June 1, 2008 (Vol. 28, No. 11)

The biotechnology industry has a strong record of contributing to the betterment of the world. The industry’s products fight disease, feed the hungry, and reduce pollution. Companies have the potential to contribute even more to improve healthcare, supply alternative fuel sources, protect the environment, and expand the world’s food supply.

Biotech firms don’t operate in a vacuum, though. Their products have to contend in a global marketplace. They have to compete for investment capital in financial markets and have to conduct research, develop and market products, and do business all within a framework of laws and regulations shaped by policy decisions made in Congress, in federal agencies, and by state, local, and foreign governments.

What happens in Washington, in state capitals across the country, and in capital cities throughout the world influences the progress of biotechnology as much as what happens on Wall Street or in the lab.

These decisions affect every biotechnology company, from the smallest venture-backed start-up to the largest multinational corporation. Policies that promote innovation help bring biotech’s benefits to mankind. Laws and regulations that inhibit innovation undermine the biotech industry’s ability to do so. The Biotechnology Industry Organization’s (BIO) mission is to help its 1,200 members advance the life sciences, grow their businesses, and maintain a policy environment that strongly supports innovation.

Two issues currently under consideration by the U.S. Congress have the potential to impact the biotech industry—for better or worse—for years to come. Patent reform and the creation of a pathway for the approval of follow-on biologics, if done right, would allow the industry to continue to deliver on the great potential of biotechnology.

Keeping IP Strong

As an innovation industry, biotech relies on strong intellectual property (IP) protection that allows inventors of new products and processes to profit from their discoveries. If Congress weakens the patent system and makes patents harder to get or easier to challenge or infringe upon, our nation will achieve less innovation. If innovative technology sectors experience reduced predictability and increased risk, investment capital will go elsewhere.

The biotech industry should welcome and encourage improvements to the country’s patent system, particularly those that increase patent quality, encourage public participation, and provide additional resources to the U.S. Patent and Trademark Office (PTO). Unfortunately, the Patent Reform Act, which passed the House of Representatives last year and is under consideration in the Senate, includes several provisions that would decrease the value of patents and incentives for innovation.

Various universities, labor unions, patient groups, major manufacturers, small businesses, patent judges, and independent inventors as well as the American Intellectual Property Lawyers Association, the PTO, and many others have joined BIO in expressing grave concerns about the Patent Reform Act.

This Act would introduce a new procedure for determining and applying reasonable royalty damages. The legislation, if passed, will require courts to peel away from the patented and infringed invention all previously known elements and ascribe value only to the remaining parts. Damages would no longer reflect the full value linked to how the patent infringer used the invention. Infringement would be cheaper, and thus the incentives for licensing patented technology would be undermined.

The legislation also adds a new postgrant, adversarial opposition procedure that essentially allows a patent to be challenged throughout its full term repeatedly and without the protections afforded under current law. Such challenges could be brought on a wide range of subjective grounds, even after patent owners have made significant investments based upon the presumed validity of their patents.

The Patent Reform Act also lacks any meaningful reform of the much-abused inequitable conduct doctrine. This rule permits courts to hold an objectively valid patent unenforceable for alleged misconduct by the original patent applicant even if unrelated to the current patent owner or the actual validity of the patent. The rule does not exist in other industrialized nations and should be repealed or at a minimum, dramatically reigned in.

The aggressive use of inequitable conduct accusations in patent litigation chills communication between patent applicants and examiners and negatively impacts patent examination quality. The National Academy of Sciences has called for the elimination or reform of this doctrine as part of their recommendations to make our patent system more objective and efficient.

Establishing Follow-On Biologics Policy

Another key issue under consideration in Congress is the creation of a pathway for the approval of follow-on biologics. BIO strongly supports a pathway that above all protects patient safety and provides incentives for continued innovation.

Biologics are manufactured in living cells and are much more complex than small molecule drugs. Due to their size and complexity, biologics generally cannot be scientifically characterized to the same degree as traditional pharmaceuticals. Unlike generic drugs, a follow-on biologic, or biosimilar, is a product that is similar to but not the same as the innovator drug.

It is critical that approval of follow-on biologics be based on the same rigorous standards of safety, purity, and potency applied by the FDA to pioneering biotechnology products. Clinical trial evidence and data are fundamental for evaluating and demonstrating the safety and effectiveness of a follow-on biologic and must be conducted on a product-by-product basis. Immunogenicity testing is necessary to avoid putting patients at risk of adverse effects from immune reactions. It is also important to ensure that physicians, not pharmacists or health insurers, decide whether to switch a patient from an innovator biologic to a follow-on product.

Congress should provide a substantial period of data exclusivity for the developer of the original biotech drug. Such nonpatent data exclusivity is necessary because a follow-on biologic manufacturer can engineer around the innovator’s patent as a follow-on biologic is similar to but not the same as the innovator product.

When it created the generic drug approval pathway in 1984, Congress enacted patent term restoration provisions to provide innovator drugs with up to 14 years of patent protection following marketing approval as a necessary incentive for pharmaceutical innovation. As a result, new drugs are marketed in the U.S. for an average of 13.5 years before the entry of generic competition.

Because of the differences in patent protection under a follow-on biologic pathway, for biologics to receive the same length of effective market protection that small molecule drugs enjoy, the period of data exclusivity must be no less than 14 years. Anything less could skew investment away from biologics R&D and jeopardize the development of future innovative therapies, particularly in light of the fact that the break-even point for a biologic occurs after it has been on the market between 12.9 and 16.2 years.

Both the Pathway for Biosimilars Act (H.R. 5629), introduced by Representatives Anna Eshoo (D, CA) and Joe Barton (R, TX), and the Patient Protection and Innovative Biologic Medicines Act (H.R. 1956), introduced by Representative Jay Inslee (D, WA), ensure patient safety and provide a significant period of data exclusivity. BIO is urging Congress to consider these bills and authorize a pathway for the approval of follow-on biologics this year.

James C. Greenwood is president and CEO of Biotechnology Industry Organization (BIO). Phone: (202) 962-9200. Web: www.bio.org.
E-mail: [email protected].

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