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Issue: The Senate has introduced the “Access to Life-Saving Medicine Act,” which has the potential to provide patients access to important new therapeutic drugs at competitive prices. This legislation is a critical step toward opening the marketplace to important new medicines, increasing accessibility and affordability for consumers. The bill provides for new competition in the provision of biologics, which are being used to treat a variety of conditions from AIDS to Alzheimer’s to several different cancers.
Traditional Drugs and Biologics: Most therapeutic drugs are known as “small molecule” drugs, which are developed using chemical processes. Biologics, on the other hand, are developed using proteins in living cells. These drugs often are more complex, and far more costly than small molecule drugs. Biologics show great promise and have been used to produce insulin, human growth hormone, and other important therapies. Globally, the market for these drugs has increased to more than $60 billion.
Brand Name and Generic Drugs: Developing a new drug often leads to the discovery of patentable intellectual property ideas. To promote innovation and research, the American legal system protects the intellectual property of pharmaceutical companies by granting patents that provide exclusive production rights for a given period of time. Typically for drugs a patent is 20 years. During the life of a patent, the manufacturer enjoys monopoly rights to reap the rewards for the research and development required to create new therapeutic drugs.
The Food and Drug Administration is responsible for approving new therapeutic drugs to ensure that they are safe and effective. This drug approval process takes time and reduces the useful life of the patent. As a result, Congress has intervened and amended the patent laws to restore time lost due to FDA review. This is, in fact, just one of the ways that brand companies can have the life of their patents extended.
Once the patent expires, the period of exclusivity ends and other must be allowed to produce the same drug. To distinguish these companies from the innovators, the new competitors are known as generic drug manufacturers rather than brand name manufacturers. Off-patent production in the small molecule drugs has saved consumers $8 to $10 billion annually in retail pharmacy costs, according to the Congressional Budget Office.
The Hatch-Waxman Act. This is popular name for the “Drug Price Competition and Patent Term Restoration Act” of 1984, and it was critical for opening the door to competition in the generic drug market. This legislation allowed the Food and Drug Administration to establish an abbreviated approval pathway for generic drugs. This was an important step for consumers, providing an opportunity for competition within the pharmaceutical industry. Without the Hatch-Waxman Act, generic drug manufacturers would be required to duplicate costly and time-consuming testing that had already been completed. Under Hatch-Waxman, as long a drug manufacturer could demonstrate “bioequivalence” it was possible to begin manufacturing and competing. Estimates suggest that generic drugs have created substantial savings for consumers, lowering costs in both the public and private health care sectors.
Updating Hatch-Waxman: At the time this important legislation was passed, biologics were in their infancy. Consequently they were not included in the original act. Today, advances in technology, expiring patents, and rising health care costs have made generic biologics, often called biogenerics, a viable addition to today’s pharmaceutical market. Competition from biogenerics would provide important opportunities for reducing the costs of some of the promising, but expensive therapeutic drugs. A year’s treatment can cost as much as $100,000 per year and more. With new generic versions available, these prices can fall, providing significant consumers savings. While the savings may not be as large as generic small molecule drugs if measured as a percentage of the cost of the original brand (due to the costly production process for biogenerics), the new competition will enhance the accessibility an affordability of these important products.
Next Steps: Currently, the FDA has limited authority to approve biogenerics. Many pharmaceutical companies claim that biologics are too complex to be produced as generics. This is not true; there are a number of pharmaceutical companies—brand name and generic—that have the capability and desire to enter the market for biologics with expiring patents. One biogeneric has already been approved by the FDA, and the agency has stated that it believes it is possible to establish an abbreviated approval process for these drugs that allows manufacturers to establish their bioequivalence. In fact, the FDA has suggested that it could approve biogenerics if it had a regulatory pathway to do so. Already, the European Union and Australia have established procedures to approve biogenerics. Congress should move forward with the “Access to Lifesaving Medicines Act” to ensure all Americans enjoy access to the latest therapeutic drugs at the most affordable prices.