I. Introduction: Why Biologics Are So Expensive and Why That Is Unlikely to Change
Biologic pharmaceuticals (biologics) are an increasingly important class of drugs and among the most commercially-successful biomedical products on the U.S. and worldwide market.Reference Blackstone and Fuhr1 They are also among the most expensive.Reference Urquhart, Hakim, Schmier, Beasley and Hernandez2 With many biologics going off exclusivity, hope was that prices would drop once cheaper versions of these products enter the market, same as with generic versions of small molecule drugs.Reference Courage and Parsons3 In a previous article, “Follow-On Biologics Are Set Up to Fail,”Reference Heled4 I explained why the United States does not have, and is unlikely to have, competitively robustReference Price, Rockoff, Carrier and Minniti5 biologics markets and why, as a result, biologics markets are unlikely to see price-drops like those observed in generic drug markets. That conclusion, I believe, still holds even after the issuance, in May 2019, of the Food and Drug Administration's (FDA) much-anticipated guidance on approval of interchangeable biosimilar products.6
Since the late 1990s and early 2000s, the brand-name pharmaceutical industry7—with its lobbying spearheads, the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA) and its many allies in Congress, state legislatures, and state and federal administrations — has been highly successful in undercutting the emergence of competition in biologics markets in the United States.8 Primary among these successes are the enactment of the Biologics Price Competition and Innovation Act (BPCIA),9 an Industry-favorable10 pathway for the approval of follow-on biologics,11 and (2) the application to biologics of the prohibition to disclose regulatory filings — including manufacturing information — to third parties in perpetuity.12 When combined with protections afforded to biologics under the Patent Act, BPCIA and the prohibition on disclosure of biologics manufacturing information have created a uniquely powerful trifecta of intellectual property (IP) protections that make entry barriers to biologics markets extremely high.
The trifecta of IP protections of original biologics consists, first, of numerous — sometimes whole portfolios — of primary patents and, frequently, secondary patents that last long after the primary patents covering the product have expired.Reference Chatterji, Koons, Shapiro and Jaffe13 Second, approved biologics benefit from an unprecedented period of twelve to 12.5 years of market exclusivity as well as four to 4.5 years of data exclusivity under BPCIA.14 And third, biologics know-how, including the details of the process of manufacturing the product, are protected, practically in perpetuity, as trade secrets, under the FDA's confidentiality policies.15 This triple-whammy of exclusivities affords biologics unusually long periods of exclusivity and guarantees that the barriers for entry into biologics markets remain high, sometimes for decades after a biologic was launched.Reference Mixter16
As a result, the picture of competition in biologics markets has been and continues to be grim. The first approval of a follow-on biologic in the United States took place in 2015, almost ten years after the first approval in Europe and nearly twenty years since the emergence of the debate regarding how to evaluate and approve follow-on biologics in the United States.17 Since then, as of the time of writing this article, a total of twenty-one follow-on products (deemed biosimilar to a total of nine original products) have been approved in the United States18 (as compared with Europe's sixty-threeReference Darrow19); only ten of these products (deemed biosimilar to a total of seven original products) actually cleared all hurdles to make it to the market;20 and none of these products has been approved as interchangeable.21 Moreover, as predicted by commentators, biologics markets, whether in original or follow-on products, are dominated by “a few subsidiaries of big pharma, a handful of established multinational generic manufacturers and the dominant large-cap biotech companies”22 who keep prices high while being protected by high entry barriers and only minimal competition with one another.
Given all of this, arguably, the regulatory and legal ecosystem of biologics itself is anti-competitive.Reference Atteberry23 Thus, one must not be overly heartened by the number of biosimilar applications pending at the FDA and the emergence of some competition in certain biologics markets.Reference Levin24 One also should not take the mere emergence of such competition to be a sign of BPCIA's success nor be impressed by sales figures — high as they may be — of a few approved follow-on biologics, as sales figures are poor indicators of competition and are more telling of medical need and desperation of patients.Reference Heled25 The goal has never been merely to have some competition in biologics markets. Rather, it is to have sufficient competition to drive biologics prices down significantly.
To make biologics markets in the United States truly competitive, a significant change must occur. This article calls for such a change to the legal and regulatory regime that dictates how follow-on biologics are evaluated and approved by FDA. Specifically, this article makes the case for legislation that would allow — possibly require — the FDA to share original biologics manufacturing information with follow-on biologics developers, enabling them to recreate the process of making the biologics they seek to imitate.
Even with the issuance of the FDA's interchangeability guidance,26 there is little reason to believe competition in biologics markets in the United States is going to significantly improve.27 To be sure, certain biologics markets are sufficiently lucrative to incentivize follow-on entry of a few or even a handful of sophisticated and financially well-backed companies.28 Yet, competition in most biologics markets is and will likely remain more akin to the competition in markets in which a few large companies promote their “me too” versions of certain drugs29 rather than to competition in markets that have seen the entry of true generics.30 As a result, while a few exceptions may exist where competition drives the price of certain biologics below the typical 10-30% markdown,31 the prices of most biologics will likely remain high. Therefore, from a public health standpoint, follow-on biologics are, and will in all likelihood continue to be, a limited phenomenon, providing only few, expensive options for payors, prescribers, and patients.
To make biologics markets in the United States truly competitive, a significant change must occur. This article calls for such a change to the legal and regulatory regime that dictates how follow-on biologics are evaluated and approved by FDA. Specifically, this article makes the case for legislation that would allow — possibly require — the FDA to share original biologics manufacturing information with follow-on biologics developers, enabling them to recreate the process of making the biologics they seek to imitate.
Part II of this article discusses the current regime of approval of follow-on biologics in the United States and explains in further detail why a paradigm shift is necessary if biologics markets are to become truly competitive. Part III explores ways of instigating such a shift by making original biologics' manufacturing information available to follow-on product developers as a potentially effective way of instilling competition into biologics markets. It lays down possible legal paths of doing so and addresses potential problems and critiques, arriving at the conclusion that making original biologics' manufacturing information available to follow-on product developers is legal, practicable, and advisable.
II. The Current Model of Competition in Biologics Markets and Why it Does Not Work
The paradigm of increasing access to biologics seeks to emulate the success of the Hatch-Waxman Act32 in opening drug markets to competition. That paradigm assumes that access to pharmaceuticals would increase once their prices drop; that prices would drop once competing follow-on products enter the market; that follow-on products will enter the market if their development can be incentivized; and that such development can be incentivized if follow-on manufacturers are allowed to rely on data submitted by the original product developer without having to make the same investment in developing the same data. That way, follow-on product developers can enter lucrative product markets without having to invest in redeveloping the data necessary to obtain FDA approval — essentially, the product — from scratch. The more data follow-on product developers can rely on, the greater their savings. And the greater their savings, the cheaper their products can be. In a nutshell: allowing follow-on product developers to rely on previously developed data to obtain FDA approval for their copy-cat follow-on products incentivizes them to enter drug markets, thereby bringing competition into such markets and, with it, much hoped-for price drops. One underlying assumption lies, however, at the heart of this paradigm and is necessary for all of this to work: that the original product and its follow-on version be sufficiently alike to serve as an acceptable substitute for each other.
In order to determine whether a follow-on product may substitute an original product, the FDA must determine whether the two products are sufficiently alike to make the substitution of one with the other clinically acceptable. To establish such clinical equivalence in the context of small-molecule drugs, the Hatch-Waxman Act requires that (1) the active pharmaceutical ingredient (API) in the follow-on product be chemically the same as the API in the original product,33 (2) the two products have the same route of administration, dosage form, and strength,34 and (3) the follow-on product is expected to have the same therapeutic effect as the original product when administered to patients.35 Follow-on product developers are, in most cases, able to meet these requirements relatively easily, with a modest financial investment,36 and without having to directly observe information from prior regulatory filings. Once the abovementioned requirements (1)-(3) are met, the Hatch-Waxman Act gives the FDA the authority to approve a follow-on product based on the assumption that if the original product was proven clinically safe and effective, and the two products are the same, then the follow-on product is expected to be equally safe and effective. In this way, the Hatch-Waxman Act makes it possible to establish clinical equivalence, and it does so while dispensing with the need to disclose or directly use data submitted as part of earlier FDA filings. Unfortunately, this elegant pathway for determining clinical equivalence of small-molecule drugs does not work for biologics.
Biologics are highly complex in both structure and composition,Reference Chhina37 and, at least presently, cannot be fully and precisely characterized in the same manner and to the same extent as small-molecule drugs.Reference Dahodwala and Sharfstein38 As a result, under current scientific methods, it is very difficult and sometimes even impossible to establish that a follow-on biologic is the same as the original reference product that it seeks to imitate.39 That is why Industry proponents have often argued that when it comes to biologics “the process [of making the product] is the product.”Reference Gitter and Carver40 Hence, it is broadly accepted that short of meticulously replicating the process of making a biologic under the same conditions and using the same cell line, it would be very difficult and sometimes impossible to guarantee identity or even near identity between an original biologic and its follow-on version(s).Reference Price, Rai and Tzeng41
But making biologics typically involves dozens if not hundreds of steps as well as many standards and techniques developed in-house and a highly specific (and potentially proprietary) progenitor cell line.42 Reverse engineering or recreating all of these essential components — the cell line, techniques, and multitude of processes — for any specific biologic simply cannot be done without access to a product's manufacturing information.
The manufacturing information of biologics is an integral part of biologics license applications (BLAs) submitted to the FDA by original product developers seeking marketing approval for their biologics.43 However, although the FDA is in possession of biologics' manufacturing information, the agency is prohibited from making that information available to follow-on biologics developers.44 The laws prohibiting the disclosure of manufacturing information reflect an acceptance of the Industry's position that information submitted to the FDA in connection with product applications is proprietary and, as such, is not to be disclosed to third parties.Reference Korwek45 These laws further dictate that the FDA could not even compare the process of making an original biologic with the process of making follow-on products as part of its internal review of follow-on biologics marketing applications, without disclosing any of the information to follow-on applicants.46
Developers of follow-on biologics therefore find themselves in a difficult position. On the one hand, they have no access — not even indirect — to original biologics' manufacturing information, which would make it possible for them to create their own versions of the original biologics they seek to imitate. On the other hand, current scientific methods of characterization and comparison of biologics do not enable them to establish identity of their follow-on versions of original biologics with the original products they seek to imitate.
As a result, developers of follow-on biologics are unable to follow a path similar to the one laid down in the Hatch-Waxman Act because they cannot establish that their products are identical to the original biologics they seek to imitate.47 They must therefore attempt to recreate as close an imitation as possible of the original product and then establish its clinical comparability (rather than chemical identity) to the original biologic. They do so by first creating their own cell line and putting it through such purification and fermentation processes that the final product is as much like the original product as possible in its structure and composition, all the while refining their processes to try to conform their product to the original.48 Next, they must attempt to recreate the clinical results of the original biologic using their own product by testing it on animals and, ultimately, human subjects.49 If they also seek FDA recognition that their follow-on product and the original product are interchangeable, follow-on product developers must further carry out a “switching study”50 on human subjects that would establish that the follow-on product “can be expected to produce the same clinical result as the [original] product in any given patient; and … the risk … of alternating or switching between use of the [follow-on] product and the [original] product is not greater than the risk of using the [original] product without such alternation or switch.”51 The exact nature and extent of the actual necessary comparisons between the follow-on biologic and the original product is decided on a case by case basis by follow-on product developers in consultation with the FDA.Reference Koyfman52
[T]he emerging regulatory reality of having to put follow-on biologics through expensive and prolonged testing — including on human subjects — is both socially wasteful and unethical. Developers of follow-on products must invest considerable resources only to try to recreate a product that already exists and is available on the market. Especially problematic in this respect is that in order to do so, follow-on biologics are required to undergo “switching studies” that potentially expose human subjects to the risk of significant harm only to confirm that a follow-on product is not more dangerous or less efficacious than an already-approved product.
The resulting framework of evaluation and approval of follow-on biologics is detrimental to the emergence of competition in biologics markets. Without access to original biologics' manufacturing information, follow-on biologics developers are forced to partake in a sort of regulatory or scientific “hide-and-seek”53 in which they try to fashion a follow-on product sufficiently akin to the original product so as to produce comparable clinical results in human patients, yet without being able to conclusively compare the two products or their manufacturing processes.54 The necessary product-specific comparisons are therefore complicated, uncertain, and involve a much larger investment of resources than establishing bioequivalence under the Hatch-Waxman Act.
Developing a follow-on biologic is estimated to cost in the range of $100-250 million and even more for monoclonal antibody products, considerably more than the $1-5 million for a typical generic drug.Reference Blackstone55 It takes eight to ten years, which is, again, significantly longer than the three to five years it takes to develop a generic drug.Reference Beall56 And it is riskier, not just because of the scientific and clinical uncertainties attendant to the limitations of comparing the products and inability to compare the manufacturing processes,Reference Paradise57 but also because the regulatory and legal environment is still very much in flux and will likely remain so for the foreseeable future.58
If the market for an original biologic is lucrative enough, a determined and sufficiently sophisticated developer of follow-on biologics may endeavor to make the significant upfront investment necessary in order to traverse these scientific, regulatory, and legal hurdles. Indeed, for multibillion-dollar products, the current framework might even create enough financial incentives for several developers of follow-on biologics to try to enter the market, potentially leading to significant price competition and increased access. However, for biologics whose market value might not provide clear opportunity to recoup the necessary initial investment, the current regulatory framework provides a smaller incentive to enter the market, leaving such markets with little or no price competition. With a few exceptions, this is, indeed, the situation in most U.S. biologics markets to date. Market entry of follow-on products is infrequent and results in only minimal price competition.Reference Megerlin and Sarpatwari59
Even more troubling, however, is that the emerging regulatory reality of having to put follow-on biologics through expensive and prolonged testing — including on human subjects — is both socially wasteful and unethical. Developers of follow-on products must invest considerable resources — resources that, arguably, would have been better spent on other research and development (R&D) projects — only to try to recreate a product that already exists and is available on the market.Reference Bone60 EspeciallyReference Frapaise61 problematic in this respect is the fact that in order to do so, follow-on biologics are required to undergo studies, including “switching studies,” that potentially expose human subjects to the risk of significant harm only to confirm that a follow-on product is not more dangerous or less efficacious than an already-approved product.Reference Webster and Woollett62
To recapitulate, without access to original biologics manufacturing information, in all but a few biologics markets, follow-on biologics do and will continue to lack the competitive edge necessary to drive down biologics prices to levels seen in generic drug markets.63 This lack of access to manufacturing information also wastes limited societal R&D resources and unnecessarily exposes human subjects to a risk of bodily harm. All of this could change by making biologics manufacturing information available to follow-on product developers.
III. Making Biologics Manufacturing Information Available to Follow-On Developers
The proprietary and confidential status of regulatory filings, including manufacturing information, has, at least thus far, been a reality of pharmaceutical regulation. Yet, it is not a foregone conclusion.Reference Epstein64 Indeed, at least once, in the Federal Pesticide Act (FPA),65 Congress had allowed public access to regulatory filings — including manufacturing information — made as part of applications for marketing approval of products subject to federal government regulation. In so doing, Congress effectively rejected the pesticide industry position — which is virtually identical to the contemporary pharmaceutical Industry position — that disclosure of information contained in regulatory filings is an unconstitutional taking of proprietary information under the Fifth Amendment.66 Despite vehement opposition mounted by the pesticide industry, the measure passed a constitutional challenge and is in force to this day.67
A. Making Regulatory Submissions Publicly Available Under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA)
Enacted in 1978, the FPA amended the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).68 Under FIFRA, pesticides must be registered with the Environmental Protection Agency (EPA) prior to their sale in interstate commerce.69 Receiving marketing approval for an original product under FIFRA typically requires submission of data to the EPA to demonstrate the safety and benefits of the particular pesticide product.70 The FPA amendments to FIFRA created a ten-year exclusivity period, that could be waived at will, for information submitted by manufacturers of original pesticide products where the data pertains to a new active ingredient or a new use of a known ingredient.71 This ten-year data exclusivity period is then followed by an additional five-year “mandatory compensation period,” during which the EPA may consider previously submitted data in connection with new product applications “only if the [secondary] applicant has made an offer to compensate the original data submitter …”72 If the parties cannot agree on the compensation amount, either party may initiate an arbitration proceeding with the Federal Mediation and Conciliation Service, the results of which are binding and not subject to judicial review, absent exceptional circumstances.73 FPA further provides that an original product developer who refuses to participate in negotiations or in the arbitration proceeding with follow-on product developers who wish to use data contained in the original developer's regulatory filings forfeits its claim for compensation.74
Most significantly for the present discussion, under FPA, after expiration of the ten-year data exclusivity period and subsequent five-year mandatory compensation period, the data contained in original pesticide developers' regulatory filings becomes freely available for EPA to use in evaluating follow-on applications and to disclose to qualified parties who request such data without any need to receive the permission of the original product developer or offer compensation for the data, regardless of whether it includes trade secrets.75 Importantly, however, the disclosed health, safety, and environmental data that EPA may use and disclose excludes information that would reveal “manufacturing or quality control processes,” inert ingredients added to a product, and methods of testing or measuring their quantity unless the EPA has first determined that such disclosure “is necessary to protect against an unreasonable risk of injury to health or the environment.”76 The EPA also may not disclose information submitted by original pesticide product developers to any foreign or multinational pesticides companies without the consent of the data developer.77 Finally, FPA made all of these arrangements applicable retroactively, namely to data submitted to the EPA after December 31, 1969.78
The legislative history of FIFRA and the FPA is instructive for the context of biologics. Originally, the 1947 version of FIFRA did not allow nor prohibit the disclosure of information relating to pesticide products.79 During the early 1970s, several key processes and developments took place that eventually resulted in the institution of FIFRA's data protection framework. Among these were the ongoing increased use of pesticides in agriculture and concerns about their potential harmful effects on human and animal health80 and the establishment of the EPA and its charge with the administration of FIFRA instead of the Department of Agriculture.81 Another significant development was the amendment of FIFRA in 1972 so as to require a showing that pesticide products seeking marketing approval would not “cause unreasonable adverse effects on the environment.”82 All of these factors resulted in heightened requirements for scientific data regarding pesticide products as a condition for the grant of marketing approval by the EPA.83 The need to collect such data, in turn, imposed increased financial burdens on developers of pesticide products who were now required to invest substantial resources in complying with the EPA's newly imposed data requirements.84
With the heightened data requirements posed by the EPA under FIFRA and the resultant increasing financial burdens, developers of original pesticide products became less and less tolerant of USDA (and later EPA) practices involving the disclosure and use of such data in connection with evaluation of follow-on product marketing applications.85 Concerned with free-riding by follow-on product developers, original pesticide product developers sought to curb these practices or at least limit them in such a way that would minimize their exposure to financial loss owing to the sharing of data about their products. A heated public policy debate ensued, which epitomized all of the key elements we have been seeing in the debate regarding the confidentiality of FDA regulatory filings.86
On one side of the debate were proponents of developers of original pesticide products who advocated for stronger protection of information submitted to the EPA in connection with applications for registration of pesticide products.87 Much like the Pharmaceutical Industry, the National Agriculture Chemical Association, for example, argued that EPA use of data submitted by original pesticide product developers in connection with an earlier application as part of its review of subsequent applications undermined incentives for the development of new pesticides and constituted a taking under the Fifth Amendment.88 Proponents of original pesticide product developers sought complete prohibition of disclosure and use of any information they deemed proprietary (including safety, health, and environmental data), or, at the very least, the institution of long exclusivity periods during which the EPA would not be allowed to use and disclose previously submitted data.89
On the other side were those who favored access and who advocated for little or no exclusivity in the data submitted to the EPA. Among them were proponents of public access to information as well as those concerned over what they saw as a potentially wasteful and unjustified extension of monopolies via the institution of “quasi-patents” in addition to patent protections in pesticide products.90
Particularly relevant to the present discussion regarding biologics was the debate surrounding the length of the proposed exclusivity period under FPA, during which EPA would not be allowed to disclose or rely on information from earlier filings. Proponents of original product developers advocated for a ten-year data exclusivity, yet their pro-access opponents objected to the institution of any exclusivity period or would accept, at most, only a reasonable compensation requirement for disclosure of regulatory filings to follow-on product developers.91 Others preferred a “middle-ground” of five years of exclusivity followed by an additional period of five years during which a compensation requirement would apply.92
Eventually, in 1978, Congress amended FIFRA by enacting the FPA, which revised FIFRA's data-consideration and data-disclosure provisions and instituted FIFRA's current regime.93
Despite its long, ten-year exclusivity period, five-year mandatory compensation period, and limitations on the type of data that could be disclosed by the EPA to third-parties, FPA failed to satisfy developers of original pesticide products as an acceptable compromise. Stepping up their decade long campaign against the use and disclosure of regulatory filings data, the original pesticide products industry challenged the constitutionality of FPA's data use and disclosure arrangements as a violation of the Fifth Amendment.94 Specifically, the pesticide industry argued that (1) FPA effected a “taking” of original pesticide product developers' proprietary information without just compensation,95 (2) the use of information was for private rather than a public purpose,96 and (3) FPA's arbitration scheme abrogated original pesticide product developers' due process rights and constituted an unconstitutional delegation of judicial power.97 The United States Supreme Court addressed these claims in the landmark 1984 case of Ruckelshaus v. Monsanto.
The Ruckelshaus Court rejected virtually all the claims raised by the original pesticide products industry and held that FPA's data use and disclosure provisions did not violate the Fifth Amendment with respect to data submitted prior to October 22, 1972, or after September 30, 1978.98 The Court began by acknowledging that data such as that which is submitted by original pesticide product developers to the EPA as part of applications for marketing approval of pesticide products may indeed contain proprietary information and that such information is subject to the protection of the Taking Clause.99 The Court then recited certain tenets of its takings law, including that there is not “any set formula for determining when justice and fairness require that economic injuries caused by public action must be deemed compensable taking” and that such inquiry is “essentially an ad hoc, factual inquiry” and should take under consideration such factors as “the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.”100
Proceeding to the taking inquiry itself, the Ruckelshaus Court then held that the original pesticide product developers had no reasonable investment-backed expectation that data submitted to the EPA subsequent to FPA would be kept in confidence and not used by EPA or disclosed to qualified third-parties.101 The Supreme Court explained:
If, despite the data-consideration and data-disclosure provisions in the statute, [an original pesticide product developer] choose[s] to submit the requisite data in order to receive a registration, it can hardly argue that its reasonable investment-backed expectations are disturbed when EPA acts to use or disclose the data in a manner that was authorized by law at the time of the submission.102
The Court reasoned that the federal government's ability to regulate the marketing and use of pesticides cannot be challenged by the original pesticide products industry and that such government regulation is “the burden[] we all must bear in exchange for ‘the advantage of living and doing business in a civilized community.’”103 The Court emphasized that “[t]his is particularly true in an area, such as pesticide sale and use, that has long been the source of public concern and the subject of government regulation” and so, given the legitimate government interest in regulating that area of technology, “as long as [original pesticide product developers are] aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking.”104
Furthermore, the Supreme Court held that absent an express promise developers of original pesticide products did not even have reasonable investment-backed expectations that the EPA will not use or disclose data they submitted before the enactment of FPA which was subject to the general provisions of the Trade Secrets Act.105 The Supreme Court explained:
In an industry that long has been the focus of great public concern and significant government regulation, the possibility was substantial that the Federal Government, which had thus far taken no position on disclosure of health, safety, and environmental data concerning pesticides, upon focusing on the issue, would find disclosure to be in the public interest.
Thus, held the Supreme Court, in the absence of express statutory language promising that information contained in regulatory filings will be kept confidential, the Trade Secrets Act “provides no basis for a reasonable investment-backed expectation that data submitted to EPA would remain confidential” and it “cannot be construed as any sort of assurance against internal agency use of submitted data during consideration of the application of a subsequent applicant for registration.106
The Ruckelshaus Court further ruled that even if the disclosure and use of proprietary information by the EPA were to constitute a taking for Fifth Amendment purposes, it would still be for “public use” and therefore permissible. The Supreme Court rebuked the view that “public use” only exists where the property taken by the government is put to use for the general public, warned that “[t]he role of the courts in second-guessing the legislature's judgment of what constitutes a public use is extremely narrow”107 and ruled that “[s]o long as the taking has a conceivable public character, ‘the means by which it will be attained is … for Congress to determine.’”108 Applying these principles to FPA, the Supreme Court upheld FPA's arrangements as directed to “public use” while giving recognition to FPA's underlying rationale:
[T]he public purpose behind the data-consideration provisions [of FPA] is clear from the legislative history. Congress believed that the provisions would eliminate costly duplication of research and streamline the registration process, making new end-use products available to consumers more quickly. Allowing applicants for [follow-on products] to use data already accumulated by others, rather than forcing them to go through the time-consuming process of repeating the research, would eliminate a significant barrier to entry into the pesticide market, thereby allowing greater competition among producers of end-use products. Such a procompetitive purpose is well within the police power of Congress.109
Thus, held the Supreme Court, any taking that may occur as a result of EPA use and public disclosure of data submitted by original pesticide product developers would be a taking for public use.110
Finally, the Ruckelshaus Court rejected the claim that takings affected by FPA — to the extent such takings were to take place — will be unconstitutional for lack of just compensation. The Court held that FPA created an arbitration proceeding aimed at providing for just compensation in cases of taking and that, even in cases in which such compensation was unavailable, original pesticide product developer were still able to sue the government in the Court of Federal Claims under the Tucker Act.111 Thus, the Court concluded, the challenge to the constitutionality of FPA's arbitration and compensation scheme was not ripe.112 In conclusion, the Supreme Court held that there was “no constitutional infirmity in the challenged provisions of FIFRA.”113
Making original biologics manufacturing information available to follow-on product developers will significantly lower the resources necessary to develop follow-on biologics and enter biologics markets with follow-on products. That, in turn, is expected to lower the existing high entry barriers to these markets, increase the number of potential competitors who will have the resources to enter such markets, and lead to increased competition, which — given a critical number of competitors — will, ultimately, lower biologics prices.
Notably, the Ruckelshaus Court did not fail to recognize the substantial investment of time and resources necessary in order to develop an original pesticide products; that such investment makes the data produced by original pesticide product developers potentially highly valuable; and that such data “contai[n] or relate to trade secrets … and Confidential, commercial information.”114 Nor has the Court shied away from recognizing that EPA's disclosure of data that constitutes a trade secret and the use of such data by follow-on pesticide product developers would destroy the trade secret owner's property interest in the data.115 Nonetheless, the Supreme Court upheld the constitutionality of FPA, setting an important precedent and, potentially, clearing the path for additional similar regimes.
The effect FPA and the subsequent Ruckelshaus decision may have had on innovation is difficult to assess. The literature examining pesticide markets and innovation during the 1970s and 1980s shows that increase in the regulatory costs imposed on the pesticide industry (from 14% to 47% of total research spending) accompanied by an increase in development time (from seven to eleven years) caused a sharp decrease in the number of new pesticide product registrations116 for minor crops (from sixty-two between 1972-76 to just fifteen over the 1985-89 period).Reference Ollinger and Fernandez-Cornejo117 At the same time, the literature also shows that during that same period there was almost no change in the number of new pesticide product registrations for major crops, that there was consistent growth in investment in pesticide R&D, and that there was a marked improvement in the safety of pesticides products.Reference Ollinger, Fernandez-Cornejo, Ollinger and Fernandez-Cornejo118 Moreover, the reported decrease in the number of new product registrations had occurred almost entirely in the early and mid-1970s, well before the enactment of FPA, and is therefore more likely to be the result of increased regulatory stringency subsequent to the establishment of the EPA in 1972 rather than of FPA's data sharing arrangements and Ruckelshaus.119 Thus, to the extent that FPA and Ruckelshaus had any effect on innovation, that effect is not readily discernable from the literature.120 The lack of a clearly observable dampening effect of FPA and Ruckelshaus on pesticide innovation may indicate that incentives for innovation were still sufficient even after FPA and Ruckelshaus and that implementing similar arrangements in other regulated industries might not undermine incentives for innovation. Which brings us back to biologics.
B. The Case for Making Biologics Manufacturing Information Available to Follow-On Applicants
Pesticides and biologics have much in common. Most relevant to the current discussion is that both require significant investment of resources in R&D before they can be brought to market; both are subject to federal regulation under specialized bodies of law and by expert federal agencies; both are required to meet certain standards before they are allowed to enter the market; both are the subject of exclusivities that are meant to incentivize innovation; and both pose high entry barriers, leading to a tendency for market concentration and its attendant ills.121 When combined with the teachings of Ruckelshaus v. Monsanto, these commonalities suggest that implementing in biologics information disclosure rules similar to those enacted under the FPA may serve to alleviate many if not all of the problems discussed earlier.
Making original biologics manufacturing information available to follow-on product developers will significantly lower the resources necessary to develop follow-on biologics and enter biologics markets with follow-on products. That, in turn, is expected to lower the existing high entry barriers to these markets, increase the number of potential competitors who will have the resources to enter such markets, and lead to increased competition, which — given a critical number of competitors — will, ultimately, lower biologics prices.122
Disclosure of manufacturing information to follow-on biologics developers will minimize the waste of limited societal R&D resources that are currently spent on efforts to imitate original biologics and make it possible to divert such resources to potentially more meritorious avenues of research.
And, last but not least, sharing manufacturing information with follow-on biologics developers will contribute to patient health and safety and avoid the ethical quagmire of requiring comparability studies. First, sharing manufacturing information will make comparability studies — especially “switching studies”123 — mostly if not entirely unnecessary, thereby eliminating the health and safety risks for human subjects participating in such studies. Second, the sharing of manufacturing information will also ensure that the safety, efficacy, and purity profiles of original biologics and their follow-on versions are as close to each other as possible, thus eliminating unnecessary health and safety risks that comparability studies might not have detected sufficiently early due to study design limitations.124 And third, eliminating the need for comparability studies will do away with the very real concern that comparability studies are unjustified, and therefore unethical, because their true purpose is not to create a new product that would benefit patients but to recreate an existing product via reverse engineering, using human subjects as mere fodder for a regulatory method whose purpose is to avoid compromising the property interests of original biologics developers.125
In short, making original biologics manufacturing information available to follow-on biologics developers would be an efficient and effective way of bringing significant price-competition to biologics markets and safeguarding patient (including test subjects) health and safety without undermining or doing away with the BPCIA framework in its entirety. I therefore propose to change the laws pertaining to the regulation of biologics to allow for the disclosure of original biologics manufacturing information to follow-on biologics developers, upon follow-on developers' request,126 sub sequent to the expiration of BPCIA's four to 4.5-year data exclusivity period. The following section discusses the legal feasibility and specific ways of doing so.
C. Pathways for Making Biologics Manufacturing Information Available to Follow-On Applicants
Making original biologics manufacturing information127 available to follow-on product developers can be achieved in numerous ways. The most preferable way would be for Congress to enact a statute that explicitly grants the FDA the authority to disclose biologics manufacturing information to follow-on product developers. Such a law could take the form of a standalone section, an amendment to BPCIA, the Food, Drug and Cosmetics Act (FDCA),128 the Public Health Service Act (PHSA),129 or any combination of these options.130
Another way would be for Congress to institute direct disclosure of original biologics manufacturing information to follow-on biologics developers (rather than through the FDA). This course of action, however, is less preferable because of its potential for abuse and for causing friction between the parties.131 Should congress choose to take this path, it may rely on and expand BPCIA's existing requirement that follow-on biologics developers disclose their manufacturing information to original biologics developers as part of the Act's patent dispute resolution framework (a.k.a. “patent dance”).132 Doing so, however, would require Congress to construct the measure such that the disclosure of original biologics manufacturing information is not limited to the patent dance framework and/or to situations in which the parties are engaged in a patent dispute.
Congressional legislation effecting disclosure of original biologics manufacturing information may be tailored broadly — e.g., allowing the FDA to use any information in its possession however it deems necessary to promote the public health. Or it may be structured narrowly — e.g., granting the FDA the authority to give specific parties access to original biologics' manufacturing information when safety considerations or the public health require it,133 and subject to commitment to keep the information in confidence and not further share it with additional third parties and/or entities with operations outside of the United States.134 Such a statute may also apply retroactively to filings made prior to its enactment.135
Disclosure of original biologics manufacturing information to follow-on product developers could also, at least hypothetically, be achieved through FDA regulation if Congress were to amend FDCA Section 301(j) so as to limit its applicability to original biologics manufacturing information. Section 301(j), which is made applicable to biologics under PHSA Section 351(j),136 prohibits “using by any person to his own advantage, or revealing … any information acquired under authority … of this title concerning any method or process which as a trade secret is entitled to protection.”137 Indeed, FDA regulations clearly reflect the FDA's reading of Section 301(j) as precluding the agency from disclosing information contained in regulatory filings in general and biologics manufacturing information in particular.138
[T]he problem with biologics markets is not that they are prone to abuse through regulatory loopholes but that they are constructed in such a way that is itself non- and even anti-competitive. To bring price competition to biologics markets, it is necessary to make a significant change to the paradigm of how FDA evaluates and approves follow-on biologics by giving follow-on developers access to original biologics manufacturing information. Unfortunately, it does not seem like we have reached the point where there is enough political will to make this kind of change. But that point may be fast coming.
Should Congress limit the applicability of FDCA Section 301(j) to biologics manufacturing information, FDA should find ample authority to create a regulatory pathway for the sharing of original biologics manufacturing information. PHSA grants the Secretary of Health and Human Services the authority to “establish, by regulation, requirements for the approval, suspension, and revocation of biologics licenses.”139 This broad authority gives the FDA the power to promulgate regulations as it deems necessary to implement BPCIA. BPCIA, in turn, grants the FDA (through the Secretary of HHS) the specific authority to approve applications for follow-on biologics based on a determination that a follow-on biologic is biosimilar to or interchangeable with an original biologic.140 BPCIA deems two products biosimilar if they are (1) “highly similar … notwithstanding minor differences in clinically inactive components” and (2) have “no clinically meaningful differences … in terms of [their] safety, purity, and potency.”141 Thus, BPCIA gives the FDA the power to promulgate whatever regulations it deems necessary to facilitate its evaluation of whether a follow-on biologic and an original biologic are “highly similar” and have “no clinically meaningful differences … in terms of [their] safety, purity, and potency.” This, I contend, may include the power to share previous regulatory filings made in connection with applications for original biologics, including manufacturing information, with follow-on product developers.
Furthermore, PHSA instructs the FDA (again, through the Secretary) to approve applications for biologics only “on the basis of a demonstration that … the [biologic] is safe, pure, and potent.”142 Reading this statutory language in conjunction with BPCIA therefore obligates the FDA to approve a follow-on biologic only if it is convinced that the follow-on product and original biologic are “highly similar” and have “no clinically meaningful differences … in terms of [their] safety, purity, and potency.”143 As discussed earlier, the ability to compare follow-on biologics to the original biologics they seek to imitate without having access to the original biologics' manufacturing information is highly limited. Accordingly, if FDA is to uphold PHSA's instruction that it approves only follow-on biologics that are sufficiently safe, effective, and pure, then — FDCA Section 301(j) aside — the law requires that FDA has the power to disclose original biologics manufacturing information to follow-on biologics developers where such disclosure is necessary to meet the FDA's standards of safety, efficacy, and purity. Indeed, expecting the FDA to ensure that follow-on biologics are sufficiently safe, effective, and pure without disclosing the original biologics' manufacturing information or even using it internally as part of its evaluation of follow-on biologics applications is, arguably, asking FDA to perform its statutory duties with one hand tied behind its back while being blindfolded.
Moreover, even in cases where comparability of follow-on biologics with original biologics may be established without disclosure of the original biologics' manufacturing information, because of the inherent limitations of current comparison techniques, the safety and efficacy of follow-on biologics would be further ensured if follow-on biologics developers had access to the original biologics' manufacturing information. This, together with FDA's duties and powers under PHSA and BPCIA, as well as the FDA's core mission — to “protect[] the public health by ensuring the safety, efficacy, and security of … drugs, biological products, and medical devices”144 — lead to the conclusion that but for FDCA Section 301(j) FDA would have the authority to share original biologics manufacturing information with follow-on product developers to the extent necessary to ensure the safety, efficacy, and purity of follow-on biologics.
BPCIA itself is silent about the issue of sharing and use of information from original biologics regulatory filings and how FDA may choose to implement its authorities under the statute in this regard.145 Rather, BPCIA only determines what information FDA may consider in evaluating follow-on biologics applications.146 The statutory language, however, does not foreclose the consideration of additional categories of information (e.g., manufacturing information) nor does it prohibit the disclosure of original biologics manufacturing information for the purpose of follow-on products evaluation. To the contrary, BPCIA expressly states that a follow-on biologic application “may include any additional information in support of the application.”147 Therefore, BPCIA itself does not preclude the FDA from use and disclosure of regulatory filings, including original biologics manufacturing information. If anything, BPCIA's open ended language regarding the types of information that follow-on applicants may submit and FDA may consider can be read as an invitation for the FDA to share manufacturing information with follow-on product developers and use such information as part of its evaluation of follow-on biologics.148
The discussion now turns to the question of why has Congress not incorporated into BPCIA a pathway for the disclosure of original biologics manufacturing information from its inception and what is the likelihood of Congress doing so in the future?
D. Politics, Political Economy, and Plausibility
With a few exceptions, legislative processes are notoriously slow and exceedingly difficult to traverse. Passing a legislative measure requires forming political alliances sufficient to chaperone the measure through all the necessary procedural hurdles in both chambers of Congress, passing it through (at least) two up-or-down votes, and then getting it past the president — a Herculean feat in the best of times, let alone in this particular day and age. And all of this is without even considering the expected opposition from the Industry, which employs one of the strongest lobbies in Congress and which is known for its lavish and ongoing financial support of numerous members of Congress.Reference Mello149 Indeed, the influence exerted by the Industry over Congress is responsible for what many view as Congress's long history of over-attentiveness to the Industry's concerns, not to say capitulation to its demands, and too little concern for public access.Reference Sekerka, Benishek and McGreal150
Congress's highly favorable attitude toward the Industry may explain why in all the legislative debates that preceded the enactment of BPCIA, the option of making original biologics manufacturing information available to follow-on developers was not even on the table. It is difficult to believe that the drafters of BPCIA and competing bills151 — including those who are not known as Industry-advocates — were oblivious of the FIFRA regime. A more likely explanation is that the idea of sharing manufacturing information was such a non-starter with industry proponents that pro-access drafters who wanted their bills to be considered seriously as a possible platform for legislative discussions never dared including it in their proposals. It may be telling that the only measure that came even close to such a proposal was an amendment to the BPCIA bill introduced by Senator Bernie Sanders (I-VT) that would have created an arrangement akin to the FIFRA mandatory compensation arrangement under which a follow-on applicant would have access to clinical data submitted by an original product applicant.152 Yet, even that rather limited proposal was summarily dismissed without any record of it ever actually being given consideration.
No doubt, some things have changed since the enactment of BPCIA. Over the last few years, the cost of healthcare in general and pharmaceuticals particularly have become a centerstage issue in the public debate. And while the Industry still has many powerful friends in Congress, an increasing number of Members of Congress are willing to speak out for access and against Industry interests.153 Still, at this point and in this political landscape, it is difficult to see Congress passing legislation that would make significant changes to the way we regulate biologics. A primary reason for that is that the movement to curb drug prices assumes that prices remain high mostly due to foul play by pharmaceutical companies, drug distributors, and possibly other actors involved in the production and sale of pharmaceuticals. That movement seems to assume that if we just closed all the loopholes that allow for such foul play, the pricing problem would resolve itself through competition. The resultant legislative efforts, therefore, have been rather narrow in that they have focused on eliminating unfair Industry practices.154
However, as explained above, the problem with biologics markets is not that they are through regulatory loopholes that could be “fixed” but that they are constructed in such a way that is itself non- and even anticompetitive. To bring price competition to biologics markets, it is necessary to make a significant change to the paradigm of how FDA evaluates and approves follow-on biologics by giving follow-on developers access to original biologics manufacturing information. Unfortunately, it does not seem like we have reached the point where there is enough political will to make this kind of change. But that point may be fast coming.
The ongoing, continuing growth of government expenditure on medicines in general and biologics in particular might instigate further shift in Congress's attitude toward the drug pricing problem, driving it to examine the underlying regimes themselves. If and when that shift occurs, Congress may, eventually, consider amending BPCIA and/or FDCA Section 301(j) to allow FDA to disclose to follow-on biologics developers the manufacturing information of the original biologics they seek to imitate. And when it does, the ball will move to the FDA's court for implementation.
To facilitate the disclosure of original biologics manufacturing information, the FDA will probably need to promulgate new regulations via a notice-and-comment process, which will, no doubt, be prolonged and marked by significant Industry opposition. It is highly likely that the promulgation process and issuance of a rule that would affect the disclosure of original biologics manufacturing information to follow-on product developers will also prompt the Industry to legally challenge the regulation, possibly as an unconstitutional taking. As discussed below, the likelihood of success of such a legal challenge in enjoining the FDA rule is not high and the challenge is unlikely to result in the court striking it down.155 And yet, given the FDA's conservative, even timid record when it comes to biologics regulation,156 Congress ought to draft the legislation enabling and instructing the FDA to disclose original biologics manufacturing information in explicit and specific terms.
E. Possible Shortfalls, Pitfalls, and (Industry) Critique
1. undermining incentives for innovation in biologics
The primary concern in making changes to regulatory schemes involving innovative products, like biologics, is that such changes might upset a balance struck between incentives for innovation and the public interest in access to the fruits of such innovation. As its name suggests, the Biologics Price Competition and Innovation Act sought to strike such a balance. Thus, the concern is that changes made to the BPCIA framework, especially as they pertain to rights in/to the products of innovative efforts, might detract from and undermine BPCIA's incentives for investment in original biologics R&D.
The overall landscape of incentives for innovation in the area of biologics, however, indicates that such concerns would be unfounded. As mentioned earlier, original biologics currently enjoy a uniquely powerful array of intellectual property protections, including patents, a twelve-year market exclusivity, a four-year data exclusivity, and trade secret protection of manufacturing information and testing data, practically in perpetuity.157 It is this array of protections that is responsible, in large part, to the poor state of price competition in biologics markets. Indeed, if anything, the area of biologics suffers from over-protection for innovation,Reference Lemley158 which is evidenced by original biologics manufacturers' ability to charge super-competitive prices for their products long after the expiration of the primary patents and market exclusivities covering these products, and certainly long after the manufacturers have recouped their R&D costs.159
Furthermore, biologics markets are the most lucrative pharmaceutical markets in history.160 The cost of developing original biologics is a highly fraught issue with estimates ranging dramatically.Reference DiMasi, Grabowski, Avorn and Ho161 Yet, even the highest estimates that are advanced by Industry-funded organizations and researchersReference DiMasi162 make clear that once a company has secured the resources necessary to develop an original biologic, recouping such investment is not particularly risky.163
Moreover, under BPCIA, exclusivity in original biologics is assured, at a minimum, for twelve-years subsequent to the approval of an original biologic by FDA.164 That period of exclusivity — also the subject of much controversyReference Grabowski, Brill and Kotlikoff165 — was devised to serve in lieu of patents and was based on the Industry's own estimates of the length of time it would take developers of original biologics to recoup their investment in a typical biologic.Reference Grabowski, Grabowski and DiMasi166 In other words, BPCIA already includes the Industry's own preferred mechanism for maintaining sufficient incentives for innovation in biologics: the twelve-year market exclusivity. Making manufacturing information available to follow-on biologics developers is not going to change that.167 Accordingly, by the Industry's own logic, the indefinite protection of manufacturing information is not only unnecessary, but also excessive.
As a side, the excess of incentives for innovation currently afforded to original biologics developers — with its harmful consequences for competition in biologics markets — is unlikely to be fully resolved even if manufacturing information were made available to follow-on product developers. Without the indefinite confidentiality of manufacturing information, original biologics developers are still going to benefit from (1) BPCIA's twelve-year market exclusivity,168 (2) BPCIA's four-year data exclusivity,169 (3) BPCIA's additional six months of exclusivity for putting their products through pediatric studies,170 and (4) whatever patent protection is available in the original active ingredient(s), processes of making them, and methods of using them.Reference Karshtedt and Mandel171 Making manufacturing information available to follow-on biologics developers may, however, alleviate some of the negative effects of the overprotection afforded to original biologics by bringing a measure of price competition to some biologics markets.
2. unconstitutionality
The Industry's longstanding position has been that its submissions to the FDA in connection with product marketing applications contain proprietary and confidential information and that sharing such information with third parties or using it for the purpose of comparing original and follow-on products would constitute a per se violation of the Fifth Amendment's Taking Clause.172 Indeed, it was the Industry's successful assertion of this position that dissuaded the FDA from attempting to develop a regulatory pathway for the approval of follow-on biologics based on its existing authorities, eventually drove Congress to step in, and resulted in the legislative efforts that led to the enactment of BPCIA.Reference Yoo173
However, the Industry's position is significantly challenged, if not wholly belied, by the Supreme Court's decision in Ruckelshaus. Under Ruckelshaus, “[i]f an individual discloses his trade secret to others who are under no obligation to protect the confidentiality of the information, or otherwise publicly discloses the secret, his property right is extinguished.”174 Thus, should Congress authorize the FDA to disclose original biologics manufacturing information to follow-on biologics developers, then — even assuming portions of the information qualify as proprietary — subsequent voluntary submission of such information to the FDA by original biologics developers will extinguish any property rights in that information, precluding the possibility of a taking.175 As plainly stated by the Ruckelshaus Court, “as long as [original product developers are] aware of the conditions under which the data are submitted, and the conditions are rationally related to a legitimate Government interest, a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can hardly be called a taking.”176
As also made clear by Ruckelshaus, a law allowing disclosure of regulatory filings information to third parties does not constitute per se taking under Supreme Court taking jurisprudence.177 Importantly, the Ruckelshaus Court did not view even the retroactive application of such a law, namely applying the law to regulatory filings made before the new law went into effect, as constituting a per se taking.178
And yet, all of this is not to say that disclosure of manufacturing information to follow-on biologics developers could never constitute a taking. Under well-established Supreme Court takings law, the determination of whether a taking occurs is an “ad-hoc, factual inquiry” that requires consideration of “the character of the governmental action, its economic impact, and its interference with reasonable investment-backed expectations.”179 As discussed earlier, making original biologics manufacturing information available to follow-on biologics developers will achieve a variety of public policy goals — improving access to life-saving medicines, preventing waste in allocation of research funds, foregoing the need for unethical research, and more — without interfering with original biologics developers' patent and BPCIA exclusivity rights. It would, however, potentially diminish or completely destroy the value of trade secrets contained in such information and significantly compromise the ability of original product developers to maintain a monopolistic market position in their products past the expiration of their 12-12.5-year market exclusivity, thus undermining projected profits from original products past that point.
The Industry has argued that such consequences would interfere with original biologics developers' reasonable investment-backed expectations that regulatory filings be kept confidential in perpetuity.180 That position is not without merit. Section 301(j) of FDCA, prohibits “using by any person to his own advantage … or revealing … any information acquired under authority … of this title concerning any method or process which as a trade secret is entitled to protection.”181 Arguably, the language of Section 301(j), which under PHSA also applies to the approval of biologics,182 may be read as a prohibition on FDA employees to disclose proprietary information contained in regulatory filings. Furthermore, FDA regulations explicitly reflect the agency's policy of not disclosing information contained in regulatory filings in general and biologics manufacturing information in particular.183 These provisions and policies could have, indeed, created reasonable expectations among original biologics developers that their regulatory filings be kept confidential.184 However, there is also merit in the view that it would be unreasonable to expect Congress and the FDA to never reconsider the current arrangements dictating the non-disclosure of regulatory filings pertaining to original biologics.
First, as explained by the Ruckelshaus Court, that the law provides general protection to trade secrets — e.g., under the Trade Secrets Act,185 the Defend Trade Secrets Act,186 and PHSA Section 301(j) — “is not a guarantee of confidentiality to submitters of data, and, absent an express promise, [a submitter of data has] no reasonable, investment-backed expectation that its information would remain inviolate in the hands of [the agency].”187 Like pre-1972 FIFRA, BPCIA is silent with respect to the possibility of disclosure of information from regulatory filings to follow-on applicants, which, under Ruckelshaus, may deem unreasonable expectations that such information would remain undisclosed forever.188 Similarly, FDA policies prohibiting the disclosure of information contained in regulatory submissions also, arguably, do not meet the Ruckelshaus “express promise” standard because they are not made in a statute.189
Second, as further explained by the Ruckelshaus Court, in regulated industries, where the statute is silent, applicants should expect that regulatory filings might be disclosed.190 Much like the pesticide industry in the 1970s, the pharmaceutical industry nowadays is “the focus of great public concern and significant government regulation,” which the Ruckelshaus Court viewed as cause enough for putting product applicants on notice that the government might, “upon focusing on the issue … find disclosure to be in the public interest.”191 Indeed, arguably, the Ruckelshaus decision itself puts original biologics developers on notice that the federal government might eventually decide to disclose information from regulatory filings to follow-on applicants, rendering unreasonable any expectations that such information be kept secret in perpetuity.
And third, the Industry's position cuts against current transparency trends in Europe and at FDA itself.Reference Sharfstein and Doshi192 These trends should, at the very least, raise questions among original biologics developers regarding the future of policies involving the confidentiality of regulatory filings. That, in turn, could call into question the reasonableness of reliance on such policies.
To summarize: the question of reasonableness of original biologics developers' expectations that manufacturing information contained in regulatory filings be kept confidential in perpetuity does not have a conclusive answer and is unlikely to have one unless and until a federal court decides it as part of its adhoc factual inquiry into the takings question. If the Industry is found to have not had reasonable investment backed expectations that manufacturing information be kept confidential in perpetuity by the FDA, then under Supreme Court Fifth Amendment jurisprudence there can be no taking. For the purpose of the present discussion, however, let us assume that a federal court may indeed find reasonable the Industry's expectations that biologics manufacturing information be kept confidential in perpetuity.
In such a case, a court deciding the question of taking must still also consider “the character of the governmental action [and] its economic impact” before it can make a determination of whether there is a taking under the Fifth Amendment.193 Given careful consideration by legislators and/or FDA regulators of the pros and cons of disclosure of original biologics manufacturing information and a carefully worded legislative and/or regulatory measure, it is possible that a court considering the question of a taking will conclude there was none regardless of any reasonable investment-backed expectations to the contrary. And so, yet again, let us assume for the purpose of the present discussion that after consideration of all relevant circumstances, the court finds that a Fifth Amendment taking indeed took place, what then? As made clear in Ruckelshaus, such a determination still does not mean that the taking cannot proceed but simply that it must be followed by “just compensation.”194
Supreme Court jurisprudence holds that “The Fifth Amendment does not require that compensation precede the taking” and that “an individual claiming that the United States has taken his property can seek just compensation under the Tucker Act.”195 Accordingly, a legislative and/or regulatory measure that would give follow-on biologics developers access to original biologics manufacturing information and that would constitute a taking under the Fifth Amendment will not necessarily have to include a means of compensating original biologics developers for the loss of their trade secrets. Rather, it would enable them to seek such compensation by suing the federal government in the Court of Federal Claims under the Tucker Act. Or, at least that would have been the case had BPCIA not already provided just compensation.
As discussed earlier, BPCIA includes a uniquely long market exclusivity period that embodies the Industry's own preferred mechanism for enabling original biologics developers to recoup their R&D investment.196 This 12-12.5-year market exclusivity is the compensation — which some would say is more than just197 — afforded by Congress to original biologics developers for the opening of biologics markets to price competition.198 Indeed, the intended quid-pro-quo that BPCIA meant to achieve is evident in the Act's very name — the Biologics Price Competition and Innovation Act — which juxtaposes price competition with incentives for innovation; the exclusivity regime instituted under BPCIA with the opening of biologics markets to price competition.
In sum, Congressional legislation that would make it possible for FDA to disclose original biologics manufacturing information to follow-on product developers might or might not constitute a taking under the Fifth Amendment. Either way, such legislation will not be unconstitutional.
3. disclosure of manufacturing information might not be enough
As discussed earlier, biologics can be difficult to make and even more so to replicate.199 Indeed, even original biologics manufacturers who have all the resources to replicate their own products sometimes have a hard time doing so in different batches of the same product.Reference Vulto, Jacquez, Gonçalves, Louët, van Beers and Bardor200 And in some cases, making a biologic requires not just meticulously following its manufacturing “recipe” but also the use of a highly specific (and proprietary) cell line, as well as application of other standards. In short: there may be cases where original biologics manufacturing information alone might not be enough for follow-on product developers to make close enough imitations of the original products they seek to imitate.
In such cases, it may be necessary to require original biologics developers to share with follow-on applicants any progenitor cell lines necessary to create a copy of the original biologic. Such sharing may be done either directly — with the original manufacturer giving a sample of the cell line to the follow-on developer — or indirectly — by depositing a sample with the FDA, which will share it with qualified follow-on developers.
At a first glance, requiring that original biologics developers share not only information but also tangible objects in their possession might seem problematic. The constituting principle, however, is the same: after the expiration of BPCIA's four to 4.5-year data exclusivity period, follow-on biologics developers should be able to have access to whatever knowledge and materials are necessary in order to create the truest replica possible of the original biologic. The physical nature of the cell line also should not significantly change the taking analysis since cell lines are easy and inexpensive to propagate and because sharing a sample from a cell line will neither destroy its value nor deny its owner the ability to use it (or at least the portions of the cell line that it retains in its possession).201 Indeed, sample depositing and sharing requirements are nothing new in federal law and have been incorporated not only into patent law — with the express intent to make such samples available to third parties202 — but also into food and drug law.203
To conclude this part: disclosure of original biologics manufacturing information is not only feasible but is also advisable.
Conclusion
As biologics continue to grow in prevalence and importance, despite the enactment of BPCIA in 2010, their prices remain high. The recent issuance of the FDA Interchangeability Guidance is unlikely to change this reality for most biologics, even after BPCIA's twelve to 12.5-year market exclusivity and primary patents covering such biologics have expired. To bring significant, Hatch-Waxman-like price competition to biologics markets, a shift in the paradigm of approval of follow-on biologics is necessary.
This article proposes such a change: the disclosure by FDA of original biologics manufacturing information to follow-on biologics developers seeking to create their own versions of the original products. Granting follow-on biologics developers access to original biologics manufacturing information will not only bring significant price competition to biologics markets but will also prevent social waste of limited R&D resources, circumvent the need to carry out potentially unethical comparability studies, and advance public health and safety. The disclosure of original biologics manufacturing information is also unlikely to undermine the strong incentives for innovation in the area of biologics. Nor will it run against the Fifth Amendment to the Constitution.
The idea of disclosing original biologics manufacturing information to follow-on biologics developers may seem radical to some, but that is because players in the area of pharmaceutical regulation have grown accustomed to the idea that regulatory filings are and will always remain confidential. As discussed in this article, that perspective is belied by the regulatory and commercial reality in the area of pesticides. The other alternative — one which many will find even less appetizing and which the United States seems to be unavoidably moving towards — is direct price control.
Acknowledgements
I am grateful to Jonas Anderson, Michael Carrier, Janet Freilich, Donna Gitter, Sam Halabi, Cynthia Ho, Dmitry Karshtedt, Laura Pedraza-Fariña, Jordan Paradise, Nicholson Price, Anya Prince, Arti Rai, Rachel Sachs, Ana Santos Rutschman, Josh Sarnoff, Andrew Torrance, Liza Vertinsky, Patti Zettler, the participants of the second Wiet Life Sciences Law Scholars Conference at Loyola University Chicago School of Law, and the participants of the Regulation and Innovation in Biosciences (RIBS) Workshop at Washington University Law School for their helpful comments. I also wish to thank Pam Brannon, Vivian Chew, Meagan Chinnis, Allison Kim, and Alessandra Palazzolo for assistance with the research for this article.
