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Enabling Generic Biologic Drugs and Banning Pay For Delay Deals:
Two commonsense approaches to improving healthcare while reducing healthcare costs.

Problem 1: No affordable generic biologic drugs.
When the Hatch-Waxman Act was passed in 1984, creating a pathway for conventional generic drugs, it was estimated to save $1 billion over the next decade. Now, the savings have grown to an estimated $734 billion over the past ten years. (1)  Still, in 2005, the US spent more per person on drugs than other countries (including 30% more than neighboring Canada) and patients faced more financial obstacles to accessing medications. (2)

Biologic drugs are drugs derived from living cells and due to their complexity, they were not covered by the Hatch-Waxman Act. But as these drugs are expected to make up half of the top 100 selling drugs by 2014 and cost on average 22 times more than conventional drugs, healthcare reform created a pathway for approval of generic biologics to reduce spending on these expensive drugs. (3,4)

Unfortunately, with some special interest groups taking advantage of the vehicle for healthcare reform, biologic drugs were given 12 years of exclusivity protection from competition. While patents prevent generic companies from making a drug prior to patent expiration, exclusivity is an additional layer of protection that prevents a generic company from using the brand-name drug’s clinical trial data to support generic approval. In contrast to biologics, conventional drugs get five years of exclusivity. This discrepancy doesn’t make sense—after all:

  • According to PhRMA, biologics actually cost a little less to develop than conventional drugs ($1.2 billion for biologic drugs vs. $1.3 billion for conventional drugs). (5)

  • Biologic drugs have double the approval rate of conventional drugs (15% for biologics vs 7% for conventional drugs). (6)

  • Biologics are already well protected from generic competition because:

    • Developing a generic biologic is much costlier ($100-200 million and 8-10 years) than developing a generic conventional drug ($1-5 million and 3-5 years), so few competitors can afford to develop a generic biologic. (7)

    • With fewer generic competitors, brand-name biologics are likely to retain a larger market share and experience less of a price drop than conventional brand-name drugs. (7)
  • Shorter exclusivity periods could reduce the federal deficit by $2 billion and save $70 billion or more over a decade compared to the $25 billion in estimated savings for the current law. (8,9,10)

In noting these arguments, the Federal Trade Commission recommended zero years of protection. As a compromise, some Congressman proposed a reasonable five years of exclusivity, the same granted to conventional drugs. (11)

This is just the beginning…
As we predicted a year ago, (12) the excessive 12 year monopoly granted biologics fueled calls for even more exclusivity:

  • Industry and industry-affiliated researchers are already calling on extending exclusivity from five years to twelve for conventional drugs so as not to prioritize costly biologics over conventional drugs. (13,14,15)

  • A proposal in Congress would also extend an extra five years exclusivity to new antibiotics. (16)

Solution 1: Expensive biologic drugs are increasingly common, but too much exclusivity threatens access to affordable generic biologics. President Obama’s 2012 budget calls for a reduction in the exclusivity period for biologics from twelve years to seven. This is a step in the right direction, but as the FTC noted, no exclusivity is justified and five years is already a generous compromise. Industry will always ask for more exclusivity, but five years of exclusivity for biologics (the same protection granted conventional drugs) balances the incentive for innovation with the pressing need to reduce healthcare spending on these costly drugs.



Problem 2: “Pay-for-delay” deals delay access to affordable medicines and increase healthcare costs.
Pay-for-delay settlements are anticompetitive agreements made during patent litigation cases where a brand-name company offers generic-drug manufacturers cash payments or other compensation to delay the marketing of price-lowering generics.  While both industries claim these deals promote access and reduce cost, the truth is the opposite:  the Federal Trade Commission (FTC) reported that Pay For Delay deals actually delay generic entry for an average of 17 months and will cost $35 billion between 2009 and 2019. (17)  And as the chart shows, the problem is getting worse. President Obama’s 2012 budget estimates that the federal deficit could be reduced by $8.8 billion if these deals are banned. (8)

Solution 2: Pay For Delay deals unnecessarily delay access to cheaper generic drugs, costing American patients billions of dollars. President Obama’s 2012 budget appropriately calls for an end to Pay For Delay deals, echoing bipartisan legislation that would give the FTC power to regulate these agreements to ensure they do not delay generic drugs. A ban on Pay For Delay deals is a commonsense approach to restrain healthcare costs without compromising quality of care.



Join us in taking action today!

  1. Generic Pharmaceutical Association. Generic Pharmaceuticals Saved $734 Billion Over Last Decade. 7 May 2009.

  2. Morgan S, Kennedy J. Prescription Drug Accessibility and Affordability in the United States and Abroad. Issues in International Health Policy. The Commonwealth Fund. June 2010.

  3. EvaluatePharma. World Preview 2014. May 2009.

  4. Purvis, Leigh, and Lee Rucker. Top 20 Biologics (2006 Ranking) and Approximate Annual Treatment Costs. AARP Public Policy Institute.

  5. Pharmaceutical Research and Manufacturers of America. Pharmaceutical Industry Profile 2009. Washington, DC: PhRMA, April 2009.

  6. Berkrot B. Success rates for experiemental drugs falls: study. Reuters. February 14, 2011.

  7. Federal Trade Commission. Emerging Health Care Issues: Follow-on Biologic Drug Competition. June 2009.

  8. White House. Budget for Fiscal Year 2012. Accessed on February 28, 2011.

  9. Miller S, Houts J. Potential Savings of Biogenerics in the United States. Express Scripts, February 2007.

  10. Congressional Budget Office. Budget Options Volume 1: Health Care. December 2008.

  11. Waxman-Deal and Schumer-Brown-Collins-Martinez-Vitter proposals (H.R. 1427/ S.726)

  12. So AD, Katz SL. Biologics Boondoggle. New York Times. March 7, 2010.

  13. Knowles SM. Fixing the Legal Framework for Pharmaceutical Research. Science. 2010 . 327:1083-4.

  14. Grabowski H, Long G, Mortimer R. Data exclusivity for biologics. Nature Review Drug Discovery. 2011 (10). 15-16.

  15. Goldman DP et al. The Benefits From Giving Makers Of Conventional ‘Small Molecule’ Drugs Longer Exclusivity Over Clinical Trial Data. Health Affairs. 2011. 30(1):84-90.

  16. 111th Congress. H.R. 6331. “Generating Antibiotic Incentives Now Act of 2010.”

  17. Federal Trade Commission. Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions. January 2010