Consider this: your friend is an excellent baker, the mastermind behind one of the best chocolate chip cookies you have ever tasted. His cookies are delicious, and are in high demand, with orders coming in daily. So many orders, in fact, that he is unable to fulfill them as quickly as they come in. Market forces prevail and as demand escalates and supply falls, prices rise sharply. You offer to help with supply to ensure that all have access to such a delicacy, and proceed to bake a cookie that you believe to be on par with the cookies created by your culinary companion. To market your product as equal, however, you need to taste test his cookies against yours. Understanding that his product is in high demand, you offer to pay the fair market value for his cookies, an offer your friend declines. As a result, you are unable to sell your product, and customers must continue to pay a high market cost for access to a cookie.
If this seems like a silly, trivial situation, it is. But, consider the same situation, only now instead of baked goods, insert a high cost biologic branded product. The situation becomes not so trite, but rather concerning as it limits the ability of patients to have access to the treatments that they need.
Biologics are highly complex drugs produced from living organisms, treating some of the most common yet difficult-to-treat diseases. Some of these drugs are in high-demand, and many are costly. While biologics are very expensive and take a long time to develop, in many cases more than 10 years and several hundreds of millions of dollars, the brand company is given 12 years to recoup the costs of that investment which typically far exceeds the cost of development. For example, Humira, a biologic approved in 2003, has generated more than $95 billion of sales through 2016. It is critical to innovation that biotechnology companies reap the rewards of a very high-risk long term investment; however, following the expiry of patents and data exclusivity periods policies should support the immediate entry of biosimilars that will increase competition and expand access to patients.
Biosimilars are based on a given biologic branded product. As with a biologic, a biosimilar is highly complex, produced from a living organism, and is meant to be as safe and as effective as a biologic branded product. In some instances, biosimilars can cost less than their branded counterpart. In nearly all cases biosimilars expand access to treatment options, meaning increased competition. This increased competition often leads to lower costs across the healthcare system, while simultaneously increasing patient access.
To create competition in the marketplace, a biosimilar producer must have access to a branded product sample to complete necessary similarity testing and/or clinical trials as required by the Food and Drug Administration and other global regulators. These studies are important and must be completed to ensure biosimilarity, safety and efficacy. Some branded product producers, however, are limiting access to product samples, effectively delaying and potentially blocking the ability of a biosimilar to reach the market and ultimately patients. Specifically, these producers may instruct distributors to limit biosimilars producers access to branded product samples.
As rationale for this action, many branded product producers cite specific safety standards and protections for their products, known as Risk Evaluation and Mitigation Strategies (REMS). Per these branded product producers, their product is complex and should be carefully distributed to limit abuse or misuse, and as such these producers limit access to biosimilar developers. Thus, a biosimilar developer is unable to conduct the required comparison studies of their biosimilar to a biologic branded product, much like in the scenario detailed above. Without comparison, approval cannot occur and therefore the branded biologic producer continues to maintain a market monopoly which is not good for competition or patients. Further, this is a direct violation of Federal Trade Commission rules, which has said that such a practice is anticompetitive.
Unfortunately, this practice is commonplace. To ensure patients have access to essential treatment options, we must ensure that REMS regulations are not overbearing. As designed, these regulations are meant to protect consumers, however as executed, they currently stand to stymie competition and limit the cost savings offered by biosimilars. In fact, a 2014 study from Matrix Global Advisors found that for every $1 billion in biologic sales, there is a loss of $140 billion for the biosimilars held back by REMS. While warranted in some cases, providing a biosimilar developer with a branded biologic for comparison studies is a safe distribution of product. By neglecting to do so, the branded product producer is abusing the system.
Soon, FDA Commissioner Scott Gottlieb is set to announce a plan to drive pharmaceutical competition. Part of this plan is expected to include a reform of the current REMS regulations, ensuring that companies cannot abuse the system to create a monopoly. This is an important step in creating a more robust marketplace for biosimilars competition and we applaud the FDA for taking this important step, but more must be done.
Specifically, passage of the Creating and Restoring Equal Access to Equivalent Samples Act (H.R. 2212) is essential. This bill seeks to drive market competition for biosimilars and facilitate timely market entry for biosimilar and generic drugs. Specifically, the bill requires the branded product producer to provide samples in a timely manner to a biosimilar or generic developer for testing when not subject to REMS regulation. When a product is subject to REMS regulation, the FDA can authorize the branded product producer to provide product samples. Importantly, the bill also states that the branded product must provide the sample to the biosimilar developer at a fair market price, prohibiting unnecessary and potentially debilitating costs for the biosimilar developer.
Biosimilars, as well as generics, are a vital part of increasing patient access to essential medicines while ensuring that positive market forces lead to innovation and reasonable costs across the system. We commend Gottlieb and the FDA for taking necessary measures to ensure increased competition and encourage Congress to follow with the passage of the CREATES Act.
Patrick Lucy is the interim CEO, president, secretary, and a member of the founding team of Pfenex Inc., a clinical stage biotechnology company in San Diego, Calif.
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