Express Lane for Follow-on Biologics — Big Deal or Big Yawn?Deloitte Debates |
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Should you get ready for the new follow-on biologics (FOBs) pathway or wait to see what happens?
The health care reform bill that was recently signed into law includes a mechanism to obtain FDA approval for FOBs – “biosimilar” drugs that come to market after the patent expires on an original biopharmaceutical product and 12 years of data exclusivity have elapsed. In 1984, the Hatch-Waxman Act paved the way for generic versions of small-molecule drugs – and changed the way we buy medicine. Will the new law do the same thing for biologics? Or will it amount to little more than an administrative detail? And even more important: What should companies do about it?
Here's the debate:
| Point | Counterpoint | |
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Get ready for the new FOB pathway Change is coming and it will be significant. Now is the time for action. |
The traditional approval path for FOBs is the same as for innovator drugs. If the new process reduces even a portion of the regulatory hurdles, it will have a huge impact on pipelines, pricing and timing. | The devil is in the details. Instead of leaping into action, companies that produce FOBs should wait to see what happens – and whether the U.S. market for FOBs justifies the investment. |
| The new FOB pathway will give follow-on companies an edge by allowing them to use the data that innovator companies have compiled. This could slash development costs and reduce time to market by months or years. | Because biologics are so dependent on the manufacturing process, it’s a challenge to copy an innovator’s molecule – even with their data. FOB companies may do just as well following the Biologic License Application (BLA) process on their own. Maybe even better. | |
| An express lane for FOBs could hurt the market – and the public. Innovators might need to raise prices or increase marketing expenses and may leave some drugs off the market entirely to focus on the most profitable blockbusters. This is what we saw with generics under Hatch-Waxman and we’ll see it again with FOBs. | Under Hatch-Waxman, innovators knew competitors were coming to market with exact copies of their products. In this case, the science behind FOBs makes that much less certain. |
| Point | Counterpoint | |
|
Wait to see what happens Even if change happens, it may not have much impact. It’s best to wait and see. |
Even with the new law, most FOB rulemaking will be left to the FDA – which appears likely to apply clinical standards so stringent that the difference between the BLA and FOB pathways won’t amount to much. | FDA policies can change over time. A difficult pathway is still a significant change from no pathway at all. |
| Follow-on drug makers aren’t waiting for the FOB pathway to take shape – they’re moving ahead right now through the BLA process, which is known and defined by current law/regulations. | Just because FOB makers are making do with what’s possible now doesn’t mean they won’t find – and exploit – the advantages of a new system. | |
| Getting physicians to adopt FOBs is a completely separate battle. Mandatory switching to generics may not be as prevalent as with small-molecule drugs. Most physicians will not switch from one biologic to another other than for clinical reasons. | Physicians are just as attuned to the economics of the pharmaceutical industry as any other player in the health care sector. If an FOB offers the same benefits at a lower price, they’ll sign on for new patients. |
My Take
R. T. (Terry) Hisey, Vice Chairman, U.S. Life Sciences Leader, Deloitte LLP
An accelerated pathway for FOBs is likely to have some unintended side effects that companies should consider as they plan their course of action.
- The “make hay” effect. The new law gives innovators 12 years of data exclusivity from competing FOBs. Given this limited time window, innovators are likely to focus on maximizing short-term revenue by raising prices and by increasing their marketing investments to drive earlier adoption. This is what happened in pharmaceuticals after Hatch-Waxman, once generics had a path for entry. Biotechnology companies however may have a tougher time tackling this challenge because their products are often targeted at smaller market segments and they therefore lack commercial economies of scale.
- The “blockbuster” effect. The high cost of drug development, combined with the limited window for generating a return on investment, may lead innovators to focus more narrowly on developing drugs that have the greatest revenue potential – moving away from the great therapeutic promise of targeted therapeutics and dramatic new treatments for orphan diseases. One way around this problem is for companies to focus development in areas that could produce a portfolio of related treatments, rather than a single narrowly focused product. Another practice is to support products with biomarkers and companion diagnostics that could improve effectiveness and product differentiation and help lock in a particular market segment. In addition, there may be opportunities to change the ROI equation by reducing costs through operational improvements and strategic alliances that create economies of scale.
- The “no man’s land” effect. As soon as a company reports a new biologic, the clock starts ticking on its protected market window. But if it takes too long to bring the product to market, at some point there won’t be enough time left to generate positive returns. We call this point “no man’s land” because it no longer makes sense to move forward. Considering the end-to-end lifecycle for a typical biologic, biopharma companies must recognize that they may have only one – four years to commercialize a new discovery before ending up stuck in no man’s land.
These unintended effects of a fast-track process for FOBs could have a dramatic impact on how biopharma companies develop new products and what developments they pursue. Companies that overlook these important effects may eventually find themselves struggling to dig out of a deep, deep hole.
Perspective from the Deloitte Center for Health Solutions
Paul Keckley, Executive Director, Deloitte Center for Health Solutions
The FOB provision of the reform bill (section 7002) was a win for pharma by protecting data exclusivity for 12 years instead of an original proposal for five years. Thus, pharma is inclined to invest in R&D and take greater commercialization risks in the U.S. market.
The PPACA does not, however, address the effectiveness of the FDA as it undertakes its expanded roles—tobacco regulation, post market surveillance, food safety—since it is inadequately funded and stretched thin.
Whatever the authorizations of the FDA, it’s greatest challenge—and as a result the greatest challenge facing industry—is its overhaul to be more efficient and effective in its oversight role.
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Express Lane for Follow-on Biologics — Big Deal or Big Yawn?
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