Deficit Reduction Could Pain Biotech

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President proposes trimming data exclusivity and nixing pay-for-delay.

This article published with permission from The Burrill Report.

Market exclusivity for brand name biologics could shrink from 12 to seven years as part of President Barack Obama’s latest deficit reduction plan.

The plan, designed to wring $320 billion from federal health care expenses in the decade ahead, seeks to generate $3.5 billion of that savings by shortening the data exclusivity period for brand name biologics beginning in 2012.

The government projects that savings from the changes would first begin to accrue in 2015 and ramp up through 2021, a year in which federal actuaries anticipate savings would reach $1 billion.

The change would encourage faster development of biosimilars while striking a balance between promoting affordable access to medications and encouraging innovation, the government argues. The biotech industry is not as convinced, viewing the current 12-year data exclusivity period, something it fought hard to establish and now risks losing, as a boon for jobs, national competitiveness and innovation.

“A reduction in the exclusivity period will jeopardize the careful balance established in the biosimilars pathway to reduce costs, ensure patient safety, and encourage continued biotechnology innovation that will create jobs and lead to breakthrough therapies and cures for deadly diseases including cancer, HIV/AIDS, Parkinson’s, and Alzheimer’s,” says Jim Greenwood, CEO of the Biotechnology Industry Organization.

Greenwood also voiced BIO’s opposition to Obama’s plan to lower the trigger point at which the Independent Payment Advisory Board, a cost-cutting panel created by the Affordable Care Act, could make unilateral changes to Medicare if costs grow too fast. The board’s potential power, while limited, is considered something of a wildcard by industry.

Whether the Joint Select Committee on Deficit Reductions, the so-called “super committee” that is charged with finding $1.5 trillion in savings over the next ten years, will embrace the president’s recommendations remains to be seen. But there’s little doubt that biotech and pharma lobbyists are working hard to protect the gains they’ve made to date by discouraging a wholesale adoption of the president’s recommendations.

In addition to these changes, the administration is also proposing the prohibition of “pay for delay” agreements to increase the availability of generic drugs and biologics. It would do so by authorizing the Federal Trade Commission to stop companies from entering into the agreements, saving $2.7 billion over 10 years in the process.