Anti-Innovation Chorus Continues Over Biologics

A press release issued earlier today by the Pharmaceutical Care Management Association (PCMA) explained that a new article published in the New England Journal of Medicine (NEJM) urges Congress and the White House to revisit pending biogenerics legislation that would grant biotech companies an a 12-year exclusivity period for biologics. The press release explains that the experts, who are Harvard researchers and unidentified patent experts are adding “to an emerging consensus, including the Federal Trade Commission, which has concluded that 12 years of market exclusivity for biologics is unnecessary.” I suppose anyone can say anything in a press release. I am still troubled by the arrogance on display by PCMA though. Either they do not know what a “consensus” is, or they are simply intentionally misrepresenting the facts in order to further their own agenda. In either case it is appalling that the discourse relating to patents and exclusive rights has devolved to the point where the truth no longer matters and the masses are mislead by things that simply are not true.

First, lets put to rest the obviously fraudulent idea that there is a “consensus.” To do so let us actually define the word and try and interject at least some objectivity into the craziness of this debate.

Consensus [kuhn-sen-suhs] – majority of opinion; An opinion or position reached by a group as a whole; general agreement or concord; harmony.

Note to PCMA, when there are more people opposed to your point of view that does not create a “consensus.” Congress as a whole, both Republicans and Democrats, do not support this point of view.  Biotechnology companies, pharmaceutical companies and other innovators do not support this view.  This view is not supported within the patent community either.  So the fact that the FTC is pandering with an obviously incorrect and flawed report, and a few in Congress and a few former Congress members hold this view does not mean there is a consensus.  Additionally, and I know this is going to hurt and almost be heretical in the view of some, the fact that our beloved leader and Nobel Prize winning President has a certain view does not mean there is a consensus, it means he has an opinion, nothing more, and Presidents are allowed to be wrong in America.  President Obama is very wrong on this issue, proving the point.


PCMA touts the Federal Trade Commission Report that 0 years of exclusivity is plenty fine to encourage the massive investment (i.e., hundreds of billions of dollars) needed to bring biologics to the market. No one in their right mind could ever logically tie any intellectually honest argument to a report that reaches such an obviously flawed, irrational and ridiculous conclusion.  Nevertheless, PCMA is propping up their entire argument on 0 years of exclusivity being enough to encourage innovative companies to invest hundreds of billions of dollars so that others will be able to copy (i.e., steal) their work immediately. I guess a ridiculous conclusion that is echoed by a beloved President and researchers who would rather copy than innovate is supposed to be persuasive.  Sorry, it is not persuasive to me because I like to live in a fact based reality.

TO demonstrate the lengths that the anti-patent and anti-innovation crowd will go we need to look no further than the remarsk of PCMA President and CEO Mark Merritt:

Consumers, employers, and taxpayers would save hundreds of billions in health spending if expensive biotech drugs faced the same generic competition as traditional brand-name drugs. Giving biologics 12 years of monopoly pricing power is costly and unreasonable.

Lets take these statements one at a time. He is, of course, 100% correct when he says that consumers, employers and taxpayers would save hundreds of billions of dollars in health care costs if biologics, which are definitively NOT drugs by the way, encountered immediate competition. There is absolutely no disputing what Merritt says here. The problem is he is making this flawlessly correct statement to support a proposition that cannot logically be reached by the statement. The reason that hundreds of billions of dollars will be saved is because the biologics will not be made unless there is appropriate exclusivity provided. So if biologics are not made they cannot be purchased, and if they cannot be purchased then there is savings.

Second, when Merritt says giving 12 years of protection is “costly and unreasonable” he is wrong on the facts and is contradicting the FTC Report that he otherwise seems to want to rely on. The FTC Report explains:

FOB entry is likely in biologic drug markets of greater than $250 million. Only two or three FOB manufacturers are likely to attempt entry for a given pioneer drug product. These FOB entrants are unlikely to introduce their FOB products at price discounts any larger than between 10 and 30 percent of the pioneer products’ price.

So generic biologics can only be expected in lucrative markets, even in those markets we will still be dealing with oligopoly pricing and the savings will be as little as 10% and as much as 30%. If you want to rely on the FTC Report you really need to rely on predictions and not just the conclusions. This is becoming far more important in Washington, DC, these days because in several instances what is happening is the conclusions reached are not actually supported by the facts and predictions contained with reports. This is one case in point, another is with respect to SACGHS Final Report on Gene Patents. In this case the report concludes that 0 years of exclusivity for gene patents is plenty fine despite concluding that “patents covering genetic tests and related licensing practices do not appear to be causing wide or lasting barriers to patient access.” Do you see a pattern? No exclusivity or exceptionally short exclusivity compared with the investment required is appropriate despite there being NO evidence to suggest that patents bar access or the abolition of patents would promote significant savings.

What Merritt wants to say is that 12 years of exclusivity is overkill because generic biologics would save consumers, taxpayers and employers hundreds of billions of dollars.  He doesn’t actually say that, coming close to the conclusion and then allowing the reader to take the leap.  I suspect he doesn’t say this and reach that conclusion because he knows it is provably false and completely lacking in any factual support.

The reality is that it costs money to innovate.  Without money there will be very little innovation.  Sure, in some areas such as software there will be meager advances made by those who enjoy doing something for recreation or as a hobby without the need to be paid, but that is not a model to build an innovation society upon.  Even if there are those in some industries who would innovate for the sake of innovation and so so for free, those folks either need to be independently wealthy or they need to have a paying job to keep a roof over their head and food on the table.  If they do need a paying job then there is far less time for them to innovate, so we would expect far less innovation even in areas where there are little or no up front costs associated with innovating.  If we are going to rely on the generosity of those who are independently wealthy, we likewise better brace ourselves for little or no innovation.  Even if every rich person on the planet were to invest in a philanthropic manner regarding innovation we would quickly run out of philanthropic rich people, and we would have very little innovation to show for it.

Greed is the motivating factor that causes large amounts of money to be invested with respect to speculative endeavors.  Greed coupled with exclusive rights is what spurs innovation, and that is something that our founding fathers understood quite well.  Incentive needs to be provided because if there is no incentive there will be little or no activity.  In the case of biotechnology, and specifically in the situation of biologics, there is massive investment necessary.  This area of innovation is not in any way similar to the computer programmer who has a computer and can innovate without cost and only devoting available free time to the project.  This innovation costs a lot of money and if we want it we need to provide the appropriate incentive.  The Federal Trade Commission is flat out wrong and everyone who is intellectually honest knows that.  Zero years of exclusivity is not enough to provide any incentive, let alone an appropriate incentive.

The question cannot be whether patents or other forms of exclusive rights are required for there to be innovation.  The question must be what is the level of innovation we want and what low levels (or nonexistent levels) of innovation are unacceptable.  Make no mistake about it, without strong exclusive rights there will be far less innovation in the future than there has been in the past.  I personally want innovation and advances, particularly medical advances.  There is no greater good to killing an industry, putting people out of work and preventing the development of life saving, life altering drugs and treatments all because of some irrational fear of patents.  The greater good argument is clearly, squarely and inarguably on the side of strong patent rights.  This provides incentives to create and eventually the creations will be off patent and available for the masses.  That never happens without strong exclusive rights because the advances will not be made.


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Join the Discussion

7 comments so far.

  • [Avatar for broje]
    October 19, 2009 04:18 pm

    Why is greed alone not enough to spur R&D into new therapies? Becasue every market player would just wait for some other market player to do the expensive R&D and then copy them. As a result, little or no R&D would take place. That is why exclusive rights are needed. Being first to market is not enough incentive to justify the costs associated with developing new therapies. Whether 12 years is the right number is debatable. But absent some other mechanism for rewarding those who innovate, some period of exclusivity is required as an incentive for investment in R&D.

  • [Avatar for Martha]
    October 19, 2009 11:59 am

    The discussion on FOBs seems to be without understanding of what biologics actually are, until Mike described some of the difficulties. Don’t get me wrong – I am all for innovation, and actually was a scientist in the field of biologics – generally thought of as genetically engineered proteins ( with the exception of monoclonal or other engineered antibodies – dealt with separately by the FDA) – before I became a patent attorney.

    There are several patents for genetically engineered protein now coming off patent. The FDA has to deal with regulations for the “generic” products that will result – and they are coming. Innovation also has to come from the followers, because the biologics, an example is insulin, will be made under conditions biosimilar to those of the innovator. Biosimilar is what will drive biologics, with the safety and efficacy issues resolved in the process. Since the patents will be old, the technologies have certainly changed since the issue date, so the generics will have to be innovative in applying the advances to their products – to make it cheaper, higher yield, and faster to market. Usually the innovator rests on his laurels without using the new technologies – so the generics have the opportunity to be more innovative if they want to make money too.

    As for batch-to-batch variation – do you know that one of the patented hormone treatments is still purified from horse urine? Talk about batch-to-batch variation, and still FDA approved. (The patent was issued in the1950s, so it is available in a chemically purified form today, as well as the original form.) I think that variation is better controlled in the biologics. There are actually standard conditions; why do you think there have to be deposits in order to patent? Enablement requires it. After the patent term, producers have to be able to produce what the patentee enabled. With industry standards, and technical personnel who know what they are doing, follow-on biologics can be a reality. And certainly, with all the job losses in the scientific field, there are many qualified people who can set up a culture and run quality controls. There won’t be shortcuts, technology is more advanced, and quality better monitored all along the way. With all the legal layoffs, too, there should be opportunity for attorneys who actually understand the science to wade through these new “generic” innovations.

  • [Avatar for Mike]
    October 19, 2009 10:54 am

    The problem with “follow on” or “generic” biologics is that they don’t exist.

    Let’s assume they use the same exact protein sequence.
    Are they going to request the cell line from the brand name manufacturer or assemble their own cell line? Even if they started with the brand name cells, they must replicate exactly the growth, expression, and purification to achieve a “similar” product, it is still not the same. Unlike chemical compounds with a single unique structure and a certain level of purity, biologics are not the same, they fold differently at different temperatures, different cells modify the proteins differently and it is very difficult to get consistency batch to batch, let alone across the marketplace.

    Each biologic should have to document safety, which is time consuming and costly. Without demonstrating clinical safety, there will be bad outcomes. People will be hurt or die if you enact shortcuts for biologics.

  • [Avatar for Just visiting]
    Just visiting
    October 17, 2009 12:05 am

    “Businesses make money every day by competing on things like quality, price, customer service, and location. Surely the vast majority of money made in this country is based on such competition, rather than on exploiting monopolies.”

    Nice … let’s just send all our manufacturing over to China, move everybody back to Europe/Asia/Africa and give the land back to the indians.

    China will kill most US manufacturers on price — hand’s down. As for quality, it takes a very sophisticaed consumer and/or lots of research to differentiate quality. Could you really tell the quality of one drug (or biologic) from another?

    Customer service? The best products don’t need constomer service. However, tell me, how are you going to differentiate customer service from one biologic manufacturer from another?

    Location? Location is becoming meaningless these days. I don’t care if the store is 1 mile away or 3000 miles away. I go on the internet, place my order, and whatever I want shows up in a box in a couple of days.

    What happens if you are a company that is great at innovation, but you suck at quality, price, customer service, and location? I guess you are out of luck then, huh? Research universities are a classic example … they produce research, but they aren’t good at much else. Royalties on patents based upon research at the university brings in a considerable amount of $$$ to universities. Do you think these universities will as excited to dump millions of dollars into research when there is no payoff?

    Unlike anytime in the past, it is soooo much easier to copy somebody else’s product and bring it to market. Say some American tool company invents this nifty new tool that they are now selling in Home Depot. Within a couple months, I can have it produced in China and be selling it in Lowes for substantially less. Great for consumers who pay less and great for the workers in China …. but it sucks for the American tool company that invested $1M to develop this new tool that I copied.

    Next time, after that experience, do you think that this tool company will be more inclined to bring an innovative product to market or will they wait until somebody else does and just copy what they did.

    The fact that businesses can compete on quality, price, customer service, location, and a host of other factors does not mean that their $XXX,XXX investment on developing a new product will pay off. The patent system is about encouraging innovation.

    One last thing, the older one gets, the more perspective they obtain. In the grand scheme of things, 20 years or even 12 years is a drop in the bucket.

  • [Avatar for Gene Quinn]
    Gene Quinn
    October 16, 2009 04:21 pm


    Do you think that pharmaceutical companies or biotech companies that need to invest $500 million to $1 billion on a single product will find it appropriate to compete on quality, price, customer service and location? Of course not. In fact, in the pharma situation if the FDA approves Drug A generics MUST EXACTLY make Drug A or they have to go through the approval process themselves. So there would be absolutely no ability to compete on quality, because the name brand and generic MUST be identical. There would be no way for the innovator to compete on price because the copyist would not need to recoup the R&D expense, which they did not incur. They could not compete on location because it is a national and global market, geography provides no advantages. What customer service is there with a drug or biologic? None.

    You seem to keep wanting to compare apples and elephants. The fact that there are industries that do not need exclusive rights does not mean every industry does not need exclusive rights.


  • [Avatar for Adam]
    October 16, 2009 02:42 pm


    It’s obvious that the profit motive spurs most R&D in this country. People invest money, which they only do if they think they have a reasonable chance of making that money back, plus some profit for their troubles. I don’t think anyone can argue with this.

    However, you always take the next step and say, “Greed coupled with exclusive rights is what spurs innovation.” The connection between this and the previous paragraph is what I haven’t yet seen you make. There are many ways to make money on products and exclusive rights are not necessary for most of them. Businesses make money every day by competing on things like quality, price, customer service, and location. Surely the vast majority of money made in this country is based on such competition, rather than on exploiting monopolies.

    One could imagine that medical treatment and device companies could do the same. I don’t know if they could or not, since I have neither the data nor skills to do such an analysis, but why do you think they couldn’t?

  • [Avatar for Mike]
    October 16, 2009 01:12 pm

    There is another way biologics can be created, not that i recommend it but the government can sponsor the huge upfront costs of research.