Date: 14 February 2011

Source: The Wall Street Journal

Link: http://online.wsj.com/article/BT-CO-20110214-715412.html

The Obama administration`s 2012 budget blueprint released Monday seeks to speed up the availability of 
generic drugs and projects billions in federal health-care savings if  the cheaper medicines are allowed on the market more quickly.

The White House budget included two proposals that could introduce early price competition to brand-name drugs by generic rivals.

One would allow the U.S. Federal Trade Commission to stop controversial settlements in which brand-name drug companies pay their generic competitors to drop patent challenges that could lead to early entry of generic drugs.

A second proposal would hasten the availability of generic biologic drugs by reducing the market exclusivity period for brand biologics to seven years from 12 years.

Biologic drugs are complex and expensive medicines derived from proteins manufactured in living cells. Traditional drugs are made by mixing chemicals.

The proposals have run into previous opposition in Congress amid extensive industry opposition.

John J. Castellani, president of the Pharmaceutical Research and Manufacturers of America, said the Obama budget would diminish crucial incentives for future U.S. medical innovations.

"While we understand the need to reduce the deficit, policies such as these represent the wrong approach," Castellani said in a statement.

Jim Greenwood, president of the Biotechnology Industry Organization, said a reduction in market exclusivity for biologic drugs is "not going to happen."

Greenwood said his industry demonstrated in the last Congress that it had a political coalition to support 12 years of exclusivity. "Now we have a Republican majority in the House; they are not going to stand for backtracking on biosimilars," he said. "I don`t believe the Senate is either."

The Generic Pharmaceutical Association offered a mixed response to the president`s proposals.  The group applauded his plan to reduce the exclusivity period for biologics but criticized the administration`s proposal to eliminate the drug-patent settlements as "misguided."

Both brand-name and generic drug makers have defended the patent deals as pro-competitive, saying they can lead to early introduction of generic drugs while eliminating the uncertainty of patent litigation.

The FTC has led the charge against the patent deals, saying brand-name drug makers have paid generics handsomely to sit on the sidelines.

"At a time when the government is making tough choices on spending, it is a matter of simple common sense to stop these sweetheart deals between pharmaceutical companies that needlessly increase government 
spending on prescription drugs by billions of dollars," FTC Chairman Jon Leibowitz said in a statement.

The Obama administration has backed both proposals previously, but did not include them in last year`s budget submission. Notably, the White House used both proposals Monday in its projections of government 
savings over the next decade.

The administration said allowing the FTC to ban anticompetitive drug patent settlements would save federal health-care programs $8.79 billion over 10 years.

Those projected savings appear far higher than estimates published by the Congressional Budget Office in 2010. The CBO, which analyzed a similar proposal in the Senate, found the legislation would have saved 
the government $2.7 billion over 10 years.

The White House estimates, however, are lower than those previously offered by the FTC`s Leibowitz, who has predicted that banning the patent settlements would save government health-care programs roughly $12 billion over the next decade.

The FTC`s savings projections, which found that American consumers would save $35 billion over 10 years, were criticized as flawed by the drug industry.

The White House also projected Monday that federal health-care programs would save $2.34 billion over the next 10 years if generic biologic drugs are allowed on the market after seven years.

Keywords: Generic Drugs / Obama / Budget / Pharmaceutical