[Ip-health] Reuters: Obama budget targets brand name medicines

Thiru Balasubramaniam thiru at keionline.org
Tue Feb 15 10:20:17 PST 2011


UPDATE 2-Obama budget targets brand name medicines
Mon, Feb 14 2011
* Obama seeks to reduce exclusivity for generic biologics

* Proposal would block deals to delay other generic drugs

* Generic drug moves to save $11.1 bln over 10 yrs

* Shares of some generic drugmakers lower (Adds industry reaction,  
analyst comment, adds share prices)

By Susan Heavey

WASHINGTON, Feb 14 (Reuters) - Big pharmaceutical companies could face  
increased competition from generic drugmakers under two proposals put  
forth by the Obama administration on Monday despite earlier savings  
extracted from drugmakers as part of last year's healthcare law.

President Barack Obama, as part of his 2012 budget proposal, called  
for cutting the number of years drugmakers could exclusively market  
brandname biologic drugs to 7 years from 12.

He also set his sights on ending controversial "pay-for-delay" deals  
that affect traditional, chemical drugs by giving the U.S. Federal  
Trade Commission power to block them. Under such pacts, brandname and  
generic drugmakers settle patent challenges with payoffs that delay  
lower-cost rivals from reaching the market.

The proposals face a tough challenge of getting through the divided  
Congress, but could alter the landscape for consumers' access to  
cheaper medicines.

They quickly drew industry protests.

While branded and generic drugmakers are divided over the biologics  
issue, "both the brand and generic drug industries will fight tooth  
and nail to preserve pay-to-delay settlements which provide  
substantial benefit to the industry," Bernstein analyst Aaron "Ronny"  
Gal said in a research note.

Still, they are unlikely to deliver a huge overall blow to the $890  
billion global drug industry in which companies such as Pfizer Inc  
(PFE.N: Quote, Profile, Research, Stock Buzz) and Merck & Co Inc  
(MRK.N: Quote, Profile, Research, Stock Buzz) can see at least $1  
billion a year in revenue from just one blockbuster medicine.

The Obama administration is turning to drugmakers to help squeeze out  
some savings to help reduce the deficit and cover other health  
initiatives such as the implementation of the health law passed last  
March that included about $80 billion in savings negotiated with brand  
name companies.

U.S. Health Secretary Kathleen Sebelus was unapologetic about the  
extra savings from industry, and saying the administration wants the  
best outcomes for patients. "This is a move in that direction," she  
told reporters.

The two proposals aimed at getting cheaper, generic medicines to the  
U.S. market would together save about $11 billion over 10 years.

The proposal impacting brandname biologics is a more dramatic version  
of a similar provision included in the health law in which brandname  
drugmakers won 12 years of exclusive sales under an new U.S. Food and  
Drug Administration approval process to allow generic versions of  

Such medicines treat conditions ranging from cancer to arthritis and  
are made from proteins, which can make them more complex to  
manufacture and more costly.

Generic drugmakers had fought for a shorter period of exclusivity, and  
on Monday the administration said 12-years of protection harms  
consumer access to much needed drugs.

Its 7-year proposal "strikes a balance between promoting affordable  
access to medication while at the same time encouraging innovation to  
develop needed therapies," the White House said in budget documents.

The measure would start to see savings of $80 million starting in 2015  
and altogether could save $2.3 billion from 2012 to 2021, it estimated.

The "pay-for-delay" plan would save $540 million starting in fiscal  
2012 and nearly $8.8 billion through 2021, it added.

In a statement, branded industry group the Pharmaceutical Research and  
Manufacturers of America said both measures would discourage industry  
investment into research and development and could stifle new medicines.

The Biotechnology Industry Organization said reducing exclusivity to 7  
years would prevent biotech firms from recouping their investments.  
Meanwhile, the Generic Pharmaceutical Association applauded the 7-year  
biogeneric plan but called Obama's move on "pay for delay" misguided.

The patent plan was likely weighing on shares on Monday for some  
generic drugmakers that benefit more from the "pay for delay" payouts,  
said Bernstein's Gal.

Shares of such as Watson Pharmaceuticals (WPI.N: Quote, Profile,  
Research, Stock Buzz) were down 1.6 percent in afternoon trading while  
Mylan (MYL.O: Quote, Profile, Research, Stock Buzz) was up 0.2  
percent. Others such as Teva Pharmaceutical Industries (TEVA.TA:  
Quote, Profile,Research, Stock Buzz) and Hospira (HSP.N: Quote,  
Profile, Research, Stock Buzz) are less exposed, said Gal, adding that  
savings from ending the deals may be even larger.

Obama's budget also renewed the call for generic drugmakers to pay  
fees for the FDA to review new generic medicines.

Other proposed fees would cover FDA reinspections of drug and device  
companies after manufacturing problems are uncovered. Hospitals and  
others participating in an outpatient drug pricing program known as  
340B are also targeted.

Additionally, the administration calls for food safety industry fees  
starting in 2013 and pledged to work with Congress to enact them.

(Reporting by Susan Heavey; Additional reporting by Diane Bartz;  
Editing by Sandra Maler)


Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
thiru at keionline.org

Tel: +41 22 791 6727
Mobile: +41 76 508 0997

More information about the Ip-health mailing list