Claims by makers of both “pioneer” biologic drugs and generic “follow-on” versions that they need increased market protection have been thrown out by the US Federal Trade Commission (FTC).

Branded drugmakers have been calling on Congress for 12-14 years’ brand exclusivity for their pioneer products, but the FTC says this is too long to promote innovation by these firms, particularly as they are likely to retain substantial market share after follow-on biologics (FOBs) come to market. Nor are makers of FOBs likely to need the additional incentives, including 180-day marketing exclusivity, which they have told legislators are necessary, it adds.

Moreover, an abbreviated approval pathway at the Food and Drug Administration (FDA) for FOBs would be an efficient means of bringing these products to market because it would provide time and cost savings, while the “special procedures” to resolve patent issues between pioneer and FOB makers before FDA approval, such as “pay for delay” agreements, could undermine patent incentives and harm consumers, the agency said yesterday.

The agency’s comments come in its new report on a public roundtable which it held last November, with additional comment and analysis accepted until this May, to examine how FOBs could enter the market and what competition between these products and pioneer biologics would look like.

Following these discussions, the Commission has concluded that competition between pioneer biologics and FOBs is unlikely to be similar to that between branded and generic drugs. Unlike the situation with generics, FOB entry so far has not resulted in steep price discounting or rapid acquisition of market share by FOB manufacturers, it says. The Commission forecasts that the scenario is much more likely to resemble brand-to-brand competition because:

- the substantial costs needed to obtain FDA approval and to develop manufacturing capacity will limit the number of FOB competitors. Such products are likely to take eight to ten years to develop, at a cost of $100-$200 million, compared to three to five years and $1-$5 million for small-molecule generic drugs. Therefore, FOB entrants are likely to be large companies with substantial resources, and only two or three would be expected to seek approval to compete with a particular pioneer biologic;

- the lack of automatic substitution between an FOB and a pioneer biologic drug will slow the rate at which FOBs can acquire market share. They will not be designated as therapeutically equivalent, which means that, like pioneer manufacturers, FOB firms will have to market their products and negotiate individual contracts with purchasers;

- an FOB may also have difficulty gaining market share due to concerns about safety and efficacy differences with the pioneer biologic drug; and

- insurers do not currently reimburse biologic drugs according to the strategies that they frequently use to encourage the use of lower-priced drugs.

As a result, while FOB market entry will be important, it will be less dramatic than generic drug competition, and is likely to be limited to biologic drug markets where annual sales are over $250 million, the FTC believes. Only two or three FOB manufacturers would be expected to attempt entry for a given pioneer product, and they are unlikely to introduce their products at discounts any larger than 10%-30% of the pioneer product’s price, it adds.

The effect on pioneer manufacturers also will be different; they are likely to respond and offer competitive discounts to maintain market share, retain 70%-90% of their market share and continue to reap substantial profits, even after FOB entry, says the agency.

The existing incentives of patent protection and market-based pricing that support brand-to-brand competition among biologic drugs are likely be sufficient to support FOB competition and biologic innovation, the Commission goes on. A 12-14 year exclusivity period is unnecessary to promote innovation by pioneer biologic drugmakers, and FOB firms are “unlikely” to need additional incentives to develop interchangeable FOBs.

Moreover, it says, the “special procedures” used to resolve patent issues between brand and generic makers prior to approval will not be necessary in the case of FOBs.

“FOB drug manufacturers are likely to be many of the same companies that have pioneered biologic drugs; thus, they will have the expertise and resources necessary to assess whether to launch their product before any patent infringement litigation is resolved, just as they do with a launch of a pioneer branded drug. Moreover, FOB manufacturers are highly unlikely to offer steep discounts that could jeopardize their ability to pay patent damages,” it says.

“Special procedures” such as “pay for delay" agreements are unlikely to be successful in providing patent certainty because pioneer biologics are covered by more and varied patents than small-molecule drugs, it says. Such procedures could also undermine the innovation incentives that patent protection affords pioneer biologics makers, and are likely to lead to consumer harm, the Commission warns.

Commenting on the report’s findings, FTC chairman Jon Leibowitz said: “if Congress creates an efficient pathway to follow-on biologic drugs and, at least as important, ends 'pay-for-delay' pharmaceutical settlements that delay generic entry, it will be taking a major step forward for both health care reform and affordable drugs for all Americans.”