologics can cause people to generate 
antibodies which are specific to that product, but most will 
not have any affect on safety or efficacy. For some to imply 
that immunogenicity reactions are always harmful is just plain 
incorrect.
    FDA can assess the risk for immunogenicity when it reviews 
the products for purity, safety, and overall quality and can 
request additional clinical data when necessary. While 
immunogenicity is an important consideration for biogenerics, 
it is certainly not a hurdle to their development.
    Mr. Chairman, the science exists for a creation of a clear, 
efficient, abbreviated biogeneric approval pathway. Analytical 
tests, combined with additional data when needed, would ensure 
the safety and efficacy of generic biopharmaceuticals.
    Thank you.
    [The prepared statement of Ms. Gerrard follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.033
    
    [GRAPHIC] [TIFF OMITTED] T0874.034
    
    [GRAPHIC] [TIFF OMITTED] T0874.035
    
    [GRAPHIC] [TIFF OMITTED] T0874.036
    
    [GRAPHIC] [TIFF OMITTED] T0874.037
    
    [GRAPHIC] [TIFF OMITTED] T0874.038
    
    [GRAPHIC] [TIFF OMITTED] T0874.039
    
    Chairman Waxman. Thank you very much, Dr. Gerrard.
    Dr. Schwieterman.

               STATEMENT OF WILLIAM SCHWIETERMAN

    Dr. Schwieterman. Good morning, Chairman Waxman and members 
of the Committee on Oversight and Government Reform.
    My name is Dr. William Schwieterman. I thank you for the 
opportunity to appear before the committee today and present 
the scientific and clinical perspective on the issue of 
biogenerics.
    One of the most disturbing experiences for a physician is 
to know that a treatment is available to help your patient, but 
the cost may simply be beyond what your patient can afford. For 
this reason, I deeply share your goal, Congressman Waxman, of 
creating a sound, scientifically based approval pathway for 
biogenerics. And, given that I also had the privilege of 
working at FDA in the area of biotechnology for 10 years, I 
know that your goal can and should be achieved.
    I come before you today wearing three hats: as a physician, 
as a scientist, and as a former FDA reviewer. From this vantage 
point I would like to make the following critical points to the 
committee.
    First, with today's scientific advancements and 
technologies, we can assure the safety and efficacy of 
biogenerics.
    Second, the supporting science for this is not new. It has 
existed for over a decade.
    Third, the issues raised in post-approval brand changes are 
reflective of the issues that are raised in the field of 
biogenerics. As such, the same science that determines 
comparability for the brand tech industry can also be adopted 
to ensure the safety and efficacy of complaint and 
interchangeable biogenerics.
    Having worked extensively with agency physicians and 
scientists, it is clear to me that there is just one agency 
safety standard, and that standard has been and will continue 
to be applied in the review and approval of each and every 
biologic, whether it be a brand name or a generic.
    The standards and science used for current 
biopharmaceuticals are informative to us with respect to 
biogenerics. A critical but not often publicized fact in the 
biopharmaceutical industry is that FDA does not require brand 
name companies to perform large clinical outcome studies to 
retest the product generated by new manufacturing processes. 
This is because such an approach would not only be infeasible, 
but, more importantly, would ignore the utility of existing 
sophisticated scientific analytic tools and techniques for this 
purpose.
    Let me briefly summarize what happens in these instances. 
FDA starts with an assessment of extensive analytical 
comparability data. With these data, and keeping in mind the 
nature of the drug, the tests used, and the disease being 
studied, FDA decides how to proceed. The agency can give a 
thumbs-up or a thumbs-down regarding each post-approval brand 
manufacture change and, if thumbs-up, have that change be 
supported by the analytic data, alone. The analytic data, 
coupled with pharmacokinetic and/or pharmacodynamic studies or 
the analytic data--the studies just mentioned--plus data from a 
large clinical outcome study.
    As you already have heard, the vast majority of brand name 
manufacturing changes need no further studies when data from 
analytic tests show the products to be comparable. For a small 
number of brand name products that show small differences in 
these analytic tests following manufacturing changes, FDA may 
require additional analytic tests and pharmacokinetic or 
pharmacodynamic tests to be conducted in animals or humans.
    These later studies, PKBPD studies, are clinical studies in 
the sense that they are conducted in patients in the clinic, 
but they are not the large clinical outcome studies commonly 
used to determine the product's ultimate clinical effects.
    These pharmacokinetic and pharmacodynamic studies almost 
always involve fewer than 100 patients, and in general last 
weeks, not many months.
    Rarely after a brand name manufacturing change does the FDA 
require that a brand name company take the last step, repeating 
a full-scale clinical outcome study. Such studies are not 
usually necessary because the variability and ``noise'' 
involved in most clinical outcome studies make them inefficient 
for determining comparability between agents. In fact, of all 
the hundreds of brand name biologic product changes, the vast 
majority were approved without large clinical outcome trials.
    In sum, FDA's scientists and physicians routinely make 
comparability determinations, since manufacturing changes occur 
throughout the brand name biologic product development and life 
cycle. The comparability algorithm has existed for over a 
decade to allow brand name biologic manufacturers to change and 
improve their manufacturing processes.
    In closing, I want to emphasize to the committee again that 
the science of comparability is not a new one, but rather an 
old one used by the agency and the brand name industry for more 
than a decade to determine comparability.
    Chairman Waxman, the Access to Life-Saving Medicines Act 
will give FDA the authority and the flexibility it needs to 
ensure the safety and efficacy of biogenerics. I commend you 
for adopting the same scientific principles, processes, and 
procedures that exist for the brand name biologic industry when 
making post-approval manufacturing product changes to the 
biogeneric sector.
    My mission as a physician reviewer at FDA, and that of all 
my colleagues, then and now, is to protect the public by 
ensuring the safety of the supply of biopharmaceuticals. No 
one's interests is served if safety is not viewed as paramount.
    Thank you very much.
    [The prepared statement of Dr. Schwieterman follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.040
    
    [GRAPHIC] [TIFF OMITTED] T0874.041
    
    [GRAPHIC] [TIFF OMITTED] T0874.042
    
    [GRAPHIC] [TIFF OMITTED] T0874.043
    
    [GRAPHIC] [TIFF OMITTED] T0874.044
    
    [GRAPHIC] [TIFF OMITTED] T0874.045
    
    [GRAPHIC] [TIFF OMITTED] T0874.046
    
    [GRAPHIC] [TIFF OMITTED] T0874.047
    
    [GRAPHIC] [TIFF OMITTED] T0874.048
    
    [GRAPHIC] [TIFF OMITTED] T0874.049
    
    Chairman Waxman. Thank you very much, Dr. Schwieterman.
    Ms. Mollerup.

                  STATEMENT OF INGER MOLLERUP

    Ms. Mollerup. Chairman Waxman, Ranking Member Davis, 
members of the committee, thank you for inviting me to testify 
today. My name is Inger Mollerup. I am vice president for 
regulatory affairs of Nova Nordisk, a company with an 80-year 
history of producing insulin and other proteins.
    I am a scientist, not a lawyer, and as such have for the 
last 30 years been engaged in the design of manufacturing 
processes and development programs for numerous recombinant 
proteins. In 2005 I represented the drug before the European 
Medicines Agency [EMEA], discussing the insulin follow-on 
guidance, and I also presented to the World Health 
Organization's INN Committee on issues related to naming of all 
therapeutic proteins, including follow-ons.
    Nova Nordisk believes that any pathway for follow-on 
biologics must be, first and foremost, constructed to protect 
patient safety, be rooted in the best science, preserve 
innovation, and respect proprietary information.
    Three major points from my testimony today are: first, that 
characterization does not tell the whole story; second, that 
pre-clinical and laboratory tests are not sufficient to 
determine immunogenicity and other important safety parameters; 
and, third, that current science does not support 
interchangeability.
    First, characterization does not tell the whole story. Any 
pathway must fully address the patient safety considerations of 
medicines that are similar to or comparable to instead of the 
same as the reference product. Given that proposals currently 
before Congress go far beyond the science in an effort to deem 
products having minor differences in immuno-acid sequence as 
highly similar, I share with you an experience we had at Nova 
Nordisk as we were developing a fast-acting insulin analog 
wherein two potential candidates with one amino acid difference 
were tested.
    All candidates were put into an extensive chemical 
preclinical and clinical program. The candidate taken to market 
had only one change to the immuno acid sequence from human 
insulin, resulting in an analog with significantly shorter 
timing of action than human insulin and a unique safety 
profile.
    An earlier candidate, which had also one amino acid 
substitution, showed a positive effect on the timing of action, 
but in full preclinical animal toxicology studies this dark 
candidate significantly elevated tumor potential in rats. 
Development of this candidate was immediately discontinued.
    Even though both analogs were fully characterized, an 
animal study was required to demonstrate that this seemingly 
minor difference had enormous consequences for important safety 
characteristics. Minor differences can have major safety 
consequences.
    Second, pre-clinical and laboratory tests are not 
sufficient to determine immunogenicity and other important 
safety parameters. Human clinical immunogenicity data must be 
required, and we have numerous examples illustrating its vital 
importance.
    While developing a complete new process for our insulin 
analog, we discussed this program with the FDA. FDA stated the 
no general safety threshold could be applied for new 
impurities. Even one as low as 0.1 percent was not acceptable 
because proteins can be immunogenic at very low concentrations, 
and it is not known when low is low enough. Immunogenicity data 
from an appropriate clinical study was, therefore, necessary 
and included in our submission.
    Third, current science does not support interchangeability. 
Based on today's science, a follow-on biologic cannot be 
determined to be the same as a innovator drug. For this reason 
and because of the potential difference in immunogenicity and 
other drug-specific adverse events, follow-on biologic products 
must not be allowed to be interchangeable. The treating 
physician must at all times be involved in the decision to 
change from one product to another.
    Interchangeability is also not part of the EMEA approval, 
and Europe has the further requirement that these products are 
clearly identified to support post-market monitoring.
    Nova Nordisk believes that any pathway for follow-on 
biologics must be, first and foremost, constructed to protect 
patient safety, be rooted in the best science, preserve 
innovation, and respect proprietary information.
    Thank you for the opportunity to speak here today. Nova 
Nordisk is ready to assist Congress as this issue moves 
forward.
    [The prepared statement of Ms. Mollerup follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.050
    
    [GRAPHIC] [TIFF OMITTED] T0874.051
    
    [GRAPHIC] [TIFF OMITTED] T0874.052
    
    [GRAPHIC] [TIFF OMITTED] T0874.053
    
    [GRAPHIC] [TIFF OMITTED] T0874.054
    
    [GRAPHIC] [TIFF OMITTED] T0874.055
    
    [GRAPHIC] [TIFF OMITTED] T0874.056
    
    [GRAPHIC] [TIFF OMITTED] T0874.057
    
    [GRAPHIC] [TIFF OMITTED] T0874.058
    
    [GRAPHIC] [TIFF OMITTED] T0874.059
    
    [GRAPHIC] [TIFF OMITTED] T0874.060
    
    [GRAPHIC] [TIFF OMITTED] T0874.061
    
    [GRAPHIC] [TIFF OMITTED] T0874.062
    
    [GRAPHIC] [TIFF OMITTED] T0874.063
    
    [GRAPHIC] [TIFF OMITTED] T0874.064
    
    [GRAPHIC] [TIFF OMITTED] T0874.065
    
    Chairman Waxman. Thank you very much, Ms. Mollerup.
    Dr. Venkataraman, we are pleased to have you with us.

                STATEMENT OF GANESH VENKATARAMAN

    Mr. Venkataraman. Good morning, Chairman Waxman and members 
of the committee. I want to thank you for the invitation and 
opportunity to present to you this morning on this very 
important topic to our industry and for the general public.
    I am Ganesh Venkataraman, co-founder and senior vice 
president of research at Momenta Pharmaceuticals. I am pleased 
to come before you today to discuss the scientific issues 
behind the need to create an abbreviated regulatory approval 
process for generic biologics, which are defined as follow-on 
protein products in Dr. Woodcock's testimony.
    The terms that I use are also defined in the written 
testimony that we are submitting for the record.
    Mr. Chairman, I am a chemical engineer by training, with 
specific expertise in bioprocess engineering, protein structure 
characterization, and analytic and quantitative methods for 
categorizing complex mixtures. While at MIT I, with Dr. 
Sasisekharan and Dr. Langer developed novel analytic technology 
that enables characterization of complex mixtures. With this 
platform and co-science and leadership at MIT, we founded 
Momenta. We develop novel drugs and generic versions of complex 
products. We use cutting edge science to develop affordable and 
safe generic versions of these products.
    Momenta has a strong interest in ensuring that Congress 
acts this year. We believe our company's experience 
demonstrates that the science is available today and continues 
to evolve to enable generic versions of complex mixture drugs.
    In my written testimony I focused on five major issues that 
I will briefly discuss today.
    First point, complex biologics can be totally 
characterized. Not all biologic products are the same, so when 
we discuss the characterization challenges we must keep in mind 
the continuum of complexity. Analytic technologies are here 
today to characterize the less-complex biologics, and 
approaches like ours and others are actively being developed 
for those that are more complex.
    In my testimony I highlight how our testimony is applied to 
heparins. While heparins are not biologics, it validates how 
complex mixtures can be characterized.
    The second point is: with such product characterization, 
generic companies will be able to design and control the 
manufacturing process to reproducibly make biologic drugs with 
the same quality as the branded companies. The manufacturing 
process for biologic drugs does not occur in a random or 
uncontrolled system. The living cells are highly specialized 
systems which, in a very careful and controlled manner, produce 
a final product.
    Scientific advances in analytical technologies available to 
the generic as well as the branded industries allow one to link 
process parameters to the final product. It is possible and 
absolutely critical that generic companies build and maintain 
the same level of process knowledge.
    Point three: clinical studies, ranging from small-scale PK 
to clinical outcome studies, should be used to address any 
residual uncertainty answering relevant scientific questions. 
Traditional empirical or full-scale clinical trials must not be 
a requirement for approval in all cases. While the FDA may 
require full-scale trials for approval of some biologics, 
others that have an increased level of characterization data 
should require significantly reduced clinical testing.
    We believe FDA is well equipped to work with applicants to 
determine the degree of testing necessary and define the 
characterization and trial requirements.
    Point four: biologic drugs can be designed to be 
interchangeable. Interchangeability is an important public 
health objective and products need to be designed and proved to 
be interchangeable. It is well within the reach in the near 
term for a number of products. This can be done through total 
characterization and/or through a proper combination of 
characterization and clinical trials.
    Point five: patient safety and product quality will not be 
jeopardized. We should hold the entire industry, branded and 
generic, alike, to the highest scientific standards, and allow 
the expertise of FDA's scientific staff, which will approve and 
oversee the marketing of innovator and generic biologics.
    In closing, Mr. Chairman, there is an opportunity to drive 
continued scientific innovation by creating a forward-looking, 
regulated system which balances the respective roles that 
characterization and clinical data should play. FDA has to be 
given the opportunity to make the decisions on comparability, 
which is interchangeability based, on the science presented to 
them. If legislation does not allow for such a pathway today, 
scientific innovation from technology companies like ours and 
many others will be stifled, and access to more-affordable 
choices would be denied.
    I hope that my perspectives will be instructive to this 
debate. I am confident that these efforts under your leadership 
will be a key contributor to increasing access to safe, 
effective, and affordable medications to patients in need.
    I thank you again for the opportunity to submit testimony. 
I look forward to answering any questions.
    [The prepared statement of Mr. Venkataraman follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.066
    
    [GRAPHIC] [TIFF OMITTED] T0874.067
    
    [GRAPHIC] [TIFF OMITTED] T0874.068
    
    [GRAPHIC] [TIFF OMITTED] T0874.069
    
    [GRAPHIC] [TIFF OMITTED] T0874.070
    
    [GRAPHIC] [TIFF OMITTED] T0874.071
    
    [GRAPHIC] [TIFF OMITTED] T0874.072
    
    [GRAPHIC] [TIFF OMITTED] T0874.073
    
    [GRAPHIC] [TIFF OMITTED] T0874.074
    
    [GRAPHIC] [TIFF OMITTED] T0874.075
    
    [GRAPHIC] [TIFF OMITTED] T0874.076
    
    [GRAPHIC] [TIFF OMITTED] T0874.077
    
    [GRAPHIC] [TIFF OMITTED] T0874.078
    
    Chairman Waxman. Thank you very much, Dr. Venkataraman.
    To begin the questioning, the Chair recognizes Mr. Burton.
    Mr. Burton. I thank the Chair for recognizing me. I have to 
go put a pharmaceutical in my eye at the hospital, so I can 
attest to the necessity for those products.
    Mr. Chairman, I am not sure this question should be 
directed to the panel. It may be directed at you. From 
everything I have seen, there can be a minor difference in a 
biological product, and if the pharmaceutical company that 
created the product in the first place has to give a generic 
company the information before their patent expires, it seems 
to me, because of the minor difference that could be created by 
the generic company, they could apply for a license well before 
the patent runs out from the original producer. If that were 
the case, the scientific research being paid for by the 
original company, the pharmaceutical company that developed the 
product, could lose its investment after they have created 
something that is going to be beneficial to everybody.
    So my question is: has that been checked out legally and 
whether or not the originating company can be protected for the 
duration of their patent?
    Chairman Waxman. Perhaps we can let one of the panelists 
answer it, but it seems to me it becomes a patent question. If 
the originator of the product has a patent over that product, a 
minor variation, as you seem to describe it, would not be 
permitted as a competitor, if it is basically the same product.
    Mr. Burton. I think the bill has a great deal of merit.
    Chairman Waxman. This is, of course, by the way, what we do 
right now with generics and brand name drugs. We allow generics 
to compete after the patent is over. If there is a new 
innovation in it or a minor difference, then the FDA would have 
to decide if it is, in fact, a generic.
    Mr. Burton. I understand that. I like the bill. That is one 
thing I would like to check out. Thank you, and thank you for 
yielding.
    Chairman Waxman. Thank you very much.
    The Chair recognizes himself.
    Let me address this question to Dr. Gerrard and Dr. 
Schwieterman. As you testified, for over 10 years the FDA has 
allowed brand name manufactures of biotech drugs to make 
changes in the process by which they manufacture their 
products, but without repeating the original safety and 
effectiveness trials. This policy seems to me to undercut the 
brand name industry argument that changes in manufacturing 
processes can affect safety and effectiveness in ways that 
could only be assessed through clinical trials. In your 
judgment and experience, does permitting companies to make 
significant manufacturing changes under a comparability 
protocol, but without repeating clinical trials, adequately 
protect patients from unsafe or ineffective products?
    Ms. Gerrard. I think, as both Dr. Woodcock and Dr. 
Schwieterman have said, FDA only has one standard for safety 
and efficacy, so when FDA makes the decision that, after a 
manufacturing change, that the product is comparable, they have 
decided that it is going to have the same safety and efficacy 
as the brand name product. What we are saying is some of those 
same principles apply to the development of generic biotech 
products.
    Chairman Waxman. Yes.
    Mr. Schwieterman. Yes, let me just add to that. The FDA is 
a science-based organization. It is filled with scientists. It 
is filled with physician reviewers. It is filled with people 
who are expert in data analysis and interpretation. Your 
question really is adking if the science there to allow in some 
cases for the absence of clinical trials, and I would say yes, 
it is there, but you would have to look at the data, you would 
have to look at the techniques, you would have to look at the 
actual agent under discussion. You take things on a case-by-
case basis, based upon the science and the data, and then make 
that determination.
    Chairman Waxman. Are there many examples of products 
approved under comparability protocols that turned out to have 
unpredicted safety or effectiveness problems that were only 
discovered after marketing?
    Mr. Schwieterman. There are none in the United States where 
there were major changes in post-marketing that caused this. We 
all know the example of Eprex, which occurred post-marketing in 
Europe. The patients developed PRCA. But the agency and the 
biotechnology industry and biopharmaceutical industry in this 
country has been amazingly good at protecting the public this 
way.
    Chairman Waxman. Does the scientific rationale underlying 
comparability protocols and FDA's 10 years of experience 
implementing it provide evidence that an abbreviated 
application process for follow-on proteins and biogenerics 
based on established comparability principles could adequately 
protect patients from unsafe or ineffective products? Dr. 
Gerrard.
    Ms. Gerrard. I think the comparability policies have been 
enormously successful from FDA's point, and the American public 
has benefited, as well. Brand name companies have been able to 
make manufacturing changes and improve their product without 
the need to redo clinical trials.
    I think we can apply some of those same principles in 
extending it one step further to generic biotech products.
    Mr. Schwieterman. I would just like to add that I think the 
rationale is, in fact, one that can be used, coupled with the 
data, coupled with the case-by-case to develop a safe and 
effective biogeneric use of the principles we outlined.
    Chairman Waxman. Dr. Schwieterman, Ms. Mollerup testified 
that immunogenicity can arise so unpredictably from changes in 
biologics that a follow-on biologic will always require a 
clinical trial to assess immunogenicity. When a brand name 
company uses the FDA's comparability guidance to make changes 
to its existing biologic products, are clinical trials always 
required to demonstrate that no new immunogenicity concerns 
have arisen?
    Mr. Schwieterman. Always is an absolute, and absolutes are 
only things that can be supported by the data. FDA is a 
scientific organization, and I would say no. In every instance 
ought there be a clinical trial for immunogenicity? No. It 
would depend upon the nature of the case. It would depend on 
the data that are there. And I think there are ways and methods 
for sure beyond clinical trials to determine immunogenicity. In 
fact, clinical trials, themselves, have limitations in this 
regard, as they do with other infrequent safety AEs.
    Chairman Waxman. Should there be more concern about 
immunogenicity for follow-on proteins than for brand name 
proteins?
    Mr. Schwieterman. I don't think there should be more or 
less concern about immunogenicity. I think that the safety of 
all agents, particularly biogenerics and biopharmaceuticals in 
this country is a critical issue for the FDA. I think that the 
same standards, the same kinds of oversight, the same 
considerations for biogenerics ought to apply for them as they 
do for present-day biopharmaceuticals.
    Chairman Waxman. Let me ask a question of Dr. Venkataraman 
and Dr. Allan. A number of companies have expressed doubts 
about whether copies of biotech drugs can be made safely. They 
have suggested that the manufacturing process for producing 
these drugs is so complex that new companies will not 
understand biologics manufacturing well enough to produce safe 
versions of these products. Isn't it true that there are a 
number of companies who already make brand name biotech drugs, 
either for themselves or on contract for other companies, who 
would be likely to want to make copies for biotech drugs if 
there were a legal pathway?
    Mr. Allan. I believe there are contract manufacturing 
organizations that do make branded products, either at the 
research level, the development stage level, or even at the 
commercial level.
    Chairman Waxman. Yes.
    Mr. Venkataraman. I would like to add I think the brand 
name manufacturers sometimes have made the process to be a 
black box. I think the science is there now to be able to go 
back and decouple product and relationship to the process so 
that you could use a different cell line and come up with a 
different process that would ultimately provide you the same 
end product. Provided you couple that with the characterization 
of looking at process-related impurities and end product, you 
could get there to the same level of being in a brand name 
manufacturer.
    Chairman Waxman. Thank you very much.
    Mr. Davis.
    Mr. Davis of Virginia. Thank you, Mr. Waxman.
    Ms. Mollerup, let me start with you. The generic system we 
created for pharmaceutical drugs in 1984, which bears Mr. 
Waxman's name, balanced and abbreviated approval systems for 
generic drugs with patent restoration and new exclusivity for 
innovators. Doesn't such a critical balance continue to 
stimulate the development of new cures for drugs, having that 
balance?
    Ms. Mollerup. In my mind it is important that we keep the 
balance that will still foster innovation, and as this process 
goes forward toward defining a legislative and regulatory 
system, that is acknowledged, because you would still want new 
drugs to come on the market in this country.
    Mr. Davis of Virginia. What kind of impact would a system 
that fails to assure safety or sustain innovator intellectual 
property rights have on innovation?
    Ms. Mollerup. A system that would fail to protect safety I 
think would be detrimental for both innovation and follow-on 
manufactures, and obviously first and foremost for public 
health. I think it is very important, as Congress moves 
forward, that the pathway you are moving toward is really 
constructed to protect patient safety and be rooted in the best 
science, and there is a lot of strong and good science 
available for this.
    Mr. Davis of Virginia. The FDA stated in its testimony that 
demonstrating the similarity of a follow-on protein product to 
a reference product is more complex and would require new data. 
I guess my question is: does this mean FDA should require 
clinical safety data for follow-on biologics, or do you think 
there are cases where they could make the determination it 
wouldn't?
    Ms. Mollerup. Based on my experience with those complete 
second-generation processes that we have developed and are 
developing at Nova Nordisk, these require immunogenicity data 
in all cases for the simpler ones like insulin, described in my 
testimony. Besides that, PKPD was required to assess both 
pharmacokinetics and efficacy for a more complex one like a co-
correlation factor, substantial clinical data will be required, 
as well as immunogenicity.
    So, based on the experience that we have with processes 
that have less substantial changes than follow-ons, from my 
standpoint, where the science is today, immunogenicity trials 
will always be required.
    Mr. Davis of Virginia. Thank you.
    Let me ask Dr. Venkataraman and Dr. Allan, you are both 
from small biotech companies. FDA stated in their testimony 
that technology today is not yet sufficient to allow for 
comparisons of complex protein products. Do you agree with 
that?
    Mr. Allan. Well, it has to be viewed on a case-by-case 
basis. I think for the product we developed the analytical 
methodology that we used, which was fairly extensive, was very 
adequate to demonstrate the structural characterization of the 
property.
    Mr. Davis of Virginia. DO you think it depends?
    Mr. Allan. It will depend on the products. There are some 
proteins that are fairly simple, relatively speaking, and you 
can characterize them extremely well.
    Mr. Venkataraman. I agree. I think on a case-by-case basis 
there are several proteins that can be characterized well 
today, and science continues to evolve. Academic groups and 
other companies I know are working very actively toward 
creating novel technologies to be able to do this for more 
complicated products. And I think a regulatory and a legal 
legislative incentive is going to propel that technology 
forward much faster to be able to do this much more 
sophisticatedly.
    Mr. Davis of Virginia. How close are we, do you think? It 
is hard to say, I know, but a couple years, 10 years?
    Mr. Venkataraman. It is difficult to say, but 4 years ago, 
when we started working on our program, people thought it was 
impossible to do. We were discouraged extremely. Today we have 
an application, we have talked to the FDA. It has been 
completely solved. I think similar situations have been 
reported by other people. So it is a matter of providing the 
right incentives for the scientists to be able to take it on.
    Mr. Davis of Virginia. OK. Are there any non-clinical tests 
or technologies that could fully substitute for studying the 
safety of biotech products in humans?
    Mr. Venkataraman. I would say that the safety, per se, so 
the comparability of the two products, characterization becomes 
a very important aspect of knowing how close you are to the 
innovator product. I think there are multiple analytical 
techniques that provide you very rigorous estimation of the 
product quality and product attributes, so yes.
    Mr. Davis of Virginia. All right.
    Let me ask Dr. Schwieterman and Ms. Gerrard, the FDA 
highlighted in its testimony the importance of ensuring that 
facilitating the development of follow-on product through 
abbreviated pathways doesn't discourage innovation and the 
development of new biological products. They also refer to the 
Hatch-Waxman Act as a balanced approach. Do you think an 
extension of data exclusivity period and certain patent 
protections would help encourage innovation and development 
with biological products?
    Ms. Gerrard. I am not a lawyer. I am a scientist. I guess I 
have confidence in the innovation of biotech companies that I 
work with to continually come up with new and better products.
    Mr. Davis of Virginia. All right. From a scientific point 
of view it is achievable, but from a policy point of view you 
are going to take a pass on it?
    Ms. Gerrard. I am not a lawyer. I am a scientist.
    Mr. Davis of Virginia. That is fine.
    Mr. Schwieterman. I will take a pass, as well. I am a 
physician scientist. From a scientific point of view I agree 
with what Dr. Gerrard said.
    Mr. Davis of Virginia. Well, Henry and I are both lawyers. 
Thank you.
    Chairman Waxman. Thank you, Mr. Davis.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Mr. Chairman.
    As a child I was left way behind on science, so I am going 
to pass on the science questions for a minute and ask something 
I know a little bit more about, and that is the business side 
of this, and I am asking business questions of a panel of 
scientists. I understand that.
    Am I correct in assuming--and anyone can answer this--I 
take it, just reading between the lines, we have several 
representatives from generic manufacturing companies and one 
from a brand name company. Judging from what we have heard 
about the complexity of these biologic drugs as opposed to 
chemical-based drugs, and we all know the stories about how 
chemical-based drugs cost pennies apiece to produce and they 
are sold for whatever, but it seems to me that the economics of 
biologics are significantly different and more complex and 
therefore dramatically more expensive. If I am correct in that 
assumption and the process is inherently expensive, how much 
money can we save by producing them on the generic basis or 
follow-on basis as opposed to the brand name?
    I guess a premise, we know that for Claritin and for Zantac 
and all these other products, and many of the drugs that are 
actually still by prescription, that we have a significant 
amount spent for advertising and marketing. I assume marketing, 
anyway, is still a big component of the biologics business. But 
what are we talking about, either from a historical perspective 
that you know about or potentially that we are talking about 
saving by allowing these drugs to be produced generically?
    Mr. Allan. I can give that a shot. Actually, I don't think 
anybody around this table is from the generic industry. Some of 
us are from the innovation biotechnology industry.
    With regard to price, it is going to be a case-by-case 
basis. There is no doubt to make a complex protein is more 
expensive to make than a small molecule. The manufacturing 
facilities that are needed, the overhead, so to speak, that 
goes into the whole program is probably larger than the 
financial commitment you would want to make for a small 
molecule plant. So I think intrinsically it is a more expensive 
business, but I believe that, you know, certainly none of us 
would be sitting around this table if we felt that we couldn't 
make these types of products at a significant price reduction 
to the innovator product. It will be case-by-case. What would 
be the percentage reduction I don't think we could--I certainly 
would not comment on that right now, but, as I said, it will be 
less expensive.
    Mr. Yarmuth. Go ahead.
    Mr. Venkataraman. I was just going to add one comment. I 
don't know if I can give you any numbers, but what I do know is 
that the margin between the cost to manufacture and the actual 
price is significant. I don't have exact numbers, but it is 
quite significant, and I assume that could translate into cost 
savings in the long run.
    Mr. Yarmuth. Again, I understand I am asking business 
questions of scientists, but would the savings result, assuming 
that we allow an easier pathway to producing generics, would 
the savings result more from the competitive aspect, or would 
they result from the fact that, just because we have protected 
the brand name manufacturer, that we have allowed that price to 
be very, very high, and that just by eliminating the 
exclusivity we bring the price down? Would the savings be 
inherent? Would they be related to competition, or is it just 
because we are allowing exorbitant profits now, understanding 
that those profits are being allowed to allow the company to 
recover some of its investment?
    Mr. Allan. I think it will be the introduction of 
competition, to a certain extent.
    Ms. Gerrard. And my economic knowledge might be right 
behind my legal knowledge, but I think what we have to 
understand is that, while biologics might be more expensive to 
make than drugs, that there is still a huge margin there, and 
that, while the cost savings, even conservative estimates that 
say 25 percent, which we have seen, when you consider that the 
cost of a biologic is so high that a 25 percent savings is a 
huge amount.
    Mr. Yarmuth. You look like you want to answer.
    Mr. Venkataraman. The pricing for a drug that a company 
like Momenta would launch as a generic would be lower by at 
least 20, 25, 15 percent, depends on the dynamics, but because 
the lower prices of the drug I think the cost saving would be 
achieved.
    Mr. Yarmuth. Ms. Mollerup, did you want to comment?
    Ms. Mollerup. Yes. I mean, cost is an important 
consideration and I think that a lower cost of drugs is good, 
as long as it is not at the expense of patient safety. I guess, 
again, back to the need for clinical trials, I would like to 
share with you, an example which I guess indicates somewhat 
where the borderline may be. In Europe we have not only had two 
approvals of follow-ons, but also one rejection. That was on an 
Interferon Alpha that did not show comparability in its 
clinical trial in that more patients had relapse of their 
disease after the treatment with Alferon was stopped, compared 
to the reference product, and there were also more side effects 
in the Alferon group. Again, I am not an economist. I am a 
scientist, but it just goes back to the equation of cost 
savings, that some cost savings can be realized but the 
products are expensive to produce, and as this example from 
Europe shows, care really has to be exercised as to make sure 
that the appropriate comparable clinical data, not a copy of 
the original data set that was handed in, but appropriate 
comparable data ensuring comparable efficacy and safety is 
included.
    Mr. Yarmuth. Thank you.
    Chairman Waxman. Thank you, Mr. Yarmuth.
    Mr. Welch.
    Mr. Welch. Thank you, Mr. Chairman.
    Dr. Gerrard, Dr. Mollerup argued that the risk of 
immunogenicity from a follow-on product must always be 
evaluated with clinical trials. That is my understanding of her 
testimony. In your view, are clinical trials the best or the 
most sensitive method of detecting this?
    Ms. Gerrard. Not always. I think we have to keep in mind 
that immunogenicity, as I stated, a product having greater 
immunogenicity really is not an issue; it is when there are 
clinical consequences. Immunogenicity just means you make 
antibodies to the product. Most of the time they are not 
neutralizing. Many times they are temporary. Patients continue 
to be treated. So it is not always an issue.
    Second, is clinical trial the best way to determine 
immunogenicity differences between two products? It may not 
always be the case. Sometimes more rigorous analytical 
comparisons, either an assessment of the product and product 
instability are really a much more sensitive way of determining 
whether that product is going to cause problems.
    Mr. Welch. Thank you.
    Dr. Schwieterman, would you agree with that?
    Mr. Schwieterman. Yes, I would. I think the concept of 
immunogenicity is one that has been talked about a lot, but, in 
fact, it is a quite complex subject. There are certain kinds of 
immunogenicities, then there are other kinds. We have had many 
day-long conferences about this. The ability of clinical trials 
to detect immunogenicity depends on what you are talking about. 
For most of the things that have been bandied about, actually 
clinical trials are rather poor measures for picking up the 
kinds of outcomes that you have heard.
    Mr. Welch. Thank you.
    I would ask this question to both of you, as well. 
Opponents of the generic biological pathway, as you know, 
always raise the example of Eprex, Johnson & Johnson's European 
version of Epogen. Can you explain a little bit about what 
happened with Eprex? I will start, I guess, with you, Dr. 
Schwieterman.
    Mr. Schwieterman. I don't know, of course, the data on the 
manufacturing changes that were made, nor was I privy to the 
investigations made. I know that Johnson & Johnson underwent a 
great deal of investigations. I mean, just to tell the story as 
I know from my standpoint, Eprex, which was one of the 
erythropoietin--ESAs, they are called, in general, 
erythropoietic stimulating agents--was marketed and approved 
overseas, and then cases of autoimmune disease or a very bad 
autoimmune immunogenic reaction to the drug, itself, ensued. In 
other words, the body started reacting to its own protein based 
upon that.
    The thing about this particular case that is different is 
that, No. 1, it occurred overseas, so, you know, there was no 
real knowledge of whether the analytic tests that were 
performed there were adequate or complete and whether they 
would have been picked up at the FDA.
    No. 2, the ultimate investigation into this product, as I 
understand it from Dr. Segal's testimony several weeks ago, 
picked up on impurities that are actually determined with 
analytic tests after the fact, and most of the investigation 
ensued upon that; that is to say, the actual analysis of the 
product, itself.
    From my vantage point, it is clearly an important issue, 
because we need to understand it, but it doesn't visciate, it 
doesn't make the arguments about analytic tests weaker, in my 
estimation. In some ways it makes them stronger.
    Mr. Welch. Go ahead, Dr. Gerrard.
    Ms. Gerrard. I was just going to add to that. Pure red cell 
plasma is a very serious disease, but it occurred in 1 in 
10,000 patients. So could this have been detected in a typical 
clinical trial of, say, several hundred people? No, it could 
not. What actually did resolve the issue for Johnson & 
Johnson's Eprex was a more rigorous analytical characterization 
to resolve that problem.
    Mr. Welch. Thank you. How large a clinical trial would have 
been required to identify that side effect?
    Ms. Mollerup. I think that everyone agrees it would have 
taken an extremely large clinical trial, and, from my 
perspective, the purpose of doing these comparative 
immunogenicity trials where you can, from the blood samples, 
isolate antibodies, characterize them, find out whether they 
are benign or not, and I fully agree with Dr. Gerrard that not 
all antibody responses are a safety issue.
    But with the case of these comparable clinical trials to 
test immunogenicity, the real important point here is that such 
trials can tell us if there is a major problem. For innovator 
products, as well as for follow-ons, it is the long-term safety 
monitoring that is also needed in order to pick up on minor 
problems like this.
    Mr. Welch. How large a clinical trial would have been 
required, then, Ms. Mollerup?
    Ms. Mollerup. I don't have the clinical for Eprex because I 
don't have that statistic, but, back to Dr. Segal's testimony, 
it would take a study of about 50,000 patients to have a good 
chance of detecting a serious effect in a patient, 1 patient 
out of 1,000. But I don't have the statistics on Eprex.
    Mr. Welch. And my understanding--anybody can answer this--
is that Johnson & Johnson, itself, doesn't argue that the Eprex 
problem would have been avoided, in fact, had they conducted a 
clinical trial before marketing the change product. Dr. 
Gerrard?
    Ms. Gerrard. No, they would not have detected it in a 
clinical trial. Every product is subject to post-marketing 
surveillance.
    Mr. Welch. Right.
    Ms. Gerrard. So a very rigorous post-marketing surveillance 
program is also important for every product.
    Mr. Welch. Dr. Schwieterman.
    Mr. Schwieterman. One point I want to make is you don't 
conduct clinical trials for no reason. You are exposing 
patients to agents and putting them through a protocol and data 
collection and blood drawing and so forth to collect scientific 
data for scientific reasons that are pre-established in 
hypotheses, and so to argue that clinical trials should be 
conducted all the time is really to negate the basic premise of 
a clinical trial, which is the study of question.
    In the case of Eprex, it would have been an impossibly 
large study to have studied that particular issue; therefore, a 
clinical trial not only would have been undetected, insensitive 
to that particular change; it wouldn't have offered any 
information at all.
    Mr. Welch. Just following on your point, would it make 
scientific sense to argue that the expressed example supports a 
clinical trial requirement for follow-on products but does not 
support that same requirement for brand name products?
    Ms. Mollerup. I think, from looking at what is required for 
the brand name industry, I mean, the trials that we undertake, 
both phase two and phase three trials, immunogenicity is an 
obvious part of that program, because we are working with 
proteins and the immunogenetic profile of our products are also 
not established as we take them through the clinical program, 
so that is certainly part of the testing we do, as well.
    Mr. Welch. I'm not sure I understand you. You are saying 
that you have to have those clinical tests for the follow-on 
products but you don't have to have them for the brand name 
products?
    Ms. Mollerup. No. I am saying the exact opposite. I am 
saying that we, in the brand name products clinical trials that 
we use to take these to the market, immunogenicity studies are 
an integrated component, and what we find reasonable to 
establish clinical comparability for the follow-ons is to also 
study immunogenicity in an appropriately sized comparative 
trial, and that will be a lot smaller than the innovator phase 
three studies.
    Mr. Welch. Dr. Schwieterman, go ahead.
    Mr. Schwieterman. I guess I would disagree with that. 
Mandated clinical trials to study immunogenicity is not 
something that is scientific, but rather political. In this 
particular case, if the science is there, depending upon the 
drug, depending upon the question, the patient, and the test, 
you could do a clinical study in certain instances where you 
believed that information would be useful from that clinical 
study. But to mandate it for all studies would be to also 
perform it for those cases where it wouldn't be useful.
    I think that what ought to happen is that the FDA, like 
they do now, be able to have the flexibility and the authority 
to use their assessments of the data and the context of that 
data to make judgments about the need for further clinical 
studies.
    Mr. Welch. Thank you.
    Dr. Gerrard, last word?
    Ms. Gerrard. I will just add to that. I think FDA does need 
that flexibility. You look at the history of the product, have 
there been any clinical consequences to the immunogenicity? 
What about the analytical characterization? You look at the 
whole picture. If there are remaining questions, of course 
safety is paramount. We want FDA to have the ability to request 
any additional data that they need to make sure that product is 
safe.
    Mr. Welch. Thank you. I yield the balance of my time.
    Chairman Waxman. Thank you very much, Mr. Welch.
    Dr. Mollerup, would you support giving FDA the ability to 
require and enforce post-market studies for both the generic 
and for the brand name drugs?
    Ms. Mollerup. I am from Europe, so I have a fair amount of 
knowledge of the regulatory system here in the United States, 
but may not be accurate on all the details. From my 
perspective, the FDA should be able to put the same 
requirements to both innovators and follow-ons, because the 
same safety issues are involved.
    Chairman Waxman. Right. In the United States the 
manufacturer agrees, when the product is licensed, to do 
followup tests for post-marketing, but they may not do it 
because there is not a sanction except to take them off the 
market, which has never been used. Do you think FDA should have 
the power to require post-marketing safety studies? You say it 
should be for both or either when it is necessary. Do you think 
FDA ought to have that power?
    Ms. Mollerup. The power not only to ask for the data, but 
also actually to get it?
    Chairman Waxman. And to insist it be done?
    Ms. Mollerup. Yes, I think they should.
    Chairman Waxman. Thank you.
    Well, I thank all of you very much. You have been very 
helpful, and I appreciate your testimony. This may be self-
serving, but the bill does allow FDA to require clinical 
trials. It allows FDA to do whatever is necessary to determine 
that the science indicates a generic version is safe and 
effective.
    Thank you very much.
    I want to call forward the witnesses for our third panel.
    Yvonne Brown is an individual living with multiple 
sclerosis and is speaking today on behalf of the National 
Multiple Sclerosis Society.
    Mary Nathan is an individual living with a rare disease 
called Gaucher disease, and is speaking today on behalf of the 
National Organization for Rare Disorders.
    Nelda Barnett is a Board Member for AARP.
    Priya Mathur is the vice chair of health benefits, Board of 
Administration, at the California Public Employees' Retirement 
System [CalPERS].
    Scott McKibbin is the special advocate for prescription 
drugs for the State of Illinois.
    Dr. Henry Grabowski is a professor of economics and the 
director of the program in Pharmaceuticals and Health Economics 
at Duke University.
    Jonah Houts is a senior analyst at Express Scripts, Inc., a 
pharmacy benefit management company [PBM], representing 1,600 
clients, including large, self-insured employers, government 
payers, unions, and health insurance companies, and covering 
more than 50 million people.
    We welcome you all to this hearing today. Your prepared 
statements will be in the record in full. We would like to ask 
each of you to limit the oral presentation to around 5 minutes.
    It is the custom of this committee, as you have already 
observed, having sat through the earlier panels, to ask all of 
the witnesses to be sworn in, so I would like to ask each of 
you to rise and raise your right hands.
    [Witnesses sworn.]
    Chairman Waxman. The record will indicate that each of the 
witnesses answered in the affirmative.
    Ms. Brown, why don't we start with you, if you have the mic 
passed over.
    The timer, by the way, will be green, and then it will turn 
to yellow for the last full minute, and then red when that last 
minute is up.
    Thank you so much for being here.

STATEMENTS OF YVONNE BROWN, FOR THE NATIONAL MULTIPLE SCLEROSIS 
 SOCIETY; MARY NATHAN, FOR THE NATIONAL ORGANIZATION FOR RARE 
  DISORDERS [NORD]; NELDA BARNETT, BOARD MEMBER, AARP; PRIYA 
 MATHUR, VICE CHAIR, HEALTH BENEFITS-BOARD OF ADMINISTRATION, 
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM [CALPERS]; SCOTT 
D. MCKIBBIN, SPECIAL ADVOCATE FOR PRESCRIPTION DRUGS, STATE OF 
   ILLINOIS; HENRY GRABOWSKI, PH.D, PROFESSOR OF ECONOMICS, 
DIRECTOR, PROGRAM IN PHARMACEUTICALS AND HEALTH ECONOMICS, DUKE 
 UNIVERSITY; AND JONAH HOUTS, SENIOR ANALYST, EXPRESS SCRIPTS, 
                              INC.

                   STATEMENT OF YVONNE BROWN

    Ms. Brown. Thank you, Chairman Waxman and distinguished 
members of the committee, for inviting me to provide testimony 
at this hearing, and thank you, Chairman Waxman, for your 
leadership on this issue.
    My name is Yvonne Brown. I live in Waldorf, MD. I have 
multiple sclerosis [MS]. I am not a pharmaceutical company. I 
am not a lobbyist. I am simply a 44-year-old woman who 
struggles every day with the devastating effects of MS and the 
unaffordable cost of treatment.
    MS is chronic, it is unpredictable, an often disabling 
disease of the central nervous system. It basically stops 
people from moving in one way or another. There is no cure. MS 
causes loss of coordination, memory, extreme fatigue, 
paralysis, blindness, and many other symptoms. These problems 
can be permanent or they can come and go.
    More than 400,000 Americans have MS, and every hour someone 
is newly diagnosed. The National Multiple Sclerosis Society 
recommends treatment with one of the FDA approved disease 
modifying drugs to lessen the frequency and severity of attacks 
and to help slow the progression of disability. Unfortunately, 
the cost is often financially devastating. I know this 
personally.
    Four of the six FDA approved disease modifying drugs are 
considered biological drugs. They range from $16,000 to $25,000 
a year. That is about twice the amount of Social Security 
disability I receive annually. For me, sometimes the financial 
struggle to get my treatment can be troubling, more troubling 
than this incurable disease.
    I am here today to appeal to the committee. My personal 
story is an example of the immediate need for this legislation 
that Chairman Waxman has introduced.
    In the past I have struggled a lot with my MS and with 
trying to get the prescriptions I need to feel a little better. 
I was diagnosed with MS in April 2000 at 37 years old. In 
August 2000, I was prescribed Avonex, a biological drug from 
Biogen. The cost of Avonex is high, and I did whatever I could 
to afford my prescribed therapy. I sold my computer, I 
disconnected my phone, I skipped paying a lot of my bills. 
Despite this, I lost my home before the end of 2001 and I was 
living in my car. From 2001 to 2005 I was homeless.
    I struggled for years to get approval from Social Security 
and I tried for over 3 years to be approved for subsidized 
housing. I was even turned down for help at shelters because of 
my MS. The staff there felt that I was a health liability due 
to my problems with balance and frequent falls. I became 
accustomed to begging, borrowing, and pleading for any help so 
I could get treatment.
    Unfortunately, access to my treatment was sporadic and I 
paid the consequences with increased symptoms and more frequent 
attacks. It was a terrible cycle. As a result of not having 
access to Avonex for an extended period of time in 2004 I was 
hospitalized. The cost of my 24 hour hospital stay was nearly 
$1,000. I am still trying to pay that bill.
    Today, after finally being approved for Social Security 
disability, I receive $1,100 a month, and I am covered under 
Medicare. I have coverage for my medications, but my co-payment 
is $220 a month just for Avonex. When you only have $1,100 a 
month to live on, $220 might as well be $220 million.
    I don't want to be homeless or live in my car again, so I 
cannot miss rent. I don't want to risk my health, so I cannot 
skip too many meals. I often skip paying bills, but I cannot 
get too far behind or risk losing my electricity or other vital 
services. And I do my best to pay my share to those who provide 
my treatments. Even today I must miss my treatments 
occasionally. There is simply nothing I can do sometimes.
    It is a misconception that help is readily available. 
Existing programs are often difficult to navigate, have varying 
criteria, take a long time, and sometimes run out of money. For 
example, last year I was finally approved for assistance by the 
National Organization for Rare Disorders. Before I received my 
assistance they ran out of funding. It was also possible to get 
assistance sometimes from Biogeniodec. After asking them for 
help over a year ago, I think I am close to getting help with 
coverage during the Medicare part D donut hole, which I will 
already enter in April. I learned my lesson, though. This time 
I know not to count my chickens before they hatch.
    As a person with MS, I take other prescription drugs for 
hypertension, depression, and several supplements. The 
difference is that the generics are available. This keeps my 
co-payments low and manageable. Most importantly, I do not have 
to miss these treatments because I cannot afford them. But this 
is not true for my MS therapies and never will be unless 
something changes.
    Hopefully you can help with a solution. I am a person with 
a chronic, life-long, costly disease, but I want to stay out of 
a wheelchair, I want to stay out of the hospital, I want to 
contribute my talents to the community, I want to pay my taxes, 
I want to be healthy so I am able to help others who have MS. I 
want to stay on my treatment. If I don't have access to 
treatments, my health will decline.
    The stress from the story I have told you, which I live 
with, has caused me to begin to lose my hair. Frankly, I don't 
really care. I just want to battle this beast that is trying to 
take away my movement.
    My story is not unique. Millions rely on biologic drugs. 
Millions struggle terribly with the cost. If I can leave this 
committee with one thought, it is that no matter how good a 
drug is supposed to be, it has no chance of being effective if 
it is not affordable to those who need it.
    For a long time no treatments were available for MS. Now 
there are. The sad thing is it doesn't matter. Some people just 
can't afford them. The cost is too much. We have to change 
that. This legislation has the power to move us a little 
closer. We all know that providing more affordable medications 
for all Americans is a serious priority. For biologic MS 
therapies, we will never, ever reach that goal if we don't 
start by simply providing the pathway. It is a necessary first 
step.
    Thank you again for your invitation and attention. I hope 
you remember me, and people like me, as you consider this 
legislation. Please help provide more affordable biological 
drugs for those who desperately need them. Help establish a 
regulatory pathway for the FDA to review and approve follow-on 
biological therapies.
    Thank you.
    Chairman Waxman. Thank you very much, Ms. Brown.
    Ms. Nathan.

                    STATEMENT OF MARY NATHAN

    Ms. Nathan. Mr. Chairman and distinguished members of the 
committee, I want to thank you for the opportunity to testify 
before you today. My name is Mary Nathan, and I am affected by 
Gaucher disease.
    As one of 4,800 people being treated worldwide with 
Cerezyem, I understand, in a very practical way, what it means 
to be alive because of a recombinant biological medicine. I 
also understand what happens when the cost of a life-saving 
drug is unaffordable.
    Gaucher disease is a rare genetic disorder classified into 
three categories and characterized by the deficiency of an 
enzyme necessary to break down fats called glycolipids. Because 
the enzyme is in short supply, lipids collect in the spleen, 
liver, bone marrow, and other organs. Left unchecked, the 
accumulation of lipids causes problems such as anemia, 
bleeding, organ dysfunction, abdominal enlargement, 
deterioration of the joints and bones, breathing problems, 
fatigue, and reduced ability to fight common infections. Type I 
is the most common. It strikes 1 in 40,000 people in the 
general population, and 1 in 600 Jews of Eastern European 
origin.
    When I was diagnosed in 1966 at the age of 11, very little 
was known about Gaucher disease. Given the increased size of my 
spleen and my low blood count, doctors scheduled me for a 
splenectomy within weeks of my diagnosis. Shortly after that I 
was hospitalized with a high fever, excruciating pain, and an 
inability to walk. We learned later that lipids had migrated 
quickly to my bones, since the doctors had removed my spleen. 
We also learned that I had experienced a Gaucher bone crisis, a 
painful episode that would repeat often as my disease 
progressed.
    By the time I entered college there was little doubt that I 
had a severe form of what is known as Type I Gaucher disease. 
At the age of 23 I underwent orthopedic surgery to straighten 
my leg and replace my destroyed hip. After a long recovery I 
was able to walk without pain for the first time in years. This 
respite lasted until 1988, when the implanted prosthesis became 
painful and unstable, so again I underwent surgery and began to 
experience complications that left me fighting for my life.
    My red blood cell count was dangerously low due to a 
reaction, depriving my bones of oxygen. I then began to 
experience an ongoing cascade of bone infarcts, vertebrae 
fractures, and a serious fracture of my other hip.
    To head off further damage, my doctor suggested a surgery 
of last resort known as a girdlestone procedure to repair my 
hip. Few patients ever walk again after this procedure.
    What happened next marked a historic medical breakthrough 
that would change the course of my life and my disease. After 
30 years of intensive scientific research, scientists at the 
National Institutes of Health discovered a treatment for 
Gaucher disease, and in April 1991, the Food and Drug 
Administration approved a commercial version called Ceredase.
    After 3 years of enzyme replacement therapy, my overall 
health improved to a point where reconstructive hip surgery was 
possible. In November 1994, after 7 years in a wheelchair, I 
took my first real steps.
    There is no question in my mind that I am alive today 
because of the orphan drug Ceredase. What concerns many of us, 
however, is that the miracle drug is priced out of the reach of 
individuals, and thus poses unprecedented challenges for 
patients who need the drug, for the doctors who treat us, for 
employers struggling with the high cost of health insurance, 
and for insurers and government programs helping to pay our 
medical bills.
    In 1994 most patients were converted to Cerezyme, the 
Genzyme Corp.'s newly approved orphan drug, to replace 
Ceredase. The cost of Cerezyme differs from patient to patient 
because dosages are based on body weight. My dosing regimen is 
60 units per kilogram of body weight for infusion. At 130 
pounds, my treatment runs about $12,600 per administration, or 
about $300,000 a year for 24 doses. An additional $25,000 in 
cost is added for administering the drug and testing and 
monitoring my response and overall health. This brings the cost 
for all charges related to my treatment to over $328,000 a 
year. Now, over a 16-year period since its approval in 1991, I 
estimate that the payments for my drug have reached well over 
$4.5 million.
    In conclusion, the wave of the future in medicine is 
biotechnology to treat rare diseases like mine and those 
diseases affecting wider populations. There is no reason why 
biogenerics cannot take their rightful place in America's 
marketplace alongside generic drugs.
    Based on some estimates, it is said that biogenerics could 
save between 10 percent and 20 percent. If that holds true, 
millions of dollars could be saved annually just for the 4,800 
patients currently on Cerezyme.
    Mr. Chairman, I want to thank you personally for 
introducing your legislation. It is time to make safe and 
effective life-saving biotech therapies accessible and 
affordable to the millions who need them.
    The Access to Life-Saving Medicines Act will create 
competition in the marketplace and, in turn, foster innovation. 
Hopefully a balance will be struck that encourages innovation 
yet allows more affordable follow-on biologics to come to the 
marketplace.
    Thank you for your time and attention to my testimony.
    [The prepared statement of Ms. Nathan follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.079
    
    [GRAPHIC] [TIFF OMITTED] T0874.080
    
    [GRAPHIC] [TIFF OMITTED] T0874.081
    
    [GRAPHIC] [TIFF OMITTED] T0874.082
    
    [GRAPHIC] [TIFF OMITTED] T0874.083
    
    Chairman Waxman. Thank you very much, Ms. Nathan.
    Ms. Barnett.
    Ms. Nathan. You are welcome.

                   STATEMENT OF NELDA BARNETT

    Ms. Barnett. Mr. Chairman and members of the committee, I 
am Nelda Barnett of AARP's Board of Directors. AARP appreciates 
the opportunity to testify in support of creating a pathway for 
generic biologics.
    AARP has endorsed the Access to Life-Saving Medicine Act 
because we believe this legislation will enable the FDA to 
establish a process for the approval of safe, comparable, and 
interchangeable versions of biologics. We call on Congress to 
pass the legislation this year.
    Biologics are used every day to treat serious diseases such 
as cancer, multiple sclerosis, anemia, and rheumatoid 
arthritis. While biologics hold great promise for treating some 
of the most serious diseases, these treatments can be 
expensive, costing tens and hundreds of thousands of dollars. 
Some people are fortunate enough to have insurance coverage or 
the means to be able to afford these medications, but many are 
not so lucky.
    Nothing illustrates how important it is that we have a 
pathway to lower-cost generic versions than the stories of 
millions of Americans who currently cannot afford high-priced 
biologic drugs, such as we have just heard.
    My colleague on AARP's board of directors, Bonnie Cramer, 
could not be here today, but she has asked that I share with 
you one particular story. Bonnie suffers from severe rheumatoid 
arthritis, and over the years has undergone a variety of 
treatment options, including a biologic drug, Enbrel, which has 
helped her. Bonnie has encountered many people who suffer from 
her condition who are not able to afford medication. One 
particular woman was so affected by the disease that her 
fingers were gnarled and she had difficulty walking and used 
all of her energy just to get through the day. This woman 
recounted how she was trying to find a way to get access to 
Enbrel but could not due to the high cost of the drug.
    Bonnie tells it best in her own words. She says, ``Having 
lived with this disease for 40 years, I know how incapacitating 
it can be and how the pain can be unbearable. I know what hope 
biologics can give to someone whose life is affected. To know 
that it cannot be obtained by other people with deadly diseases 
is brutal. How do you tell someone that they cannot have a 
treatment that may alter their lives significantly?''
    The astronomical cost of these drugs not only impacts 
consumers, but also health care payers such as employers, 
private health care plans, public programs such as Medicare and 
Medicaid. One way to control these costs is to provide a 
pathway for the approval of generic versions of these drugs. 
Any prescription drug therapy treatment must be affordable and 
safe in order to be effective for individuals. H.R. 1038 leaves 
the scientific determinations up to those who are best equipped 
to address them, the FDA. Common sense, alone, tells us that 
the agency that has the scientific knowledge to approve the 
brand name biologics, surely has the ability to provide a 
pathway for generic approval of the same biologic.
    The Hatch-Waxman Act created a pathway for FDA to approve 
generic prescription drugs. Twenty-three years later the time 
has come for generic approval of biologics. H.R. 1038 provides 
FDA the authority to produce the safe, comparable, or 
interchangeable version of the biologic. Our members and all 
Americans need Congress to enact this bipartisan legislation 
this year. We are pleased to see this committee and Members 
from both Houses of Congress and both sides of the aisle moving 
forward on this issue.
    Thank you again for inviting us here. I am happy to answer 
any questions.
    [The prepared statement of Ms. Barnett follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.084
    
    [GRAPHIC] [TIFF OMITTED] T0874.085
    
    [GRAPHIC] [TIFF OMITTED] T0874.086
    
    [GRAPHIC] [TIFF OMITTED] T0874.087
    
    [GRAPHIC] [TIFF OMITTED] T0874.088
    
    [GRAPHIC] [TIFF OMITTED] T0874.089
    
    [GRAPHIC] [TIFF OMITTED] T0874.090
    
    Chairman Waxman. Thank you very much, Ms. Barnett.
    Ms. Mathur.

                   STATEMENT OF PRIYA MATHUR

    Ms. Mathur. Good afternoon. Mr. Chairman and members of the 
committee, I commend you for convening today's hearing and for 
the introduction of bipartisan legislation to enable consumer 
participation in the biopharmaceutical marketplace.
    On behalf of the California Public Employees' Retirement 
System [CalPERS], I welcome the opportunity to testify about 
this issue of importance to our members, to our State, and to 
our Nation.
    Let me begin by introducing myself and CalPERS. My name is 
Priya Mathur, and I was elected by 400,000 public sector 
employees to serve on the board of CalPERS, to invest their 
$230 billion of retirement assets, and to manage their multi-
billion-dollar health care program.
    CalPERS' health program covers 1.2 million active and 
retired public employees and their families. Notably, CalPERS 
is the third-largest purchaser of employee benefits in the 
Nation, behind only the Federal Government and General Motors, 
and it is the largest purchaser of health benefits in 
California.
    This year CalPERS will spend almost $5 billion on health 
benefits, or $13.4 million per day. Of that amount, CalPERS, 
for the first time, will spend over $1 billion on members' 
prescription drugs. At a time when our State is trying to 
expand health insurance coverage to more Californians, slow the 
rate of growth in health care costs, and make our health care 
system more efficient, the high cost of biopharmaceutical 
products presents an unsustainable challenge to calPERS and to 
our entire health care system.
    CalPERS has long been a leader in implementing cost 
effective health care programs. Among many strategies, we have 
instituted innovative prescription drug benefit cost-sharing 
designs to maximize the use of generics and therapeutically 
appropriate brand name drugs. CalPERS has actually achieved 
tremendous success in controlling prescription drug costs 
through the use of generics. This has been possible thanks to 
the chairman, whose efforts two decades ago led to the 
enactment of the Drug Price Competition and Patent Term 
Restoration Act of 1984, what we call Waxman-Hatch.
    As you well know, Waxman-Hatch gave the FDA the authority 
to provide an abbreviated approval process for those products 
deemed equivalent to an innovator product after patent 
expiration. Without generic substitution, we estimate that our 
costs would be about 60 percent higher than they are today. 
Generics save our enrollees and our State taxpayers hundreds of 
millions of dollars every year.
    In spite of all of our cost containment efforts, CalPERS 
has seen an average annual increase of about 13.5 percent for 
our HMO and PPO products since 2002.
    Mr. Chairman, CalPERS' spending for biotech products is 
distressingly substantial and rising at a rate that is 
significantly higher than traditional pharmaceuticals. Because 
of the complex delivery requirements of many 
biopharmaceuticals, it is exceedingly difficult to break out a 
stand-alone spending line for these products. However, we 
believe that our spending on so-called specialty drugs is a 
good proxy, because biotech products make up the great majority 
of spending in the specialty drug category.
    Total spending for specialty drugs was $83.7 million in 
2006, a 1-year increase of 16.9 percent, compared to a 5.4 
percent increase in traditional prescription drugs. On average, 
spending for biotech products was at least $55 per day, 
compared to traditional drugs at only $2 per day.
    CalPERS supports a competitive health care marketplace that 
leads to innovation and life-saving medicines; however, 
competition does not exist today because the FDA asserts that 
it does not have the authority to approve biogeneric products. 
As a result, today's biotech companies are benefiting long 
after patents expire and are profiting at the expense of all 
Americans.
    CalPERS supports giving the FDA explicit authority to 
approve biogeneric products that are safe. Without the ability 
to access less-expensive comparable and interchangeable 
biopharmaceuticals, CalPERS ultimately will be forced to raise 
prescription drug co-pays or raise premiums, shifting the 
increasingly unaffordable costs onto the individuals who can 
least afford them.
    Mr. Chairman, before I conclude I need to address one 
important issue. The opponents of this legislation--as you 
point out, they are limited to the biotech industry--are 
claiming that those who support your legislation are ignoring 
the safety threat of bringing biogenerics to the marketplace. I 
want to be perfectly clear. The safety and health of our 
members comes first in any decision we make on any health care 
policy. Therefore, we strongly support providing FDA with full 
discretion to make the ultimate decision about whether and when 
any prescription drug product, be it brand name or generic, 
comes to market. Your legislation does just that.
    Mr. Chairman, CalPERS is proud to add our support to the 
growing and diverse list of stakeholders who support your 
legislation to open the door to biogeneric competition. Thank 
you for giving us this opportunity.
    I would be happy to answer any questions.
    [The prepared statement of Ms. Mathur follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.091
    
    [GRAPHIC] [TIFF OMITTED] T0874.092
    
    [GRAPHIC] [TIFF OMITTED] T0874.093
    
    [GRAPHIC] [TIFF OMITTED] T0874.094
    
    [GRAPHIC] [TIFF OMITTED] T0874.095
    
    [GRAPHIC] [TIFF OMITTED] T0874.096
    
    Chairman Waxman. Thank you very much for your testimony.
    We are going to ask questions after everybody is finished.
    Mr. McKibbin.

                  STATEMENT OF SCOTT MCKIBBIN

    Mr. McKibbin. Thank you, Mr. Chairman, and thank you for 
the opportunity to speak on behalf of Illinois Governor Rod R. 
Blagojevich in support of establishing a pathway for generic 
biopharmaceuticals.
    I want to applaud Chairman Waxman for his vision, 
recognizing that escalating cost of biopharmaceuticals to 
States and consumers is creating an economic burden on 
Illinoisans and State budgets nationwide. These costs will 
continue to make it more difficult to balance cost control and 
access for patients to affordable, life-saving 
biopharmaceuticals, both in Illinois and in the Nation as a 
whole.
    Further, I would like to recognize Illinois Congressman 
Emmanuel for his cosponsorship of H.R. 1038, the Access to 
Life-Savings Medicine Act, and for supporting these important 
measures.
    In my present role as a Special Advocate for Prescription 
Drugs, I have functional accountability for overseeing 
prescription drug spending for the State of Illinois. I am also 
a two-time kidney cancer survivor, and can speak personally 
from experience on both the value and the cost of therapies 
that treat such dreaded diseases as cancer.
    I want to make it clear that I have a dual role as Special 
Advocate. The State of Illinois, as every State, has a 
responsibility to ensure that prescription drug pharmaceuticals 
available to consumers are safe and effective, so I would like 
to dispense with the issue of safety as a given for the 
discussion of generic legislation.
    While some in this debate are seeking to obscure the real 
issue with inflammatory rhetoric about the potential lack of 
safety of generic biopharmaceuticals, it is my position that 
this legislation authorizes FDA to take those scientifically 
sound steps that are appropriate to ensure the safety of 
generic biopharmaceuticals.
    I want to focus the bulk of my testimony on the reality of 
biopharmaceutical costs and the value of generic competition in 
this arena.
    Illinois is a partner with the Federal Government in 
providing and paying for prescription drugs. We are also 
responsible for providing and nurturing a sound economy in our 
State, one that does not allow health care costs to bankrupt 
our State or to negatively impact employers or the overall 
business climate of our State. To this end, Governor 
Blagojevich has introduced a comprehensive program to expand 
coverage to the 1.4 million uninsured between the ages of 19 
and 64, and to offer relief to many of our residents who 
struggle every day to pay for health care costs covered under 
the existing insurance plans.
    There is some debate as to whether the annual increase of 
the cost of biopharmaceuticals is 15, 17, or 20 percent, but 
the difference is, in fact, not material. If, as I believe and 
my data will show, these expenditures for products are rising 
at an average of slightly larger than 15 percent annually, then 
within 5 years what Illinois spends on these drugs today will 
double. That would have a dramatic negative effect. We would 
not be able to afford these medications.
    Many States probably don't realize the depth of what they 
are spending now on biopharmaceuticals. According to IMS, 
biopharmaceutical sales in 2006 grew to $40.3 billion. While 
the spending has escalated, a debate over potential for generic 
biopharmaceuticals has spanned four FDA Commissioners, all with 
a variety of prioritization on how to establish a 
biopharmaceutical generic approval process.
    States need more than continued discussion on this issue. 
We need action. Chairman Waxman's bill is a great first step in 
actually getting us on the road to creating a framework to 
permit generic competition and the savings it will create.
    To understand the breadth and impact of spending on 
biopharmaceuticals for Illinois, we examined the leading 
products and what the State of Illinois spends on these 
products. The results were staggering.
    For our 227,500 member employee retiree group, the State of 
Illinois spent $33.2 million on a select list of approximately 
100 biopharmaceuticals during the fiscal year that just ended 
July 2006. With that trend, this represents over 12 percent of 
our entire cost for drugs, and is growing at an astronomical 
rate both on the price and the utilization side of the ledger. 
The ingredient cost increase was 49.9 percent, and the plan 
cost per member was 50.3 percent.
    The number of prescriptions for this select list of 
biopharmaceuticals also rose significantly, a nearly 29 percent 
increase. For programs administered under the State Medicaid 
Agency, we have seen similar cost and utilization increases, 
but on a much larger scale. For the most recent year in which 
data is available, the cost of 61 biopharmaceuticals was 
$1,662,000, paid for under the pharmacy benefit side, and an 
estimated $75 million paid for under the medical and the Part D 
wrap-around program. The grand total exceeded $200 million a 
year, without trend.
    Now, much has been said about the potential cost savings of 
generic competition. Opponents to creating a pathway for 
generic competition argue that the cost savings may be only 10 
or 20 percent. But let's look at the worst case scenario, a 10 
percent savings. If Illinois was able to reduce its 15 percent, 
16 percent annual increase in spending on biopharmaceuticals by 
even 10 percent, then we not only extend our ability to pay for 
these drugs, but we also extend our ability to continue, under 
State programs, to provide increased access to them.
    The other issue to consider about savings is this--it 
appears an obvious one from my perspective, but seems lost in 
this debate. In the past year, biopharmaceutical expenditures 
have increased at double digit rates. If we do nothing for the 
rest of 2007, we will end the year even higher expenditures 
associated with those biopharmaceuticals. Every day that we 
delay in creating a pathway for generic competition is a day of 
potential lost cost savings to States, to taxpayers, and to 
consumers. We can not afford to wait any longer to begin the 
savings, even if, as opponents predict, the savings would 
initially only be modest.
    Chairman Waxman. Thank you very much, Mr. McKibbin. Are you 
just about to conclude?
    Mr. McKibbin. I have just a few more words, Mr. Chairman.
    Chairman Waxman. OK.
    Mr. McKibbin. I appreciate it.
    I would just like to urge Congress to approve this 
legislation to authorize the FDA to apply sound scientific 
regulatory criteria that would give Illinois and other States 
and every consumer and taxpayer lower biopharmaceutical 
products and increased access, the result from the cost 
savings.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. McKibbin follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.097
    
    [GRAPHIC] [TIFF OMITTED] T0874.098
    
    [GRAPHIC] [TIFF OMITTED] T0874.099
    
    [GRAPHIC] [TIFF OMITTED] T0874.100
    
    Chairman Waxman. Thank you very much for your testimony.
    Dr. Grabowski.

                  STATEMENT OF HENRY GRABOWSKI

    Mr. Grabowski. Thank you, Mr. Chairman and members of the 
committee. I am Henry Grabowski, professor of economics at Duke 
University.
    My comments will focus on the differences between generic 
drugs and follow-on biologics and how these differences affect 
the expected budgetary savings. I also will discuss the 
importance of data exclusivity for innovation incentives. With 
my colleagues, I have examined these issues in two recent peer 
reviewed studies. I will make these studies available for the 
record, along with my statement.
    Based on our analysis, we conclude that the cost of entry 
will be significantly higher for follow-on biologics than 
generic drugs. We expect fewer firms will enter, and average 
prices will decline less for follow-on biologics. Consequently, 
conservative budgetary scoring is appropriate in terms of 
expected savings to the Government and to other payers.
    Second, in designing a pathway for follow-on biologics it 
is also very important that Congress balance price competition 
and innovation incentives. In this regard, it is important to 
include in the legislation a data exclusivity period that takes 
account of the high cost and risk of developing new entities. 
My statement provides data from a new study that is peer 
reviewed and co-authored with Joe DiMasi in this regard. The 
cost of R&D for a representative new biologic is now over $1 
billion when one takes account of preclinical and clinical 
expenditures, the cost of failures, the cost of capital, and 
process engineering, which is higher for biologics than 
pharmaceuticals.
    So let me now briefly summarize some of the key differences 
between follow-on biologics and pharmaceuticals that will 
affect cost savings in scoring procedures.
    The first is clinical trial cost. As we have heard earlier 
today, some clinical trial data is going to be necessary to 
demonstrate comparable safety and efficacy, at least for the 
foreseeable future. In the case of European filings, the 
estimates range from $10 to $40 million for preclinical 
studies. This contrasts with $1 to $2 million costs for 
bioequivalents for generic drugs.
    Second is development times. Estimates from generic firms 
indicate development times for a follow-on biologic are likely 
to range from five to 8 years. By comparison, generic drugs 
seldom require more than a few years to do required tests and 
gain regulatory approval.
    Third is manufacturing cost and risk. The required capital 
investment in property, plant, and equipment and the cost of 
manufacture are also likely to be significantly higher for 
follow-on biologics.
    Fourth, there are important differences on the demand side. 
It is unlikely that most follow-on drugs will be designated as 
interchangeable by the FDA, at least not for the foreseeable 
future and without extensive clinical trials. As a result, we 
expect the physicians will initially be cautious with respect 
to the substitution of follow-on products. Health care 
providers and patients are likely to be wary until clinical 
experience has accumulated and shown that a follow-on product 
is a satisfactory therapeutic alternative to the original 
innovator products.
    These costs and demand side differences have important 
implications for entry and price competition. In our research, 
we find the number of entrants and the priced discounts of a 
follow-on biologic are highly sensitive to fixed cost. As a 
consequence, even very large-selling biologics are likely to 
have only a few entrants. For markets with only one to three 
entrants, we project price discounts will be in the range of 10 
to 25 percent. This is in accordance with European experience 
to date.
    These differences also have important implications for 
scoring cost savings. In particular, cost saving estimates 
based on the experiences of generic drug utilization and 
pricing are subject to strong upward biases. A correct 
accounting of this and all other relevant factors would 
substantially lower the savings estimates in studies such as 
that by Express Scripts and the PCMA.
    A recent analysis by Avalier Health has very different 
assumptions in some important dimensions, find much lower cost 
savings.
    The remainder of my statement covers R&D costs and 
innovation incentives. I understand the bills under 
consideration have no data exclusivity provisions or patent 
restoration features for innovators. The fact that there is no 
data exclusivity provision would allow generic firms to 
challenge innovators' patents from the date of first marketing 
approval and to enter the market soon thereafter. The resulting 
uncertainty in IP litigation would have significant negative 
incentive effects on capital market decisions for private and 
public biotech firms with pipelines. Many of these firms are 
entrepreneurial in nature and have few if any profitable 
products.
    The exclusivity period for pharmaceuticals under Hatch-
Waxman is 5 years. R&D costs have increased substantially since 
Hatch-Waxman was enacted 20 years ago. Five years does not 
provide enough time for firms to recoup the high cost of 
discovering and developing a new medicine. Break-even returns 
on R&D for the average new drug and biological product now 
exceed more than a decade.
    Since this legislation will essentially define the terms of 
competition between innovators and imitators for decades to 
come, it is critical that it maintains strong incentives for 
R&D investment in new biopharmaceuticals, as well as provide 
incentives for price competition.
    A data exclusivity period of at least 10 years in length 
would recognize the high cost and risk of developing new 
biological entities and deter patent challengers from occurring 
and entering until a more mature phase of the product life 
cycle. This would also preserve incentives for the development 
of new indications for existing drugs and harmonize U.S. law 
with that of the European Union.
    Thank you.
    [The prepared statement of Mr. Grabowski follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.101
    
    [GRAPHIC] [TIFF OMITTED] T0874.102
    
    [GRAPHIC] [TIFF OMITTED] T0874.103
    
    [GRAPHIC] [TIFF OMITTED] T0874.104
    
    [GRAPHIC] [TIFF OMITTED] T0874.105
    
    [GRAPHIC] [TIFF OMITTED] T0874.106
    
    [GRAPHIC] [TIFF OMITTED] T0874.107
    
    [GRAPHIC] [TIFF OMITTED] T0874.108
    
    [GRAPHIC] [TIFF OMITTED] T0874.109
    
    [GRAPHIC] [TIFF OMITTED] T0874.110
    
    [GRAPHIC] [TIFF OMITTED] T0874.111
    
    [GRAPHIC] [TIFF OMITTED] T0874.112
    
    [GRAPHIC] [TIFF OMITTED] T0874.113
    
    [GRAPHIC] [TIFF OMITTED] T0874.114
    
    [GRAPHIC] [TIFF OMITTED] T0874.115
    
    [GRAPHIC] [TIFF OMITTED] T0874.116
    
    [GRAPHIC] [TIFF OMITTED] T0874.117
    
    [GRAPHIC] [TIFF OMITTED] T0874.118
    
    [GRAPHIC] [TIFF OMITTED] T0874.119
    
    [GRAPHIC] [TIFF OMITTED] T0874.120
    
    [GRAPHIC] [TIFF OMITTED] T0874.121
    
    [GRAPHIC] [TIFF OMITTED] T0874.122
    
    [GRAPHIC] [TIFF OMITTED] T0874.123
    
    [GRAPHIC] [TIFF OMITTED] T0874.124
    
    [GRAPHIC] [TIFF OMITTED] T0874.125
    
    [GRAPHIC] [TIFF OMITTED] T0874.126
    
    [GRAPHIC] [TIFF OMITTED] T0874.127
    
    [GRAPHIC] [TIFF OMITTED] T0874.128
    
    [GRAPHIC] [TIFF OMITTED] T0874.129
    
    [GRAPHIC] [TIFF OMITTED] T0874.130
    
    [GRAPHIC] [TIFF OMITTED] T0874.131
    
    [GRAPHIC] [TIFF OMITTED] T0874.132
    
    [GRAPHIC] [TIFF OMITTED] T0874.133
    
    [GRAPHIC] [TIFF OMITTED] T0874.134
    
    [GRAPHIC] [TIFF OMITTED] T0874.135
    
    [GRAPHIC] [TIFF OMITTED] T0874.136
    
    [GRAPHIC] [TIFF OMITTED] T0874.137
    
    [GRAPHIC] [TIFF OMITTED] T0874.138
    
    [GRAPHIC] [TIFF OMITTED] T0874.139
    
    [GRAPHIC] [TIFF OMITTED] T0874.140
    
    [GRAPHIC] [TIFF OMITTED] T0874.141
    
    [GRAPHIC] [TIFF OMITTED] T0874.142
    
    [GRAPHIC] [TIFF OMITTED] T0874.143
    
    [GRAPHIC] [TIFF OMITTED] T0874.144
    
    [GRAPHIC] [TIFF OMITTED] T0874.145
    
    [GRAPHIC] [TIFF OMITTED] T0874.146
    
    [GRAPHIC] [TIFF OMITTED] T0874.147
    
    [GRAPHIC] [TIFF OMITTED] T0874.148
    
    [GRAPHIC] [TIFF OMITTED] T0874.149
    
    [GRAPHIC] [TIFF OMITTED] T0874.150
    
    [GRAPHIC] [TIFF OMITTED] T0874.151
    
    [GRAPHIC] [TIFF OMITTED] T0874.152
    
    [GRAPHIC] [TIFF OMITTED] T0874.153
    
    [GRAPHIC] [TIFF OMITTED] T0874.154
    
    [GRAPHIC] [TIFF OMITTED] T0874.155
    
    [GRAPHIC] [TIFF OMITTED] T0874.156
    
    [GRAPHIC] [TIFF OMITTED] T0874.157
    
    [GRAPHIC] [TIFF OMITTED] T0874.158
    
    [GRAPHIC] [TIFF OMITTED] T0874.159
    
    [GRAPHIC] [TIFF OMITTED] T0874.160
    
    [GRAPHIC] [TIFF OMITTED] T0874.161
    
    [GRAPHIC] [TIFF OMITTED] T0874.162
    
    [GRAPHIC] [TIFF OMITTED] T0874.163
    
    [GRAPHIC] [TIFF OMITTED] T0874.164
    
    [GRAPHIC] [TIFF OMITTED] T0874.165
    
    [GRAPHIC] [TIFF OMITTED] T0874.166
    
    [GRAPHIC] [TIFF OMITTED] T0874.167
    
    [GRAPHIC] [TIFF OMITTED] T0874.168
    
    [GRAPHIC] [TIFF OMITTED] T0874.169
    
    [GRAPHIC] [TIFF OMITTED] T0874.170
    
    [GRAPHIC] [TIFF OMITTED] T0874.171
    
    [GRAPHIC] [TIFF OMITTED] T0874.172
    
    [GRAPHIC] [TIFF OMITTED] T0874.173
    
    [GRAPHIC] [TIFF OMITTED] T0874.174
    
    [GRAPHIC] [TIFF OMITTED] T0874.175
    
    [GRAPHIC] [TIFF OMITTED] T0874.176
    
    [GRAPHIC] [TIFF OMITTED] T0874.177
    
    [GRAPHIC] [TIFF OMITTED] T0874.178
    
    [GRAPHIC] [TIFF OMITTED] T0874.179
    
    [GRAPHIC] [TIFF OMITTED] T0874.180
    
    [GRAPHIC] [TIFF OMITTED] T0874.181
    
    [GRAPHIC] [TIFF OMITTED] T0874.182
    
    [GRAPHIC] [TIFF OMITTED] T0874.183
    
    [GRAPHIC] [TIFF OMITTED] T0874.184
    
    [GRAPHIC] [TIFF OMITTED] T0874.185
    
    [GRAPHIC] [TIFF OMITTED] T0874.186
    
    [GRAPHIC] [TIFF OMITTED] T0874.187
    
    [GRAPHIC] [TIFF OMITTED] T0874.188
    
    [GRAPHIC] [TIFF OMITTED] T0874.189
    
    [GRAPHIC] [TIFF OMITTED] T0874.190
    
    [GRAPHIC] [TIFF OMITTED] T0874.191
    
    [GRAPHIC] [TIFF OMITTED] T0874.192
    
    [GRAPHIC] [TIFF OMITTED] T0874.193
    
    [GRAPHIC] [TIFF OMITTED] T0874.194
    
    Chairman Waxman. Thank you very much, Dr. Grabowski.
    Mr. Houts.

                    STATEMENT OF JONAH HOUTS

    Mr. Houts. Good afternoon, Chairman Waxman and fellow 
committee members. My name is Jonah Houts. I am a senior 
analyst with Express Scripts. I am pleased to be here today to 
discuss the issue of biogenerics from the perspective of a 
leading pharmacy benefit management company. Express Scripts 
would like to thank the chairman for his leadership in 
introducing this legislation, which we believe will 
fundamentally improve health outcomes by giving patients access 
to lower-cost biological alternatives.
    Express Scripts monitors prescription drug trends and 
expenditures for 1,600 clients, including large self-insured 
employers, government payers, unions, and health insurance 
companies. I would like to talk about three basic issues today. 
First, I would like to speak about the trend of specialty drug 
spending, especially biologic agents. Second, I would like to 
describe the tools used by the PBM industry to control the 
increase in cost of prescription drugs. Third, I would like to 
describe how we would apply these tools to biogenerics and the 
potential benefit to patients, plan sponsors, and the 
Government.
    Spending on pharmaceuticals now represents 11 percent of 
total health care spending. Within the pharmaceuticals are 
specialty drugs. These are the most high-priced biologic 
agents, which we are discussing here today.
    I brought an exhibit which may demonstrate the increased 
growth here. In 2006, spending on specialty drugs was $54 
billion, representing 20 percent of pharmaceutical spending. 
The rate for specialty drugs will almost double by 2010 to $99 
billion. This rate of increase is the second highest in all of 
the health care field, exceeded only by diagnostic imaging 
tests.
    In total, Express Scripts manages the pharmacy benefit for 
over 50 million individuals in this country. Our mission is to 
make the use of prescription drugs safer and more affordable. 
To this end, we have developed sophisticated tools, such as 
formularies, tiered co-payments, step therapies, and drug 
utilization management programs, just to name a few. These 
tools promote the most clinically sound and cost effective use 
of pharmaceuticals.
    One of the most potent tools that we have is the promotion 
of generic medications. These therapies are time tested and 
thus are clinically effective. They also have well 
characterized safety profiles. The additional advantage is that 
they are the most affordable for both patients and plan 
sponsors. For these reasons, patients achieve higher compliance 
rates with these therapies. Utilizing programs like I 
previously described, our company has an industry leading 
generic fill rate of 60 percent.
    But it is important to recognize that all of our programs 
for promoting the use of generics or less expensive branded 
medications are reviewed by our external pharmacy and 
therapeutics committee. This committee is made up of both 
specialty and general medicine doctors, and pharmacists who are 
not employees of Express Scripts. Safety has and always will be 
of primary concern to Express Scripts.
    As we have stated, spending on biologic agents is 
increasing at an alarming rate. This legislation will allow for 
a pathway at the FDA for companies to bring to market generic 
versions of these important medications.
    The PBMs have the tools to assist patients in switching to 
the most cost-effective biogenerics. In fact, our switching 
tools will be even more effective in this market because of the 
limited number of patients, the limited number of 
prescriptions, the limited prescribing community, and the 
potential for enormous savings. Our plan sponsors will be very 
motivated to have us pursue each and every savings opportunity.
    We are pleased to hear the FDA today not rule out 
interchangeability in the future, but, regardless, if the FDA 
deems a product is interchangeable or just comparable, will be 
quite effective at working with the prescribing physician to 
aid patients in receiving the most cost-effective and 
clinically appropriate therapy.
    In the realm of branded pharmaceuticals, drugs compete on 
their research and development and marketing. It would be 
irrational for branded drugs to compete on price, as they are 
competing within a finite group of patients, and price 
reductions would result in reduced revenues for all 
manufacturers in the class. Generic drugs, however, can only 
compete on price. Without this extensive research and 
development, the only way for a generic to capture market share 
is on price. This price competition benefits payers, plans, and 
the Government.
    This historic legislation would allow patients, payers, 
physicians, and PBMs to work together to make these wonderful 
therapies more available, with improved health outcomes and 
tremendous savings.
    [The prepared statement of Mr. Houts follows:]

    [GRAPHIC] [TIFF OMITTED] T0874.195
    
    [GRAPHIC] [TIFF OMITTED] T0874.196
    
    [GRAPHIC] [TIFF OMITTED] T0874.197
    
    Chairman Waxman. Thank you very much, Mr. Houts.
    I want to thank all of you for your testimony, especially 
Ms. Brown and Ms. Nathan. Your very moving testimony is what 
this legislation is all about. When drugs are miracles, but the 
miracles are too expensive for people, they are not going to be 
there for them, and that is why we need to figure out a way to 
hold down costs. Providing generics is certainly, to me, one of 
the best ways to hold down costs. Others have suggested other 
ideas, but competition, market forces I think do work and have 
worked in the past.
    Ms. Mathur, I find it stunning that in California spending 
on biologics or specialty drugs in 2006 was $83.7 million, and 
that is at a cost of $55 per day, compared to $2 per day for 
traditional drugs. If those kinds of spending trends are 
maintained, what will be the impact on CalPERS and your members 
in the future?
    Ms. Mathur. I think we really are at unsustainable levels, 
and what we fear is that in the future we will have to shift 
more of the cost on to the member, either through increases in 
co-pays or by raising premiums. We have already heard stories 
from some of our members that, as the cost of health care 
increases overall, they are less and less able to afford health 
care, even through our program. I would hate to see some of our 
members drop health care coverage that is available to them 
simply because they cannot afford it.
    Chairman Waxman. Dr. Grabowski asserts that the savings 
from generic competition in the biologics context will be 
modest, in the range of 10 to 25 percent. What would even those 
modest savings mean for CalPERS? And let me ask this also of 
Mr. McKibbin for Illinois.
    Ms. Mathur. I'm sorry, Mr. Chairman. I thought you were 
directing that to Mr. Grabowski.
    Chairman Waxman. The 10 to 25 percent savings, Dr. 
Grabowski says those are modest.
    Ms. Mathur. Yes.
    Chairman Waxman. What will that mean, however?
    Ms. Mathur. I think it would be extremely significant. I 
mean, the cost for some members, $300,000 a year, 10 to 15 
percent or 10 to 25 percent is a significant savings. So even 
though on a percentage basis the savings for biotech drugs or 
biogenerics might be less than for synthetic drugs, it is 
certainly, on an aggregate total cost basis, going to be a very 
large number.
    Chairman Waxman. Mr. McKibbin.
    Mr. McKibbin. For Illinois, Mr. Chairman, we are talking 
about $20 to $50 million, depending on when we start it, if we 
start it this year. And those are numbers that come out of the 
base, so, as you know, if this trend continues at 15 percent 
plus, we, too, like California, will reach this point where it 
is not sustainable, so we will either have to make those tough 
choices of trying to pass more costs or to limit access, which 
is untenable.
    Chairman Waxman. Thank you.
    Mr. Houts, one of the frequent assertions we hear from BIO, 
the trade association for the brand name biotech drugs, is that 
when a generic pathway for biologics is established we are not 
going to see much in the way of savings because generic 
biologics won't be interchangeable like they are with 
traditional generic drugs. Obviously, we might disagree on the 
number of biologics that will end up being interchangeable, but 
assuming BIO is correct that a high number of biologics will be 
just comparable instead of interchangeable, what kind of impact 
will that have on spending on biologics?
    Mr. Houts. There is still a significant savings 
opportunity, even if interchangeability is not granted by the 
FDA. Managed care plans and the PBMs, a recent example would be 
in the statin market, where there was a high-priced, effective 
statin, Statin A, and then a lower-priced and still effective 
Statin B. While they were different chemical entities, we were 
able to move market share to the cost-effective product.
    We were actually able to move 49 percent of the market 
share when they weren't interchangeable, as you will. And so 
there is still a significant opportunity in the area of 
biologics to move patients to the preferred safe, effective, 
cost-effective products.
    Chairman Waxman. Well, you said it would be safe. When 
therapeutic switches are made, what process is in place to 
protect patient safety?
    Mr. Houts. All of those decisions are reviewed by our 
pharmacy and therapeutics committee that I referred to in my 
testimony, and this is composed of specialist physicians, and 
other physicians to ensure that drugs in those classes will 
have no adverse effects on patients.
    Chairman Waxman. Thank you very much.
    Mr. Danny Davis.
    Mr. Davis of Illinois. Thank you very much, Mr. Chairman.
    Once again, let me thank you for calling and conducting 
this hearing. It has, indeed, been informative, and I want to 
thank all of the witnesses for their testimony. I especially 
want to echo the sentiments that you expressed, Mr. Chairman, 
relative to the impact of the testimony of Ms. Brown and Ms. 
Nathan, consumers for whom all of us work. Hopefully, as a 
result of their experiences and their testimony, the hearing 
heightens the recognition that we must do something, and do it 
as quickly as possible, to try and make sure that we have 
available the very best and the most cost effective medical 
care that the country can provide. So I certainly want to again 
thank both Ms. Brown and Ms. Nathan for being here and for 
their testimony.
    Mr. McKibbin, let me just commend the Governor for the 
State of Illinois. When I see the kind of interest that Rod 
Blagojevich has shown relative to health care, and especially 
the effort to try and make sure that pharmaceuticals are 
available to all of our residents at a cost for which they can 
pay, it makes me proud to live in the State of Illinois and 
proud to know that he is, indeed, our Governor. Please convey 
that to him.
    Mr. McKibbin. I will.
    Mr. Davis of Illinois. If I could direct your attention to 
the chart located over here, which shows the five largest 
Medicare Part B drug expenditures in 2005--and you may not be 
able to see, but listed are all of the medicines listed of 
biotech drugs that are regulated as biologics. Spending on 
Epogen, an anemia treatment, alone, was over $1.7 billion, but 
it was actually even higher than that, because those numbers on 
the chart do not include spending on the end-stage renal 
disease, ESRD program. Three of the other drugs are also anemia 
treatments, and they collectively represent over $2.1 billion 
in Medicare spending. Remicade, an arthritis medicine, 
accounted for $541 million.
    My question is: are we seeing those same kind of trends in 
the State of Illinois? And in terms of State spending, what are 
the five top biologics in the State of Illinois?
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] T0874.198
    
    Mr. McKibbin. Well, Congressman, we are seeing those 
similar type of numbers, and anyone who has a television will 
recognize those drugs because they are fairly heavily 
advertised, but those five drugs on your screen, I did a quick 
analysis and we are talking about $23 million a year, a little 
over $23 million for those five drugs on your particular chart.
    For us, I took a look at the top five for just our State 
employee retiree group, and those top five were Enbrel, Humira, 
Avonex--which was talked about earlier--Lantus, and Forteo. 
Those were the top five drugs from a total dollar amount. On a 
per patient basis they are slightly different, but those five 
drugs are our top five, and not dissimilar to your chart. In 
some cases the difference may be because of Medicare and where 
Medicare may cover, versus an employee group, but we are seeing 
those similar types of trends.
    Mr. Davis of Illinois. I know that all of us throughout the 
country moan and groan and talk about the speculation of 
Medicare and Medicaid and whether or not there are going to be 
increases or decreases. Many of the hospitals kind of operate 
on shaky ground every year. They are wondering whether or not 
they are going to experience severe cuts.
    Are they going to have to close departments or, in some 
instances, actually go out of business? Should we continue to 
see increases in pharmaceutical drug costs, what impact do you 
think that would have on the hospitals, for example, in the 
State of Illinois, as well as throughout the Nation?
    Mr. McKibbin. Certainly, Congressman, it could be the 
tipping point, and that is something that we are very concerned 
about. I know yourself and others in the delegation are 
concerned, and we would urge that this legislation be passed 
sooner rather than later. As I said earlier, you know, every 
day that goes by is a day that is a lost opportunity, and it 
may be, in fact, a tipping point for hospitals in the Illinois, 
metro Chicago, and the rest of the United States.
    Mr. Davis of Illinois. Mr. Chairman, I see that the light 
is on, but could I ask Mr. Houts if he could respond to that 
same question relative to the continued escalation of 
pharmaceutical costs without relief, how this will affect the 
Medicare/Medicaid programs, and certainly their impact on our 
hospital infrastructures?
    Mr. Houts. It is not really a field of expertise for me as 
far as government payers. What I can say is that there is an 
exceptional opportunity for the Government in terms of Part B 
and end-stage renal disease, especially looking at those top 
drugs listed there, to save a pronounced amount of money. And 
so, as you consider this legislation, you may want to find ways 
to make Part B and the ESRD program more comparable to the 
commercially insured market and adopt some of the tools we use 
to manage trend.
    Mr. Davis of Illinois. Well thank you very much.
    Mr. Chairman, again, I just simply want to commend you for 
your insight in introducing this legislation, the leadership 
that you continue to provide. I have always known of your 
strong interest in health care. You probably would not remember 
it, but way back in a different life when I used to come to 
D.C. to lobby on behalf of the National Association of 
Community Health Centers, you were always the person that we 
felt that we could come to and get some understanding. I mean, 
Senator Kennedy over in the Senate and Representative Waxman 
here in the House, you were our guys. I want to thank you 
again.
    Chairman Waxman. Thank you. Now you are one of our guys, 
too. Thank you for your kind comments.
    I very much appreciate all of our witnesses in this panel, 
as in the previous panels.
    I would like to ask unanimous consent that all Members have 
5 days to submit additional questions for the record to the 
witnesses that have appeared before us today.
    That concludes our hearing, and our meeting is adjourned. 
Thank you very much.
    [Whereupon, at 1:29 p.m., the committee was adjourned.]
    [The prepared statement of Hon. Elijah E. Cummings and 
additional information submitted for the hearing record 
follow:]

[GRAPHIC] [TIFF OMITTED] T0874.199

[GRAPHIC] [TIFF OMITTED] T0874.200

[GRAPHIC] [TIFF OMITTED] T0874.201

[GRAPHIC] [TIFF OMITTED] T0874.202

[GRAPHIC] [TIFF OMITTED] T0874.203

[GRAPHIC] [TIFF OMITTED] T0874.204

[GRAPHIC] [TIFF OMITTED] T0874.205

                                 
