On November 21, 2008 the Federal Trade Commission (FTC) held a roundtable focused on the competitive aspects of a new abbreviated regulatory approval pathway for follow-on biologic drugs (sometimes called “biosimilars”). Many observers expect Congress to take up this issue in its next term, and the FTC is seeking to contribute to the policy process, focusing on the “non-FDA economic issues.” Biologics are products created from living cells, tissues and organisms through biologic processes, including modern biotechnology. They typically are very complex in structure, are often referred to as “large molecule” drugs, and they have their own unique FDA approval process dating back to 1902. In the United States, there is no regulatory pathway for follow-on biologics (FOBs) to enter the market via abbreviated applications, as there has been since 1984 for “generic” versions of non-biologic, or “small molecule,” drugs. Second and subsequent companies are permitted now to conduct their own testing of their own biologic products and seek FDA approval of biologics license applications (BLAs), subject to patent rights of other companies and third parties, such as universities, that hold a sizeable share of the patents granted in the biotech sector.  

A key issue at the roundtable was how Congress, in establishing an abbreviated approval process for follow-on biologics, might strike the right balance in designing exclusivity periods intended to incentivize development, facilitate price competition through market entry of products from the generic drug sector, and stimulate new and improved drug development. The present Hatch- Waxman scheme which governs non-biologic generic drug products offers one approach. Under the Hatch-Waxman framework, exclusivity periods provide innovator drug companies some insulation from competition, separate from patent protection. In addition, the first generic drug applicants to challenge innovator patents are eligible for a 180-day exclusivity period. But, as noted, Hatch-Waxman does not apply to the development of biologics, and there is currently no formal legal or regulatory pathway in the United States to approve FOBs (except for insulin, human growth hormone, and a few other product classes that have been approved under FDA’s main newdrug regulatory scheme). Moreover, Hatch-Waxman has not been without controversy. Critics have decried the vast amount of litigation spawned by the law, particularly stemming from the 180-day generic exclusivity clause.  

The FTC roundtable focused on the following topics:  

  •  Likely market effects of follow-on biologic drug competition
  •  European Union (EU) experience with biologics  
  • Biotechnology patent issues including any differences between biotechnology patents and small molecule patents  
  •  Likely competitive effects of follow-on biologic regulatory incentives such as Hatch- Waxman-like exclusivity periods for FOBs  
  •  Patent dispute resolution processes, including lessons that have been learned in the Hatch-Waxman context  

Hogan & Hartson partner Linda Horton participated in the panel discussion on the EU experience with biologics. As requested by FTC staff, Linda’s presentation focused upon (1) the exclusivity periods provided in EU legislation and (2) the law and policies at EU and national levels dealing with the interchangeability and substitutability of a biosimilar for the reference product. Her presentation is posted on the FTC website or available from her directly, upon request.  

The public comments submitted in response to the FTC’s workshop notice addressed the issues listed above and highlight the diversity of viewpoints at play. The docket remains open to additional comments until December 20. The FTC will make a transcript of the workshop available on its website.  

The roundtable is not the first indication that the FTC has a keen interest in the regulation of FOBs. Commissioner Harbour has given two speeches on the topic, and in May 2008 the FTC provided a letter response to a request from the House of Representatives Energy and Commerce Committee Subcommittee on Health for views on how to establish a regulatory approval process for FOBs. For a number of years, federal legislators have considered creating an approval mechanism that parallels the Hatch-Waxman Act for biologics, and, as noted earlier, it is widely believed that the next Congress will pass, and our new President will sign into law, legislation creating a U.S. pathway for FOBs. The Commission’s letter focused on the lessons it believes can be learned from the application of the Hatch-Waxman Act to small molecule drugs. The FTC supported the general idea of an abbreviated approval process for FOBs as competition-enhancing, but warned against a scheme that could result in “unintended consequences” that might limit these benefits. By way of example, the agency discussed several situations where companies have abused the generic drug approval system. Specifically, the letter warned of  

  •  “exclusion payment” or “reverse payment” patent settlements
  •  the danger that marketing exclusivity for the first FOB for a particular drug could create a bottleneck
  • “gaming” of the system, including misusing the citizen petition process to delay generic approval and limiting generic entry by making a minor, non-clinically significant change to a branded product  

FTC staff asked a few questions on these topics during the roundtable but did not particularly focus on them. Although Commissioner Harbour had expressed similar concerns in her speeches, noting not only problems with the implementation of the Hatch-Waxman Act, she added that “it would be incorrect to assume that Hatch-Waxman can simply be imported from the pharmaceutical realm to biologics. There are too many critical differences.” The FTC plans to issue a report in spring 2009 analyzing the potential impacts of FOBs on the marketplace.