As the Trans-Pacific Partnership (TPP) saga continues, the entire fate of this ambitious trade agreement might rest upon a provision regarding intellectual property protections for the burgeoning biologics industry.
Biologics are a hybrid of pharmaceuticals and technology. Instead of being produced by chemical synthesis, as are traditional drugs, biologics are created within a living cell. This results in complex structures being significantly larger than small molecule drugs. Because of their complexity, it is impossible to create an exact copy in the same way regular generic drugs are produced. When attempting to copy a biologic, there are variations in the copy’s structure and composition. Because of this, biologic “copies” are called biosimilars. As a result, there has been great uncertainty as to how intellectual property law will deal with this continually-emerging market.
Senator Orrin Hatch (R-UT) is leading the battle for stronger protections. U.S. law already has a 12-year market exclusivity term (similar to a patent) for biologics, as stated in Biologics Price Competition and Innovation Act (BPCIA) of 2009. However, under the current draft of the TPP, biologics have protection for only five to eight years in the member countries.
Weaker intellectual property protections pose a risk to the industry’s success. Not only do data protections on biologics help incentivize innovation, but they also promote competition. Before the passage of BPCIA in 2010, all biologics were treated as separate molecules, meaning biosimilars had to undergo the same lengthy testing and approval process as the original biologic before bringing their drug to market. This essentially meant biologics had no way to be treated as “generic” drugs under U.S. law.
While creating a 12-year market exclusivity period may appear to inhibit competition, it actually creates an environment where drug companies can create the lower cost biosimilars without undergoing the rigorous and expensive process of designing a “new” drug. Expanding this 12-year protection to TPP members would help encourage competition in countries who would greatly benefit from biotech investments.
Critics of the intellectual property protections for biologics also claim that the TPP will create new drug monopolies and serve only to benefit Big Pharma. But in the realm of biologics, innovation is not just limited to these large businesses. Startups and small firms play an integral role in developing these life-saving drugs.
Biotechnology Innovation Organization is an international trade organization that represents over 1,000 pharmaceutical companies, and many of its clients are small or medium-sized firms. BIO’s vice president Joseph Damond states that between 600 to 700 of the firms his organization represents are still in the developmental phase and have yet to bring a product to market.
The intellectual property protections in the TPP are not just for large corporate giants, but also for small firms to develop biologics. Without the ability to develop and market a biologic product exclusively, there is much less incentive to invest in development in the first place.
While the total cost to produce a biologic is up for debate, some estimates have the cost of bringing a single biologic to market at $1.24 billion and anywhere from 8 to 15 years. Further, biosimilars, the biologic equivalent of generic drugs, cost between $75 and $250 million to produce, while generic drugs, such as ibuprofen, only cost between $1 to 4 million to produce.
Venture capitalists have an incentive to invest in these smaller firms if they know they can generate a return. The average time it takes for a firm to recoup its investment in a biologic is just under 13 years. Stronger patent protections, such as the 12-year exclusivity period, ensure that these products have the potential to be profitable.
If biosimilar producers are able to enter the market too soon and start producing copied versions of the drugs, then producers will not have enough time to earn returns on their investments. It is critical that these producers be able to earn profits, otherwise the incentive to enter the market and invest in new drugs vanishes.
Over 5,000 of the 7,000 total drugs in development in 2014 were in the United States, which is a testament to the strength of the American pharmaceutical industry. This figure is not completely dependent on intellectual property law alone, but it demonstrates a correlation between America’s strong intellectual property protections and high concentration of pharmaceutical innovation.
All members of the TPP should adopt longer market exclusivity periods for biologics. With longer protections, smaller firms in North America and around the Pacific region will be able to create more cutting-edge, accessible, and life-saving drugs.
Shane Otten and Andrew Meleta are e21 contributors.
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