[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
EMERGING HEALTH CARE ISSUES: FOLLOW-ON BIOLOGIC DRUG COMPETITION
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 11, 2009
__________
Serial No. 111-46
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan JOE BARTON, Texas
Chairman Emeritus Ranking Member
EDWARD J. MARKEY, Massachusetts RALPH M. HALL, Texas
RICK BOUCHER, Virginia FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey CLIFF STEARNS, Florida
BART GORDON, Tennessee NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois ED WHITFIELD, Kentucky
ANNA G. ESHOO, California JOHN SHIMKUS, Illinois
BART STUPAK, Michigan JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York ROY BLUNT, Missouri
GENE GREEN, Texas STEVE BUYER, Indiana
DIANA DeGETTE, Colorado GEORGE RADANOVICH, California
Vice Chairman JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania GREG WALDEN, Oregon
JANE HARMAN, California LEE TERRY, Nebraska
TOM ALLEN, Maine MIKE ROGERS, Michigan
JANICE D. SCHAKOWSKY, Illinois SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York PHIL GINGREY, Georgia
JIM MATHESON, Utah STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA CHRISTENSEN, Virgin Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE BRALEY, Iowa
PETER WELCH, Vermont
(ii)
Subcommittee on Health
FRANK PALLONE, Jr., New Jersey, Chairman
JOHN D. DINGELL, Michigan NATHAN DEAL, Georgia,
BART GORDON, Tennessee Ranking Member
ANNA G. ESHOO, California RALPH M. HALL, Texas
ELIOT L. ENGEL, New York BARBARA CUBIN, Wyoming
GENE GREEN, Texas HEATHER WILSON, New Mexico
DIANA DeGETTE, Colorado JOHN B. SHADEGG, Arizona
LOIS CAPPS, California STEVE BUYER, Indiana
JAN SCHAKOWSKY, Illinois JOSEPH R. PITTS, Pennsylvania
TAMMY BALDWIN, Wisconsin MARY BONO MACK, California
MIKE ROSS, Arkansas MIKE FERGUSON, New Jersey
ANTHONY D. WEINER, New York MIKE ROGERS, Michigan
JIM MATHESON, Utah SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas TIM MURPHY, Pennsylvania
JOHN BARROW, Georgia MICHAEL C. BURGESS, Texas
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
C O N T E N T S
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Page
Hon. Frank Pallone, Jr., a Representative in Congress from the
State of New Jersey, opening statement......................... 1
Hon. Nathan Deal, a Representative in Congress from the State of
Georgia, opening statement..................................... 3
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 4
Prepared statement........................................... 7
Hon. Ed Whitfield, a Representative in Congress from the
Commonwealth of Kentucky, opening statement.................... 12
Hon. Anna G. Eshoo, a Representative in Congress from the State
of California, opening statement............................... 12
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 14
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 15
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, opening statement.......................... 17
Hon. Jim Matheson, a Representative in Congress from the State of
Utah, opening statement........................................ 18
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 19
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 20
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 20
Hon. Donna M. Christensen, a Representative in Congress from the
State of Virgin Islands, opening statement..................... 21
Hon. Steve Buyer, a Representative in Congress from the State of
Indiana, opening statement..................................... 22
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 23
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 24
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 24
Hon. Tim Murphy, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 25
Hon. Zachary T. Space, a Representative in Congress from the
State of Ohio, opening statement............................... 26
Hon. Betty Sutton, a Representative in Congress from the State of
Ohio, opening statement........................................ 26
Hon. Bruce L. Braley, a Representative in Congress from the State
of Iowa, opening statement..................................... 27
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 28
Witnesses
Pamela Jones Harbour, Commissioner, Federal Trade Commission; and
Michael Wroblewski, Deputy Director of the FTC's Office of
Policy Planning................................................ 29
Prepared statement........................................... 33
Answers to submitted questions \1\
Submitted Material
Federal Trade Commission report of June 2009..................... 40
Working paper by Duke University Department of Economics on Data
Exclusivity, dated December 22, 2008, submitted by Mr. Buyer... 184
HHS responses to subcommittee, dated September 18, 2008,
submitted by Ms. Eshoo......................................... 234
Reported entitled, ``Proper Duration of Data Exclusivity for
Generic Biologics,'' by Alex M. Brill, submitted by Mr. Deal... 250
Report entitled, ``Stimulating Innovation in the Biologics
Industry: A Balanced Approach to Marketing Exclusivity,'' by
Laurence J. Kotlikoff, submitted by Mr. Deal................... 262
Report entitled, ``Biologics in Perspective: The Case for Generic
Biologic Drugs,'' by AARP Public Policy Institute, submitted by
Mr. Deal....................................................... 282
----------
\1\ Ms. Harbour did not respond to submitted questions for the
record.
EMERGING HEALTH CARE ISSUES: FOLLOW-ON BIOLOGIC DRUG COMPETITION
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THURSDAY, JUNE 11, 2009
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:08 a.m., in
Room 2123 of the Rayburn House Office Building, Hon. Frank
Pallone, Jr. [chairman of the subcommittee] presiding.
Present: Representatives Pallone, Dingell, Gordon, Eshoo,
Green, DeGette, Capps, Schakowsky, Baldwin, Matheson, Harman,
Barrow, Christensen, Castor, Sarbanes, Murphy of Connecticut,
Space, Sutton, Braley, Waxman (ex officio), Deal, Whitfield,
Shimkus, Buyer, Pitts, Myrick, Murphy of Pennsylvania, Burgess,
Blackburn, and Gingrey.
Also present: Representative Inslee.
OPENING STATEMENT OF HON. FRANK PALLONE, JR., A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF NEW JERSEY
Mr. Pallone. The meeting of the subcommittee is called to
order, and I will recognize myself initially. Today, the
subcommittee is meeting to discuss the Federal Trade Commission
report entitled Emerging Health Care Issues: Follow-on Biologic
Drug Competition. This is an extremely timely report and goes
to the very heart of our President and this Congress'
commitment to ensuring affordable and quality health care for
every American. Creating a statutory pathway for the approval
of follow-on biologics presents us with an opportunity to
improve millions of lives at a more affordable cost. Currently,
brand biologics account for approximately 15 percent of total
U.S. prescription drug sales, and the industry is growing at a
rate of around 20 percent annually. In a couple years, we could
be spending over $100 billion just on biologic drugs.
According to data from the Centers for Medicare and
Medicaid Services, CMS, just 4 biologics account for 30 percent
of all Medicare Part B spending. Obviously, these drugs are
costing the health care system a lot of money, and it is not
just the health system that is being burdened by these high
costs. For American families biologics can cost in the tens of
thousands of dollars for the most popular drugs. In some cases
the life-saving biologic can cost a patient over $300,000 a
year. There is no doubt that these innovative drugs provide
Americans access to ground breaking treatments for devastating
illnesses, including cancer, arthritis, and multiple sclerosis.
But I have heard too many stories from my home district in
New Jersey and from all around the country of hard-working
people who just can't afford the tremendous cost of these life-
saving and life-improving drugs. In a country of the best and
the brightest, which we are, I have to believe that we can do
better. We must continue to innovate and push the envelope to
discover more effective treatments and cures for the scourges
of our time. In the same vein, we must also ensure that these
innovative products are available to patients at an affordable
price. We are faced with a delicate balance moving forward
between ensuring reasonable drug prices and expenditures,
increasing access for more Americans, and supporting
innovation. And I know that we have different bills on this
subject and we have significant disagreements, but I also think
that we all believe that we need to move forward with a pathway
for these follow-on biologics, and this hearing today is the
beginning of that process.
There are some principles, the same principles that
essentially guided us with chemical substances I think can
guide us in the creation of legislation today. We all know
about the Hatch-Waxman Act. Mr. Waxman isn't here, but I am
sure he will be.
Mr. Waxman. I am.
Mr. Pallone. Oh, you are. I am sorry.
Mr. Waxman. It is Waxman-Hatch.
Mr. Pallone. Yes, I know. I was going to say that. I see in
the document it says Hatch-Waxman. I said it is Waxman-Hatch,
not Hatch-Waxman. But we know that Waxman-Hatch has been a
great success since its passage or since it went into effect in
1984. And since its passage more generic drug manufacturers
have entered the market driving down costs to the consumer.
Also, pioneer drug companies have given protections that have
spurred innovation leading to advancements that are helping us
to live longer and healthier lives. In addition to driving
innovation, Waxman-Hatch was also able to effectively and
without any market interference drive down the cost of drugs.
In fact, the U.S. health care system has saved over $700
billion in the past 10 years through the use of generic
pharmaceuticals. In a time when we are facing an economic
crisis partly brought on by skyrocketing health care costs,
this is a staggering figure.
If biologics are the future, then we should do everything
we can now to control costs while aiding innovation just like
Waxman-Hatch did. So today we are hearing testimony on the
newly-released Federal Trade Commission report looking
specifically at the issues of innovation, cost, and
competition. The FTC has decades of expertise in this area and
I value their objective and comprehensive analysis. I am
anxious to hear from the FTC about what factors we must
consider when moving forward with legislation and how follow-on
biologics are likely to behave in the market setting as
compared to generics. I am especially curious to hear about
what incentives and protections will be necessary in a biologic
and follow-on biologic world that are similar or different than
the current brand and generic arena.
And I want to welcome FTC Commissioner Harbour to the
committee today. She comes from the State of New Jersey. Thank
you for coming to testify before us. I would also like to
welcome the author of the FTC report, Michael Wroblewski, who
has been invited along with the Commission to answer more
technical questions about the report. So thank you both for
being here. I now recognize Mr. Deal for 5 minutes.
OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Deal. Thank you, Chairman Pallone, for holding this
hearing today on the issue of surrounding the establishment of
an approval pathway and of patent protection concerns on
follow-on biologics at the Food and Drug Administration and the
resulting impact that this may have on competition and
innovation in the biologic drug marketplace. I also want to
thank Commissioner Harbour for joining us today to discuss the
results of the Commission's very recently completed report. I
look forward to that testimony and to the questions and answers
that will follow regarding that report, and we hope she will be
able to provide us some definition to the debate that currently
surrounds this issue. As this subcommittee prepares to consider
fundamental health reform this summer, I believe a critical
component of such reform must include the establishment of
appropriately abbreviated approval processes for follow-on
biologic drugs, a priority upon which innovators engineers, and
manufacturers both agree.
In 2007, global sales of biologic drugs reached $75 billon,
and current estimates suggest that over half of all drugs, both
chemical and biologic in nature, will be bio-pharmaceutical
products next year. Biologic drugs have provided some of the
most promising benefits for a wide range of diseases, including
anemia, hemophilia, cancer, diabetes, HIV, rheumatoid
arthritis, and other debilitating medical conditions that
affect millions of Americans every day. Access to lower cost
biologics represents a critical step forward in reducing the
overall high cost of health care and will provide greater
access to patients in need of these critical life-saving
therapies. In doing so, Congress must be certain a balanced
approach is established, which encourages new innovation in new
bio-pharmaceuticals while providing more affordable options for
the American people.
At the center of this issue, the period of marked
exclusivity given to innovator products, as well as patent
dispute resolution procedures, and the flexibility which
Congress will give to FDA to approve bio-similars will direct
our nation's ability to expound upon the advancements in the
biologic arena and to serve a growing number of patients in
dire need of these drugs. In the report under consideration
today produced by the Federal Trade Commission, a number of
arguments are made which support the robustness of our current
patent system as it applies to biologics and highlights the
question how long of a period of market exclusivity must an
innovator of biologic products be afforded in order to yield
net profit results, notably with respect to the significant
outlays expended in bringing the product to market and how the
current intellectual property rights translate into the field
of bio-pharmaceuticals.
I recognize the critical need for innovators to earn a
profit on innovative and cutting edge therapies, but also
recognize the importance of ensuring access to the American
people who simply cannot gain access to these critical
therapies solely based upon their significant cost. Therefore,
a delicate balancing act must be played as we pursue
congressional establishment of an appropriate approval pathway
and patent resolution processes under FDA for these unique
drugs. Among the report's findings, I am particularly
interested in the stated dynamic of competition which follow-
ons are likely to face upon an appropriate approval mechanism
once it is in place. According to the report, pioneer
manufacturers, potential follow-on biologic manufacturers, and
payors were virtually unanimous in their predictions that
competition from follow-on biologic drug entry is likely to
resemble brand to brand competition rather than brand to
generic drug competition.
And unlike chemical generic drug entry, follow-on biologic
entry would not result in steep price discounting or rapid
acquisition of market share by follow-on biologic
manufacturers. Therefore, although the introduction of a bio-
similar may result in a 10 to 30 percent reduction in innovator
price and an introduction of a competing product into the
marketplace innovator companies are still capable of securing
adequate positive returns on investment for years to come and
maintain significant market share. And it is important to note
the exorbitant cost of many of these therapies which thousands
of Americans across the country are forced to accept. For
example, taking a conservative 15 percent reduction in cost of
a hypothetical follow-on bio-pharmaceutical which would cost
$40,000 per year. Allowing bio-similars into the marketplace
could potentially save this individual $6,000 per year, which
is a dramatic step toward reigning in the cost of these drugs
while encouraging innovation.
There are a lot of questions which remain. I remain
committed to working on this issue, an issue which I do believe
cannot wait any longer to be addressed. I appreciate the
cooperation of my colleagues on this committee. I look forward
to the testimony. I look forward to working together
cooperatively as we move this issue forward. Thank you, Mr.
Chairman.
Mr. Pallone. Thank you, Mr. Deal, and thank you for
prioritizing this issue. And now the chairman, Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. Today, we
are going to hear from the Federal Trade Commission on an issue
of paramount importance to the debate on a pathway for approval
of follow-on biologics, how long a period of exclusive
marketing must we give to biotech drugs to sustain innovation.
As was true when Congress passed the Hatch-Waxman Act 25 years
ago, an effective follow-on biologics bill must maintain a
balance between increasing consumer access to affordable
medicines on the one hand and providing adequate incentives for
innovation on the other. Life-saving drugs are useless if no
one can afford them, yet making today's drugs affordable does
us little good if we cut off the supply of future
breakthroughs. We have made great progress in the last 3 years
toward a consensus on how to ensure that follow-on biologics
are safe and effective. Just 2 years ago the drug industry
argued that it was impossible to make follow-on biologics. Now
there is agreement that it can be done.
But we remain divided on what incentives are needed for
innovation. It is no longer a matter of whether patients will
get generic versions of these life-saving medicines but when.
In assessing how much exclusive marketing is needed to sustain
innovation, I began with a basic premise. The balance we struck
in the Hatch-Waxman Act has worked well for 25 years. It has
given us access to affordable drugs and it has not damaged
innovation. Pharmaceutical R&D expenditures have not just been
maintained, but have steadily risen throughout these 25 years.
Under Waxman-Hatch innovative drugs get 5 years of exclusivity.
The drug industry has been engaged in a massive and expensive
lobbying campaign to convince the members of this committee
that the supply of life-saving drugs will dry up if they don't
get triple the monopoly protection available to all other
drugs. The drug industry is demanding 12 or even 14 years of
exclusivity for biotech drugs.
To support this extraordinary request, the industry makes 2
main arguments. First, that their patents are much weaker than
drug patents and won't block competition from follow-ons.
Second, that it takes 12 to 16 years for biotech drugs to break
even so that is the period of exclusivity they need. Though I
have seen little or no persuasive evidence to support these
arguments, the industry has blanketed Capitol Hill with them.
The outcome of this debate is too important for our nation's
health to let lobbying cloud decisions. The cost of reaching
the wrong decision is simply too high. Instead, the appropriate
length of exclusivity must be decided on the basis of evidence
and analysis by objective experts, experts who are not being
paid by one side or the other. That is why I am so pleased that
the Federal Trade Commission has undertaken an in-depth review
of all the evidence and arguments on both sides of this debate.
The FTC employs economists, patent lawyers, and experts in the
pharmaceutical marketplace. Their job is to assess the impact
of laws, regulations, and marketing practices on both
competition and innovation in the prescription drug
marketplace.
The FTC has overseen this marketplace for decades and has
produced highly respected reports on generic drug competition
and anti-competitive practices in the drug marketplace. For
example, in 2002 the FTC produced a report on abuses of Hatch-
Waxman that inappropriately delayed consumer access to generic
drugs. The report resulted in important amendments to our law
enacted the following year. Today, the FTC will tell us whether
the methods we have used to sustain innovation in the drug
industry, patents, and the market-based pricing with perhaps a
short period of exclusivity are adequate to sustain innovation
for biotech drugs, and they will tell us whether the argument
is in favor of 12 to 14 years of exclusive marketing hold up to
scrutiny. Objective evidence-based answers to these questions
from the expert agency charged with overseeing competition and
innovation of the drug marketplace will provide critical
information to the committee as we move forward. I look forward
to exploring the FDC's analysis and conclusions on these
questions. Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Waxman follows:]
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Mr. Pallone. Thank you, Chairman Waxman. Next is the
gentleman from Kentucky, Mr. Whitfield.
OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF KENTUCKY
Mr. Whitfield. Mr. Chairman, thank you very much for this
important hearing today on an important subject matter. All of
us are in total agreement that some type of generic pathway for
biological drugs must be created. I think it demonstrates by
the different bills that we have that there are some
significant differences in how we create that pathway. We all
understand yesterday that the Federal Trade Commission's report
was submitted and it leaves many of us with some serious
concerns with their findings, specifically the claim that data
exclusivity is essentially unnecessary in a generic pathway.
The scenario outlined by the FTC would, I believe, unfairly
tilt competition in favor of bio-similars by allowing them to
capitalize on innovators substantial research and development
efforts at any time. This would create even more uncertainty, I
believe, for innovators when they make their R&D decisions.
I might also say that Professor Dr. Henry Grabowski at Duke
University, and you all can correct me if I am wrong on this,
but I believe he has the only peer-reviewed document on this,
and he summarized the findings of his study that concludes that
without a data exclusivity period of between 13 and 16 years
the future introduction of important new medicines could be
delayed significantly or deterred altogether and that a strong
innovative industry is necessary for an industry to thrive over
the long term. So we find ourselves today trying to balance the
need for new drugs providing low cost medicines for our senior
citizens, and so this hearing is vitally important, and I
certainly look forward to hearing from the Federal Trade
Commission today and learning more about their report and how
it compares with Dr. Grabowski's report. And thank you very
much.
Mr. Pallone. Thank you. Next is the gentlewoman from
California, Ms. Eshoo, and I want to thank her also for all her
work on this issue.
OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Eshoo. Thank you, Mr. Chairman, and good morning to
everyone that is here. I am pleased to be here to discuss
competition in the biotechnology industry, but I have to say
that I am puzzled and somewhat disappointed by the
subcommittee's approach to this critical issue. Everyone
understands that this is not only critical, it is extremely
complex. In May of 2007, over 2 years ago, the Health
Subcommittee had a hearing on bio-similars. In October of 2007
subcommittee members met to discuss bio-similar, and the result
of that meeting, as members might recall, was a series of
questions that the members provided to stakeholders and the FDA
several months later in April of 2008. We received thoughtful,
thorough responses from a large number of interested
organizations and experts.
Now today this is the first committee action on bio-
similars in more than 2 years and a hearing on an FTC report we
received less than 24 hours ago. When we were informed that
there was going to be this hearing, we immediately called the
FTC to ask for a copy of the report. They said that we could
not have it, that it would be available the morning of the
hearing. I then, Mr. Chairman, approached you and asked if
members could at least see this the day before. Why have a
hearing if you can't read the report that you are having the
hearing on? So we did receive it. I don't know how many members
have read this report, and I don't think that this process
really reflects well on I think the most distinguished full
committee and subcommittee in the House.
Now I assume that the FTC has devoted significant efforts
and resources in putting this report together, but I am not
convinced that the FTC Commission is--and what they have in
this report are exactly what we have been waiting for 2 years
to hear about. I have met with many scientists, doctors,
patients, who have much to contribute to the subcommittee's
deliberations, but we only have the FTC here today, and I guess
it was the decision of the chairman not to have anyone else.
This is a report that has not even had been subjected to the
scrutiny of the public. I think that we can do better than
that. Now what does the FTC report, as I read it as quickly as
I could, what does it conclude? It says that increased
competition in the biotechnology industry would result in lower
prices for biologics. It is exactly why I introduced along with
Mr. Inslee, Mr. Barton, the Pathway for Bio-Similars Act.
This is the Kennedy legislation in the House. Now
competition is always healthy. Anyone that has known me over
the 16-1/2 years I have been in the Congress knows that I
believe that it benefits consumers whether it is in
biotechnology, whether it is in telecommunications, whether it
is in energy, whether it is health care, or whether it is
baseball. I am a staunch advocate of fair competition and open
markets, and I believe that my legislation will provide new
competition while promoting sound science, and above all else
protect patients. Any new pathway for bio-similars must provide
effective safeguards for patients and sufficient incentives for
the development of new treatments for the most deadly diseases
that affect humankind today.
I am pleased that my bill enjoys the support of just shy of
100 members, bipartisan members, of the House, and it has
received the endorsements of over 70 patient, physician,
industry, and academic groups, as well as governors of 4
states. So I think that we need to be respectful of both
efforts. And I am very proud of this because this is a
complicated issue, and the amount of time spent with members,
as well as members of the public and others, has been
considerable. The establishment of a new regulatory pathway for
approval of bio-similars is a critical matter for this
subcommittee and the Congress to consider. I am eager to get to
work on this, and I encourage you, Mr. Chairman, to hold more
thorough and more inclusive hearings in the near future. I am
glad that the FTC is here today. My understanding of the FTC is
that most of its work deals with anti-trust. In my questions, I
would like to know where the scientific data and the basis for
the report has come from, but I nonetheless welcome the FTC
here. You are an important agency. And I thank you, Mr.
Chairman, and I hope that when I ask you why we were doing it
this way, your response was it is the only time we have before
the August recess.
I think it could have been broader. I think the
subcommittee deserves that. I think the full committee deserves
that. I think the House of Representatives deserves that on
this issue which is so critical, so critical, to the well-being
of patients and a process by which we can reduce the cost of
biologics for people in our country. So, thank you, and I yield
back.
Mr. Pallone. Thank you. And let me assure the gentlewoman,
as I said, that we will have additional hearings on this very
important issue.
Ms. Eshoo. When do you plan to do that?
Mr. Pallone. Well, as I mentioned, we are going into the
health care debate, so I can't say when, but I promise you we
will because this is a very important issue for the members.
Let me turn to the gentleman from Texas, Mr. Burgess.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman. Mark me down as
leaning ambivalent on this issue. Now just like everyone who
sits on this committee, I know we have all spent months looking
at the legislative proposals dealing with follow-on biologics.
I know I personally have been in meeting after meeting with
interested parties, and I have become convinced that this
committee needs to hold more hearings. We lack sufficient
information, primarily safety information, to render an
informed opinion. We do have 2 bills championed by leaders on
this committee, and we obviously need to explore those
divergent points of view involved. Certainly, like
Congresswoman Eshoo, I welcome Commissioner Harbour here. There
are lots of things that I would like to discuss with the
Federal Trade Commission. I am terribly interested in the lack
of the ability of our physician community to be able to
negotiate with our insurance community, but we don't get to do
that today.
So my excitement with this hearing was tempered when I
realized we really are only going to be focusing on a very
narrow aspect of the bio-similars discussion, and that very
narrow aspect will not include patient safety. Market
exclusivity and patent integrity are important elements of any
legislation authorizing a pathway for follow-on biologics. I
was unaware that this committee had already achieved consensus
on issues of safety, science, and the Food and Drug
Administration. Assuming this committee has not reached such a
consensus, then it is just downright frustrating that the Food
and Drug Administration is not here in this room at this
hearing. Now assuming that we didn't want to hold a series of
hearings on points of disagreement and wanted our first focus
to be on market forces, as we will today, then a second panel
representing concurring or dissenting opinions from industry
would be appropriate in my opinion.
And then maybe we could even hear from the scientists and
the doctors. Mr. Chairman, I referenced last week I took a
field trip out to the Food and Drug Administration last week. I
had some wonderful interactions with some of the scientists who
are working on some of these very issues, the issues of bio-
similars as they relate to monoclonal antibodies. This is the
type of research that may unlock a lot of secrets that have
been kept from our physician community for years, and it is
just such terribly important information that I cannot believe
we are going to be asked to make a decision without access to
that information. I will be interested to what extent the
Commissioner will be able to testify on the issue of
interchangeability. Interchangeability is one of the foremost
at issue of science, but it is importantly one of patient
safety and that should have a physician and patient at the
heart of the discussion.
I would not typically associate the Federal Trade
Commission with such discussion. Mr. Chairman, I am fascinated
by the prospect of a reliable, bio-similar pathway. Texas is
becoming a focal point for bio-technology development. Not only
does this mean new therapies for previously untreatable
diseases with just the chance of projection that 50 percent of
the drugs by 2020 will be biologics so this is a huge economic
issue for Texas as well. Just as scientists and doctors have
just scratched the surface of potential biologics for the next
generation of cures and treatments, this committee has plenty
of work to do to find a compromise bill that solidifies our
ambitions and meets or exceeds our expectations. No artificial
deadline, and this goes to the health reform debate as well, no
artificial deadline should compel us to ride rough shod over
the deliberative nature of this body in regular order. To do so
not only tarnishes this great committee but could literally
mean life or death for our constituents. Thank you, Mr.
Chairman. I will yield back the balance of my time.
Mr. Pallone. Thank you. The chairman emeritus, Mr. Dingell.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Mr. Chairman, thank you, and I commend you for
holding this hearing, which is very important. We are here to
discuss the findings of the Federal Trade Commission with
respect to its study on how competition between pioneer
biologics and follow-on biologics is likely to develop. This is
a series of hearings, which I hope will take place, which is
wrought with many, many questions of great importance and many
fewer answers of any relevance or importance. We have a
tremendous opportunity here to develop a follow-on biologics
policy that will bring the competition needed to provide
greater access on life-saving biological drugs. However, we
also have a responsibility to ensure that the innovation that
develops the current biologic products continues in a way that
will breed new effective therapies or a new group of
conditions.
One thing the FTC report makes abundantly clear is that
biologic products are different from small molecule chemical
drugs. They are enormously complex, much longer, and they are
also either products of or sometimes living organisms. The
science is clearly different. The safety considerations between
the 2 categories of drugs are different. And as the FTC report
concludes, the competition between pioneer products and generic
competitors is different. It must be noted that we will find
that the traditional questions that FDA has had to address will
be somewhat different either in form or in total. And the
question of whether it is safe, biologically equivalent, what
are the side effects, contraindications, and whether it is
effective are going to be interesting and different questions
that have to be addressed.
It also is going to be a major question before us as to how
we address the question of biological equivalency and whether
or not one drug is an honest, safe substitute for another which
could properly be prescribed with expectation of helping rather
than hurting the patient. In 1984, Congress granted the FDA
authority to approve generic drugs, and we all commend Chairman
Waxman for his leadership in that effort. We did not foresee
the need for a similar pathway for generic biologics. The
science has exploded under our feet since then and in certain
instances biotechnology provides clear technical advantages
over other traditional therapies. We also need to examine if
exclusivity limitations that we create is reflective of true
costs in time and resources.
We also need to know how this is going to affect the cost
of medicine and how it is going to impact on our efforts to
reduce the tremendous skyrocketing now going on in health care
costs. We also want consumers to make sure that there is
affordable access to these life enhancing and sustaining
therapies. What is the path forward on exclusivity? Is it 5
years, 12 years or 14 years, more or less? Eleven years the
European has set forth. We need to create a framework that
balances good science and the public health. We can also focus
on patient safety and at the same time ensure that incentives
remain for private innovation.
The FTC report does a good job of laying out the economic
and competitive effects of a follow-on biologics policy.
However, we should be reminded that safety should be our number
1 priority, and protection of the American consuming public
should be of the highest priority. Policies that protects the
safety of the patient is paramount as we forge ahead in the new
area of follow-on biologics. We should be thoughtful as we move
forward but not allow fear to restrict us, but above all else
we have got to move forward to get the answers to the question.
Here are a few questions that I find troublesome. What
standards will ensure that follow-on biologics are as safe as
the original products, and that we provide the necessary
knowledge to medical practitioners in the use of these
products.
As we study potential competition models, should we be
guided by a one size fits all approach or should we allow
different approaches, and, if so, when, how, and what
discretion should we give FDA to use those, or should there be
a variation from one product to another? What study should
support follow-on biological applications? Can a generic
biologic product be created that is genuinely or sufficiently
interchangeable? People tell us yes, people tell us no. But in
this area of enormous complexity, I am not convinced that we
can give a decent answer to that question. I am convinced that
all these questions could be answered and that there is a way
forward in developing sound follow-on biologic policy that
provides greater access to current products and supports
innovation in developing new ones.
I look forward to contributing to that discussion, and I
know that this committee is fully up to the task for which we
were created, and that is dealing with questions of this kind.
I am pleased this hearing is being held. I look forward to the
testimony, and I anticipate much needed feedback from our
members. And I thank you, Mr. Chairman.
Mr. Pallone. Thank you, Chairman Dingell. The gentlewoman
from Tennessee, Ms. Blackburn.
OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TENNESSEE
Ms. Blackburn. Thank you, Mr. Chairman, and I want to say
welcome to our witnesses today. Members on this committee have
heard me talk a little bit about serving in the State Senate in
Tennessee, and one of the things that I worked very diligently
on while I was there was starting our Tennessee Biotech
Association. And now that has 130 members across our state, and
they really have become the recognized authority on biotech
research in our state. Right now we have got about 300
companies that are life science companies that are working in
Tennessee that are innovating every day, and they are working
with pharmaceutical companies and bio-science companies large
and small to create new products and therapies and protocols.
And we are very pleased with the work that they are doing.
We are also pleased with the work that is being done by
many of our universities in Tennessee, which have taken a lead
in this. And they received $580 million in external funding for
biotech related research in our universities in the past year,
and the University of Tennessee Health Science Center has
Memphis Bioworks. We have complimentary work that is being done
at St. Jude's. We have the life sciences center where
Vanderbilt has a partnership and that is in the mid state area
East Tennessee State University of Tennessee and Oak Ridge over
on the east side of our state, and in the past 6 years along
with the funding that has gone to the universities you have
seen just under $1 billion in venture capital go into
innovations.
So I am pleased to be able to praise that innovative
industry in our state but I will tell you I am very concerned
about protecting the intellectual property of the industry in
that state, and, quite honestly, as I read through your report,
it was something that was of concern to me. And I am going to
have some questions for you today as we move forward with this
hearing. One of the things that I felt as I read your report,
if you followed the scenario, the patient scenario that you lay
forth, then it appears that bio-similars could be brought to
market while they are still infringing on valid patents. And as
my colleagues know, last week when we debated the energy bill,
I sought to bring intellectual property protection for those
innovators that are working in the energy sector. Yesterday on
the floor, Congressman Larson, Congressman Kirk and I had an
amendment that went in to provide protection for this
innovation.
So this raises some red flags with me of how infringement
could be allowed and product brought to market. It raises red
flags to me that it is uncertainty that would be placed on our
innovators. And I see that as a hamper to R&D which we badly
need. I know I am over my time, and we are going to have votes.
I will yield back, and I do look forward to the questions.
Thank you, Mr. Chairman.
Mr. Pallone. Thank you. The gentleman from Utah, Mr.
Matheson.
OPENING STATEMENT OF HON. JIM MATHESON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF UTAH
Mr. Matheson. Thank you, Mr. Chairman. I think we all know
as we go into the 21st century and we look at the U.S. economy
innovation is such a key factor in how our economy is going to
succeed. I think it is very important to remember that in the
context of today's hearing because within the innovation
economy few industries have more promise and more uncertainty
and risk than the biotechnology industry. The biotech industry
supports more than 3.2 million jobs in the United States, and
we all know many of these are high wage jobs, but we should
also acknowledge that this is an industry where the U.S. is
still the leader in the world. This is one of those centers of
excellence that is in the United States when you look at the
global economy.
Yet with all that good news more than 80 percent of the
biotech companies in our country remain unprofitable, and a
third of the companies had less than 6 months cash on hand. And
this is with no competition from follow-on products. The
companies that make up the majority of this industry are small.
They have no source of revenue and they are operating solely on
the hope that they will achieve a major breakthrough in
medicine. So one of the main issues up for discussion today is
the issue of date of exclusivity, how much time should an
innovative biotechnology product have on the market to try to
recoup investment in research and development before a follow-
on biologic is approved. The average cost of developing a
biologic is about $1.2 billion.
Clearly, that is an expensive investment, particularly when
you have no revenues coming in the door. I think we all can
agree that competition in the market for medicines is a good
thing. It brings down costs for individuals and for the health
care system as a whole, and I fully support establishing a
pathway for approval of follow-on biologics. However, I believe
we need to be sure we are creating appropriate incentives for
biotechnology companies to take the risks involved in bringing
these medicines to patients. Now I understand that the FTC
believes that 5 years is a sufficient period for data
exclusivity for innovative biotechnology products. I disagree.
As I said earlier, this is one of America's strengths, but
we got to look at the context of global competition. The
exclusivity period in Europe is longer than 5 years. This is an
industry that can move offshore in a moment, and as members of
Congress, we need to take that in consideration when we set
this type of policy. A recent report from Duke University shows
that the break even point for most biologics is somewhere
between 12 and 16 years. With an appropriate incentive, the
researchers at Duke believe a few companies or venture
capitalists will invest the necessary capital to research and
develop a biotech product.
These products are going to be developed in this country,
not necessarily with taxpayer dollars. That last statement I
just made about this is an industry that is financed through
venture capital and other private capital markets, and the
public policy platform we wet will establish proper incentives,
I hope, to allow that private investment to happen. These are
the issues we ought to be talking about today. It is our job to
take these steps to make sure this innovation agenda has an
opportunity to succeed in this country. And I would hope, Mr.
Chairman, as others have voiced that this subcommittee can
bring in other witnesses besides just the one panel today to
bring in other points of view as we examine this very important
issue. I look forward to working with the committee on that,
and I will yield back the balance of my time.
Mr. Pallone. Thank you. The gentleman from Georgia, Mr.
Gingrey.
OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Gingrey. Mr. Chairman, thank you very much. I would
tend to agree with Ms. Eshoo that getting the report from the
FTC at 2:00 yesterday afternoon really allows very little time
to go through the 120 pages. I have to admit that I haven't had
an opportunity to go through any of it, so I certainly do look
forward to the witness that we are going to hear from shortly.
This is a hugely important issue, this issue of follow-on
biologics, and as we all know there are 2 bills introduced on
the one hand by leadership on the majority side combined with
some leadership from the minority side, and also a bill on the
minority side co-authored by Ranking Member Barton. I looked at
these bills. I have studied them. I have tried to understand on
the one hand 16 years, I guess, of exclusivity and on the other
hand 8 years. The issue of interchangeability, once these
generic biologics, follow-on biologics, are actually approved
by the FDA, I think is a very important issue.
And it is tough. It is a tough thing to decide on, and we
just need, as my colleagues have said, as much information as
we can possibly get, particularly in regard to patient safety
because as the chairman emeritus said these are not single
molecules or small molecules as we dealt with back in 1984
under Hatch-Waxman. These are different. These are living
cells, and every manufacturing process for these drugs are
different, and there is no way to make them completely the
same, so it is going to be a tough thing. I would hope that
maybe there is room for compromise, quite honestly. As we
listen to the debate and study further the 2 particular bills
because there are great members that are trying to do the right
thing and trying to make sure that we get cost effective, I
don't want to say cheap, but cost effective, the very expensive
medications to the public as soon as possible, but also that we
have to always keep in mind safety. So I look forward, Mr.
Chairman, to the hearing and getting more information on this
hugely important issue. And yield back.
Mr. Pallone. Thank you. The gentlewoman from California,
Ms. Harman.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman. I am a new member to
this subcommittee, and I surely agree with Ms. Eshoo that this
subject is complex, and I am persuaded that I don't know enough
about it to have a final opinion. That is why I am happy we are
having this hearing, and that we will have a series of hearings
in the fall. I have not co-sponsored either of the pending
bills because I feel I need to learn more. But surely I know
enough to believe that we should be getting reports more than
18 hours in advance of hearings, and I hope that in the future
that will happen so that all of us can be as knowledgeable as
possible. I just want to say a couple things about the general
subject.
First of all, although new to the committee, I am not new
to this earth and I am not new to Congress, and I remember 1984
when Henry Waxman did something very impressive, and that was
to strike an agreement with his political opposite Orin Hatch
on a bill that the drug industry strongly opposed and that has
led to considerable progress, so I really think these things
can happen and be done right, and that is a history in our
committee, and hopefully we will follow it again. But this
time, I think this subject is more complicated and I think the
implications, as Mr. Matheson said, for the future of the U.S.
industry are grave. I don't know much about this subject, but I
do know what we did to the U.S. commercial satellite industry
when in my opinion we got it wrong in the late 1990's, and we
basically took away the market edge for our U.S. satellite
makers.
Now we are trying to get it back. Hopefully we will, but we
lost 10 years, and so I just want to make sure we get this
right, and I want to be sure that I make the best contribution
I can as a hopefully thoughtful member of this committee. So I
thank you for holding this hearing, and I look forward to
learning a lot more about this subject. I yield back.
Mr. Pallone. Thank you. The gentleman from Pennsylvania,
Mr. Pitts.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Pitts. Thank you, Mr. Chairman. I would like to thank
you for convening this hearing on the Federal Trade
Commission's report, Emerging Health Care Issues: Follow-on
Biologic Drug Competition. I think all of us realize the
potential of follow-on biologics, and I believe we all agree on
the need to set up a pathway sooner rather than later. I must
say also that it would have been more helpful to give the
members a little more time until we had a time to read and
analyze this 120-page report, which was released just yesterday
before having the hearing. I am quite concerned by the report's
assertion that no period of data exclusivity is necessary for
pioneer or brand biologics because patents and market pricing
should provide sufficient protection and incentive. This logic
has worked well for small molecule drugs governed by Hatch-
Waxman but as this report points out multiple times there are
significant differences between small molecule drugs and
biologics.
As the report acknowledges, a generic small molecule drug
is identical to its brand counterpart. A follow-on can only be
similar to the brand biologic. It is this space between
identical and similar that opens the door for a follow-on to
circumvent or skirt one or more of the brand biologic's
patents. With this uncertainly over whether a patent will
actually protect the brand biologics investment biotech
companies and the venture capitalists that fund them may
reassess the cost and risk involved in the development of new
biologics and opt not to go forward with new drug development.
Stifling innovation and potentially impeding patients' access
to the most promising, cutting edge biologics is surely not the
goal of anyone on this subcommittee.
Data exclusivity provides the certainty brand biologics
need to spend hundreds of millions of dollars and years
investing in the research, development, and approval of new
drugs, and the assurance that this investment can be recouped.
I would ask our witnesses to carefully explain why they believe
that patent circumvention by bio-similar companies is not a
valid scenario. Thank you, and I yield back the balance of my
time.
Mr. Pallone. Thank you, Mr. Pitts. The gentlewoman from the
Virgin Islands, Mrs. Christensen.
OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A
REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS
Mrs. Christensen. Thank you, Mr. Chairman, and thank you
for beginning this discussion on this very important and
complex issue at this hearing. As I understand it, the report
was requested basically to determine if follow-on biologics
would result in reductions in cost of these complex but very
important therapeutic drugs, and anyone who knows me would know
that one of my concerns is that life improving or saving
medication be accessible to everyone, and, yes, cost is an
important barrier to that. But as a physician, safety trumps
everything. I have seen substandard meds marketed in the
Caribbean, and in small molecular drugs that may not be a
dangerous difference. The situation with bio-similars or
follow-up biologics is totally different. I only had a chance
to read the executive summary and some of the first pages of
the report, but what I have taken away so far is a clear
understanding that biologics are very complex, large molecules
produced under very sensitive conditions that are not easy to
reproduce exactly, that significant investment is made in their
production and that if reduction of cost is what has generated
the request for this report FOBs are not likely to result in
much of a price decrease.
If the latter is true then why sacrifice safety? And some
questions remain unanswered. Why accept a similar rather than
the same in the case of such a complex medication when a tiny
difference could make a difference in its action and its
immunogenicity. I am puzzled by the assertion also that a
shortened patent life will not stifle innovation. If it takes
12 to 14 years to recoup investment as demonstrated by a peer
review article by Duke Professor Grabowski, and that is likely
after may trials have failed at that company and they have
experienced financial losses, why should these complex
molecules not have a longer time? Very importantly, the report
states that technology is not yet, and I am quoting here,
``technology is not yet robust enough to determine whether an
FOP product is interchangeable with the pioneer product.''
That statement, plus the fact that not a single country in
the EU has authorized interchangeability, and several have
outlawed it, should slow down any rush to allow products that
are only similar to the pioneer, and to require more of any
follow-on manufacturer to prove safety. It seems to me that
sufficient uncertainty exists so that the FTC didn't even make
a specific recommendation for a period of exclusivity. I would
like to see these important drugs reach everyone, and that
means exploring ways to ensure that that happens, including
having the pharmaceuticals look after a period of time perhaps
reducing the costs, but I am convinced that shortening the time
of patent and data exclusivity would adversely impact needed
innovation, and it seems to me that based on the complexity of
the large molecules and the lack of information on several
factors, we should err on the side of safety and make sure that
we do no harm. So I welcome Commissioner Harbour and look
forward to your testimony. Thank you, Mr. Chairman.
Mr. Pallone. Thank you. The gentleman from Indiana, Mr.
Buyer.
OPENING STATEMENT OF HON. STEVE BUYER, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF INDIANA
Mr. Buyer. I have come here today, I also like my
colleague, Jane Harman, I have not co-sponsored either of these
2 bills yet, and I find myself in a curious position why we are
even seeking the counsel of the Federal Trade Commission on an
issue whereby we are most concerned with regard to the drug
safety and efficacy. When I look at the commissioners from the
Federal Trade Commission, none of them have any experience in
public health whatsoever. We got lawyers. Well, I am a lawyer
too, so what I need is not the advice or counsel of another
lawyer. I need advice and counsel from public health, from
scientists. So we have a conversation today lawyer to lawyer.
You can give me your opinion on what you think the marketplace
is and what it is like, and I guess if you are going to tell me
about trying to promote competition in the drug industry, big
versus small, and how we protect innovation as part of your
core mission of the FTC, I guess we may as well ask you to
report on NASA.
Gee, let us talk about what big company it out there and
how we can promote innovation to do exploration in space. Hey,
the last frontier isn't even space, it is marine. So maybe we
should ask for a report from the FTC about the exploration on
the ocean floor. You can give me an opinion on that. Maybe I
should ask for--I will just make it up. So I am sitting here
today as a curious member of Congress that I have come here to
listen to lawyers tell us what they think about drug efficacy
and safety. Now I haven't had a chance to read this. I am more
than anxious to look at it. I am also curious as to who
initiated this. Did anyone from Congress ask you to do this? I
don't know. So I am interested for you to let us know why you
initiated this, why this group of lawyers think that your
opinion is so important with regard to efficacy and the safety
of drugs.
Now what bothers me the most is that what I have learned
over the years in dealing with the drug industry and biologics
is that we do everything we can to promote this innovation, yet
we try to find science in narrow populations, and it is very
challenging because when you go into the marketplace, how do
you raise that at risk capital, and if we don't give these
companies an opportunity to recoup their cost and make a
profit, they won't go into narrow spectrums, and if they won't
go into narrow spectrums then people then turn to government
and say that government, you have to do it. And if it is all
about innovation, safety, and efficacy, I want to hear from the
experts, Mr. Chairman. So what I am hopeful is that if you are
going to do this today, please bring us a panel of experts, the
FDA, bring in the scientists so that we can have equal quality
here with regard to substantive testimony. That is what I am
looking for. That would be my request of you, Mr. Chairman. I
yield back.
Mr. Pallone. The gentleman from Texas, Mr. Green.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, and like my colleagues,
I have concerns about this hearing on the FTC's report that we
received yesterday on follow-on biologics competition. We have
heard this will be the only hearing on the issue of follow-on
biologics because the schedule will not accommodate additional
hearings on the topic. If we are going to have a fair debate on
follow-on biologics and the issues surrounding H.R. 1548, the
Eshoo-Barton-Inslee Pathway to Bio-Similars Act, which I am a
co-sponsor, and H.R. 1427, the Waxman-Pallone-Deal Promoting
Innovation and Access to Life-Saving Medicine Act, the arena
for those should not be centered around a hearing with one
witness from the FTC.
Follow-on biologics are extremely complex issues and
members of this committee are divided between the 2 bills
pending before us. One hearing with one witness who isn't from
the FDA, an innovator company, a generic drug company, or even
a patient who has used biologics is not a true hearing on the
difficult issues surrounding follow-on biologics. We believe we
need to have a hearing with at least the FDA before this
committee moves forward with any legislation on follow-on
biologics. I think we can all agree that there needs to be a
regulatory path in this country to follow-on biologics, and
however we resolve the differences between the 2 bills, we need
to consider the implications for employers, innovators, the
generic industry, and, most importantly, the patients who
depend on these life improving and life-saving therapies.
Biologics offer tremendous promise in the treatment of
disease but there is no question we have to get it right. The
undeniable fact is biologics are different from the small
molecule drugs and present unique concerns about their safety
and effectiveness. Holding one hearing that doesn't allow us to
explore the questions such as what effect does a small change
in immunoacid sequence produce, is that effect large enough and
concerning enough to warrant additional clinical trials before
the follow-on biologics is available to the public, can we in
good conscience consider the follow-on product safe if they are
never even tested on the human population?
I share the goal of lowering patients' costs to follow-on
pathway but not at the expense of the same patients' safety.
Any action by the committee must balance the desire for the
lower cost of biologics with the need to preserve the
incentives for innovation and patient safety so that more
Americans can benefit from the therapeutic promise of
biologics. And again I thank you and yield back my time.
Mr. Pallone. Thank you. The gentleman from Illinois, Mr.
Shimkus.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. I knew I could be here when the gavel dropped
and go to the next meeting and still make it, so I apologize to
the Commissioner. I would just read from the report here on the
executive summary. Current technology does not yet allow the
creation of an exact replica of a pioneer biological drug
product according to the FDA. In addition, technology is not
yet robust enough to determine whether the follow-on biologic
product is interchangeable with the pioneer products such that
a patient would be able to switch between the 2 products
without risk of an adverse effect. Follow-on biologics are not
chemical compounds. We need more hearings on this, Mr.
Chairman, and we need to have science brought in. And with all
respect to the FTC, they are not the ones. They are not the
ones to give us the direction on the safety and efficacy on
follow-on biologics, so I look forward to that, and I hope we
can follow up with more hearings. I yield back.
Mr. Pallone. Thank you. The gentlewoman from Wisconsin, Ms.
Baldwin.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. And thank you,
Commissioner Harbour, for joining us today. I have really been
interested in the issue of follow-on biologics for a number of
years. I happen to represent a district that is rich in
intellectual capital in this area. The University of Wisconsin-
Madison has produced some of the world's leading research in
biologic drugs. We also have an unique entity in my district
called the Wisconsin Alumni Research Foundation. We call it
WARF. And what they do is they work with business and industry
to transform university research into real products benefitting
society at large. It was founded in 1925 to manage the
University of Wisconsin-Madison discovery that eventually
eliminated the childhood disease rickets, and today WARF holds
nearly 100 patients related specifically to biologics.
I am certainly supportive of the creation of a pathway for
the approval of bio-similars, and we will hear from the FTC
this morning that when we do create this pathway current patent
protections coupled with market-based pricing are sufficient to
continue to spur innovation in the biologic drug market. And
yet on the ground I hear often times the opposite is true. Even
if with current patent protections and without a pathway for
bio-similars, WARF is having trouble finding companies to buy
and license those 100 plus biologic patents that I referred to
and that they currently hold. Developing biologic drugs is a
billion dollar enterprise with an extraordinarily high failure
rate. To take that on knowing that another company could invest
a fraction of that amount and take even a small portion of your
market share may be enough to rethink the enterprise
altogether.
I am extraordinarily proud of the companies in my district
who have taken on this risk in hopes of saving lives and
improving health. Just one example is the example of Flugen
located in Madison. They are working on developing influenza
vaccines, and we know that this is a timely and critically
important enterprise. Flugen, like the vast majority of biotech
industry colleagues, is a very small company. It does not have
the profit margins of 50 and 60 percent, yet these are the
profit margins that are used to conduct these economic analyses
that conclude that only minimal data exclusivity is necessary.
Without sufficient data exclusivity protection Flugen faces the
risk that a company will really come in and take a free ride
off of their clinical data and design around their patent
forcing them out of the market entirely.
One final point, Mr. Chairman. The FTC report seems to
conclude that a long period of data exclusivity would hamper
innovation. Currently, with no pathway biologics enjoy infinite
data exclusivity and yet we have had an astounding innovation
in this arena. So you really only need to look to the second
congressional district in Wisconsin to see the best proof of
that. Thank you, Mr. Chairman, and I yield back my balance of
time.
Mr. Pallone. Thank you. The gentlewoman from North
Carolina, Ms. Myrick.
Ms. Myrick. Thank you, Mr. Chairman, but I will waive.
Mr. Pallone. The gentleman from Pennsylvania, Mr. Murphy.
OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman. Part
of what we have to do here with Solomon's sword is to
understand that drugs that are not affordable offer little
consolation, and a drug that is not invented offers little
cure. A couple years ago when we had a hearing on this issue of
follow-on biologics, I talked about a constituent of mine who
had pancreatic cancer, and he at that time was taking
experimental biologic drug which actually shrank his tumors
down considerably, but unfortunately ended up with some kidney
failure and he died in the process. It was exciting to watch
how his cancer was going away and otherwise would be a lethal
problem for him. It was troubling to see how he had to jump
through a lot of hoops to get the treatments.
But, moreover, I want to make sure that we are continuing
to do everything we can to encourage companies to make the
investments to come up with these cures. I know that part of
what we are facing here is a way that once we come up with
these cures, how do we make sure that people can afford these
drugs, and that is what I hope we have a lot of discussions on,
a lot of hearings to really work out some mechanism whereby
these become affordable. But again I say that if the drug is
not invented, there is no cure, and, therefore, no hope. And I
hope that as we proceed with this, we will both hear from
witnesses with some ideas along these lines, but also continue
to deliberate among ourselves in using all that is possible to
make sure that we do not stop either end of this. And with
that, I yield back.
Mr. Pallone. Thank you. The gentleman from Ohio, Mr. Space.
OPENING STATEMENT OF HON. ZACHARY T. SPACE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Mr. Space. Thank you, Mr. Chairman, for the opportunity to
provide my perspective on what is clearly a very difficult and
somewhat controversial issue. In listening to the opening
statements of my colleagues on both sides of the aisle, it is
clear that we are arriving at a consensus, and as very
eloquently stated by Mr. Murphy from Pennsylvania, the need to
innovate is directly conflicting right now with the need to
provide affordable biologic medication. We have seen a
tremendous boom in the manufacture of biotechnology and
industry. Generally, the United States has been a leader, and
it is something that we can be very proud of. I am sincerely
torn right now on this issue because I have a child who suffers
from a disease who is alive today because of biologics, and I
understand the need to foster innovation to create an
environment in which those biotech companies that are
flourishing in this country right now are able to take the
risks necessary to innovate and create new treatments and
cures.
At the same time, I come from a district where many people
don't have quality health care. Many people do not have the
ability to pay considerable sums for these sophisticated
medicines. And I do take hope in listening to the opening
statements of my colleagues on both sides of the aisle that
this committee will face this challenge in a way that it should
with a sincere and passionate desire to do the right thing. I
look forward to working with you, Mr. Chairman. I appreciate
the hard work that you have devoted to this issue. And I do
look forward to hearing the testimony today, and I yield back.
Thank you.
Mr. Pallone. Thank you. The gentleman from Georgia, Mr.
Barrow.
Mr. Barrow. I waive.
Mr. Pallone. The gentlewoman from Ohio, Ms. Sutton.
OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Ms. Sutton. Thank you, Mr. Chairman for holding this
extremely important hearing, and I look forward to hearing what
the panelists have to say. In the United States, competition
has always been an engine for innovation, and that has been
true in the health care and the industry that supports it. And
while national unemployment numbers continue to be a source of
concern the Bureau of Labor Statistics reported that in May of
this year health care employment increased by 24,000. This
increase is in line with the average monthly job growth so far
in 2009. Clearly, when it comes to the need for health care,
demand far outweighs supply and it is important to nurture the
technology and advancement that leads to medical breakthroughs.
However, in doing so, we must also consider that those who use
our health care system, we have to be accountable to them as
well.
Patient access to life-saving technology and drugs is
critically important with the cost of health care bankrupting
American families. We must consider how we can make things work
for our citizens. It is important that we have a pathway for
options such as biologics, but it is equally important that
this pathway be safe. Our experience in the field of generics
has taught us that multiple entrants into a pharmaceutical
field or category can drastically drive down price and increase
accessibility of drugs for patients.
And I am eager to hear from our panelists about how the FTC
envisions the market for follow-on biologics that will allow
innovation to flourish, and also serve to better our health
care system and protect the health and the wallet of Americans.
I yield back.
Mr. Pallone. Thank you. The gentleman from Iowa, Mr.
Braley.
OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IOWA
Mr. Braley. Thank you, Mr. Chairman. If you have been
paying attention to what my colleagues have been saying this
morning, you will appreciate this is a tough job. This is a
tough job that we have. I have friends on both sides of this
issue. You hear great arguments on the strengths and weaknesses
of these various proposals, and I think the thing that unites
us all is a strong desire to make something happen that is
going to benefit the people who are going to realize whatever
potential medical gains there are to be realized from the
research and development of biologics, and that is what brings
us here and motivates us. I want to thank the chairman for
holding this important hearing. And we all know that
establishing a fair pathway for follow-on biologics is
extremely important, and we stand to see tremendous health care
improvements as biologics continue to come to the market.
And when you look at the challenges we are facing with the
broader health care reform debate these are questions that have
enormous implications going forward, and that is why we are all
so focused on this issue. We know that biologics have improved
the treatment of many Americans and save countless lives, and
these innovations will only see more and more use in coming
years. The proteins that form the bases of biologics are
extremely complex, and I must say the policy questions
surrounding the creation of a pathway to the market are almost
just as complex. Any pathway for follow-on biologics must
ensure fair competition without discouraging innovation in the
industry.
We owe many of our biggest medical achievements to those
who have spent significant time and resources researching and
experimenting with drugs, and biologics is no different. We
need to continue innovating and we must make sure that every
American who needs them can access life-saving drugs and
biologics that are a result of that innovation. I have been
studying this issue closely since joining this committee and
hearing from parties on all sides of the issue. I am glad to
see that we are gearing up to address the issue today, and I am
confident at the end of the day we will have a proposal that
both encourages innovation and ensures affordable access to
those life-saving biologics.
I look forward to continuing in these negotiations to make
sure that Iowans that I represent continue to benefit from
innovative, affordable medications. The FTC has a great deal of
expertise and a long record of ensuring fair competition in the
marketplace, but that record is sometimes not always perfect.
They have thoroughly examined Waxman-Hatch in the past, and I
always take their findings very seriously. That is why I look
forward to today's testimony, to the follow-up hearings we are
going to have, and I want to thank the chairman for convening
the hearing.
Mr. Pallone. Thank you, Mr. Braley. The gentleman from
Maryland, Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman. I don't have much to
add to what has been said. Obviously, we have on one end of the
equation the need for research and development to proceed in a
way that is meaningful and leads us to new discoveries that can
benefit consumers. On the other hand of the equation, we have
got the interest of affordability and access for the consumer.
And we are struggling, or we are not struggling yet, we are
working hard to figure out where the right balance is going to
be. The testimony today is obviously going to be helpful in
that process. I just hope that when we reach the balance, we
come to it principally through the perspective of what makes
sense for the consumer. And so I look forward to the testimony,
and I yield back my time.
Mr. Pallone. Thank you. The gentlewoman from Illinois, Ms.
Schakowsky.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you, Mr. Chairman. As we continue
moving forward on health reform legislation, it is important
that we take a long, hard look at prescription drugs and how we
can work together to reduce drug prices and increase patient
access to life-saving drug therapies. I am a co-sponsor of H.R.
1427, and I thank Chairman Waxman and Chairman Pallone for
sponsoring this legislation because I believe this bill
effectively safeguards against unsafe drugs entering the market
while allowing patients to access lower cost generic drugs. I
recognize the importance of encouraging innovation in the
pharmaceutical industry. As the report authored by the FTC
shows, innovation will not be hampered by allowing biologic
generics into the market.
First, the research shows that it will most likely take 8
to 10 years to develop the manufacturing capacity to make a
similar and interchangeable generic for a brand name biologic.
More importantly, the amount of money required to produce the
generic between $100 million and $200 million will limit the
number of generic manufacturers. In other words, assuring that
generic manufacturers can enter the market after a 5-year
exclusivity period will pose little threat to the brand name
industry but it would have enormous pay backs for consumers. I
strongly believe that encouraging competition particularly in
the health care industry not only promotes creativity and
energizes researchers to discover better and more effective
products but it reduces costs.
I think it is important that we give this complex issue
some context. Like many of the states represented on this
committee, Illinois is facing a budget crisis, a deficit that
is approaching $11 billion. As a result, many of the programs
currently in place to help our citizens are facing drastic
cuts. Among those programs headed for a cut includes the
Illinois Cares RX program, a program that provides prescription
drug assistance to 172,000 seniors with high drug costs. Many
of these drugs cost patients tens of thousands of dollars each
year. Some can be over $100,000, and out-of-pocket co-payments
could run $10,000 to $20,000 a year. We obviously have to do
all we can to bring down drug costs for patients.
I believe that H.R. 1427 will help us do that. Mr.
Chairman, I look forward to working with you and further the
health and well-being of our constituents and bring drugs to
the market in a safe and timely and affordable way. I yield
back.
Mr. Pallone. Thank you. The gentlewoman from Colorado, Ms.
DeGette.
Ms. DeGette. Mr. Chairman, I will submit my statement for
the record. Let me just say an issue that none of us knew one
thing about, we now are quite conversant, and I think we need
to move forward and talk about how we are going to resolve it.
I am very much eager to hear the testimony of Commissioner
Harbour today. I think that will lend some light onto this very
tough decision we have to make. And with that, I will yield
back.
Mr. Pallone. Thank you. I think we have heard all the
opening statements. I just want to make sure that is true. Yes.
OK. We will now turn to our witness, and thank you for being
here. First, let me say our witness, actually we only have one
witness, is the Honorable Pamela Jones Harbour, who is the
commissioner from the Federal Trade Commission. However, my
understanding is she has been joined by Mr. Wroblewski, who is
the prime author of the report. And he is not going to testify,
but will be available for questions is the way I understand it.
And we know we have 5-minute opening statements, and then we
may get back to you later with additional written questions as
well, but we will have questions from all the panelists, from
all the members of the subcommittee today. So if you would
begin, thank you.
STATEMENT OF PAMELA JONES HARBOUR, COMMISSIONER, FEDERAL TRADE
COMMISSION
Ms. Harbour. Thank you, Chairman Pallone, Ranking Member
Deal, and members of the subcommittee. I am Pamela Jones
Harbour, a Commissioner of the Federal Trade Commission. I am
joined by Michael Wroblewski, Deputy Director of the FTC's
Office of Policy Planning. Thank you for inviting us to testify
here today. I appreciate this opportunity to provide an
overview of the Commission's recently released report called
Emerging Health Care Issues: Follow-On Biologic Drug
Competition. A primary goal of our report is to examine how
competition is likely to evolve in biologics market in
particular between pioneer biologics and follow-on biologics or
FOBs. The report sets forth our findings regarding the
competitive dynamics of FOBs, and we hope that our
recommendations will inform the legislative debate.
I note that the report does not address any specific bills.
The Commission recognizes that legislators are balancing many
different objectives, as they seek to craft a solution that
best protects the public interest. The Commission has limited
its recommendations to competition issues, which are our core
area of expertise. We believe, of course, that this competition
perspective is of critical importance in the FOB debate, which
is why we are grateful to have been given, literally, a seat at
the table today.
If Congress can create a balanced pathway for FOBs, and
also pass legislation to eliminate pay-for-delay patent
settlements between branded and generic companies in small
molecule markets, then Congress will have taken substantial
steps to ensure that all Americans have access to affordable
life-saving medicines. On behalf of Chairman Leibowitz, I
commend the Commerce Committee for moving legislation to ban
these patent settlements through the Consumer Protection
Subcommittee last week. The report's basic premise is that
competition between pioneer biologics and FOBs is likely to
look much more like current competition between 2 or more
branded drugs that treat the same medical condition, for
example, Enbrel and Remicade, which both treat rheumatoid
arthritis. It will look less like current competition between
branded and generic versions of a drug and I will explain why
the Commission reached this conclusion, and I will also
identify some implications for legislation seeking to create an
abbreviated regulatory approval pathway for FOBs.
But first, I will begin by highlighting some important
characteristics of the biologics marketplace. As you know, the
emergence of biologic drugs has dramatically improved the lives
of thousands of Americans over the past few decades. For
example, the biologic Herceptin is used to treat breast cancer,
and an annual course of treatment costs about $48,000 a year.
One way to reduce the costs of biologics would be to authorize
the Food and Drug Administration to permit follow-on biologics
to enter the market once a biologic drug's patents expire.
However, there is no statutory or regulatory pathway to allow
abbreviated FOB entry without the FOB applicant having to
duplicate existing knowledge about safety and efficacy. This
duplication represents an inefficient use of limited R&D
resources. Also, as the FDA has explained, repeating all of the
clinical trials raises ethical concerns associated with
unnecessary human testing.
Elements of the Hatch-Waxman Act provide a model for
reducing FOB entry costs and addressing ethical concerns.
Hatch-Waxman does not require generic applicants to duplicate
the clinical testing of branded drugs that have already been
proven safe and effective. Hatch-Waxman has successfully
reduced drug prices, has broadened access, and has hastened the
pace of innovation. And if pay-for-delay settlements are
prohibited, these benefits of Hatch-Waxman will be preserved.
But as the report describes, according to the FDA, there are
key scientific differences between biologic and small molecule
drug products. Most notably, under Hatch-Waxman, the generic
applicant must show that the product is bio equivalent to the
branded drug product. This is important because it means that
the product is identical.
In stark contrast, according to the FDA, biologic products
cannot be perfectly duplicated, at least not based on current
science. Technology is not yet robust enough to determine
whether an FOB product is interchangeable with the pioneer
product. Current FOB legislative proposals reflects the
complexities of biologics. They would permit FDA approval of an
FOB drug that is similar to, but not an exact replica of the
pioneer biologic product. Under these proposals, the FDA could
rely on its previous findings regarding the pioneer biologic
drug's safety and efficacy to the extent those findings would
also be relevant to the FOB. An FOB manufacturer likely would
save on some clinical testing expenses, which would reduce
entry costs.
So with that background in mind, let me turn to the
Commission's report. The purpose of our study was to evaluate
how FOB competition is likely to develop and evolve, paying
particularly close attention to the differences between small
molecule and biologic drugs. The study was coordinated by an
interdisciplinary FTC team, headed by Mr. Wroblewski, that
included not only pharmaceutical industry experts, but also
patent lawyers and economists. As part of its inquiry, the
Commission solicited 2 rounds of public comments which
attracted submissions from approximately 30 industry
participants and other stakeholders.
In November 2008, the Commission conducted a public
roundtable discussion that included over 30 panelists. The
Commission also has examined European markets where FOB entry
has occurred. In the interest of time, let me briefly summarize
the 4 major reasons why FOB competition is not likely to be
like generic brand competition. First, it is the extraordinary
cost and time necessary to develop an FOB, which will sharply
limit the number of competitors who can afford to enter, and
also will limit the discounts the FOB can offer in relation to
the pioneer price. Second, follow-on entry will not radically
erode the pioneer's market share. Third, the specialty
pharmaceutical characteristics of FOBs are likely to further
constrain the FOB entrant's ability to gain market share. And
the fourth reason is because biologics are provided in clinic-
type settings as part of medical treatments. They are not
purchased and reimbursed in the same manner as small molecule
drugs.
As a result of all of these factors, the Commission's
report predicts that FOB markets are likely to develop with the
following characteristics. First, that FOB entry is likely to
occur in biologic drug markets with more than $250 million in
annual sales. Only 2 or 3 FOB manufacturers are likely to
attempt entry in competition with a particular pioneer drug
product. These FOB entrants likely will not offer price
discounts larger than 10 percent to 30 percent of the pioneer
product's price. Although this discount is not as steep as with
small molecule generic drugs, it does represent millions of
dollars in consumer savings for these very expensive products.
Pioneer manufacturers are expected to respond by offering
competitive discounts to maintain their market share. This
price competition likely will increase consumer access and
further expand the market. Without automatic substitution, FOB
market share acquisition will be slowed. Pioneer manufacturers
likely will retain 70 percent to 90 percent of their market
share. This means that a pioneer firm will continue to reap
substantial profits for years, even after entry by an FOP. FOB
market dynamics will contrast sharply with the market dynamics
of generic drug competition, where lower-cost generic entry
plus automatic substitution lead to rapid erosion of the
branded drug's market share. When the first generic drug enters
the market, it generally offers a 25 percent discount off the
branded drug's price. As additional generic firms enter, and
often there are 8 or more of them, the price discounts reach as
high as 80 percent.
Given these likely dynamics of FOB markets, the Commission
next asked whether any additional----
Mr. Pallone. Commissioner, I am sorry, but you are like
twice the time so far so----
Ms. Harbour. OK. Then I will stop.
Mr. Pallone. No, no. Just wrap up. I don't want to stop you
completely. Just try to summarize the rest, if you could.
Ms. Harbour. I would say that the findings have several
implications for the design of an abbreviated approval system.
I think first pioneer manufacturers are unlikely to need
additional incentives to continue to innovate in the face of
FOB entry beyond the existing patent protection and market-
based pricing. I would be ready to answer questions now. We can
engage in a Q and A, and I know that the committee is very
interested to hear what we have to say, so thank you.
[The prepared statement of Ms. Harbour follows:]
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Mr. Pallone. Thank you very much. I always hate to stop
anyone but we have time constraints. We are going to have a
series of questions. I am going to start, and then we will go
back and forth between Democrats and Republicans, as you know.
First of all, I want to thank you for the report. As the expert
agency charged with overseeing competition, as you mentioned,
in the drug marketplace, the FTC's conclusions on how much
exclusivity is needed to sustain innovation, I think is crucial
to any resolution of many of the questions that have been
raised on this issue. And I have to be honest to say that I, of
course, hear mostly from people who have a financial stake in
this, and I think it is essential that we have an objective
assessment with regard to exclusivity, and that is one of the
reasons why I think it is really crucial that you are here
today and that this report came out.
Now members of the biotech industry argue that their
patents are not as strong as those on traditional drugs, and
are not strong enough to protect them from competition from
follow-on biologics. If I understand you correctly, the FTC has
reviewed all the evidence provided by the industry, as well as
relevant patent law, and has concluded that the industry's
claim is unsupported by the evidence. And this is an extremely
important point because members of the biotech industry have
premised their argument for a 12 to 14-year exclusivity period
on the claim that their patents cannot fulfill the role they
are supposed to. And it is important, I mean this is important
enough that I want to be sure I understand your conclusions,
and that there is no doubt about it.
So let me ask 3 questions. First, are patents on biotech
drugs too narrow or too weak to protect them from competition
from follow-on biologics? And, Mr. Wroblewski, obviously can
answer as well.
Ms. Harbour. Yes. Mr. Wroblewski is the expert here, but I
would say that our research has shown that the patents are
strong in this area. In fact, as we look at the sector, the
biotech sector, they have been very strong. The stocks in that
area actually has been very strong and the general sector stock
prices have gone down 30 percent, but in the biotech sector
they have only gone down 15 percent. So we have not seen as
much erosion in that area, and I do believe that the patents
are strong in that area.
Mr. Pallone. Maybe I will just go to the second question.
The second question is will biotech patents provide less
protection from follow-on biologics than the protection against
generic competition offered by patents on traditional drugs?
Mr. Wroblewski. The patent questions are really central to
this entire debate. What we did was we examined--currently
there is branded competition between competitors, and so what
we did is we looked to see--we looked at all of those cases,
which the industry gave us, and the ones that we found--all the
cases that are out there doing our own research, and we broke
them into 2 groups. The first group was the patents have been
very strong. Both the drug molecule patents and the process
patents have been very strong to keep other branded competitors
off the market. When we looked at those cases in which the
branded competitor or the pioneer had lost, the cases really
turned on a factual determination that was central to that
patent or how those claims were drafted. It wasn't because the
law prohibited them to draft their claims in a broader way.
And there are PTOs written, description guidelines, that
say this is how you can--the legal requirements to get a broad
patent to protect against those types of claims that FOBs are
likely to make. The written guidelines allow the claims to be
drafted broadly enough to protect against those types of
patents. The one last thing we did is there was a great study
that came out about a year ago that surveyed all of the patent
cases in terms of has the law changed so that it is very
difficult to get a broad scope on your patient to kind of guard
against the potential threat of an FOB, and it found that the
law had not changed and that the patent holders have the
ability to draft their claims, to draft their patents to
provide a potent shield against FOB competitors.
Mr. Pallone. All right. Let me just ask my third question
quickly. Is there any defect in the protection offered by
biotech drug patents that justifies a longer exclusivity period
than the period available to traditional drugs?
Mr. Wroblewski. We found that there are no defects. There
is an argument that there may be drugs that have been
discovered but somehow are unpatentable because they are not
novel any longer, and the requirement to get a patent is that a
drug has to be novel. If that is the case, and we haven't seen
any evidence that that is the case, then an exclusivity period
similar to the way Hatch-Waxman had a 5-year exclusivity period
for a new chemical entity that didn't have patent protection.
Hatch-Waxman also gives 3 years for a new indication because
that indication couldn't get patent. If there is something new
that is being delivered that the patents won't incentivize,
then it may be very appropriate to have an exclusivity period
to encourage the companies to engage in the expensive R&D to
test those drugs.
Ms. Harbour. Such as in the drugs for children population
and the diseases that affect very small populations. That would
be an example where one would offer an exclusivity period.
Mr. Pallone. And not otherwise? But not otherwise?
Ms. Harbour. Unless there was an unpatentable drug as Mr.
Wroblewski indicated.
Mr. Pallone. OK. Thank you very much. Mr. Deal.
Mr. Deal. First of all, let me make sure that I understand
since there has been criticism about the scope of this hearing
today, what I understand you to say is that your study and your
testimony today is to deal with this question of competition
and how it will evolve in a follow-on biologic marketplace, and
questions like safety, interchangeability, those are issues
that best address themselves to the Food and Drug
Administration and not to you, am I correct?
Ms. Harbour. That is precisely correct.
Mr. Deal. I didn't want you to be criticized for something
you were not undertaking to do here today, and I think that is
important because we all are concerned about safety. We are all
concerned about the things that are within the province of the
FDA. Let me focus in on what you have testified to, and what
your report identifies. Most of us have heard from the lobbying
community about how long should the period of exclusivity be.
Now what I hear and what I see at least in the summary that I
have read of your report is that you don't even feel that there
is even a need for any exclusivity period, and specifically I
think your statement says the drug had already been
incentivized through patent protections and market-based
pricing, so you are saying that there are 2 protections that
the pioneer drugs enjoy that is somewhat different from the
chemical-based arena in these areas, one being that patents are
strong enough.
And let me ask you specifically about that. As I understand
you to say, the reason you think patents are stronger than we
might be led to believe is that in this arena there are more
and varied patents in the follow-on biologic arena than in the
chemical arena, specifically including patients on
manufacturing and the technology platforms on which they are
based, is that correct?
Ms. Harbour. That is correct, and there is another
component too that competition resembles brand to brand
competition and in brand to brand competition the patents
protect the innovation. In the follow-on context, you have the
method of treatment patents. You have the product by process
patents, the manufacturing process including the cell lines,
so, yes, the report concludes that patents have been shown to
be strong in this area.
Mr. Deal. And the second component that gives protection
that is more unique to this follow-on arena than chemicals is
what you refer to as market-based pricing, and I think you have
already told us that you do not expect the drastic reduction in
pricing to occur on the pioneer product just because a follow-
on comes on to the market.
Ms. Harbour. That is right.
Mr. Deal. And that is an additional protection that the
pioneer enjoys in this arena that they do not necessarily enjoy
in the chemical arena?
Ms. Harbour. And the characteristics of this market is a
follow-on, there would only be 2 to 3 follow-ons that would
enter the market, and those follow-ons would only take 10
percent to 30 percent of the market share away, so the branded
pioneer manufacturer would still enjoy 70 percent of its market
share, and so there would be enough incentive and competition
and pricing to satisfy the entrants contrasted with the generic
market where after the first generic comes in taking 25 percent
of the branded firm, then you would have 8 to 10 generics come
in and then they would all cannibalize that 80 percent. So it
is a very different competitive situation with the follow-on.
Mr. Deal. Plus, also am I correct that the follow-on
biologic will take a longer period of time for approval even
with the exclusivity period even non-existent, it would still
take longer to get a follow-on on the market than a traditional
chemical-based generic would take?
Ms. Harbour. I am not sure about that. I am going to turn
to Mr. Wroblewski. I think not, but I will let Mr. Wroblewski
answer that.
Mr. Wroblewski. The time to bring a follow-on to the
market, the evidence shows would be about 8 to 10 years. The
time it takes to bring a generic drug to the market is 3 to 5
years. The one thing about market-based pricing, the point that
we were--to compliment what Commissioner Harbour just talked
about was that when you have a patent that allows you to
charge, and you are the only one on the market and you have
developed innovation, that allows you to charge a price, any
price, a monopoly price, so if the period of time in which you
enjoyed that monopoly is shortened the ability to raise the
price, that is what marked-based pricing is all about to make
up for that.
Ms. Harbour. Mr. Deal, I misunderstood what you had said. I
thought you meant FDA approval, whether that would take longer,
and my answer was, no, it would not. But, as Mr. Wroblewski
said, yes, FOB drugs would take about 8 to 10 years to develop,
and they would likely cost between $100 million to $250 million
as compared to small molecule generic drugs, which would take 3
to 5 years to develop, and would cost roughly between $1
million to $5 million.
Mr. Deal. Thank you.
Mr. Pallone. Thank you, Mr. Deal. Chairman Waxman.
Mr. Waxman. Thank you very much, Mr. Chairman. Could you
just repeat that last point? For biologic drugs it takes 8 to
10 years?
Ms. Harbour. Yes. Biologic drugs would take 8 to 10 years.
Follow-on biologic drugs would take 8 to 10 years to develop,
and it would likely cost between $100 million to $250 million,
contrasted with the small molecule generic drugs where product
development would take approximately 3 to 5 years to develop
and would cost between $1 million and $5 million.
Mr. Waxman. So it costs more money.
Ms. Harbour. Yes.
Mr. Waxman. And it takes more time to develop these
biologic drugs.
Ms. Harbour. Yes.
Mr. Waxman. And, therefore, they want to know they are
going to have their full protection. Mr. Wroblewski.
Mr. Wroblewski. I just want to make sure that we are
talking about the follow-on and not the pioneer.
Mr. Waxman. Oh, I see. You are talking about the follow-on.
Mr. Wroblewski. I just want to make sure.
Mr. Waxman. So if you got a new biologic drug, you got a
patent and you think the patents are good, that is enough
protection, we could give an exclusivity for that period of
time. Patents, by the way, are for 20 years, isn't that right?
Mr. Wroblewski. Correct.
Mr. Waxman. When we did the Hatch-Waxman Act, the patents
were 17 years. We moved the patent period all the way to 20
now. And the Hatch-Waxman Act was a trade off. We said that we
would allow generics to be approved through an abbreviated
process in exchange for giving the brand name company
additional time lost at FDA for the approval time. And that is
called the patent term restoration. Well, we didn't know about
biologic drugs in the mid-1980s, but these drugs get that
patent term restoration, don't they?
Mr. Wroblewski. Yes, they do.
Mr. Waxman. So they now have a longer patent time and they
get the restoration period for the time spent at FDA. Your
conclusion is pretty surprising because what you are saying is
that if somebody says they need 12 to 14 years of exclusivity,
you don't think they need it because patents, and they have
market-based pricing available under the current law, which you
believe provides sufficient incentives for innovation.
Mr. Wroblewski. It is not only that we believe it, it is
what the industry has said for years that patents have been so
essential to their development.
Mr. Waxman. Now you also concluded, and Mr. Deal pointed to
this, so let us say we say at some period of time there is
going to be an approval process for a generic follow-on, and
that may take 8 to 10 years, so that is a long period of time
once they even start to get the generic follow-on to come into
competition. But once it is approved, it is not the same as a
small molecule drug where people know it is the exact same drug
and it could be substituted. A generic follow-on drug, which is
going to take longer to get on the market, and they can't even
be considered until the patent period is up or the exclusivity
period is up, won't be substitutable. It is going to be like
another brand name drug competing with a different brand name
drug. What will that mean in terms of the loss of market to the
generic competitor?
Mr. Wroblewski. One of the aspects of branded drug
competition is the substantial first mover advantage that the
pioneer has, and so what is going to have to happen is when
that follow-on comes on it is going to have to develop its own
marketing and sales force to show that its product is actually
more safe or more effective or somehow improves safety,
convenience, efficacy for treatment of that drug to gain any
market share. And that is actually a huge benefit for
competition. Competition brings not only price competition, but
it also brings improvements to the products which are very,
very important, so you have to look at both of them.
Mr. Waxman. But the competition doesn't start immediately
to drop that price because they have to convince the doctors
and others that this is a follow-on that can serve the same
purposes of the original drug.
Mr. Wroblewski. That is correct, and when we have looked at
market experience in Europe in which they have a bio-similar
pathway in the 2 markets that we have looked at there are 2
drug markets. Both of them, after 3 to 4 years where the bio-
similars have already been on the market only had about a 15
percent combined market total, so that means the pioneers still
retain 85 percent of the market share which is totally
different from the generic drug model.
Mr. Waxman. Will follow-ons provide--going to make high
price biotech drugs more affordable and will these follow-ons
provide other benefits to consumers?
Mr. Wroblewski. I think the evidence that we have seen
shows that they will come in at a 10 to 30 percent discount and
a 10 to 30 percent discount on a drug that for a course of
treatment annual is $50,000 is a substantial savings, and it
will then prompt the pioneer to then move forward to further
refine and develop and improve its drugs which benefit
consumers.
Mr. Waxman. So having an end point and then having
competition even if it is not as strong as generics are for
small molecule drugs does spur innovation?
Mr. Wroblewski. Of course it does. Of course it does.
Mr. Waxman. Thank you. Thank you, Mr. Chairman.
Mr. Pallone. Thank you, Mr. Chairman. Next, we have the
gentlewoman from North Carolina, Ms. Myrick.
Ms. Myrick. Thank you, Mr. Chairman. A couple of questions.
This is just kind of a regional question relative to North
Carolina. The biotech sector you know is very important in
North Carolina and in how it plays into our economy. We see a
total employment impact of over 200,000 jobs because of our
rich biotech sector. No doubt a well-designed FOBs pathway
could also generate additional economic growth. If the pathway
were designed as the FTC describes, do you foresee any negative
economic impact when it comes to profitability of innovative
biotech companies?
Ms. Harbour. I don't believe that the report identifies
any, and as I had said earlier the biotech sector is doing
better than a lot of other sectors in today's economy looking
at our stock industry.
Ms. Myrick. Right. I heard you say that, so you just don't
think that there is any--the other thing I wanted to ask was
about the European Union. You know their system is different
than ours is, and when you look at the policies that we have
and they have, do you think that their policies generally
translate to the United States because we have such a glut of
biotech companies here and our existing patent system the way
it is set up?
Mr. Wroblewski. The 2 things that we look at in terms of
the European market, they do things a little bit differently in
terms of their patent coverage, and they do things differently
in determining at the European level, they decide what is safe
and effective for a bio-similar and they are leaving to the
states, the members states and the countries, to decide what
would be interchangeable. That is a slightly different
structure than we have here in the United States. But the
commercial aspects in terms of what these large multi-national
companies are doing can provide some insight--in Europe can
provide some insights into what they are likely to do here in
the U.S.
Ms. Myrick. One more question. When you talk about the
delay in the time it takes for the price differential between
the FOBs and the innovative biologics, it becomes significant
because the point of entry for these products is different than
traditional generic drugs. The study says that the price
differential would be 10 to 30 percent of the original
therapy's price. Do you think that that would put pressure on
the insurers in large companies, pressure on providers to make
the time period shorter?
Mr. Wroblewski. To make the time period shorter?
Ms. Myrick. Yes, of bringing them to market. You don't
think there is a possibility that can even happen from what you
said basically?
Mr. Wroblewski. Right.
Ms. Myrick. I think that is all at this point, Mr.
Chairman. Thank you.
Mr. Pallone. Thank you. Let me mention to everyone that we
will have 2 votes. One has already been called, but I would
like to get at least 2 more of our members to ask questions
before we go. So next is the gentlewoman from Wisconsin, Ms.
Baldwin.
Ms. Baldwin. Thank you. Commissioner, the FTC report claims
that the development time for small molecule and biological
drugs are roughly equivalent, and I would like to highlight the
example of Flugen, which is a company that I talked about
during my opening remarks. They are currently working on an
adjuvant to the standard flu vaccine which would allow 10 times
as many doses from the same stock of vaccine, so basically
allows what would be usually 1 dose to be used for more
vaccines. This adjuvant was patented from the University of
Wisconsin-Madison research lab in the year 2001, but will
likely not make it to clinical trials until the year 2011, and
then it is predicted to be another 7 years to get to market,
which leaves only 3 years of patent protection. And so I am
wondering how do companies like this factor into your analysis?
Do you think the patent protections are sufficient in an
instance like this?
Ms. Harbour. Could I just clarify the first part of your
question? I believe you said something was equivalent. Would
you just go back to that, please?
Ms. Baldwin. Absolutely. My understanding is that the FTC
report claims that the development time for small molecule and
biologic drugs are roughly equivalent.
Ms. Harbour. They are not.
Ms. Baldwin. OK. Maybe you could shine some light on----
Mr. Wroblewski. There are 2 things that we are talking
about. One is if you are looking at a pioneer drug, the first
in class, the innovator, if you look at a biologic drug or a
chemical drug, they roughly cost the same amount to develop and
it takes the same amount of time. If you then look at the
follow-ons or the generics, the generic is much quicker to come
to the market than a follow-on. Does that make sense? So the
pioneers are equivalent. The second in the class, so to speak,
take a little bit longer for follow-ons.
Your question is whether the patent restoration that--the
example that you gave is basically they are only going to have
3 years left or 4 years left on their patent. They get patent
restoration now so they would be able to add back that time
that was lost in FDA approval. That applies to them now. And if
that isn't sufficient because of the long period of--the longer
period, so to speak, of testing for FDA approval then the fix
would be to fix the restoration of the patent, not to then add
an additional layer somewhere else, but to fix the underlying
problem, which is what the patent isn't providing the length of
time that was caught up in the FDA approval process.
Ms. Baldwin. Let me also ask you a little bit about changes
in technology that take place over these periods of time. Over
the lifetime of a patent for biologics manufacturing technology
will surely improve making it much easier for companies
delivering bio-similars to enter the market. These companies
will gain really at the innovators significant expense. And
isn't that an argument for some period of exclusivity to be
sure that innovators will still be willing to take the up front
risks to develop these incredible medicines?
Mr. Wroblewski. You know, those technologies that they are
going to be developing actually would be applicable to the
pioneer as well, so the pioneer actually can benefit from the
increase in technological advancement. For example, if a
follow-on develops a better manufacturing process, that
manufacturing process can be then imported or be used by the
pioneer as well, and so that competition to improve innovation
benefits not only follow-on but can benefit the pioneer as
well.
Mr. Pallone. OK. Mr. Murphy. I am sorry. Mr. Buyer.
Mr. Buyer. Thank you very much.
Mr. Pallone. Before you start, let me just mention he will
be the last speaker before we break for the votes, and then we
will come back right after.
Mr. Buyer. I would like to know who asked you to do this
report. Who asked you to do this report?
Ms. Harbour. Thank you for that question. Before I answer
that, there is a lot of commonality in this room although it
may not----
Mr. Buyer. That is not answering my question. Answer my
question.
Ms. Harbour. I did.
Mr. Buyer. Were you contacted or encouraged by any member
of the House and Senate or staff----
Ms. Harbour. May I answer your question, sir?
Mr. Buyer. Yes.
Ms. Harbour. In 2003, I read the Commission's IP report. I
was a new commissioner. I read it, and there was a footnote
that talked about generic biologics they called it then and how
there was a great debate and a lot of controversy about this
issue and how it was keeping potentially life-saving drug
products from the American consumer. So as a commissioner, I
went to my staff and I said this is an issue that is very
important to the American people. And I know that my staff is
very expert in these areas. I said can we take a look at this
and see if we can add to the debate. That is how this issue
came to the fore.
Mr. Buyer. So you did this on your own?
Ms. Harbour. No. It was with the approval of the other
commissioners, but I did see this issue back in 2004.
Mr. Buyer. Do you see yourself as an expert in promoting
competition in U.S. markets?
Ms. Harbour. No, I do not. No. I see myself as an expert on
the American consumer and trying to be a champion of the
American consumer much as most of Congress is.
Mr. Buyer. Since you are eager to sit at the table and
discuss health, would you be equally as eager to turn to your
commissioners and ask that the FTC consider studying the
effects of the proposed public health plan options on
competition in the health insurance market?
Ms. Harbour. First of all, I was summoned to the table. I
am not eager to sit here, but I am happy to sit here.
Mr. Buyer. I am going to just ask you to answer the
question that I have asked.
Ms. Harbour. Would you repeat it, please?
Mr. Buyer. Would the FTC consider studying the effects of
the proposed public health plan options on the competition in
our health insurance market?
Ms. Harbour. If we are directed to study anything by
Congress----
Mr. Buyer. Well, you weren't directed to do this study and
give it to us. You did this on your initiative you said with
pride.
Ms. Harbour. Yes, and we do a lot of things on our own
initiative at the Federal Trade Commission.
Mr. Buyer. Would you on your own initiative consider the
public option plan discussed by the President and its impact on
competition in the insurance market?
Ms. Harbour. If we were asked to do so we----
Mr. Buyer. You are asked to do so. All right? I ask you to
do so.
Ms. Harbour. But we would have to vote on that and it would
have to be decided by a majority of the Commission.
Mr. Buyer. Right. OK. Oh, wonderful. I will even put it in
writing to you. I will ask you to do that, and then you can
consider with the other commissioners. Would that be OK?
Ms. Harbour. Sir, you may do whatever you like and we
will----
Mr. Buyer. Well, you have just done whatever you like,
right, on your own initiative. Let me just do this. If you are
willing to--now you are willing to consider the public plan
options in the insurance markets impact on competition because
you are so concerned about the consumer. Number 2, I am going
to ask you for another report. Here in the House, we just
passed a tobacco bill. The Senate is about to pass a tobacco
bill that locks down the tobacco market, as a matter of fact,
almost eliminates competition because we don't even have harm
reduction anymore, and so I am going to ask for a second report
for you also to consider, the impact of tobacco legislation and
competition in the marketplace. I am going to ask you for 2
reports, OK?
Now the other question I have is I noted in a footnote that
you had sent a letter to Chairman Pallone outlining preliminary
views on the likely effects of the regulatory approval pathway.
That is great. That wasn't shared with any of us. If this had
been done back in May of 2008, this is a hearing, Mr. Chairman,
that should have happened some time ago, so I appeal to you
that this not be our only hearing that we have----
Ms. Harbour. Sir, I believe that letter is on the public--
--
Mr. Buyer. Ma'am, I am not asking any question of you.
Ms. Harbour. It is in the public record.
Mr. Buyer. Ma'am, I am not asking any question of you.
Mr. Pallone. If you are asking me the question----
Ms. Harbour. The letter is on the public record.
Mr. Pallone. Let me just cover it. Is the gentleman
yielding to me?
Mr. Buyer. My point is, this is my personal opinion, this
is a hearing that we should have had later--at an earlier time,
not now, and so my appeal to you is, Mr. Chairman, that we
bring the FDA in so we can look at----
Ms. Harbour. And CC'ed.
Mr. Buyer. Pardon?
Mr. Pallone. Wait a minute. Let us please----
Mr. Buyer. Ma'am, I am not asking you any question.
Mr. Pallone. Mr. Buyer, look, it is a little unclear who
you are asking the question of. It may not be obvious to you
but it is increasingly to the 2 of us that we are not sure. The
question is to me at this point?
Mr. Buyer. All right. My appeal is that you bring the FDA
in so we can get into the efficacy and safety issues. That is
my appeal to you.
Mr. Pallone. OK.
Mr. Buyer. So I am not asking any questions of this
witness.
Mr. Pallone. Let me just--if you would yield. Well, we are
out of time anyway. But let me answer the question. First of
all, the letter you mentioned, it is my understanding that that
letter was posted on the web site for the committee and
circulated almost a year ago, the one that you mentioned that
was sent to me. And as far as the second question, I have
already stated that we are going to have additional hearings
and this is just the first one so I just want to make that
clear again.
Mr. Buyer. All right. I have a unanimous consent request.
Mr. Pallone. You have a unanimous consent request?
Mr. Buyer. Yes.
Mr. Pallone. Go ahead.
Mr. Buyer. I have a letter from the Association of American
Universities, which includes the leading research universities,
not only researchers in Indiana and Purdue, but over 60 in the
country, and I would ask unanimous consent that the Association
of American Universities letter be inserted into the record.
Obviously, they are seeking providing 12 years of data
exclusivity, and I don't believe it is very clear from the FTC
report that they include the nation's leading academic
researchers and what their opinions are.
Mr. Pallone. Without objection, so ordered.
[The information appears at the conclusion of the hearing.]
Mr. Pallone. And the committee is going to now recess until
we have the conclusion of these 2 votes and then we will come
right back. Thank you.
[Recess.]
Mr. Pallone. The subcommittee will reconvene. Thank you for
still being here. And we go to the gentlewoman from the Virgin
Islands, Mrs. Christensen.
Mrs. Christensen. Thank you, Mr. Chairman, and again thank
you for holding this hearing and welcome to the commissioner,
Commissioner Harbour. The report makes several statements to
support its conclusion that a 12 to 14 data exclusivity period
is unnecessary. One statement is that there is no evidence that
patents claiming a biologic drug product have been designed
around more frequently than those claiming small molecules. And
the other is that because there is no evidence about the lack
of patentability of new biologic products nor that market
forces have been insufficient to incentivize development the
Commission has not recommended a specific length for
exclusivity period. If there are no bio-similar pathways that
exist, how could there be any evidence as to how patents could
be worked around? Isn't the whole point that in a bio-similar
world patentability changes because the approval standard has
been reduced from sameness to similarity?
Ms. Harbour. Let me just say that in this market we know
that the follow-on biologic will resemble brand to brand
competition. And we know that the patents are strong on
biologic drugs. Now your question was rather long, so I didn't
get all of it but I am going to let Mr. Wroblewski answer what
he heard, and then I will come back.
Mr. Wroblewski. OK. Sure. Your question was to the extent
that if there is no follow-on biologic how can there be--if
there is no pathway yet how can there be any evidence. What we
looked at is the existing brand competition because these
markets are very large, and so there is plenty of opportunity
for another branded competitor to come into the market,
duplicate all the clinical and safety efficacy data, get a full
new drug, and then compete, but we found that the patents have
been so strong in so many of these markets that it has even
kept out a branded competitor from doing just that.
Mrs. Christensen. So from creating a similar product that
comes through a different pathway?
Mr. Wroblewski. If you create the similar product what you
are doing is you are saying to the FOB you don't have to do as
much clinical testing but you are still going to have to do
some in order to be approved and you can rely on the FDA's
previous findings about the innovator drug that it is safe and
effective and you won't have to do as much. But if the patents
have been strong to keep out the branded competitors they are
going to be equally as strong to keep out the follow-on
competitors who have to be similar.
Mrs. Christensen. I guess you don't really make a
recommendation as to what the period of exclusivity is, but
just given the trends and the complexity of the drugs, and all
of the other factors, the length of time that the very specific
processes that have to take place that may not be able to be
duplicated, the amount of investment that has to be made, can
you just explain to me again why we would not provide for a
longer period. It just seems, I mean as a physician I know that
I would have a lot of difficulty. I would have to adjust myself
to generics period to begin with because my patients, some of
them wouldn't accept them even if I did. But because there may
be immune differences in how a person reacts immunologically
and the medication, why wouldn't you give these complex
molecules with all the other factors a longer period of
exclusivity?
Ms. Harbour. Let me take a stab at that. We feel that the
patent protection and market-based pricing is enough. Why?
First of all, the rationale for 12 to 14-year branded
exclusivity period basically would be to compensate for any
perceived failures of the patent system to reward and protect
and to incentivize biologic drug innovation, but our report has
not found any perceived failure. Therefore, we found that
branded exclusivity was not necessary because the branded
biologic manufacturers are likely to enter the market and earn
substantial revenues even after follow-on entry.
And the follow-on biologics are unlikely when they do enter
the market against the pioneer manufacturers, they are unlikely
to price discount more than 10 to 30 percent. That means that
the branded pioneer manufacturers are likely to maintain their
advantage. They will still retain 70 to 90 percent of their
market share after the follow-on biologic enters. They are
still making very excellent profits and the biologic product
has already, as I said, been incentivized through patent
protection and market-based pricing.
Mrs. Christensen. Well, my time is up. If there is another
round, I may come back.
Mr. Pallone. Just to know, we are not going to have another
round but thank you. Mr. Murphy.
Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman. Some
quick questions here. The comment that you just made about 70
to 90 percent, they will maintain 70 to 90 percent of their
market share, and they will likely continue to reap substantial
profits. What is the basis of that statement? Likely, what does
likely mean?
Mr. Wroblewski. The basis of the statement is the
experience that we have seen so far in Europe in terms of how
they have priced and then with the limited experience that we
have seen with the one example with Humatrope here in the U.S.
It is a biologic drug but happens to be approved under the
Federal Food, Drug, and Cosmetic Act so it is an exception. So
when we looked at those, but then it is also based on the
Commission conducted a workshop in which we had the biotech
industry. We had the potential FOB competitors. We had the
payors, the PBMs, and the----
Mr. Murphy of Pennsylvania. Did you have the companies that
actually do the research and development in the room? Did you
have the companies that actually developed the new drugs in the
room?
Mr. Wroblewski. Oh, yes. Oh, yes.
Mr. Murphy of Pennsylvania. And did they say that they
thought it was maintaining at 70 percent----
Mr. Wroblewski. Yes.
Mr. Murphy of Pennsylvania. Did they say maintaining 70
percent market share they could continue to----
Mr. Pallone. I couldn't even hear some of the comments you
made. I don't know if the reporter could. Maybe don't repeat it
now but just stay close to that mike.
Mr. Wroblewski. OK. I am almost swallowing it.
Mr. Murphy of Pennsylvania. I understand that nearly 90
percent of biotech companies have remained unprofitable. In
2008, a third of them had less than 6 months cash on hand. They
have to go out and get venture capital for these things, and if
we say to the venture capitalists who are investing that we are
going to reduce that by several years of return on investment
here that to have someone come through--I wasn't in this room
when everybody met. Let us take out the payors. Let us take out
the FOBs who is going to benefit from this. Just the companies,
they said, yes, it is fine with us, cut us down to 5 years and
we can make do with this?
Mr. Wroblewski. No. No.
Mr. Murphy of Pennsylvania. OK. What did they agree to?
Mr. Wroblewski. They agreed to what the market effect would
be of FOB entry.
Mr. Murphy of Pennsylvania. They are fine with it?
Mr. Wroblewski. It was their research that----
Mr. Murphy of Pennsylvania. Down to what level, down to how
many years exclusivity?
Mr. Wroblewski. Say that again.
Mr. Murphy of Pennsylvania. Down to how many years of
exclusivity are they fine with?
Mr. Wroblewski. What we were trying to do was analyze how
competition was likely to develop.
Mr. Murphy of Pennsylvania. But down to how many years
exclusivity, did they comment on that?
Mr. Wroblewski. They have strenuously advocated for a 12 to
14-year period of exclusivity.
Mr. Murphy of Pennsylvania. So they are OK if it stays 12
to 14 years and to have competition into the market there, is
that what they said, they can still----
Mr. Wroblewski. Say the last piece again. And the----
Mr. Murphy of Pennsylvania. The 70 to 90 percent of their
market share but it is at 70 to 90 percent of their market
share so let FOBs come in, but would that also still maintain
some exclusivity for that 12 to 14 years?
Mr. Wroblewski. What we had tried to do was to see how the
competition was likely to develop to determine whether----
Mr. Murphy of Pennsylvania. I only have 2 minutes left. I
just need an answer. Does that--are they agreeing, yes, we are
OK with competition if we can keep the 12 to 14-year
exclusivity, and that allows us to raise enough money in an
unprofitable time to do research on new drugs?
Mr. Wroblewski. I don't think they ever agreed that they
would be able to keep 70 to 90 percent. It is just what the
experience has shown that they would----
Mr. Murphy of Pennsylvania. Well, I am confused because I
thought you said that they all met together and they told you
they were supportive.
Mr. Wroblewski. Everybody predicts that the effect of a
follow-on biologic will be--that they will come in at a 10 to
30 percent discount, and if they do that the brand or the
pioneer is likely to retain 70 to 90 percent of its market
share.
Mr. Murphy of Pennsylvania. OK, but I thought you said----
Mr. Wroblewski. We looked at what that implication was.
Mr. Murphy of Pennsylvania. I need an answer here. I am
really not trying to be funny, but I don't want to dance around
this because I want to make sure we have plenty of money to
continue to develop life-saving drugs. That is what I want.
Cheap drugs that don't cure anything are worthless. Expensive
drugs that no one can afford are worthless. So I need to know.
You talked about some people sat around and they agreed to
something. What the heck did they agree to, and if they didn't,
don't tell me they did. Are they saying that this 12 to 14-year
exclusivity remains, are they saying they are OK with
competition, are they saying they are OK with making it 5-year
exclusivity? What specifically did they say in 3 words or less?
I just need an answer quickly.
Mr. Wroblewski. They agreed that competition would be like
a branded competitor and we have ways to deal with branded
competitors now.
Mr. Murphy of Pennsylvania. Did they comment at all on the
years of exclusivity or is your report not touching on today?
Mr. Wroblewski. No. It describes completely that they have
put forth a model that shows that they need 12 to 14 years.
Mr. Murphy of Pennsylvania. OK. One other thing I want to
ask real quick. The issue of similarity so a molecule may
change its large molecule. A molecule may change. We are not
going to require the FDA to do testing on those?
Mr. Wroblewski. We took it as a given that the FDA would
approve a safe and effective product, whatever that required.
Mr. Murphy of Pennsylvania. So the FDA may still require
additional testing of some of these drugs?
Mr. Wroblewski. And that is the reason why it is going to
be so expensive to bring in an FOB.
Mr. Murphy of Pennsylvania. OK. So just changing a molecule
on something, I mean you could change one molecule in an H20
formula and make something that is toxic versus something that
is necessary so I hope that that is an important part of this
whole report. If that is something we have discussed more
perhaps you can elaborate on this for me because it is
something you made reference to in writing and also in your
testimony here. I really would like to know what that means
because that is going to be very important to understand how we
can have a competitive marketplace and also make sure there is
sufficient funding in here that we can keep moving forward in
developing these new drugs. I would be grateful for that. The
procedure will be to let the chairman know and we will go on
from there. Thank you so much.
Mr. Pallone. Let me mention to you and to the members, and
obviously as always you will be able to pose questions in
writing that we would ask you to respond to after the hearing.
The gentlewoman from California, Ms. Eshoo.
Ms. Eshoo. Thank you, Mr. Chairman. The first thing I would
like to start out with is to ask for unanimous consent to place
in the record the comprehensive responses to every question
raised by the subcommittee from the chief scientist of the FDA,
Dr. Frank Torti, which was peer reviewed, and, second, the
exhaustive economic analysis of data exclusivity of biologics
by Henry Grabowski, whose name has been mentioned several times
by several members on both sides of the aisle today. He is the
director of the Program of Pharmaceuticals and Health Economics
at Duke University. So I would ask that these be placed in the
record.
Mr. Pallone. Let me just ask, these are the comments by the
FDA under the Bush Administration, is that what they are?
Ms. Eshoo. Well, the FDA is the FDA regardless of what
Administration it is under.
Mr. Pallone. No, no, I just want to make sure because I
know we have asked--I am only asking because I know that we
have asked the FDA, the current FDA, too, but these are the
ones from the previous, right? Let me see them.
Ms. Eshoo. You know what, Mr. Chairman, I think you know
what I asked. I am just asking for unanimous consent to place
this in the record. If people want to read it, they will have
access to it. If they think it is garbage, they can throw it
out. It doesn't force anyone. It is a very simple request.
Mr. Pallone. No, no, I agree. I am just trying to verify
what it is.
Ms. Eshoo. Read it and then you will see. Is there
unanimous consent to it?
Mr. Pallone. Well, normally I like to know what it is
before I agree.
Ms. Eshoo. I just read it into the record.
Mr. Pallone. Tell me again. It is the FDA----
Ms. Eshoo. These are the comprehensive responses to the
questions that the members of the subcommittee almost 2 years
ago before we had the meeting----
Mr. Pallone. Right, but we have also asked them--these are
the ones from the previous Administration. We have asked them
again in the current Administration.
Ms. Eshoo. You don't agree with what the FDA responded, but
I still would like that in the record.
Mr. Pallone. No, I just want to make sure that they are the
ones from the previous Administration. That is what we are
talking about, right?
Ms. Eshoo. What is the date on it? It is September 18,
2008.
Mr. Pallone. OK.
Ms. Eshoo. So it is just before my candidate for President
won.
Mr. Pallone. All right. So ordered.
[The information appears at the conclusion of the hearing.]
Ms. Eshoo. In trying to read the report, digest it, and
then analyze it in the unfair time frame that was established
either by the FTC or by the committee, I don't know which it
is, there is something that stood out to me, and that is
throughout the report, throughout your report you base the--you
talk about obviously the generics that are the result of Hatch-
Waxman, which we all celebrate, and this new attempt to use
that framework, very broad framework, and apply it to
biologics. But what you, I think, fail to state and then
develop in the report is that under Hatch-Waxman the compounds,
the pharmaceuticals must be identical. That is by law.
Biologics, bio-similars, think of the 2 parts of that word,
will be similar. They cannot be identical. I don't know what
scientists you brought in to instruct you on this, but I have
to say that to base your report, as I read it, I think it is
deeply flawed because you base your outcome and your analysis
of bio-similars on the previous regimen and the previous law,
which is very different.
I don't see where you have taken into consideration the
differences between the two which is what makes this case very
complex. We have a regulatory framework today in which any new
biologic will receive, and I want to move on, because I want to
ask my questions but that is an observation, any new biologic
would receive 20 years of patent protection and no potential
for bio-similar competition. Innovators and investors are
assured that as long as their patents are in force, there is no
possibility of a competitor going to the FDA using the
innovator's safety and efficacy record and taking a shortcut to
the market to compete against them.
Now we are proposing to move to a policy in which patents
will remain in force but competitors will be able to come to
market to compete against an innovative product without going
through a full-blown FDA review. As you point out in the
report, this will cost a bio-similar manufacturer about a tenth
of the cost for an innovator or a non bio-similar competitor to
bring a product to market. Now how can this not possibly
change? How can this--because you say in your report that
investment incentives won't change. How can this not possibly
change the investment incentives in bio-technology? If a
venture capitalist or a drug company is contemplating a new
product for development, won't this fundamentally alter their
rise/reward calculation? This has to have an examination. I
don't know where you leap frog to. It is almost as if this
doesn't exist or that if we don't talk about, we don't have to
deal with it, therefore, it doesn't exist.
So I think you need to answer that. And I want to bring out
my next question as well. Your report states that a 12 to 14-
year exclusivity period, this is quote, ``is unnecessary to
promote innovation by pioneer biologic manufacturers.'' This
position is based on your assumptions that patent workarounds
will be no easier to accomplish for biologics than they have
been for small molecule generic drugs. You also state that data
exclusivity is only justified for products that are
unpatentable, but I see no substantiation at all for these
positions in your report. That is why I question whether past
or present information about small molecule generics is a
reliable predictor for biologics, and that is why I question
the basis for your assumptions.
We have absolutely no experience, and I want to repeat
that. We have absolutely no experience with the similarity
standard that will be used for biologics for the approval of
bio-similars, so how can you be sure that a new and untested
standard would not facilitate a path for patent workarounds for
biologics? How can you be sure that the different nature of
biologic patents in conjunction with the similarity standard
would not facilitate patent workarounds? How can you be sure?
And, you know what, guessing in this is not going to be good
enough. I would challenge you to ingest what comes out without
the kind of scrutiny of the FDA and comparing one with the
other as if they are the same as if it is apples and pears. It
is not. How can you be sure that today's science and the
scientific advances in the future would not make it easier for
bio-similar companies to work around biologic patent claims?
I think that this is a real chink in the armor of the
report or just in the report, which I have to tell you at
quarter to 1:00 this morning, I thought really suggested a lot
of guesswork on the part of the FTC. And let me hold something
up, and I don't know if you had anyone come in and show you
this. This is a regular drug, small molecule compound. This is
tamoxifen. Look at it. It is all the same. This is herceptin.
This is herceptin. This is herceptin. If this picture doesn't
speak a thousand words where you use the model throughout your
report based on the generics of the small molecules and apply
it to this, I want to tell you something, patients are going to
be in big trouble in this country. Patients are going to be in
big trouble in this country.
And if efficacy of this movement is not taken into
consideration, God help us. Now there is something else that
has gone around in the committee for those that are opposed to
my viewpoint, and they have every right to oppose it. But I
want to--and there are other members that have touched on this.
We cannot take for granted those that innovate to pursue the
cure of these deadly diseases. The FDA is not going to do it,
the Energy and Commerce Committee is not going to do it. We
have a private sector that does it. Yes, there need to be new
rules of the road because we want lower costs and safe
products. But that role cannot be diminished, and, I don't
know, I looked at the back of your report. Did you have any
people that do the investing in this come and be part of your
round table? If they were law firms, I didn't recognize them.
Mr. Pallone. Let me just--we are like twice the time so I
am just going to ask you to--I know you can't respond to
everything but----
Ms. Eshoo. Well, there was an assertion, Mr. Chairman.
Mr. Pallone. But if you could just respond as quickly as
you can because we need to move on.
Ms. Harbour. I will. There were just a number of
assumptions. First of all, let me just apologize to you for the
lack of time you had to read the report.
Ms. Eshoo. Well, why did that happen to begin with? Were
you told--how long have you been working on this?
Ms. Harbour. The commissioners received the report at 4:00
on Tuesday evening.
Ms. Eshoo. No, no. How long has the FTC been working on
this report?
Mr. Wroblewski. We announced our workshop because we had a
public hearing in August of last year.
Ms. Eshoo. How long have you been working on it?
Mr. Wroblewski. Ten months.
Ms. Eshoo. Ten months.
Ms. Harbour. And it was finished on Tuesday.
Ms. Eshoo. And you notified the committee that it was
complete when?
Mr. Wroblewski. I notified the--the beginning of last week
that it would be ready.
Ms. Harbour. And it was ready Tuesday at 4:00.
Ms. Eshoo. And did the FTC--was it the FTC that refused to
put the report out to members and only after cajoling that we
finally got it and that some of us took it home to read last
night?
Ms. Harbour. Let me be really clear. The report was
finished Tuesday at 4:00 p.m. The commissioners of the Federal
Trade Commission voted this Tuesday, this week, at 4:00 p.m. on
the report. There were embargoed copies that went probably
before we even voted on it, but it went to the full committee
the very next day.
Ms. Eshoo. You know what, let us get to the----
Mr. Pallone. All right, but we have to move on.
Ms. Eshoo. I would like you to answer the questions that I
posed.
Ms. Harbour. OK. There was an assumption that was made, you
said that the report applied the Hatch-Waxman framework in this
context. It doesn't----
Ms. Eshoo. Similarities. I am sorry. The identical standard
and use it and apply it to the similar standard.
Ms. Harbour. The report actually did not say that. In fact,
the approval pathway for biologics will be very different than
the Hatch-Waxman approval process, and that is why I started by
apologizing that you didn't get a chance to read the full
report because it doesn't say that the approval process is
similar. It is not. In fact, we are advocating that a Hatch-
Waxman approval process would not be appropriate in the case of
follow-on biologics. And the reason we say that is because it
mimics brand-to-brand competition.
Ms. Eshoo. I am not talking about the approval process. I
am talking about the investment incentive. You all are the ones
that are in charge of competition. That is why, I guess, you
got involved in this whole issue and that is why I think----
Mr. Pallone. If you would just answer that, and then we
have to move on. I am just going to have to move to the next
person.
Mr. Wroblewski. What we did is we looked at--we did look at
the investment incentives for the biologics and compared them
to the investment incentives for a small molecule drug, the
Hatch-Waxman type drug, and the research that we have that is
out there, and I provided to your staff earlier, was that the
actual time and the cost to develop a pioneer biologic drug
versus a pioneer small molecule drug are the same.
Mr. Pallone. All right. I have to go. Mrs. Capps is the
next for questions.
Mrs. Capps. Thank you. Thank you, Honorable Commissioner,
for being here for this long. One of the reasons, I have 3
different questions to ask, one of the reasons that has been
given for a 12 to 14-year exclusivity period is that without
such a lengthy period start-up biotech companies will not be
able to interest venture capitalists in investing in their
companies, and without venture capital these companies cannot
survive. Some believe that this specific number of years is
very difficult to evaluate. Before Congress makes a
determination on exclusivity periods, this hearing is because
we feel a duty to determine whether there is adequate evidence
to support arguments in its favor. First question, did the
evidence gathered by the FTC in the course of its investigation
support the claims that venture capitalists will no longer
invest in start-up biotech companies without this 12 to 14
years of exclusivity?
Mr. Wroblewski. We believe that patent protection will
still provide those incentives. Patent protection plus market-
based pricing will still provide those incentives for venture
capitalists to invest in start-up biotech ventures.
Mrs. Capps. I know you have mentioned this already. I just
wanted to get it clearer from my perspective as well. Next
question, is there evidence that start-up biotech companies
will still be able to recruit venture capital in during like a
5-year period comparable to what the traditional drugs have or
the small molecule drugs have?
Mr. Wroblewski. Yes, because patent rights are still going
to be strong.
Mrs. Capps. Do you have evidence that this is the case?
Ms. Harbour. Well, we have seen if you take a look at the
stock market in the biotech market the stock prices only went
down 15 percent compared with the general market indices went
down 30 percent.
Mrs. Capps. But you are using that as one method of your
valuation?
Ms. Harbour. There are probably more as well, but that is
what comes to mind.
Mrs. Capps. Are there others?
Mr. Wroblewski. The only thing I was going to add was the
venture capital that has come into the biotech industry in the
past quarter has actually been very robust.
Mrs. Capps. And right now there is no 12 to 14-year
exclusivity because that is what we are debating, so right now
they have nothing--pardon?
Mr. Wroblewski. That is true, there is no 12 to 14-year
exclusivity.
Mrs. Capps. There is the same as small molecule. Finally,
another kind of tact, the FTC report concludes, as you just
mentioned, that 12 to 14 years of exclusivity is unnecessary
because patents and market-based pricing available under
current law provides sufficient incentives for innovation. I am
particularly interested in one of your conclusions that given
an excessive period of exclusivity may in itself have negative
consequences, and that may actually harm patients. This is a
piece that I would like you to spell out. What are some of
these negative consequences, particularly how the length of
exclusivity might decrease the number of medical breakthroughs
but also the particular--I know many people hang on to the hope
that something is going to be available to them for their own
life-saving needs, and so these 2 aspects. Additional
breakthroughs, follow-on behind some new discovery, often times
they do, and then the part that relates to the patient's own
survivability.
Ms. Harbour. I would say that the 12 to 14-year exclusivity
period could in fact slow the pace of innovation so new----
Mrs. Capps. So other companies will know they just can't
even do anything for that long a time so they won't try?
Ms. Harbour. That is right, and ultimately that is not good
for the American consumer because you are not getting new drug
products in the market as quickly.
Mrs. Capps. Right. I know especially because there are
different criteria in other countries that sometimes people see
availabilities in other places that they can't make available
to themselves here, which creates quite a possible tragic
situation at least from their points of view although to be
sure we want to make sure that our standards are ones that we
set ourselves. Is there any evidence on the previous--since I
have just a few seconds left, that a long length of time of
exclusivity would have this sort of chilling effect on
additional innovations to that particular so upgrading it or
making it better or doing something different along the side of
it, sometimes different outcomes based on something that is set
up in a particular--and they are very complex and they will
spin off into some other kind of breakthrough?
Mr. Wroblewski. We have seen in other areas that whenever
the exclusivity ends that that is when the innovation occurs,
and so to the extent that the follow-on pathway that you are
establishing still keeps intact those very robust incentives of
patent protection and market-based pricing then you will have
the threat of competition coming from behind acting it is
almost like carrots and sticks. With the carrot you have the
ability to price at market whatever the market will bear for
that period of time for your patent. And then you have the
competition can come on and hasten the development. That is
win-win for the consumers.
Ms. Harbour. And one thing I want to add. The exclusivity
is really additional protection over and above what the patent
system provides and the original rationale for the 12 to 14-
year branded exclusivity period under Hatch-Waxman was to
compensate for a perceived failure of the patent system. We
haven't perceived that failure here with biologics and follow-
ons.
Mrs. Capps. Thank you. I yield back.
Mr. Pallone. Thank you. The gentleman from Utah, Mr.
Matheson.
Mr. Matheson. Thank you, Mr. Chairman. In my opening
statement, I mentioned that 80 percent of the biotech industry
right now remain unprofitable. Is that consistent with what you
have heard as well?
Mr. Wroblewski. We have seen the same statistics.
Mr. Matheson. In the previous round of questions, you were
asked for evidence about ability to attract capital. You
mentioned recent stock performance and quarterly investment
from venture funds. Do you think that short-term window of the
last few months is really the best evidence you got for telling
us that the investment incentives are right because I got to
tell you that doesn't sell me.
Mr. Wroblewski. Sure. We can certainly provide you all the
evidence. We would be more than happy to give you the evidence.
Mr. Matheson. Mr. Chairman, I think it would be real
helpful again at future hearings, let us get some folks in the
venture capital industry and let us get some other folks in
here so we can have a broad discussion about what is really
going on here because I do think we want to make sure when we
are setting policy that we do set an environment that
encourages that private sector investment in these areas. I
think that would be a useful tool. I want to ask a question.
Right now in Europe, you have heard, and a number of people
said this in their opening statements, that it is 10 to 11
years of data exclusivity. Have you in your analysis thought
about how an exclusivity period in the United States would be
lower than the European model, how that would affect U.S.
competitiveness in this industry?
Mr. Wroblewski. The European model is very different for 2
reasons that we mentioned earlier. One was that the scope of
the patent system is different in that they have regulated
prices in Europe, so with a 10-year period of exclusivity and
only the ability to charge a regulated price as opposed to a
price that the market would bear, and if they have developed a
monopoly, it is a monopoly price, that that market necessarily
isn't--that model isn't necessarily as translatable here to the
U.S.
Mr. Matheson. Have you in your analysis, have you seen
where a biotech industry is moving away from Europe and coming
to the United States in previous years?
Mr. Wroblewski. I think what we saw throughout the entire
analysis was that biotech in many ways is a global industry,
but that here in the United States it is locally centered, so
because of the strong collaborative efforts between
universities, between start-ups that have talent to manage
projects that you have a collaboration, and so that is why you
have in Wisconsin, you have a biotech industry----
Mr. Matheson. Let me ask you, in your analysis did you look
at why--in terms of looking why the Europeans set this data
exclusivity at 10 to 11 years, you have mentioned your issue
about market pricing, did you analyze other reasons why they
set that exclusivity period where they did, and in fact was not
one of the reasons because industries were leaving Europe and
coming to this country?
Mr. Wroblewski. When we spoke with the European regulators
they explained that their system was kind of a different system
because they were incorporating not only biologics but small
molecule drugs too in that whole system and that it was a
different dynamic than what I think we are facing here.
Mr. Matheson. Let me ask you this question. Obviously, the
committee is looking at different bills that look at data
exclusivity. What are the factors you think we ought to be
taking into consideration as a committee in terms of how we
determine an appropriate length of exclusivity?
Mr. Wroblewski. I think there are a couple of things that
we should look at, one, to see if there is a failing in the
patent system because drugs are unpatentable, that is a serious
flaw for all drug development, and there should be some type of
mechanism to recoup and to encourage people or firms to engage
in that clinical testing.
Mr. Matheson. So are you suggesting it is more of a patent
reform issue and not data exclusivity, is that what you are
saying?
Mr. Wroblewski. Yes.
Mr. Murphy. And you are saying that the fact the biologic
industry maybe faces a different set of dynamics than
conventional prescription drug industry that this exclusivity
issue is not an appropriate tool for us to acknowledge the
challenges in the biotech industry?
Mr. Wroblewski. We didn't see that the tools that we
currently used to incentivize innovation, basically patents and
the fact that you can price up the market somehow would fail
and with a bio-similar that wouldn't have nearly the dramatic
market impact that a small molecule generic drug would have.
Mr. Matheson. If you think that the intent is that we want
to set up an appropriate opportunity for the private sector to
recoup its R&D cost to develop one of these, are you telling me
data exclusivity is not an appropriate tool for us to be
looking at?
Mr. Wroblewski. I think it is an appropriate tool to look
at if the other 2 tools which have been wildly successful are
broken.
Mr. Matheson. And you are suggesting they are broken?
Mr. Wroblewski. Quite the opposite. I am suggesting that
they seem very strong.
Mr. Matheson. I see my time has expired, Mr. Chairman, but
I guess I will reiterate what a number of folks have said. I
think it would be helpful to bring some other folks in before
this committee to get some other points of view, and I will
yield back my time.
Mr. Pallone. Thank you. Before I ask Mr. Inslee, I know
that my colleague from Georgia has a request.
Mr. Deal. Yes, Mr. Chairman. I have a unanimous consent
request that a report from Alex M. Brill, who is a fellow at
the American Enterprise Institute, and a report from Lawrence
L. Kotlikoff, Professor of Economics at Boston University, and
a report from the ARP Public Policy Institute on biologics,
that they be included in the record.
Mr. Pallone. Without objection, so ordered.
[The information appears at the conclusion of the record.]
Mr. Pallone. Mr. Inslee.
Mr. Inslee. Thank you, Mr. Chairman. Thanks for allowing me
to participate in this very important hearing, and I hope there
are others on this line. This is a complex area, but there is
one conclusion of this report that is so, in my view,
fantastically unrelated to the realities of the marketplace. I
really got to question it. On page 7 of your executive report,
I will read you what it says. It says, ``Central to each of
these exclusivities is a public policy trade-off, a restriction
on competition is provided in return for the development of a
new drug product or new use of an existing product. A 12 or 14-
year exclusivity period departs sharply from this trade-off
because it does not spur the creation of a new biologic drug or
indication. The drug has already been incentivized through
patent protection and market-based pricing.''
Now that statement is so fantastically unrelated to reality
suggesting that the removal of the exclusivity period will help
incentivize further investment in new drugs to cure new
diseases. Right now if a drug company wants to go out there and
develop a new drug that will cure leukemia, they have an
incentive to investment in part because of data exclusivity,
and yet you have turned that upside down and suggest by
removing that data exclusivity somehow you will create an
additional incentive for investment of a new drug. Now a
biologically similar drug is not going to cure a disease that
hasn't already been dealt with by the original product, and I
just cannot fathom how you make this argument that removing
data protection is going to create greater incentive for
investors to put money into products that will truly respond to
this condition in a new way. I just think you have turned
reality on its head in that regard. So I will give you a chance
to respond to that. I can't imagine what it would be but take a
shot.
Ms. Harbour. Let me take a shot first. Your question seems
to presume that the patent system is not strong enough to
protect patents. Basically, exclusivity is additional
protection above and beyond what the patent system provides.
Mr. Inslee. But let me just ask you this. Don't you agree
that data exclusivity is one of the things that investors take
into consideration when they decide to plunk down several
million dollars on something that may take a decade, that may
or may not work? Don't you think that is an incentive for
investment in truly new drugs that truly treat conditions in a
new way, which is the original patent that we are talking about
here? Don't you agree with that?
Ms. Harbour. No, only if there is truly a perceived failure
with the patent system.
Mr. Inslee. Well, then you do not have any, and with all
due respect, any recognition of the investment climate in the
United States if you do not recognize this as critical to
inspiring investment in these truly new drugs. So let me ask
you about that. Did your study of valuing the impact on the
investment in new products, truly new products, what will
approach these conditions in a new way, did you evaluate how
that would affect investment in these new products, and I mean
new. That is not follow-on biologics. Did you?
Mr. Wroblewski. We did not evaluate that in particular, and
I will tell you why. It is because patent protection has been
very, very strong. We have suggested though in the executive
summary that one way to----
Mr. Inslee. I have got limited time. I think if you would
answer my question, I would appreciate it, but the point I want
to make is you assumed for purposes of this study that there is
no impact. That is an assumption we can't make because if you
make that assumption and it is wrong, which I believe it is
wholeheartedly wrong, you will cut off the development of new
drugs because investments will not be made in them. So let me
ask you a further question. Madam Commissioner, you told us you
consider yourself an expert on consumers. I will give you a
hypothetical consumer. Let us take parents of a 10-year old kid
with leukemia, and we are now evaluating risks when we consider
this legislation. One of the risks is that we would continue
data exclusivity and the parents might have a 10 to 30 percent
increased cost of a drug that might cure leukemia. Let us
assume that there is one right now. The other risk is that a
drug would never be created to cure leukemia because by
removing data exclusivity the investment never gets made to
provide that life-saving drug. As an expert in consumer
behavior, what do you think is more important in the bigger
risk to those parents of that kid?
Ms. Harbour. First of all, if I said I was an expert on
consumers, I misspoke but let me----
Mr. Inslee. I think that was the direct quote I could find.
Ms. Harbour. I am an expert on protecting the American----
Mr. Inslee. OK. As an expert in protecting the consumer,
what do you think would be a greater risk in the minds of the
parents of that child, the risk that they would have a 10 to 30
percent higher cost for the drug or the risk that this drug
that could cure their child would never be created?
Ms. Harbour. You are assuming that data exclusivity is the
only way that one would invest in a drug, and that is what I am
pushing back against. I don't think that assumption is correct.
There are exceptions though where if you have a small patient
population or if you are bringing drugs on the Orphan Drug Act
where exclusivity would be necessary because there is a
perceived market value, in that circumstance exclusivity would
be absolutely appropriate.
Mr. Inslee. And the unfortunate limitation of your study,
according to what was just testified----
Mr. Pallone. I just have to ask the gentleman----
Mr. Inslee. Thank you, Mr. Chair. I appreciate your
cooperation.
Mr. Pallone. OK. The gentleman from Texas, Mr. Burgess.
Mr. Burgess. Thank you, Mr. Chairman. Let me just follow
along that discussion that you were just having. Now within the
Federal Trade Commission, have you constructed a matrix that
will give you a cost benefit analysis, some of the newer
compounds, for example, that inhibit some small blood vessel
growth that may be used in treating more advanced cancers? Do
you look at the number of hospital days that might be saved by
using one of these advanced biologics and considering the cost?
Yes, they are expensive but the disease that they are treating
also has expensive consequences associated with it, so that if
we avoid a surgery, if we avoid a week in the hospital, there
are additional savings, not just the base line of the drug but
there are other things to consider. So is there a matrix or a
simulation or program that you use to help make those
evaluations or is this simply data that is derived from the
price tag on the bottle or box that the drug comes in?
Ms. Harbour. Those sort of questions sound like they are
within the expertise of the FDA. We are looking at the----
Mr. Burgess. I am so glad you brought that up because Mr.
Chairman, we should be having this discussion with the FDA.
Ms. Harbour. And perhaps you will. We are your beginning
act here, and we are talking about the competitive consequences
of this sort of follow on. I believe there will be more
hearings and discussions on these issues.
Mr. Burgess. Now you and the FDA, are you aligned on your
definition of things like bio-similar and bio-generic? Do you
mean the same thing when you say those terms?
Mr. Wroblewski. Yes.
Mr. Burgess. It seems like the FDA has hinted that it might
be otherwise, but you feel that currently there is a scientific
basis for determining interchangeability of biologics from
different and unrelated manufacturers?
Mr. Wroblewski. What we tried to do was to say if there is
an abbreviated pathway where the follow-on does not have to
duplicate findings of safety and effectiveness because it can
rely on the FDA's approval of the pioneer drug if that is
allowed.
Mr. Burgess. That is such a crucial question because the
safety question can be very, very difficult to answer. And
again just as an aside a week ago I was visiting the FDA and
Dr. Hamberg and getting a tour with her through the new
facility that they are occupying out there. One of the
researchers just passing in the halls said what a difficult
time they were having because of the viruses that might infect
the cell cultures that are going to create these monoclonal
antibodies that might be useful in the treatment of prevention
of Alzheimer's in the future. Well, that is a pretty important
arm or branch of that research. I don't know that he knows or
would be interested if he could tell us that is this something
that is so standard and so settled that you could do this in
Dallas as well as Denver as well as Bejing and get the same
result.
Ms. Harbour. That is very important, and that certainly
would be for the FDA, not the FTC, to determine the safety and
efficacy of these follow-on biologics.
Mr. Burgess. Again, we are hitting on a recurrent theme,
Mr. Chairman. We need to have a hearing that involves the FDA
and many of us have been asking for that for some time. Again,
I will just emphasize that I have not aligned myself with
either of the 2 bills that are out there. I am really in an
information gathering mode and safety had to be paramount for a
doctor that picks up the pen and writes the prescription and
rips it off and puts it in the patient's hand and counsels them
as to the risks and benefits. We have got to be able to provide
them the best data. And it isn't always just the price tag on
the box or the bottle that the medication is going to be
delivered in.
What about, because this would come up all the time when I
was a doctor, and I was in practice for years. There were some
classes of medicines, and these were not biologics, these were
just regular things, but there was some class of medicines
there you just really didn't want to make a change and you
didn't want a generic to be substituted and some of those
things might be some of the cardiac drugs, certainly some of
the diuretics that treat congestive heart disease, and in my
practice estrogens from different manufacturers actually seemed
to have a different biologic behavior. And I don't know whether
it was the bio availability or the vehicle or what it was, but
how are we going to address that? A doctor has got a patient
who is on a very stable regimen, a patient with a serious and
significant disease, and now a new bio-similar becomes
available, how are we going to govern that because in the
generic world it became harder and harder for me to control
that, and often times I would have to pick up the phone and
call 1-800 California and stay on hold for a long time to get
my point across.
Mr. Wroblewski. We couldn't agree with you more that those
types of switching are going to be very difficult to do in the
bio-similar environment, and that is one of the foundations
that drew our conclusions that when a follow-on comes on to the
market that its market impact is going to be substantially
different than a generic drug, the market impact that a generic
drug has.
Mr. Burgess. Under the Waxman-Hatch, whatever it was, we
lost the ability to--the provider, the doctor, lost the ability
to control that, and again you had to really intervene on your
patient's behalf if you didn't want to have a substitution.
Mr. Wroblewski. And there is no similar type mechanism in--
--
Mr. Burgess. Well, I think we heard that discussed this
morning that there would have to be ways of directing this
behavior because you couldn't always trust doctors to do the
right thing, imagine that. Just one last point I will make. We
heard the heparin tragedy a year ago in this very hearing room.
The fact that often times the act of pharmaceutical ingredient,
we only manufacture the compounds in this country but actually
the active pharmaceutical ingredient may come from overseas,
and the ability of the FDA to monitor those manufacturing
facilities that are overseas, and again we saw a tragedy with
heparin which is not a complex molecule. It is a little bit
more complex than aspirin but it would not fall into this
category. And we saw what happened with the intrusion of a
foreign substance into that active pharmaceutical ingredient.
It just seems to me that this manufacturing process which is
fraught with much more peril, you got to be much more precise.
You don't just line up the amino acids and say, there, I have
made the protein. It is the folding, the unfolding, the
sulphide bonza, hydrogen bonza, all those things are going to
be critical to the biologic action of that product, and, again,
all of which can be affected by the humidity, the atmospheric
pressure, and goodness knows what else.
We have an obligation to protect--you say you are the
advocate for the consumer. I think our first obligation has to
be for the safety of that consumer, which is both the physician
and the patient in that scenario.
Ms. Harbour. And as an advocate for consumers, I think it
is a good thing to discuss all of these issues. We are here
discussing the competitive implications. Obviously, the safety
implications are paramount. You can't pass go if there aren't
safety implications. There needs to be a hearing on this
potentially as well, but here we can't opine on those. We don't
have the expertise to opine on the safety. The FDA would have
to do that.
Mr. Burgess. Thank you for your testimony. Mr. Chairman,
did you get that, we need to have a hearing with the FDA?
Mr. Pallone. I have repeatedly said that we are having more
hearings so no one is disagreeing with that notion, and I think
it is pretty obvious that we have a lot of disagreements here
and we need further hearings. Let me just thank both of you for
being here. This has not been easy for you, but I appreciate
your bearing with us. And, as I mentioned before, we will
undoubtedly have members asking in writing for you to respond
to questions. Normally that is about 10 days, and the clerk
will notify you within the next 10 days of any written
questions that the members would have. But I cannot stress
enough that I think that this report was really informative for
me and the other members, and appreciate your bearing with us
today. Thank you very much. And without further adieu, this
subcommittee hearing is adjourned.
[Whereupon, at 1:45 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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