The Biologic Price Competition and Innovation Act (BPCIA) and the Perils of Biologic Development: Part 1

Biologics are a class of therapeutics derived from living systems, including bacteria, viruses and mammals.  Though often very expensive to produce, this class of therapeutics represents the cutting edge of modern medicine, encompassing humanized molecular antibodies, viral vector drug delivery systems, and nucleic acid therapeutics.

In an effort to ameliorate the high expense and risk involved with bringing biological therapeutics to market, Congress enacted the Biologic Price Competition and Innovation Act (BPCIA) in 2010.  Modeled after the Hatch-Waxman Act (HWA), the BPCIA was crafted to protect innovation of new biologics by offering a period of “data exclusivity” while providing a novel regulatory pathway for approval of generic biologics.  The Act’s twelve year “data exclusivity” period requires imitators to bear the full cost of clinical trials without relying on an inventor’s data.  On June 28, 2012, the BPCIA narrowly survived judicial scrutiny when the US Supreme Court upheld the Act in a 5-4 vote.

Though survival of the BPCIA was a victory for biologic drug development, the “data exclusivity” term under the Act has been hotly disputed by health advocates.  Critics of the BPCIA have pegged its twelve year term as an unnecessary extension of the five year term provided for under the HWA.  Critics view the extended exclusivity term as an “evergreening” tactic employed by powerful pharmaceutical company lobbyists, crafted to exact unreasonably high costs for therapies desperately needed in generic form in the developing world.  However, when one considers the critical nature of industry incentives facing drug developers, it becomes clear that these criticisms are misguided.

The twelve year data exclusivity term of the BPCIA provides a critical incentive for small biologic and biopharmaceutical developers, who pursue extremely expensive and risky ventures.  On average, a biological therapeutic costs $1 billion to develop and bring to market.  In addition to decades-long development pipelines, biologic developers have faced declining rates of drug approval.  In fact, annual drugs approved for marketing in the United States has declined from 53 new drugs in 1996 to 39 in 2012.  See Matthew Arnold, Med. Marketing & Media, Dec. 31, 2009.  In addition, with the recent expiration of more than 70 drug patents, brand-name drug spending has reduced substantially (a decline of $14.9 billion in 2011 alone).  See Dave McCleary, eCTD ANDA Submission Statistics, Custopharm Blog, Oct. 7, 2011.

Despite the challenge of decreasing revenues, investment in startup biopharmaceutical companies still holds the promise of substantial rewards.  Indeed, the twelve most commercially successful biological compounds in the United States reached an estimated $30 billion in value in 2010, and this figure is projected to reach $129 billion by 2018. See Paula Tironi,19 Annals Health L. 311, 328 (2010).  Following the recent Myriad decision by the US Supreme Court, investors are also hopeful that lower courts will bring clarity to the decision and thereby spur further investment in industries surrounding DNA and RNA biologics.  See Association for Molecular Pathology v. Myriad Genetics, 569 U.S.__(2013).

Thus, while the biopharmaceutical industry continues to hold great promise, the extended twelve year data exclusivity term for biologics under the BPCIA is of critical importance to maintain the incentive structures supporting development of next-generation therapeutics.