Health Business Blog

The Senate’s Health, Education, Labor and Pensions Committee is holding hearings on legislation that would establish a path to market for generic biologics (Kennedy urges tough tests for generic biologic drugs). The issues can be boiled down as follows:

• The budget for traditional pharmaceuticals is kept somewhat under control by the appearance of low-priced generics at the end of a drug’s patent life. To enter the market, generic players have only to show that their drugs are chemically identical. They don’t have to conduct expensive, time-consuming human trials
• Biotech drugs are different. They tend to be a lot more expensive than traditional drugs, and it is much more complex scientifically –some say it’s impossible– to create exact copies. Although patents on biotech drugs are beginning to expire, prices remain high because the products are exempt from generic competition. As biotech drugs become more popular, they are taking up an ever larger slice of health care spending, which is worrying policymakers
• To address this problem, lawmakers have focused the debate on whether the same path that worked for traditional pharmaceuticals –generic competition– can work for biologics. On one side are the biotech industry and its supporters, who argue biogenerics will be unsafe without extensive, expensive testing in humans. On the other are proponents of low prices, who figure there must be a way to do it

I tend to agree with the biotech folks on the need for extensive testing, even though their statements are self-serving. I also think prices should go down once patents expire. As I’ve proposed before (A better idea than biogenerics), there’s a fairly simple alternative: price regulation of biotech drugs once they lose patent protection.

The price could be based on the cost of goods, a percent of the previous selling price, or some other mechanism. Sure there are distortions that come into play with any kind of price regulation. But we could avoid the cost, danger, and complexity of biogenerics while achieving lower prices and not discouraging innovation. The only real losers are the prospective biogenerics manufacturers.

I’m going to forward this post along to Committee members and see what happens.

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PS, I filled out a web form for each of the 21 Senators on the Committee, copying this post into the message. I’m not holding my breath.

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