Biogenerics Get A Low Score From CBO, But Is BIO Actually The Loser?
The reaction of stakeholders to the Congressional Budget Office's score of potential savings from follow-on biologics illustrates the challenges for the various players as debate on legislation continues.
CBO's assessment is that follow-on biologics would save the federal government a modest $5.9 billion over 10 years - a figure that is most likely too small to re-energize negotiations this year. 1CBO's report was released June 25, almost exactly a year after the mark-up of the bill that it analyzes, S. 1695.
That legislation, which cleared the Senate Health Committee June 27, 2007, would give innovator biologics 12 years of exclusivity and give FDA broad authority to approve follow-on products based on limited data (2"The Pink Sheet," July 2, 2007, p. 3).
Immediately after the 2007 mark-up, the brand and generic associations issued statements which were similarly guarded in tone. Both the Biotechnology Industry Organization and the Generic Pharmaceutical Association each criticized multiple elements of the bill, while supporting the idea of a pathway.
BIO headlined its release "Leading Biotechnology Organizations Praise Effort and Express Concerns with New Follow-on Biologics Proposal."
GPhA said, "We commend the extraordinary efforts of the Committee to craft a long-overdue pathway for safe and effective biogenerics. However, we must underscore that changes to the underlying bill must be made in order to ensure that this bill achieves the very real potential of this legislation."
What A Difference A Year Makes
A year later, however, the rhetoric from the two sides is quite divergent, and BIO - which now almost sounds like a consumer advocacy group with its focus on the cost of medicines - is essentially endorsing the bill.
BIO President Jim Greenwood said in a June 25 statement that CBO's "report finds that most of the savings will be obtained several years after a follow-on pathway is established, reinforcing the need for Congress to develop and pass a responsible pathway this year that protects patient safety and preserves innovation. We are essentially leaving money on the table the longer we wait to implement a pathway."
"By relying on the provisions in S. 1695, the CBO study also shows that we can achieve meaningful cost savings in biologics spending while providing needed protections to allow for continued innovation," Greenwood continued.
In a statement released June 26, Sen. Orrin Hatch, R-Utah, echoed BIO's money-saving theme. "The savings outlined in the CBO cost estimate underscores the absolute need to pass S. 1695. It is essential that the Congress consider this important legislation before adjourning for the year," he said. Hatch is one of the co-sponsors of the legislation, along with Sens. Mike Enzi, R-Wyo., Edward Kennedy, D-Mass., and Hillary Clinton, D-N.Y.
GPhA's June 25 statement, on the other hand, continues its arms-length approach to the bill. "We are pleased that CBO agrees that significant savings will be achieved by bringing biogeneric medicines to consumers and that even greater savings will result from removing harmful barriers to access, including brand evergreening and unprecedented market exclusivity provisions," the statement from President Kathleen Jaeger reads.
"We look forward to continuing to work with Congress on legislation that will bring affordable life-saving biogenerics to patients without needless barriers to access that will last for years to come."
Awaiting The Fighting 111th Congress
The evolution of the two sides' talking points probably reflects how they view the future of prospects of the legislation to create a follow-on pathway. The low score does not give Congress much incentive to consider the legislation this year, and the dynamics of the next Congress - with Democrats expected to gain seats and perhaps even the White House - favor generic companies.
That change in landscape - and the fact that CBO thinks the current bill would not create a terribly robust follow-on market - may be why BIO seems eager to get legislation passed now. However, the next election cycle will not instantly create the conditions conducive to more generic-friendly legislation.
For one, the configuration of the House Commerce Committee, which has not marked up a bill, seems unlikely to change much. Chairman John Dingell, D-Mich., seems openly hostile to the idea of giving FDA more discretion in any oversight area (3"The Pink Sheet," Feb. 25, 2008, p. 4). And Rep. Anna Eshoo, D-Calif., is sponsoring legislation endorsed by BIO (4"The Pink Sheet" June 9, 2008, p. 29).
Second, there is no obvious vehicle for moving such a weighty bill. Depending on the outcome of the election, next year may see a debate on health reform, and the savings from a pathway, however meager, might be attractive for those seeking ways to pay for more universal health insurance. (CBO pegs the total savings from follow-ons over the next decade at "roughly 0.5 percent of national spending on prescription drugs, valued at wholesale prices.")
Beyond any possible health insurance legislation, the next most obvious route for a follow-on pathway would be through the renewal of the user fee program in 2012.
But even there, the current fundamentals may apply, in which advocates for follow-ons must convince Congress that a pathway is worth creating and is not unnecessarily risky. The low score from CBO doesn't help that case, but it may help the cause, allowing advocates to argue that a stronger bill is needed to achieve more meaningful savings.
Backers of follow-on biologics would like a bill with less exclusivity than the Senate offers and stronger limits on the ability of innovators to "evergreen" their products.
The prospect of evergreening seems to have especially colored CBO's thinking about the impact of follow-on biologics. "CBO anticipates that such a scenario could allow an innovator company to limit the size of the market available to a competing FOB primarily through efforts to switch patients from its original 'reference product.'"
"Beyond the 2009-2018 period, the potential for innovator companies to modify existing product lines could become an increasingly significant constraint on the ability of FOBs to compete," CBO states.
CBO Sees Relatively Low Prices, But Limited Use
CBO's estimate of $5.9 billion in savings ($6.6 billion if increased tax revenues are included) is at the low end of previous estimates.
The figure is higher than an analysis released last year by Avalere Health, which put savings at around $3.6 billion over 10 years (5"The Pink Sheet," March 29, 2007, p. 18). But it is far lower than a projection by the Pharmaceutical Care Management Association. The pharmacy benefits management trade group predicts that follow-on biologics could save Medicare Part B alone $14 billion over 10 years (6"The Pink Sheet" Jan. 8, 2007, p. 5).
CBO's estimate is especially low at the outset: during the first five years of availability, follow-on biologics are projected to save $46 million for the federal government.
The difference among various projections largely arises from assumptions made in gauging the acceptance of follow-ons in the market.
CBO estimates that "during the first year of FOB competition, the market share of a FOB would be about 10 percent. By the fourth year, we estimate that the sales-weighted average market share would increase to about 35 percent."
In contrast, the PBM Express Scripts used a substitution rate of 83.4 percent in its projections on the issue (7"The Pink Sheet," Feb. 19, 2007, p. 3). Express Scripts projected nearly three times more in the total savings than CBO did - $70 billion in total health care expenditures compared to CBO's $25 billion over 10 years (combined federal and other savings).
CBO's market penetration estimate was based on experience in what it terms "similar markets" - "complex small molecule drugs with narrow therapeutic indexes, human growth hormone products, and FOBs recently marketed in the European Union." Express Scripts used its actual generic fill rate.
Express Scripts actually foresees higher prices for follow-ons than CBO does. The pharmacy benefit manager estimated 25 percent savings. CBO projects that "during the first year of competition, the sales-weighted market average discount on FOBs relative to brand-name innovator drugs would be about 20 percent, reaching 25 percent in the most competitive markets. By the fourth year of competition, we anticipate that the sales-weighted average discount of the FOB relative to the brand-name price would reach about 40 percent."
- M. Nielsen Hobbs
This article is reprinted from "The Pink Sheet" – June 30, 2008
