Yesterday's passage of comprehensive health reform no doubt opens a Pandora's box. And while legal challenges may eventually block its full implementation, an outright repeal is unlikely, which means many—if not most—provisions will remain in effect.
One such provision is the creation of a pathway for follow-on biologics ("FOBs", or generic biologics)—new versions of innovator products. For years, the industry has been at an impasse over data exclusivity and patent law.
A pathway now exists, for better or worse. Most likely better. Increased competition should benefit all parties: generic makers, payers, patients, and even innovators.
This morning, Steven Grossman of the HPS Group—and a veteran policy expert on the biopharmaceutical industry—posted an important article on his blog FDA Matters, which we've also published in our newsletter Perspectives. (Read here.)
The market was not waiting for the law to pass. Even though a legislatively-created FOB approval process was uncertain, Pfizer (PFE), Merck (MRK), Novartis (NVS), Teva (TEVA) and other major biopharmaceutical companies had already made decisions to be involved. Billions have already been spent or committed by companies before they knew the final FOB ground rules in the US.
More knowledge about the discovery, creation and manufacturing of biologics will be good for innovators, as much as imitators. Some of those biologically-similar products will themselves be innovative. As a result, many will require full approvals rather than being able to take advantage of an abbreviated FOB pathway.
Innovators will benefit from progress on characterizing biologic molecules, new testing methodologies and manufacturing improvements. To take a single example, the FOB market will force new investments in understanding immunogenicity that will benefit the entire industry, as well as patients.
The question now is, what's next?
Expect more dollars invested in biotechnology and specialty pharmacy, the high value-added supply chain for these products. (Winners could include Medco (MHS), CVS, Express-Scripts (ESRX), and Magellan Health Services (MGLN).)
Market movement won't occur overnight. It could take five years or more to gather momentum. It's not just product development cycles and legal challenges that affect this, but also supply chain imbalances.
That momentum will be substantial.
Mandated use of electronic health record and ICD-10 implementation will facilitate this momentum by enabling greater specificity in care delivery and establishing more efficient reimbursement.
Because personalized medicine cannot occur without a more competitive marketplace for biopharmaceutical products—and the FDA has been reluctant to approve follow-on products without a pathway—the creation of a pathway is essential to medicine's evolution, and therefore unlikely to be repealed.
Of course, this doesn't mean lawmakers won't alter its details, the 12-year exclusivity period or patent provisions.
Just the basic construction of a pathway should be enough to accelerate powerful market momentum.
Disclosure: No positions