During the health care reform debate this year, controlling increases in health care spending has become a major focus. As a result, Congress has been searching for solutions to save money on health care costs.
In the search for cost savings, Congress is considering legislation to facilitate faster Food and Drug Administration (FDA) approval of “generic” versions of biologic medicines. Nearly all members of Congress on both sides of the aisle favor creating an abbreviated FDA approval pathway for similar versions of already approved biotech drugs, often referred to as biosimilars. The hope is that biosimilar drugs save money in the same way that generic drugs save money for consumers and for federal health care programs like Medicare and Medicaid.
The Congressional Budget Office estimates that biosimilar legislation in both the House and Senate saves approximately $6 billion to $7 billion for the federal government over 10 years.
The current legislation in the House and Senate would protect an innovator’s research data for 12 years before a generic competitor could free-ride on its clinical trial data to gain FDA approval. A minority of legislators claim that changing this legislation to allow biosimilar manufacturers to copy another product as early as 7 years will result in an enormous additional savings to the government, but the facts simply do not bear this out.
A substantial majority of biologic drugs currently on the market are already at or near the end of the proposed 12-year protection period, so lowering the data protection period would result in minimal additional savings.
Moreover, the 12-year protection period is necessary so the legislation does not irreparably harm the uniquely American biotechnology industry and the future cures it will produce. This 12-year period currently in the legislation is also a bipartisan compromise overwhelmingly approved in the House Committee on Energy and Commerce before it passed the House as part of health care reform and received similar bipartisan support in the Senate Committee on Health, Education, Labor & Pensions.
As the former chief actuary for Medicare and Medicaid, with almost 40 years of experience preparing cost estimates for federal health care programs, I know it’s a great deal easier to project savings than to actually realize them.
Biologic medicines have unique scientific aspects that make them practically impossible to replicate in separate manufacturing processes. Unlike the ordinary generic drug molecule, the biologic molecule is large, complex and dependent on the manufacturing process to define its properties.
Instead, a similar molecule is produced in a manner more like a brewing process than a traditional chemical reaction. Even small deviations in the makeup of the molecule that results can cause significant changes in its therapeutic properties and side effects.
Thus, the difficulty of the manufacture of biosimilar drugs, the number of likely biosimilar entrants in the market, the number of biologic products near the end of their patent life over the next decade, and the FDA review process that would be required to ensure the safety and effectiveness of biosimilar drugs, all lead to the conclusion that any savings from reducing the years of data protection would be insignificant.
Advocating for a lower period of data protection by arguing it will produce significant savings isn’t just misleading; it is counter to the public’s interest in having biotech companies retain sufficient incentives to continue investing billions of dollars in the research and development of vital new medicines.
In my experience, the congressional budget process best serves the public interest when savings estimates are realistic rather than exaggerated - and when legislative decisions are based on credible scientific and economic merit.
Creating an approval pathway for biosimilars is good public policy. Cutting costs is an appropriate part of the current discussion and debate, but it needs to be realistic and well reasoned. Moving from 12 years of data protection to seven years would not materially impact the savings, but would materially impact the incentives for innovator biotechnology companies to discover the next generation of treatments for such serious diseases as cancer and Parkinson’s.
Congress should consider its next actions on biosimilars very carefully. It should weigh modest savings as just one consideration in the larger context of ensuring that patients have access to safe and effective biological medicines, both now and in the future.
Roland “Guy” King was chief actuary for the Health Care Financing Administration (now called CMS) for 16 years. He is currently an independent consulting actuary and resides in Maryland.