Threat to American dream of Indian biopharma

Once again the threat has emerged on the legislation that was created to recognise generic versions of biologics in the US, approved by the US Senate finally in 2010 following to the hard work of the Obama administration.

Unlike pharmaceutical drugs, the generic (off patent) versions of biotechnology based drugs are not recognised by the US Food and Drug Administration (USFDA) so far. This is because it is believed that despite scientific advancements in the biotech domain it is not possible for generic biotech companies to create identical biotech drugs owning to the complexity of biological molecules.

The exports of pharma drugs from India to US were nonexistent until 1980s when the US Congress introduced the Drug Price Competition and Patent Term Restoration Act in 1984 (popularly referred to as Hatch Waxman Act). The said legislation provided Indian pharma companies the opportunity to manufacture and sell pharma drugs in the US after their product patents or extended terms have expired.

After the initial success, Indian pharma companies became more confident and also attempted to challenge the validity of product patents of several blockbuster drugs including Lipitor, in order to realise profits in the most important healthcare market in the world. However the story has not been so sweet for biopharma companies. Until The Patient Protection and Affordable Care Act (PPACA) was approved in 2010, there wasn’t any legal provision in the US that would recognise the interchangeable versions of biotech drugs leading to the continued monopoly of the innovator biotech companies in the US.

PPACA is a US federal statute that was signed into law by President Barack Obama on March 23, 2010. The statute comprises a sub legislation titled Biologics Price Competition and Innovation Act (BPCIA) which recognises an abbreviated licensure pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an existing FDA-licensed biological product1.

The USFDA is working on the rules around the BPCIA legislation currently and has already held several stakeholder meetings and discussions. The legislation promotes more competition by recognising biosimilars thereby reducing the price burden on consumers and at the same time promotes innovation by providing 12 year market exclusivity to the reference product owner (innovator biotech company). This piece of legislation is considered to be the single most important thing for the success of Indian biopharma industry in the same manner that Hatch Waxman Act passed by Congress in 1984 was for the emergence of Indian pharma companies.

The journey of BPCIA has been tough since the very beginning and on several occasions President Obama has failed to gather support of his own party representatives in the Senate.

Further BPCIA also mandates comprehensive provisions for patent based negotiations between biosimilar applicant and reference product sponsor (innovator) to be triggered before any interchangeable biosimilar is approved by USFDA. Such pre-approval patent negotiations will definitely be expensive for any biosimilar applicant, may last up to eight months and were absent from the Hatch Waxman Act.

Sandoz AG the world leader in Biosimilars has stated2 “The US legislation even goes a step further than the EU, offering the potential for full biosimilar interchangeability. However, it also includes an unprecedented patent-related provision that could require biosimilar developers to provide their full dossier to the originator, resulting in potentially lengthy and expensive litigation”. On the contrary to the situation in the US, the scenario in Europe has been progressive with regard to guidelines on biosimilars and so far 14 biosimilars have already been approved by the EMEA (European Medicines Agency) since 20063.

Now in a major move, the constitutional validity of some or all the provisions of the PPACA was challenged earlier this year by over 26 US states and other organisations as well as individuals, since it contains a provision that makes it mandatory for people not sponsored by either their employer, Medicaid, Medicare or the other public insurance programmes, to purchase medical insurance from a approved private insurance company or to face penalty (known as “individual mandate”).

The US Supreme Court has already heard the arguments in March last week and is likely to pronounce the decision in June on the constitutionality of such provision that was supposed to be enforced from 2015. Since PPACA does not have a “severability” clause it is likely that the entire legislation including BPCIA will fall down in case the “individual mandate” is found unconstitutional and the new US president (whether Republican or Democrat) will have to start all over again. A severability clause is a safeguard clause incorporated in a legislation that insures if one or more provisions are void the remaining remains enforced. Failure of PPACA (often called as “Obamacare”) will be the biggest failure of his presidency. This will be a big blow for the Indian biotech companies who were looking to either launch biosimilars on their own or in collaboration with established companies in the US.

The matter is anticipated to be decided as a close one with a 5-4 vote among the nine Justices in the US Supreme Court. There are three possibilities that I foresee: The court can either uphold PPACA or the court finds the “individual mandate” to be unconstitutional and deletes provisions affected thereby or the court finds the “individual mandate” to be unconstitutional and due to the lack of a severability clause in the legislation, repeals entire PPACA.

During oral arguments at the Supreme court the issue regarding “severability” did come up4 when one of the Supreme Court justices, Justice Elena Kagan asked Paul Clemant who is the lawyer for the 26 states that are suing the federal government over the law, “Isn’t a half of loaf [of bread] better than no loaf?”

No, said Paul Clement, sometimes no loaf is indeed better than half a loaf, he said. In the case of the PPACA, the mandate is too integral to the overall survival of the whole law. For all stakeholders of the biopharma industry in India the Supreme Court ruling on this matter
is a matter of survival of the spider in the web.

References:
1. http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/default.htm
2. http://www.sandoz-biosimilars.com/ biosimilars/regulation.shtml
3. http://www.ema.europa.eu/ema/ index.jsp?curl=pages/regulation/general/general_content_000408.jsp&mid=WC0b01ac058002958c
4. http://www.medpagetoday.com/Washington-Watch/Reform/33101

(The author is an Indian patent attorney working at Legasis Services and can be contacted at priyank.g@legasis.in)