Commentary: Biotech Drugs: Where Are The Generics?

They're in regulatory limbo -- and likely to stay there

After much thrashing around, the biotech industry is finally nearing consensus on what to call less expensive, generic-type alternatives to pricey biotech drugs. The preferred term is "follow-on protein products," or FOPPs. Good, that's settled. Now for the bad news: Without concerted action in Washington, patients in the U.S. won't get their hands on such products for years.

The need for FOPPs couldn't be clearer. Record numbers of biotech products are reaching the market, with price tags often exceeding $10,000 per year. Such drugs currently account for nearly 12% of America's $235 billion drug bill, up from 8% just five years ago, and Mercer Human Resource Consulting (MMC ) projects that 100 new ones will hit the market in the next five years.

This trend causes people like James A. Carlson to break into a sweat. The director of pharmacy clinical services for Group Health Cooperative is constantly scrutinizing his company's $220 million prescription drug bill for ways the HMO can save money. Already, two biotech drugs top the list of medicines that carry the highest tabs: the anemia treatment Procrit and the rheumatoid arthritis therapy Enbrel. "If there's no hope of these going generic," Carlson frets, Group Health's drug bill "will skyrocket."

Yet there are significant obstacles on the path to generic biologic drugs, beginning with the very definition of "generic." In the world of ordinary pharmaceuticals, most of which are simple chemical compounds, generics are perfect replicas of drugs that have lost their patent protections. But in biotech, the drugs are mostly complex proteins that are cloned and grown in temperamental cultures consisting of hamster ovary cells and other exotic materials. For these extremely complex drugs, some biotech executives argue, it's almost impossible to ensure that any two protein cultures are identical.

That means the hurdles will be higher for generic drugmakers. To prove their products are safe substitutes, they will have to do more human tests than are required for non-biotech generics. They'll also have to file more in-depth applications with the Food & Drug Administration and maybe even market the products as if they were novel drugs instead of copies. All of this research and marketing overhead means the price differences between today's drugs and a FOPP substitute "won't be as profound" as they are on generic drugs, predicts Dr. Jay S. Markowitz, an analyst with T. Rowe Price Group (TROW ).

Technical challenges aside, another roadblock looms: There's no framework for regulating such drugs. Most biotech drugs were approved under a law called the Public Health Service Act, while all non-biotech products were approved under the Food, Drug & Cosmetic Act. But while the latter was amended in 1984 to open the way for generic drugs, no provisions were added to the Public Health Service Act to allow for generic biotech products.

Lost Momentum

Yet a handful of biotech drugs aren't regulated by the Public Health Service Act, including versions of insulin and human growth hormone. Due to a distinction made years ago between certain biotech products, these were approved under the Food, Drug & Cosmetic Act -- and therefore can enjoy provisions that permit generic manufacturers to shortcut the normally laborious process for getting a drug on the market. As recently as last spring, the FDA seemed prepared to move toward approving a few FOPPs. But under the acting commissioner, Lester M. Crawford, the momentum has been lost.

That became clear with the stalled application for a FOPP for human growth hormone, called Omnitrope, from Novartis (NVS ). The Swiss pharma giant has put the compound through a battery of tests to prove that it is as safe and effective as the branded Pfizer Inc. (PFE ) version. These include human trials as well as high-tech screens that reveal the structure of the protein and its electrical charge. The cost of its investment to date, including expanding a manufacturing plant in Austria: more than $150 million.

Will FOPP hopefuls ever get a chance? Not if it's up to manufacturers of branded human growth hormone, such as Pfizer and Genentech Inc. (DNA ). Both have filed protests with the FDA over the agency's plans to outline what manufacturing tests and other requirements it needs to approve an application like the one for Omnitrope. They argue that any move by the agency to instruct a player like Novartis on what is required could indirectly reveal details about proprietary manufacturing processes, and that amounts to sharing trade secrets. Pfizer's and Genentech's strategy seems to be working. Last year, Novartis said the FDA informed the company it wasn't acting due to "uncertainty regarding scientific and legal issues." The FDA's reluctance to move on even simple FOPPs raises concerns among lawmakers such as Representative Henry Waxman (D-Calif.). "We cannot continue to have a system that effectively enshrines permanent monopoly status for some of our most important medicines," he says.

The pressure for the FDA to act will only intensify as biotech patents expire. Already, key patents on human growth hormone and human insulin have lapsed. In Europe the patents on the blockbuster anemia drugs Eprex and Epogen, sold by Johnson & Johnson and Amgen respectively, have expired. The pace should pick up in the U.S. toward the end of this decade: Genzyme Corp.'s (GENZ ) treatment for Gaucher Disease, which costs on average $175,000 a year, loses a key patent in 2010. Patents on Biogen Idec Inc.'s (BIIB ) multiple sclerosis drug Avonex begin expiring in 2011. And U.S. patents on Epogen and J&J's version, called Procrit, which haul in combined sales of $6.2 billion worldwide, start running out in 2012. The companies believe additional patents add a few years to their protection.

To ease the barriers confronting follow-on proteins, a two-pronged approach is needed. First, the FDA needs to make a scientific decision on whether it can approve generic biologics for the few products, like human growth hormone, where it already has the legal authority to do so. If the agency approves Omnitrope, it will lay the foundation for the scientific requirements that future generics would need to meet.

For biotech products that lack a generic pathway, Congress needs to create one. It's true that these drugs will require the strictest of oversight. But they would provide a more competitive market and some relief from skyrocketing pharmaceutical costs. Washington must work out the kinks soon, or FOPPs are doomed to become just another big health-care flop.

By Amy Barrett, with John Carey in Washington and Kerry Capell in London

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