Follow-On Biologics: Economic, Innovation and Policy Reflections The Fuqua School of Business Duke University

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Follow-On Biologics Economic, Innovation and
Policy Reflections The Fuqua School of
BusinessDuke University

• November 6-7, 2008

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Charles DiLiberti

• V.P. Global Pharmacokinetics
• and Bioequivalence,
• Barr Laboratories, Inc.

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Commercial Opportunities and Challenges for
Follow-on Biologics
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Presentation Overview

• Generic Biologics
• Commercial Opportunities Savings
• Science Technology Challenges
• Regulatory Intellectual Property Issues
• Summary

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Commercial Opportunities Savings
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Benefits of Generic Competition

• Significant Cost Saving Opportunities
• Savings for consumers and taxpayers
• Generic Competition Will Fuel Innovation
• Brand companies will have the incentive needed to
  vigorously pursue new biologics

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Increasing Significance of Biologic Products

• US Biologic Revenues
• 1997 17.4 Billion
• 2007 65.2 Billion
• 400 Biologics Vaccines Currently in Clinical
  Trials Targeting gt200 Diseases
• Between 2003 and 2006, biologics represented 24
  of all new chemical entities approved by the
  US
• Sales of biotech products in the US showed an
  annual growth rate of 20 between 2001 and 2006
  compared with 6 to 8 in the pharmaceutical
  market

Ernst Young Biotechnology Industry
Organization Journal of American Medical
Association, October 22, 2008
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High Cost of Brand Biologics

• Annual Cost per Patient
• Enbrel (Arthritis) 20,000
• Cerezyme (Gaucher Disease) 200,000
• Remicade (Arthritis) 35,000-66,000
• Generic Competition Will
• Reduce These Costs

Baltimore Sun January 28, 2007 Bloomberg
January 11, 2007 Philadelphia Inquirer
September 19, 2006
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Significant Cost Savings Opportunity
Generic Biologics Represent Significant Cost
Savings Opportunities and Stimulate Innovation

• Epogen
• Market Before Generic Launch 2.5 Billion
• Brand/Year Today 9,000
• Generic Savings/Year assuming 50 savings 4,500

• Enbrel
• Market Before Generic Launch 2.7 Billion
• Brand/Year Today 20,000
• Generic Savings/Year assuming 50 savings
  10,000

ABN AMRO February 2008 National Journal
February 10, 2007 Baltimore Sun January 28,
2007
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Generic Competition

• Price Drops as Number of Manufacturers Increases

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Market Size for Select Biologic Products
Product 2006 Sales ( Millions) Patent Expiration
Aranesp (Darbapotein alfa) 2,790 2016
Enbrel (Etanercept) 2,736 2012
Epogen (Epotein alfa) 2,511 2004
Remicade (Infliximab) 2,355 2013
Rituxan (Rituximab) 2,071 2013
Eprex (Ortho Biotech) 2,064 2004
Avastin (Bevacizumab) 1,746 2019
Rebetron (Ribavirin Interferonalfa-2B) 1,361 2001
Lantus (Insulin glargine) 1,260 2015
Source ABN AMRO February 2008
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Market Size for Select Biologic Products
Product 2006 Sales ( Millions) Patent Expiration
Humira (Adalimumab) 1,176 2013
Avonex (Interferon beta-1a) 1,022 2003
Cerezyme (Imiglucerase) 1,007 2010
Neupogen (Filgrastim) 830 2013
Humalog (Insulin lispro) 811 2013
Ceredase (alglucerase) 537 2001
Rebif (Interferon beta-1a) 493 2005
Neulasta (Pegfilgrastim) 493 2015
Source ABN AMRO February 2008
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PerspectiveHistorical Growth in Substitution
Source IMS Health, Banc of America Securities
LLC estimates
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Generic BiologicsOpportunity

• Generic Pharmaceuticals - A Vital Part in Health
  Care System
• Approximately 67 of the Prescriptions Dispensed
  in the US Are Generics
• Biologics
• Worldwide Market Estimated around 75 Billion
• Per Patient Cost for Biologic Products Can Exceed
  100,000 Per Year
• Generic Biologics
• US Consumers Could Save 43 Billion Between 2011
  and 2020
• Estimated Value of Biologics that have already
  lost Patent Protection 10 Billion
• Estimated Value of Biologics to lose Patent
  Protection in the Next Ten Years 20 Billion

IMS Health Citizens Against Government Waste
(CAGW) Release, May 2, 2007 ABN AMRO February
2008
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Science Technology Challenges
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Scientific Challenges for Generic Biologics

• Characterization
• Safety Assessment
• Therapeutic Equivalence
• Manufacturing Controls

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Generic Biologics

• Generic biologics, sometimes called follow-on
  biologics (FOBs), are protein products that are
  pharmaceutically and therapeutically equivalent
• Generic biologics do not utilize the reference
  products proprietary process, specifications or
  clinical data
• For established products, therapeutic equivalence
  can be demonstrated using
• In vitro studies and/or
• Pharmacokinetics and/or
• Surrogate markers and/or
• Clinical outcomes
• depending on the characteristics of the protein

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Biologics ? Size Does Matter...
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Misinformation Campaign About Generic Biologics

• Myth
• Raw materials of biologic origin are hard to
  source and only brand biotechs know where to find
  them.
• Reality
• Raw materials are available today for many
  generic biologics including insulin, G-CSF,
  erythropoietin, interferons, etc.

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Misinformation Campaign About Generic Biologics

• Myth
• Biologics are too complicated to be
  characterized.
• Reality
• Numerous highly sophisticated analytical methods
  have been developed, permitting complete
  characterization. More advances will be achieved
  each year.

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Misinformation Campaign About Generic Biologics

• Myth
• Generic companies lack the medical, scientific,
  and technical ability to produce safe and
  effective biotech products.
• Reality
• Generic companies can and do make safe and
  effective biologics. Many safe and effective
  biologics currently are made in controlled
  environments and marketed by generic companies
  outside the U.S.

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Generic Biologics (Biosimilars) in the EU

• The ability to make generic biologics is far from
  a theoretical possibility.
• In 2004 EU issued EMEA Draft Guidelines for four
  classes of generic biologics, referred to as
  biosimiliars in the EU.
• Since 2004, the EU has approved several
  biosimilar products.

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EU Biosimilar Approvals

• DRUG EU MARKET
  AUTHORIZATION DATE
• Sandozs Omnitrope (somatropin) April 12,
  2006
• BioPartners Valtropin (somatropin) April
  24, 2006
• Sandozs Binocrit
• Medices Abseamed
• Hexal Biotechs Epoetin alfa Hexal
  (recombinant human erythropoietin alfa) August
  28, 2007
• Stada Arzneimittels Silapo
• Hospiras Retacrit
• (epoetin zeta) December 18, 2007
• Tevas Tevagrastim
• Ratiopharms Ratiograstim
• Ratiopharms Filgrastim ratiopharm
• CT Arzneimittels Biograstim
• (human G-CSF) September 15, 2008
• current through September 25, 2008

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FDA Approves Sandozs Omnitrope

• There has been some movement in the US to approve
  generic biologics.
• FDA approved Omnitrope in May 2006.
• FDA stated, however, that this approval does not
  create a pathway for all generic biologics.
  Omnitrope referenced a brand product (Genotropin)
  approved under the FDCA.

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Misinformation Campaign About Generic Biologics

• Myth
• The Product is the Process.
• Reality
• Old models and mantras are inhibiting progress
  the product is no longer the process.
  (Statement of Mathias Hukkelhoven, Ph.D., Senior
  V.P., Global Head, Drug Regulatory Affairs,
  Novartis, Sept. 14-15, 2004).

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Misinformation Campaign About Generic Biologics

• Reality (continued)
• Biotech products can be fully characterized and
  compared analytically.
• Biotech Firms routinely justify their own process
  changes via FDA approved comparability protocols.

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Development of Generic Biologics

• Strictly Controlled Process (Validated)
• Extensive Analytical Comparability
  (Characterization)
• Comparable Biological Activity
  (In Vitro/In Vivo)
• Non-Clinical Comparability (Safety,
  Immunogenicity...)
• Comparable pharmacokinetics (blood concentration
  profile)
• Comparable Clinical Efficacy and Safety

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Development Considerations

• Product Complexity
• From Development To Clinical
• Characterization
• Biosynthesis, In-Process and Finished Product
• Nomenclature
• Lack of Strict Definition, INN Issue
• High Cost of Development
• Marketing Requirements and Cost
• Post-Marketing Safety Surveillance
• IP Strength

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Regulatory Intellectual Property Issues
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Challenges for Generic Biologics

• Regulatory
• Congress needs to create an abbreviated approval
  pathway
• Intellectual Property
• Brand exclusivity
• Generic exclusivity
• Resolution of patent litigation prior to generic
  launch

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Regulatory Issues

• Regulatory Framework Complicated By Existence of
  Two Laws For Biologics
• FDCA for NDA Products
• PHSA for BLA Products
• NDA Products
• Generic Pathway Exits, But FDA Implementation Is
  Unclear
• BLA Products
• Three Issues Need To Be Resolved
• Mechanics of Approval Pathway Need To Be Defined
• Brand/Generic Exclusivity
• An Efficient Patent Dispute Resolution Mechanism

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Abbreviated Generic Pathway Under PHSA

• A Generic Pathway Should
• Give FDA Authority To Decide Approval
  Requirements For Generic Products
• Adopt Exclusivity Provisions No Greater Than
  Those Found In Hatch-Waxman
• Permit Pre-Launch Adjudication of Certain Patent
  Disputes

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Abbreviated Generic Pathway Under PHSA

• FDA should be permitted to decide what tests/data
  are necessary for approval as a comparable or
  interchangeable generic.
• Congress should not impose unnecessary barriers
  to generic approvals, e.g., mandatory guidance or
  rule-making requirements mandatory clinical
  trials requirement that generics seek approval
  for all approved brand uses.

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Abbreviated Generic Pathway Under PHSA

• Congress should carefully consider any new,
  additional exclusivities awarded to brand
  biologics.
• Considerable incentives already exist for brand
  biotech companies.

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Existing Incentives for Brand Biotech Companies
INCENTIVE
Patent Term Restoration Drug manufacturers get back up to 5 years of time lost to product testing and approval delays.
PTO Patent Restoration If the patent approval is delayed by PTOs fault, patentee gets back each day in excess of 3 years.
Orphan Drug Exclusivity 7 years of exclusivity for drugs treating rare diseases.
General Business RD Tax Credit Allows manufacturers to claim 20 of qualified spending in the U.S. above the base amount.
Puerto Rico Tax Credit Allows U.S. corporations to exempt 40 of income from business operations owned in P.R., U.S.V.I., etc.
Foreign Tax Credit Allows U.S. corporations to claim limited tax credit for taxes paid to foreign governments.
URAA Patent Term Restoration The Uruguay Rounds Agreement Act (URAA) gives drug companies a 20 year patent from the date it was filed (rather than 17 years from issue).
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Abbreviated Generic Pathway Under PHSA

• If Congress decides to give additional
  exclusivities to brand companies, Hatch-Waxman
  establishes the maximum length and number of
  exclusivities that can be justified
• - 5 years for truly new, innovative products
• - 3 years for certain improvements to
  already-approved brand products

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Abbreviated Generic Pathway Under PHSA

• Unlike the incentives that already exist to
  develop new brand biologics, no incentives exist
  to develop generic biologics.
• Generic biologics legislation should include an
  incentive, just as Hatch-Waxman does for small
  molecule drugs, for the development of generic
  biologics.

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Abbreviated Generic Pathway Under PHSA

• Effective generic biologics legislation will
  include a mechanism for expeditious resolution of
  patent disputes.
• Hatch-Waxman has shown that patent mechanisms can
  be abused to delay generic market entry.

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Abbreviated Generic Pathway Under PHSA

• Only those patent disputes that would cause the
  generic company to delay launch should be
  litigated simultaneously with the FDA approval
  process.
• Disputes over any other patent that the brand
  owns should wait until the generic company
  actually launches.

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Abbreviated Generic Pathway Under PHSA

• Such a process ensures that brand companies
  cannot use weak or suspect patents to delay
  generic market entry.
• At the same time, the process protects all
  legitimate patent rights it allows litigation
  over all patents, but controls when that
  litigation can start so that generic marketing
  isnt unduly delayed.

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Regulatory IssuesU.S. Proposed Legislation

• Negotiations Are Ongoing
• Much Momentum Gained in Debate
• Optimistic for Ultimate Resolution

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Summary
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Generic Biologics in US

• Significant Momentum in US Congress
• Failed to Pass in 2007-08 Session Likely to Be
  On Legislative Agenda in 2009
• Strong Consensus for Generic Biologics Among
  Payers, Consumer Groups
• Debate Centers On Three Issues
• Mechanics of Pathway
• How to Resolve IP Issues
• Exclusivity Issue

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Broad, Bipartisan Support for a Workable Pathway
for Generic Biologics
Groups in Support Groups in Support Groups in Opposition
Consumer Groups AARP AFL-CIO AFSCME California Public Employees Retirement System (CalPERS) Consumer Federation of America Consumers Union Families USA National Consumers League National Multiple Sclerosis Society (MS) National Research Center for Women Families National Organization for Rare Disorders (NORD) National Women's Health Network Pharmaceutical Care Management Public Citizen Service Employees International Union (SEIU) Spastic Paraplegia Foundation US Public Interest Research Group United Auto Workers (UAW) BIO PhRMA
Business Groups Caterpillar, Inc. DaimlerChrysler Corporation Eastman Kodak Company Ford Motor Company General Motors Corporation
Health Plans Aetna Inc. Americas Health Insurance Plans Blue Cross Blue Shield Association Humana Kaiser Permanente United Health Group Wellpoint
Pharmaceutical Stakeholders Apotex Ben Venue Barr Laboratories Caremark Express Scripts Generic Pharmaceutical Association (GPHA) Hospira Medco Momenta National Association of Chain Drug Stores National Association of Health Underwriters Pharmaceutical Care Management Association (PCMA) Ranbaxy Pharmaceuticals Sandoz Teva Pharmaceuticals USA Watson Pharmaceuticals Walgreens Company
State Governors Vermont Wisconsin Minnesota Kansas Montana Virginia West Virginia Mississippi Washington Nevada
State Governors
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