Last week the Obama Administration released its Budget for the upcoming fiscal year, which includes a number of policy proposals designed to save money for both the government and taxpayers. Its proposal to shorten the monopolies granted to brand name biologic drugs – and thereby hasten generic competition – would directly clash with the provisions the Administration seeks in the Trans Pacific Partnership.
Biologic drugs receive 12 years of data exclusivity in the U.S. under current law. During this period, generic competitors cannot win FDA approval for their products based on originator data, and would instead need to replicate human trials. To replicated human trials would be prohibitively expensive and time consuming, and it violates medical ethics to repeat experiments on humans when the result is already known. In other words, generic drugs are blocked from the market during the 12 year period of data exclusivity. This allows the brand name firms to charge monopoly prices, which are quite high – the most recently approved biologic, Ibrance, will be $118,200 per patient per year in the U.S.
The Obama budget for FY 2016 proposes reducing the term to seven years. Specifically, page 63 of the budget calls for “ awarding brand biologic manufacturers seven years of exclusivity, rather than 12 years under current law, and by prohibiting additional periods of exclusivity for brand biologics due to minor changes in product formulation.” Estimated savings to the federal government would be $940 million over five years and $4.5 billion over ten years (see the table on page 115). Lower prices would also benefit the private sector, where insurers have been struggling to cover these high-priced medicines as more of them reach the market.
However, the Obama Administration is currently seeking rules in the Trans Pacific Partnership negotiations that would permanently lock in the current 12 year period of exclusivity. The negotiating text is secret, but it has been widely reported in the press that the Administration is seeking the longer period. The fact that the Obama administration is seeking seven years at home has raised eyebrows, and the Wall Street Journal now reports “It isn’t clear whether U.S. officials will be able to clinch a deal that includes 12-year protection without compromises in other areas of the TPP.”
