Rx Minute: Sustaining Biologics R&D; Potential Impact of FOB Legislation

Rx Minute: Sustaining Biologics R&D; Potential Impact of FOB Legislation

Sustaining Biologics R&D; Potential Impact of FOB Legislation

A March 2009 report by Deloitte, examines the incentives needed to sustain the discovery of new biologics that should be considered in establishing an abbreviated pathway for approval of follow-on biologics. The report emphasizes that today’s biotechnology sector is very different than the pharmaceutical sector of 1983, the year before the Hatch-Waxman (H-W) Act creating an abbreviated pathway for generic pharmaceuticals was passed. Unlike the pharmaceutical industry in the early 1980s, the biotechnology industry today is young, more fragmented and much more heavily reliant on venture capital (VC).

These differences make the biotech industry much more sensitive to financial disruption. Higher risks and lower returns could force VC firms to change their investing patterns, likely driving development overseas or reducing investment in the early, risky stages of research.

Another difference between the industries is in the complexity of the products themselves. Biologics are so large and complex that patents often do not cover the entire molecule or cover just the process for making the molecule. In many cases the patent would offer little protection and data exclusivity may be the means to providing the needed incentives.

The report concludes that to increase competition and foster continued medical innovation, Congress should consider different intellectual property policies for biologics today than were applied to pharmaceuticals in 1983. They caution that with reduced incentives “we would likely never know which promising compounds had gone undeveloped, and which medical breakthroughs had not been brought to market.”

Cost of Medicare Drug Coverage Substantially Offset by Lower Overall Spending

A recent study published in the New England Journal of Medicine found that the Medicare prescription drug benefit (Part D) increased the use of prescription drugs among enrollees who previously had either no drug coverage or modest benefits, but the cost of the increased use was offset by decreases in other medical spending for patients who previously had limited coverage.

The study tracked prescription drugs and other medical spending two years before Part D and two years after the program’s implementation in four groups of elderly beneficiaries: those who consistently had no cap on drug coverage, those who had no previous drug coverage, and those who had a $150 or $350 quarterly cap before they were covered by Part D. After 2 years of the program, enrollees who previously had no drug coverage had increased their monthly drug spending by $41, as compared with those with no cap, but that was roughly offset by a decrease of $33 in their monthly medical spending. Similarly, those who previously had a $150 quarterly cap on drug spending increased their drug spending by $27, which was offset by a decrease of $46 in their medical spending. Enrollees with a previous $350 quarterly cap spent slightly more on both medicines and other medical services.

The study also found an increase in the number of prescriptions filled for managing high cholesterol and diabetes among all intervention groups, leading the authors to conclude that the offsetting reduction in medical spending was probably due to improved medication adherence among enrollees with chronic conditions.

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