Data Exclusivity: Getting the Balance Right

Federal budgets are all about numbers -- typically, the type of numbers that are preceded by dollar signs. But other numbers in the Administration's 2012 budget limit something called "data exclusivity protection" for a type of drug called "biologics".

Sound dry and bureaucratic? Maybe, if you're healthy. But not if you're fighting cancer and need a biologic drug like Retuxin, or have kidney failure and require Epogen. In fact, whether Congress agrees to a little-noticed but important provision in the President's budget could have a big impact on health and safety.

Let's back up. Biologics are drugs made from living organisms, and treat a wide array of conditions, including cancer.

These drugs are different from chemical-based prescription drugs like Lipitor or Vicodin, from which exact copies -- generics -- can be made. By contrast, it's not possible to make an exact replica of a biologic (after all, no two living things are perfectly identical). The imitator version of a biologic is called a "biosimilar."

Under the Patient Protection and Affordable Care Act, the pharmaceutical companies that make biologics get "data exclusivity" for twelve years. That means that makers of generic drugs can't use the original clinical trial data to seek FDA approval of their imitator biologic (called "biosimilars"). A provision in the 2012 budget would reduce that nearly by half, to seven years.

Who cares, and what are the benefits of longer data exclusivity versus shorter? Longer data exclusivity means that the original drug maker has a corner on the market, and can charge higher drug prices; the biosimilar maker, who didn't have to spend billions on the original innovation, can always offer the product at a lower cost.

Sounds easy, right? Let's simply eliminate "data exclusivity" all together -- set it at zero -- and cut healthcare costs! Or, at least, let's cut the data exclusivity period nearly in half, like the 2012 budget proposes!

Not so fast.

First, there's the question of safety. Keep in mind that a biosimilar, at most, will be "highly similar" to the original biologic but never the same. If it's being prescribed for the same condition, you can bet that you'll want to know it's been tested as equally safe and effective. Some reference to the original data may be permissible, but it is inappropriate for the FDA to rely solely on data from the original creator to approve its biosimilar, which won't be the same.

Second, there's the very logical question of incentive. Did that drug help save a life? Great; it wouldn't have been created at all without free-market incentives -- and nobody should begrudge the original drugmaker, who invested billions in developing the drug, from recouping their expenses and turning a profit. Remove data exclusivity, and you've got no incentive for new, life-saving drugs.

But third, those incentives have to be limited in some respect to eventually make drugs like biologics affordable. A 50-year period of data exclusivity might seem like a great incentive, but there have to be some limits so that biosimilar drugmakers can eventually enter the market, offering lower-priced drugs and saving lives. So data exclusivity shouldn't be indefinite: some limitation makes drugs affordable and helps save lives.

So what's the right length for data exclusivity? The current law says innovator drug makers have twelve years; in the European Union, it's ten; and the Administration's 2012 budget proposes seven. Who's right?

To some degree, it's a bit arbitrary -- why twelve years, not eleven or thirteen? -- but the existing twelve-year approach, reflecting Congressional intent, is probably in the right range. First, if we assume that drugmakers need to recoup their costs, forcing them to do so within seven years could nearly double the price of biologics in that period.

Second, the budget proposal would force companies that develop innovative drugs to share their data with competitors. Already, several drug firms have found it is more lucrative to 'copy' existing drugs than to innovate. Our medical system should be "innovative, not imitative" -- and seven years is a pretty quick turn-around.

Third, there's the important question of safety. Biologics raise safety considerations beyond those of chemical drugs, and even a slight change in the biological composition can be significant. The longer data exclusivity period will help ensure that biosimilar makers are held to the same standards of safety and efficacy as the original drug maker.

Biologics -- and their imitative versions, biosimilars -- are exciting new developments in the world of health care. But it's important to balance safety, cost and innovation incentives correctly. It's reasonable to be concerned that cutting the current period of data exclusivity nearly in half may throw that carefully crafted balance out of whack.