Fixing the Biotech Marketplace

The marketplace for drugs from the biotechnology industry, known as biologics, is damaged and needs repair. While biotechnology has revolutionized medical care and improved the lives of millions of patients, it is costly, with biologics running between $6,000 to $250,000 annually. With 400 biologics under development, the science has outpaced our ability to pay for it all.

We need laws that will allow for competition in the biologics business, such as the Access to Life-Saving Medicine Act (S. 4016 and H.R. 6257). This bill, which has bipartisan support, would allow the introduction of generic versions of biologics. The patents of many biologics developed in the 1980s have expired. Yet these drugs continue to grab billions in sales; 16 percent of spending on biologics is for drugs with expired patents. Most are in important drug categories. The Coalition for a Competitive Pharmaceutical Marketplace says biologics with $10 billion in sales will have expired patents by 2010. While the process by which traditional pharmaceuticals face generic competition has its own flaws, its marketplace is far more vibrant than that for biologic drugs. Over 8,700 of the nearly 11,500 drugs are listed in the FDA’s Orange Book as having a generic alternative, which can represent a saving of up to 70 percent.

Presently, however, there is no avenue for generic versions of biologic drugs to reach the market, which amounts to protectionism. This situation serves the biotech industry very well, but at the expense of all those who pay medical bills. Congress has an opportunity to knock down these barriers to more affordable medicine by passing the Access to Life-Saving Medicine Act. The effect of this bill would be similar to that of the 1984 Hatch-Waxman Act, when generic drug manufacturers were able to gain approvals for bioequivalent drugs from abbreviated new drug applications. The increased competition, in turn, spurred the pharmaceutical industry to develop new blockbuster drugs in the late 1980s and 1990s.

A similar scenario could occur in the biotech industry-and it could not come at a better time. Biologics are the fastest growing segment of the pharmaceutical marketplace. Most specialty drug dollars are concentrated in treating rheumatoid arthritis, multiple sclerosis, cancer, growth hormone deficiencies, anemia, anticoagulation therapy and hepatitis C. Spending for specialty drugs grew 16.1 percent in 2006, driven by a 7.3 percent increase in utilization and price inflation.

There is no denying their clinical benefit. Biologics keep patients alive and prevent prolonged hospital stays and surgeries, since they better target conditions and often are better tolerated than traditional medications. The Access to Life-Saving Medicine Act is a means for a more dynamic marketplace for this increasingly critical category of treatment.

Congress also needs to ensure that the full benefit of the bill reaches the marketplace. This can happen by increasing the budget for the FDA’s Office of Generic Drugs. Currently, 1,200 applications are backlogged at the office, which is responsible for approving safe and effective generic drugs. Giving the Office of Generic Drugs the tools to do its job could save the health care system billions, since every 1 percent increase in generic drug use saves the health care system $4 billion each year.

Higher funding for the Office of Generic Drugs, closing loopholes in the citizen petition process, and passage of the Access to Life-Saving Medicine Act are three important steps that need to happen in order to begin repairing the health care marketplace. As medicine becomes more personalized, patients and doctors need a greater selection of choices- including those that cost less-to meet patient needs.


David B. Snow Jr. is chairman and CEO of Medco Health Solutions, a pharmacy benefit manager.

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