[Posted on behalf of W. Nicholson Price II, Academic Fellow, The Petrie-Flom Center (with the disclaimer re: live blogging – see posts below)]
The first panel of today is on regulatory exclusivity and generic drugs, moderated by Ben Roin at the Petrie-Flom Center.
Leading off was Kate Greenwood, discussing orphan drug development and recycled molecules. She started off with Makena, known as 17-P, first approved in 1976 as Delalutin. In 1996 FDA withdrew its approval at the manufacturer’s request, as it hadn’t been marketing it. A few years later, a study showed that the molecule, 17-P, helped prevent premature birth. Compounding pharmacies started making it, and in 2006, CustoPharm filed a Citizen’s Petition asking whether the way was clear for a generic; FDA said yes, though the route might be challenging. But in May 2006, a different company filed for a NDA for this new use; it was approved as Makena in January 2007; the company (KV Pharmaceuticals) priced it at $30,000 for a course of treatment (vs. $300 for the compounded version, still available pre-approval). Responding to criticism, FDA stated that Makena’s reliance on government funding did not prevent Orphan Drug application. But a few months later, FDA stated that compounding pharmacies could still make 17-P for patients; KV declared bankruptcy and blamed FDA’s decision not to discretionarily enforce Orphan Drug exclusivity. KV has since sued FDA and HHS, and the case is pending.
Kate moved on to discuss ways to adjust the innovation/access balance, including shortening the exclusivity period, allowing limited competition, or capping or controlling drug prices. There are concerns, however, that after Makena payers won’t really allow any monopoly price period.
Next up was Kevin Outterson, talking about opacity of R&D information; all we see are the shadows of data. There are $250 billion of branded drug sales, with something like $200 billion in patent rents in the U.S. alone (twice that globally). Patent theory describes this as the engine behind development in drugs – but it’s not free; we pay in higher drug prices. We’re paying for R&D, not the pills themselves, which would be priced at the generics’ cost. There’s no industry that celebrates inefficiency the way drugs do, touting the $1.2 billion figure for drug development. Don’t blame patent law, though! They require up-front disclosure. But that doesn’t apply to clinical data, which is kept locked away, only accessible to FDA. This process, which society pays for, is anathema to the scientific process.
Kevin argues that marketing exclusivity is far better than data exclusivity. For biosimilars, FDA says the 12 year period is market exclusivity, but the US Trade Rep is arguing right now it’s data exclusivity. The ability to challenge is quite different; data and marketing exclusivity are virtually unreviewable, as opposed to patents. You can invent around patents, and can get around data exclusivity, but not market exclusivity. The geographic scope is different; market exclusivity and patents are very territorial, but data exclusivity is like an extreme network good. In addition, market and data exclusivity can protect unpatentable products.
With respect to innovation incentives, exclusivity moves money from universities to drug companies (because royalties usually die at the end of the patents). Congressional process is different, because exclusivity is scored as costless, and is drug-industry specific. Finally, data exclusivity bars transparency, where patents require disclosure, and market exclusivity works with that. So if we want to work with Europe on transparency, data exclusivity is a bad step.
Marie Boyd followed with a presentation on preemption of state law tort claims for generics versus branded drugs. If two patients take the same drug, one branded and one generic, and both are injured, only the patient who took the branded drug can recover under state tort law. This results comes from Wyeth v. Levine, 555 U.S. 555 (2009), and PLIVA, Inc. v. Mensing, 131 S.Ct. 2567 (2011), which together held that a branded company could be sued for failure to warn, because it could unilaterally strengthen the drug’s warning under federal law, but that a generic company couldn’t, because generics must have the same label as the branded drug, and thus can’t independently strengthen their warnings. Branded manufacturers can make label changes through the Change-Being-Effected process, where a company lets FDA know about moderate changes being made as it makes them.
Marie argued that Mensing is troubling because it exposes a regulatory gap which causes tort problems. Especially if the brand name drug has left the market, no manufacturer is responsible for the drug’s labeling. Several proposals have been made to reform labeling for generic drugs, including allowing generics to change their labels or making FDA responsible for generic labels; giving generic drug manufacturers access to information to monitor and analyze, and creating a “no-fault” trust fund. Each of these proposals has its own problems, including generics’ overwarnings, FDA resources, and “sameness” concerns for changing labels. Overall, the existing proposals fail to explore the process by which changes should be made and implemented, especially related to FDA’s authority to take unilateral action.
Finally, Henry Grabowski presented on FDA regulation of biosimilars. The Affordable Care Act included a pathway for biosimilars, with a goal, like Hatch-Waxman, of providing price competition while maintaining innovation incentives. Biosimilars are different from pharmaceuticals because they are much larger, made by living cells in a complicated process, often injected or infused, and are reimbursed as medical benefits rather than pharmacy benefits. The statute requires that biosimilars be “highly similar” to the reference product based on several types of data; biosimilars can be “interchangeable” if they’re expected to produce the same effect in any given patient and don’t carry a risk of switching. This structure is largely within FDA’s discretion. The statute also includes provisions on exclusivity, anti-evergreening provisions (with exceptions for different next-gen products), and patent provisions governing private information exchanges. As opposed to Hatch-Waxman, the statute has no Orange Book listing, no 30-month stay, and no 180-day exclusivity for the first biosimilar filer (just 1-year exclusivity for the first interchangeable).
Ben asked Marie whether fixing the tort law system is a first-best or second-best system. Marie replied that she views tort compensation as an important second layer adding to regulatory law, which also adds information benefits.
Freddy Jimenez from J&J (not speaking for the company), addressing Kevin, agreed that open data is helpful. He mentioned three fundamental problems: fear that patient-level data could be used for a 505(b)(2) application here – market exclusivity is needed to counter that; privacy concerns that might dissuade patients from studies; and asymmetry in drug companies’ ability to communicate to respond to reports by third parties, which requires embracing Caronia to permit company response. Kevin replied that he agrees that market exclusivity is the quid pro quo for data transparency. GSK’s independent scientific committee approach (evaluating proposals to see if they’re real research) should help. We’ll need to learn as we go.
Ted Ruger commented that the panel generally applied to clumsy regulatory approaches to getting to underlying cost functions. He asked Marie whether Mensing is a problem, since we want to incentivize people to use generics, and we can think of sacrificing liability protection down the road as a quid pro quo for cheaper prices. He also asked Kate about the coordination between CMS and FDA acting on the same day re: Makena, and asked if it was White House driven, like Plan B.
Marie answered that tort law for generics is important due to (1) the information-exposing function of tort law; and (2) FDA’s regulatory gap still existing when there’s no brand which can change the label. Kate said she had no inside information, but noted that KV asserts in litigation that it was clearly concerted action. Kevin, jumping on to Ted’s question to Marie, said that it would be a bad signal to send, given the struggle to convince everybody that generics are just as good.
Jeremy Green from JHU asked about declining innovation in the pharmaceutical industry, mentioning an argument that generics are decreasing innovation (the “Better than the Beatles” argument); he was curious about how much generics are a space for credible innovation.
Kevin replied that dominant, excellent drugs might help push pharma into other areas. But in antibiotics that doesn’t seem to work. Marie answered that more labeling responsibility might actually increase post-approval innovation for generics. Kate mentioned that the interest in recycled molecules can be seen as a sign of the innovation slowdown. We might need more gradated incentives to allow better small changes to, e.g., formulation.
Finally, Jeff Shapiro asked Marie about differential preemption: how can any solution involve generic labeling diverge from brand labels, given patient paranoia that generics aren’t as good as brands? Marie answered that under the current system, we do have short-term differences between brand and generic labels; many labels are different even now.
