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Generic Drugs Fight Uphill Battle in Washington

In the battle between generic and branded biotech, the deck looks increasingly stacked against generics.

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The biopharma lobby demonstrated its influence in Washington on July 13 through the actions of the Senate Health, Education, Labor, and Pensions (HELP) Committee; the Committee voted 16 to 7 to amend broader health-care legislation to include 12 years of market exclusivity for novel biologics. Legislated exclusivity periods block generic competition regardless of the strength of the innovator's patents. The vote favored branded biopharma manufacturers, such as  Amgen (AMGN) and Roche (RHHBY), which could see more than a decade of protection from competing versions of their drugs if the amendment is enacted. The vote hurt leading generic drug manufacturers, such as  Teva (TEVA),  Mylan (MYL), and  Hospira (HSP), that have been building their biosimilar capabilities in anticipation of a legislative pathway in the U.S. Excessive exclusivity periods block consumer access to cheaper medicines as well.

No Compromise
The issue of exclusivity has been the most significant obstacle to creating a biosimilar pathway in the U.S. Aside from the obvious profit implications, either too much or too little branded protection could stymie future innovation. We had expected a compromise of between seven and 10 years. This was based on proposals from branded biopharma, which called for 12 to 14 years, and virtually every other relevant stakeholder, including the White House and Federal Trade Commission, which called for zero to seven. Within the existing system for small-molecule drugs, innovators get five years of market exclusivity for novel drugs and three years for modifications, beyond which drugmakers depend on the strength of their patents. Generic drug firms routinely challenge and often knock down weak pharmaceutical patents.

Brian Laegeler has a position in the following securities mentioned above: JNJ. Find out about Morningstar’s editorial policies.