Innovation-based drugmakers have told President Obama in no uncertain they are not impressed by his 2012 budget proposals, especially plans to reduce patent protection on biologics and end 'pay-for-delay' deals with generics firms.

The White House budget, designed to cut some $1.1 trillion from the US deficit over the next decade, contains a couple of proposals directly affecting the pharmaceutical industry. First up is a plan to cut marketing exclusivity for brand-name biologics to seven years from 12, while the second would give the US Federal Trade Commission power to block controversial agreements between pharma and generic drugmakers which see the latter receive payments in return for delaying launches of their versions of branded medicines.

The White House believes the two proposals would save about $11 billion over 10 years, with most of that saving, some $8.8 billion, coming from a 'pay-and-delay' ban. The welcome from big pharma has not been warm, however.

Incentives for R&D reduced

The head of the Pharmaceutical Research and Manufacturers of America, John Castellani, said the President’s budget proposal "would diminish crucial incentives for future US medical innovations". He claimed that the 12-year biosimilars provision of the healthcare reform law passed last March, "the only provision in the law to garner strong bipartisan support, achieves an essential balance. It provides appropriate incentives to support future medical advances".

Mr Castellani went on to say that "such a public policy flies in the face of the Administration’s recent commitments supporting domestic innovation, biomedical research, jobs and US competitiveness". He added that if passed, the proposal would provide "less data protection for new, innovative biologics than is currently bestowed in Europe".

The PhRMA chief went on to say that "patent settlements are a vital aspect of a patent owner’s ability to protect intellectual property"and restricting such settlements, "which already are subject to review by the Federal Trade Commission and the Department of Justice". Without settlements, "innovators’ defence of their patents in court could keep generics from being available to patients for years".

Mr Castellani said that "while we understand the need to reduce the deficit, policies such as these represent the wrong approach. Instead, our country needs to retain and extend policies that promote the growth of private-sector R&D investment and secure our sector’s future". He ended by saying that "while the USA currently retains an advantage in medical innovation, it's ours to lose".

Flawed approach

The Generic Pharmaceutical Association said it was concerned at the proposal to ban patent settlements, "a misguided public health policy initiative that has repeatedly failed to receive Congressional support in separate and frequent legislative attempts at passage". As for the claim that such a ban would save $8.8 billion, GPhA believes "that this economic assumption is fatally flawed".

The association went on to say the FTC already has the authority to review and reject any patent settlement "and that its challenges to the validity of settlements has been consistently and soundly rejected by the courts". It added that these settlements "have never prevented competition beyond the patent expiry, and generally have resulted in the early, date-certain introduction of generics years earlier than would otherwise have been possible".

The GPhA argues that “Congress should reject this initiative, and instead concentrate efforts on those initiatives that would continue to dramatically reduce prescription drug spending". These would involve promoting "the increased utilisation of generics for federal and state government funded health care programmes and accelerating the approval of more affordable generics by increasing funding for the Office of Generic Drugs".

However, the GPhA backed Obama's plan to reduce exclusivity period for branded biologics be reduced to seven years. It said "there is no question that a 12-year exclusivity period would provide unwarranted monopolies for brand biopharmaceuticals, which would delay the savings that could result from the earlier introduction of biogenerics".