The fiscal 2010 federal budget outlined by the Obama administration Feb. 25 takes a conservative view of the fiscal benefit of generic biologics - estimating they will contribute $9.2 billion over 10 years to help pay for health care reform.

This figure is the lower of the most recent Congressional Budget Office estimates of the budgetary impact of follow-on biologics (¹ Also see "Follow-On Biologics Coding Tweaks Could Raise Savings By 30% – CBO" - Pink Sheet, 22 December, 2008., p. 23).

It suggests the administration is not counting on giving follow-on biologics the same reimbursement code as their reference products, a move that CBO estimates could increase the combined savings and revenues from generic biologics to $12 billion.

The $9.2 billion, which includes $8.1 million in lower drug costs for federal programs, plus $1.1 billion in increased revenues, is tabulated as part of a health reform fund.

The administration plans to put $630 billion over 10 years into the fund, which will be used to finance changes in the U.S. health care system. Half is to come from taxes and half from savings such as generic biologics and changes in the Medicare and Medicaid programs (see ² Also see "More Rebates For More Coverage: Budget Seeks Medicaid Rx Rebate Of 22%" - Pink Sheet, 2 March, 2009.).

The $9.2 billion in FOB savings is predicated on a data exclusivity period of 12 years for brand products and does not calculate the impact of modifying brand products to obtain another 12 years of exclusivity.

The Obama budget overview reiterates the latter point, specifying that under a generic biologics program, brand firms should not be allowed to restart the exclusivity period by reformulating their products.

Taking It To The Hill

In calling for an approval pathway for "generic biologic drugs," the budget overview states that "a period of exclusivity would be guaranteed for the original innovator product, which is generally consistent with the principles in the Hatch-Waxman law for traditional products."

However, the extent of that consistency is uncertain. During a background press briefing, a senior White House Office of Management and Budget official demurred from making legislative promises.

"The specifics of the program have not yet been [defined]. ... It's generally consistent with what's been talked about on the Hill," he said. "We have not yet transmitted legislation so I think it's best to leave it at that."

What has been discussed in Congress ranges from zero data exclusivity provided in H.R. 1038 proposed by Rep. Henry Waxman, D-Calif., to as much as 14 years in H.R. 5629 from Rep. Anna Eshoo, D-Calif. (³ Also see "Waxman To Seek Consensus On FOBs, Incentives For Early Patent Resolution" - Pink Sheet, 9 February, 2009. p. 33). A 12-year data exclusivity is provided by S. 1695, which was reported out by the Senate Health, Education, Labor and Pensions Committee in 2008 and was the basis for the CBO analysis (⁴ Also see "Senate Biosimilars Bill Readied For Take-Off In Next Congress" - Pink Sheet, 25 November, 2008.).

Gauging The Reaction

The Obama administration's decision to basically adopt that score contains positive and negative elements for both the brand and generic industries

Obama's opposition to ever-greening is welcomed by the generic industry. On the other hand, there is no mention of the Medicare coding changes that would boost substitution.

The Generic Pharmaceutical Association statement on the budget applauded the inclusion of a follow- on pathway. "The President's budget proposal would ensure that this process mirrors the proven Hatch-Waxman market exclusivity model, by ensuring that brand companies cannot extend exclusivity using 'ever-greening.'"

The brand industry should be buoyed by the budget's failure to allot the maximum possible savings from follow-on biologics.

A follow-on biologics pathway will be a success if "it is as balanced as the Hatch-Waxman approach is for small molecule pharmaceuticals," the Biotechnology Industry Organization said in response to the budget.

- Cathy Dombrowski (c.dombrowski@elsevier.com)

Follow The Follow-On Money: Obama’s Budget Has Modest Biogeneric Savings

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