By Xenia P. Kobylarz
IP Law & Business/May 2007

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Bruce Downey is known in the pharmaceutical industry as the patent killer, and that's not a compliment. The onetime U.S. Department of Justice attorney is the chairman and chief executive of Barr Pharmaceuticals Inc., the third-largest generic drug maker in the United States. Under his leadership, Barr has made millions in profits by successfully challenging patents on blockbuster drugs invented and manufactured by some of the world's biggest pharmaceuticals companies. In 2005 Barr generated more than $750 million of its $1 billion worldwide revenues from manufacturing copycat versions of the drug industry's biggest hits, including the popular antidepressant Prozac and breast cancer drug Tamoxifen.

These days, the 58-year-old is adding to his dangerous reputation by taking aim at a faster-growing target: the $60 billion biotech industry. As a Capitol Hill power broker and the second-term chairman of the Washington, D.C.-based Generic Pharmaceutical Association (GPhA), Downey has emerged as one of the more influential voices in lobbying Congress. Backed by a powerful coalition of more than 50 consumer groups, including the powerful seniors group AARP, state governments, and such big employers as General Motors Corporation and Eastman Kodak Company, Downey and the GPhA are leading the charge in pushing for a new law that would open the biotech industry to generic competition.

Currently, generic makers can't make copies of biotech products in the U.S. because there isn't any specific regulatory process under which the generics can be approved. For years, biotech companies have deflected any attempt at opening up their industry to generic competition by persuading lawmakers, regulators, and advocacy groups that generic versions of biotech drugs should be subject to more rigorous vetting than generic versions of "small molecule" or chemical-based brand-name drugs to ensure public safety. Biopharmaceuticals, which are based on proteins manufactured in living cells, are far more complicated to produce than conventional drugs. So even while many biopharmaceuticals are already off-patent and more than $10 billion worth of biotech drugs are expected to come off patent over the next five years, the idea of biogeneric drugs, also known as "follow-on biologics" or "biosimilars," got little traction in Congress or elsewhere in the U.S.

Opponents of a biogenerics bill often cite the example of an anemia drug, made by Johnson & Johnson and sold in Europe under the name Eprex, to highlight the potential dangers. Responding to a request from European regulators in 2003, J&J changed its manufacturing process for Eprex, substituting a synthetic protein for a human-derived stabilizer protein. [See "Should the U.S. Copy the Europeans?"] The drug itself, a synthetic form of the human erythropoietin protein, remained unchanged. Unfortunately, the reformulation caused clumps to form in patients' bloodstreams, triggering an extreme form of anemia in 250 patients. It turned out that the new formulation caused other compounds to leach out of the uncoated rubber stoppers of the vials used to store and supply the drug. (J&J now uses vials with coated rubber stoppers, and has also changed the label to give other precautions.)

But despite such bumps, Downey's group has managed to bring the issue of biogenerics back to life. In February, Democratic headliners Hillary Clinton and Charles Schumer of New York in the Senate and Henry Waxman of California in the House introduced an identical bill that would give the Food and Drug Administration authority to approve cheaper, generic copies of biotech medicines after patents expire, without the full testing required of the originals. The Access to Life-Saving Medicine Act is the first credible attempt by lawmakers to come up with a new legislative scheme to provide for generic biophamarceuticals. Generic companies have been pushing for such a law for more than a decade, but no bill has actually been drafted to address the matter until now. Waxman sponsored a similar bill last year, but it failed to even get a hearing. The generic-friendly bill has won broad-based support among insurers, employers, and labor unions. For example, GM, which spent $4.8 billion on health care in 2006, has been throwing a lot of lobbying effort behind the bill. Greg Martin, GM's director of policy, says the company believes biogenerics are an excellent opportunity for GM to lower these costs.

In lobbying for the bill, supporters often cite the high cost of biotech products such as Amgen Inc.'s anemia-fighting drug Epogen. One year's treatment with the drug can cost a patient $10,000. The federal Medicare program spent $2 billion on the drug in 2005, according to the Government Accountability Office.

Overall, pharmacy benefits manager Express Scripts Inc. estimates that generic biotech drugs could save Americans $71 billion over a decade. "There's fair consensus now that there needs to be a legal pathway for biogenerics, and that's a giant step from where we were just a few years back," says Barr's Downey. "Before, all you heard was that it can't be done. Now people are thinking more along the lines of when and how do we do it."

Biogenerics have bipartisan support. But the shift in control of Congress in November from the Republicans to the Democrats has encouraged Downey and all the generic makers, because a victory for affordable drugs would be a fine issue for a Democratic presidential candidate to carry into the 2008 election.

In March, FDA deputy commissioner Janet Woodcock told lawmakers that the agency is capable of approving simple follow-on biologics without requiring clinical trials. This is a departure from the agency's stance a few years back, when it rejected follow-on biologic applications, saying that it didn't have the authority to approve such drugs. The agency had to be hauled to court by Sandoz, the generic unit of Novartis AG, in order to force it to approve Omnitrope, a generic version of Pfizer Inc.'s human growth hormone drug Genotropin.

In May 2006 the FDA, under court order, finally approved Omnitrope and has used the example as evidence of its ability and experience in approving simple biologics. As for more complex biologics, Woodcock said that the agency may require clinical trials on a case-by-case basis, and may in the future be able to approve such biogenerics by evaluating data not generated by human trials.

But biotech executives, who have a lot to lose, are promising a long and hard battle over the bill. They criticize the proposed legislation as heavily tilted in favor of generic companies and warn that generic competition could have a devastating impact on the financial future of the biotech industry, as well as pose serious risks to public health. Sara Radcliffe, vice president of science and regulatory affairs at the Washington, D.C.-based Biotechnology Industry Organization (BIO), calls the bill a "nonstarter." "The bill does not require clinical trials for the follow-on manufacturer. For us, that's the floor," Radcliffe says.

In 1984 Congress enacted the Hatch-Waxman Act to make it easier for generic versions of more conventional drugs to enter the market without going through costly and lengthy human clinical trials. Under the law, the FDA considers generic products to be a substitute for, or interchangeable with, the brand product. Generic companies need only perform relatively simple tests to confirm whether a copycat version is a chemical equivalent of the branded product and that it is safe and effective. The law did not cover biotech drugs because at the time there were only a handful of products in the market and there was no effective test to determine whether a generic biologic was an equivalent to the original product.

Today, there are more than 150 biotech drugs on the market and more than 300 biotech medicines in clinical trials, targeting more than 200 diseases, including cancer, Alzheimer's disease, heart disease, diabetes, multiple sclerosis, AIDS, and arthritis. And though both camps now agree that biological science has improved enough to be able to test for similarities in drug proteins, there is still debate on whether these tests are good enough to determine whether a copy of a biotech drug could be considered identical and interchangeable with the original, without actual clinical trials.

Innovator companies must put almost all their new biotech products through full clinical testing. But under the proposed bill, the FDA will decide on a case-by-case basis whether clinical trials are required for a biogeneric, or if data derived from analytical tools and other studies are sufficient to confirm safety, purity, and potency. The FDA will also be authorized to establish two categories for biogenerics. The first category is for a generic biologic product that is a "comparable" product, which means that it performs the same function as the branded product, but is not exactly similar. The second category will be for drugs that are "interchangeable," which means that in many states, pharmacists could automatically switch the patient to the generic from the brand.

But if biotech companies have their way, no biologic product will be marketed as a "generic biologic," or exact copy, without clinical trials. "Biologics can be very unpredictable," says BIO's Radcliffe, "and that is why it continues to be the case that the product is the process, the process is the product." The live cells that manufacture protein-based drugs have their own quirks, and even different manufacturing facilities run by the same company sometimes produce subtly different products.

"Adding the cost and uncertainty of clinical trials in the approval process will certainly reduce the incentive for generic manufacturers to get into market," says New York biotech attorney Veronica Mullally, a partner at Orrick, Herrington & Sutcliffe. If generic firms must conduct trials, consumers may not see price reductions for biopharmaceuticals equivalent to those associated with conventional generic drugs, which are priced 60-80 percent lower than the branded products, says Mullally. But even half those savings could be very attractive to health care payers.

In fact, the authors of the biogeneric bill are not only blazing a path for biogenerics, but also trying to make that path free of some of the obstacles that generic companies now face in bringing conventional drugs to market. (Separate pieces of legislation encompassing these changes are also circulating in Congress.) Unlike the Hatch-Waxman law, the bill does not provide for a 30-month stay of FDA approval pending any patent litigation. What's more, instead of just listing all their patents in the FDA's Orange Book, the bill requires owners of patented products to provide a list of all patents related to the product upon request by a generic applicant, a list that today can take much time and money for the generic company to research on its own. The innovator company has to respond within 60 days and is obligated for two years to update the list. (The innovator may demand up to $1,000 for supplying the patent list, a small nod to clerical costs.)

The bill also calls for major changes in the way patent litigation is initiated. Currently, generic companies have to wait to be sued before they can challenge a patent in court. Under the bill, the generic applicant may send a notice letter to the innovator identifying which patents it believes are invalid or unenforceable. The generic company also chooses the jurisdictions it consents to be sued in. The innovator then has 45 days to bring an infringement suit. If relevant patents are not disclosed to the generic applicant in a timely fashion, the product owner cannot later enforce the relevant patents against the generic manufacturer. Also, if a suit is not brought within 45 days, the only remedy available to the product owner will be reasonable royalty payment and no damages.

Other tactics used by pharmaceutical companies to moderate generic competition are also dismantled. For example, the bill clearly excludes so-called authorized generics from the 180-day period of exclusivity given to the first successful generic applicant. Making "authorized generic" versions of their own branded medicine has become a popular way for branded-drug companies to split the market with the "real" generic company. Consumer advocates have derided the practice as unfair and anticompetitive. The Federal Trade Commission is currently investigating the practice.

Citizens petitions would also lose their appeal as a delaying device. Under FDA rules, anyone can write a letter and raise safety concerns regarding a pending application for a drug or product. Pharmaceutical companies gum up the approval process of a generic drug by days or months just by filing multiple citizens' petitions. The bill contains provisions to prevent the filing of frivolous petitions, which includes requiring certification of each petition filed. "People might actually think twice before filing these petitions if they have to go through a certification process," says patent attorney Neil Greenblum, of Greenblum & Bernstein in Reston, Virginia.

But the generic industry's wish list so far is just that, and Washingon-style horsetrading proceeds. Alan Bennett, a partner at Ropes & Gray in Boston, who is advising several biotech companies on the pending legislation, says the bill is biased against innovators. Bennett was one of the principal lawyers involved in drafting the Hatch-Waxman law on behalf of a dozen big pharmaceutical companies. "If this looks like Hatch-Waxman at all, I'd say we're in an early phase of a lengthy process," he says. "I'd be surprised if we end up with a law that resembles the draft legislation."

Bennett says that biotech firms will likely ask for and get concessions similar to the ones that pharmaceutical companies received in 1984, including a patent-term extension of up to ten years. "The shape of this bill will influence the way biotech products are evaluated by investors," Bennett says. "These products take years to develop and are expensive and difficult to produce, and without longer exclusivity, investment in the sector might be discouraged."

No matter how the legislative wrangling plays out, some patent attorneys predict that a biogeneric law would open the biotech industry to a flood of patent suits similar to the current patent litigation boom created by Hatch-Waxman. Nearly 73 percent of all generic drug applications have resulted in patent litigation, according to a 2002 FTC study. Although no one has tracked the exact number of ongoing patent cases relating to generic products, some patent litigators say that it easily reaches into the hundreds. They expect another blossoming of litigation if a biogeneric law is passed. "[A biogeneric law] will certainly generate new types of lawsuits similar to ANDA [Abbreviated New Drug Application] litigation," says Duane-David Hough, a biotech partner at Fish & Richardson in New York. He sees an advantage ahead for law firms with plentiful Ph.D. bioscience credentials because assessing biotech patents requires highly sophisticated scientific knowledge.

Many experts do remain skeptical that the generic industry will make much headway soon. "There's a lot of rhetoric out there, but I don't see biotech companies running scared," says Arthur Wong, a biotech analyst at Standard & Poor's.

But Downey at Barr Pharmaceuticals doesn't have time for the skeptics. Last year Barr acquired Croatian drug company Pliva for $2.5 billion, having identified the firm as one with credible biotech drug manufacturing expertise. (The company, based outside Zagreb, is also the inventor of a top-selling antibiotic sold in the U.S. as Zithromax, and is a major supplier of raw materials for generic drugs.) With Barr's guidance, Pliva is developing a copy of Amgen's Epogen, which had more than $2.5 billion in worldwide sales in 2006. In Europe the drug has a different patent term than the U.S., and biotech analysts expect a generic version to hit the market in three years. It isn't clear when the patent protection on Amgen is going to end in the United States. Amgen asserts that Epogen is protected by patents in the U.S. until 2015 and can't be copied right away even if generics legislation passes. Nevertheless, Barr has moved forward and recently broke ground in Croatia for a $25 million biotech manufacturing facility. Downey's actions speak louder than words: For him, biogenerics are a done deal.