Alert May 01, 2012

Implementation of the Biologics Price Competition and Innovation Act

A statutory and regulatory scheme to encourage the development of “biologics,” drug products made in living organisms, has been a goal for more than a decade, and the Biologics Price Competition and Innovation Act (“BPCIA”) was enacted on March 23, 2010.  The U.S. Food and Drug Administration (“FDA”) is working to implement the BPCIA and published draft guidelines for the industry on February 7, 2012.

The policy rationale of the BPCIA, similar to that of the 1984 Hatch-Waxman Act for pharmaceutical compounds, is to reduce the cost of biologics through increased innovation and increased entry by generics into the biologics market by creating data and market exclusivities for innovators, reliance for generics on the already-submitted data of innovators, generic market exclusivity and a structured mechanism for generic challenge of innovator patents.  Unlike small-molecule drugs, however, there is heightened concern that biologics might perform differently than the innovator product because biologics have greater molecular complexity and their safety and efficacy might be affected by the use of different molecular clones, cell banks or fermentation or purification processes.  Consequently, approval of generic biologics will require more stringent analysis than small-molecule generic drugs and likely will include clinical testing of efficacy.

Innovators warned Congress that a Hatch-Waxman approach to biologics would cause a loss of market share due to the speedy entry of generic biologics and, therefore, reduce interest in the development of new biologics.  To provide incentives for innovators and compensate for instances in which the remaining term of relevant patents at the time of market entry is short, Congress provided four years of data exclusivity between FDA approval and an abbreviated filing for a generic biologic relying on the innovator’s data and market exclusivity.  This prevents approval of a generic biologic until 12 years after approval of the innovator product.  The 12-year market exclusivity is more than twice as long as the five years provided under the Hatch-Waxman Act for new chemical entities, but does not apply to new indications, routes of administration, dosing schedules, dosage forms, delivery systems, delivery devices, or strengths of the innovator biologic, or to a modification of the structure of the biologic that does not result in a change in safety, purity or potency.  

To be approved for marketing, the abbreviated application must demonstrate that the generic biologic is either “biosimilar” to or “interchangeable” with the already-approved innovator product.  To be biosimilar, a generic biologic must utilize the same mechanism of action and have the same administration, potency, dosage form and strength, and have “no clinically meaningful differences” from the innovator product.  There is substantial uncertainty about what effects will be “clinically meaningful differences” and how the generic manufacturer will establish their absence.

Generic biologics categorized as biosimilar will be considered an alternate therapy with a different active ingredient from that of the innovator product.  Consequently, pharmacies and hospitals will not be permitted to substitute a biosimilar product for the innovator drug.  The first biosimilar to enter the market will not be entitled to a period of exclusivity from competition from other biosimilar or interchangeable products.
A designation of interchangeability will be necessary for the generic biologic to be substituted for the innovator by a pharmacy or hospital.  The first licensed interchangeable product will be awarded exclusivity as to other interchangeable biologics for at least one year, but will not enjoy exclusivity as to other generic products that are merely biosimilar.  Moreover, it will be difficult, if not impossible, to achieve “interchangeability” because it must be shown that the risk in terms of safety or efficacy of alternating or switching between the use of the generic product and the innovator product is not greater than without the alternation or switch.

The BPCIA does not require innovators to list the patents that cover their products as is done in the “Orange Book” for pharmaceutical compounds.  The generic applicant is required to submit its application to the innovator.  The innovator can use that application only to determine whether a claim of patent infringement can be reasonably asserted.  The innovator then must provide a list of all patents owned or licensed by it that cover its product including those directed to methods or processes.  The biologics applicant then must identify the patents that it challenges as invalid, not infringed or unenforceable, provide a detailed statement in support for each assertion, and also identify the patents for whose expiration it will wait before marketing its product.  
The FDA’s draft guidelines represent its “current thinking” on approval of generic biologics.  The guidelines only discuss biosimilarity for therapeutic protein products – there is no analysis of interchangeability, or of biologics other than proteins produced from a cloned gene. 

Generic manufacturers are to take a step-by-step approach to demonstrate biosimilarity in which they evaluate, at each step, the extent of remaining uncertainty and “consult extensively” with the agency.  

The steps for establishing biosimilarity are to provide (i) extensive structural and functional characterization of both the innovator and biosimilar products, which for proteins is a functional analysis of primary, secondary and tertiary structure; (ii) toxicity, pharmacokinetics, pharmacodynamics and immunogenicity data from studies in animals; (iii) comparative pharmacokinetic and pharmacodynamic data from studies in humans; and (iv) clinical data of immunogenicity in humans.  A fifth step of comparative clinical data of safety and efficacy in humans will be necessary if uncertainties remain after steps one through four.  

It is not clear that manufacturers of generic biologics will utilize the statutory and regulatory mechanism in view of the relatively long market exclusivity for innovators and the expected difficulty of establishing interchangeability to claim generic exclusivity.
There are additional uncertainties about the BPCIA.  The BPCIA is part of the Patient Protection and Affordable Care Act (“PPACA”), which requires individuals not covered by employer- or government-sponsored health insurance plans to maintain minimal essential health insurance coverage or pay a penalty, often referred to as the “individual mandate.”  The individual mandate has been challenged as unconstitutional.  The PPACA does not contain an express “severability” clause stating that if one provision of the Act is struck down as unconstitutional, the remaining provisions of the Act shall remain in effect, which increases the likelihood that if the individual mandate is struck down, the entire Act including the BPCIA will be struck down.  The U.S. Supreme Court heard oral argument on the constitutionality of the individual mandate and severability on March 26 through 28.  The Court’s decision is expected in late June.  There is a chance that the BPCIA will be struck down by the Court.

There also is a possibility, depending on the outcome of the 2012 elections, that Congress will repeal the PPACA or amend the BPCIA.  For example, the Obama Administration’s budget proposal for 2013 proposes to amend the BPCIA to reduce market exclusivity from 12 to seven years.

John P. Hanish, Ph.D., will speak at the April 26, 2012 meeting of the New York Chapter of the Licensing Executives Society regarding “Medical Devices – New Rules, New Opportunities”: