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Twelve Years, or Fewer? Two Current Debates on the Exclusivity Period for Biologics

The exclusivity period for biologic drugs has recently become a hot topic in both domestic and foreign policy. With biosimilar manufacturers poised to enter the U.S. market this year, lawmakers are discussing the length of non-patent exclusivity for marketed biologics. At home, the Obama administration’s latest budget proposes reducing the exclusivity period to seven years, down from its current 12. Abroad, the exclusivity period for biologics has developed into a sticking point in negotiations over the Trans-Pacific Partnership.

Under current law, the Affordable Care Act provides 12 years of exclusivity from biosimilar competition for biologic drugs. During this period, biosimilar manufacturers cannot be approved to sell biosimilars of FDA-approved biologics. The Affordable Care Act, which the President signed into law in 2010, provides this 12-year term in return for the use of the pre-clinical and clinical data developed for the FDA-approved biologics. This data enables biosimilar manufacturers to secure regulatory approval for their products with less than a full complement of pre-clinical and clinical data thereby greatly reducing the cost and time needed to develop these complex drugs.

In its FY 2016 budget, the Obama administration has proposed reducing the exclusivity period from its current 12-year term down to seven years. It has also proposed prohibiting additional periods of exclusivity arising from certain changes to product formulations. According to the administration, these proposals will “increase access to generic drugs and biologics by stopping companies from entering into anti-competitive deals intended to block consumer access to safe and effective generics.” Additionally, it claims that these proposals will save the government $16 billion over 10 years, including savings in Medicare and Medicaid.

This is not the first time that the Obama administration has sought to reduce the 12-year exclusivity period for biologics provided in the Affordable Care Act. Since 2011, the administration’s budget has consistently included a proposal to reduce the term to seven years. Past proposals – thus far, all unsuccessful – have proved polarizing. While consumer groups support a shorter term due to the potential for lower prices, industry organizations have argued that it will discourage biotech innovation.

Meanwhile, the biologics exclusivity period has become a potential stumbling block in the latest round of negotiations over the Trans-Pacific Partnership, or TPP. The TPP is a proposed free trade agreement among a dozen Pacific Rim nations, including the United States, Japan, and Australia. Some of the TPP countries currently offer no regulatory data or market protection for biologics, and none of them provides for as long of an exclusivity period as the U.S. does. U.S. negotiators have been pushing for the TPP to protect biologics from biosimilar competition for 12 years, as required under U.S. law. However, they have met stiff resistance. At a January hearing on the progress of the TPP talks, U.S. Trade Representative Michael Froman indicated that the demand for a 12-year term has become “one of the most difficult outstanding issues in the negotiations.”

Much like the budget proposal to reduce the exclusivity period, the administration’s TPP negotiation stance has been lauded by some and drawn fire from others. Senator Orrin Hatch, chairman of the Senate Finance Committee, has been a strong supporter of a 12-year term for the TPP, citing concerns about whether biotech innovators can stay competitive without protection from biosimilar drugs. AARP and Doctors Without Borders, on the other hand, have advocated a shorter term, which they say will lower prices and increase access to medicine.

The Obama administration’s latest proposal for a 7-year term is expected to fare no better than the administration’s prior proposals. As to a TPP deal, 12-years of exclusivity is the law in the U.S. and there remains strong bipartisan support for the 12-year term.

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