Biogenerics: Not Yet a Reality in the U.S.

Biologic products grew at an average clip of 17% over the past two years, a growth higher than any other sub-sector within the pharmaceutical industry. There are many biologics in the approval pipeline and it has been projected that 50% of drugs approved for the marketplace in 2010 will be the result of biotechnology. Biologic medicines, manufactured from complex living cells, provide some of the most effective treatment options for serious diseases like cancer and diabetes, but are prohibitively expensive. Biogenerics (generic versions of biologics) can bring down the cost of biologics. However, there is no regulatory process for approving biogenerics.

A biologic to treat colon cancer costs $100,000 a year. There would be a substantial economic benefit - estimated savings of at least $43.2 billion between 2011-2020 - if Congress creates a new path, similar to the Hatch-Waxman Act (a landmark law enacted in 1984 that gave birth to generic drug industry) for the approval of biogenerics. The absence of such a regulatory approval process for biogenerics prevents competition that would lower biologic drug costs.

The top players in the biogeneric industry are Teva Pharmaceutical (TEVA), Novartis' Sandoz (NVS), Barr Pharmaceutical's Pliva (BRL) and Hospira Inc. (HSP). The companies particularly susceptible to potential competition would be Amgen Inc. (AMGN) and Genentech Inc. (DNA). A substantial number of patents on biotech therapies have expired or are due to expire over the next 4-5 years in the US market. Patent for Biogen's Avonex (2006 sales: $1Bn) expired in 2003, Eli Lilly's Humatrope ($390M) expired in 2003, Genentech's Humulin ($1Bn) expired in 2004, while the blockbuster anemia drug - Amgen's Epogen ($2.5 Bn) is set to expire in 2012. Thus, it is imperative that several players are raring to enter the field.

A Biogenerics Bill

Biologics Price Competition and Innovation bill, drafted by Rep. Henry Waxman and supported by political leaders like Senators Hillary Clinton and Charles Schumer was cleared by the Senate in June 2007 but faced slow progress in Congress and ultimately failed to be attached to the Prescription Drug User Fee Act [PDUFA] reauthorization bill. The law governing approval of biogenerics could possibly be postponed until after the 2008 Presidential elections. The rising pressure to contain healthcare costs (Sicko is being screened free in many cities during the holidays), the prevailing Democrat control of both houses and the approval of biogenerics in Europe are likely to ensure that biogenerics become a reality in the US.

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