From The Editor | August 5, 2019

Bury The Hatch-Waxman: Generics Were Not The Answer

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By Louis Garguilo, Chief Editor, Outsourced Pharma

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The hypothesis is bold: Our emphasis on generics is a detriment to U.S. patients and the entire healthcare system. Instead, these past decades we should have focused intently on increasing the life cycle and distribution of innovator drugs.

Innovator drugs should be readily available to patients until an appreciably better drug comes along; no force-feeding Americans cheap-drug copies in a wayward attempt to save a financially collapsing healthcare system.

The consequences would be dramatic:

A healthier population, reliable drug supply, dramatically different healthcare system, and the saving of billions of dollars.

Our CDMO industry could pursue loftier goals of ever-increasing quality and manufacturing efficiencies. Offshoring would be reversed.

We started this discourse with the editorial, “What If Our Generics Strategy Has Been All Wrong?” Every biopharma professional I spoke to, at some point in our discussion, set the clock back to 1984 and the Hatch-Waxman Act.

That includes Robert Ward, Chairman & CEO, Eloxx Pharmaceuticals, and Robert Discordia, COO, Corbus Pharmaceuticals.

It’s not our intention to rehash Hatch-Waxman; rather, to understand how it became a springboard to generics addiction, and to look for clues to craft a far different future where innovator drugs rule.

What Price Success?

The Drug Price Competition and Patent Term Restoration Act (Public Law 98-417), known as the Hatch-Waxman Act, is a 1984 United States federal law encouraging the manufacture of generic drugs. It ushered in a system of government-led, generic-drug manufacture and regulation.

Generics we got.

Along with a slew of unintended consequences: a dangerous dependency on cheap copies of innovator drugs, manufactured in less-regulated, sometimes unsafe environments and offshore locations; false narratives about generics as the best option for patients; and ironically, skyrocketing prices of new drugs that nobody anticipated decades ago.

Bob Ward
Nonetheless, says Ward, “The starting point is to talk about how Hatch-Waxman was a success.”

“Low rates of generics use in the mid-1980s have risen to 90% of prescriptions. And the big difference is there are many thousands of biotechs today. That tells us there's way more competition on the innovative side then at the time of Hatch-Waxman.”

Parenthetically, Outsourced Pharma readers know no small part of that biotech boom is attributed to the contract research, development and manufacturing industry: Biotech runs on outsourcing.

So here we sit in 2019 at around 90% generics penetration, but also with ample innovator-business formation and service-provider support. 

And we say: Wait a second, how did drug prices get so high?

“Hatch-Waxman's great bargain was society invests in innovative drugs; when they go off patents and become generics, they are widely available at much lower costs,” says Ward.

However, the extended patent protection included in Hatch-Waxman “has been effectively eroded by longer and more costly development times for innovator drugs.”

This, suggests Ward, “is addressable by streamlining the regulatory path.”

“Every time we learn about a potential risk, the corresponding pre-approval research required by the FDA to rule that risk out means trials get bigger, cost more, and run for longer periods of time,” he explains.

“If we learn something off an initial new-drug entry in the market, we ask the second pharma company to do more, and the third to go even further. With exceptions like orphan drugs and accelerated reviews, we don’t get a progressively streamlined regulatory path. That's a piece right now that doesn't make sense.”

What makes less sense is conversely, our system is set up to rush ANDAs through to get cheaper-made generics out to patients. These patients in effect are then cut off from the original drugs.

“So a big problem is regulatory,” says Ward. “It's not that you should strip the patents as some suggest; leave the patents alone. You have plenty of people competing on a patented basis. That's very different than when Hatch-Waxman was born.”

Patents By Other Limitations

Bob Discordia
I disagree slightly. Don’t leave patents alone. Lengthen them again – even if we do get some regulatory reform.

But this time, build a better framework for patients. Implement a meaningful set of limitations on innovators, those that “act as tools to incentivize the industry, and generate a system of greater value for the patient,” says Discordia of Corbus. “Not those viewed as simple trade-offs.”

Consider how it would create far less pressure on a Gilead, or a Pfizer, or a start-up biotech, if we eliminated the need to replace a large percentage of income every year because their drugs come off patent.

Back to Ward: “The government doesn't say, here’s our approved knock-off Mustang that consumers should by from Shop-O-Cars; we don’t get steered to an Apple-computer knockoff from the government-approved-copy department; or a government-approved-generic coke, all with some vague promise to consumers they’re as good as the innovators’ product.

“If we did, we’d blow up these companies. The problem pharmaceutical companies have is their portfolios are taken away from them. They have to price them dearly. What if it’s your only product at the time, like it is with many biotechs?”

Innovator-Centric

So, incredibly, we’ve arrived at a point where new-drug pricing actually starts from a national goal of getting patients on generics as soon as possible. This is no way to care for our population, or to run our biopharma industry. 

It’s well past time we move to a system centered on improving patient outcomes by creating a marketplace where innovators can offer affordable and profitable pricing long-term. These components do not have to be in conflict.

“We are tied to this patent system that causes innovator pharma companies to go to extraordinary lengths,” says Discordia. “Despite the 20-year term for innovator pharmaceuticals, the average patent-life is in practice about 10 years post-approval.

“What would the outcome be if innovator companies were guaranteed the full 20 years of commercial exclusivity from that point?”

Twenty years without a generic?’ Yes, replies Discordia, but in exchange, “for lack of a better word, some new form of limitations. For example, requirements a certain percentage of income must go back into R&D to spur innovation for the next level of drugs. Again, these are not trade-offs; they are tools to incentivize desired future consequences.”

Readers might have other “limitations” in mind to incentivize a more rational drug industry.

The goal is to move to an “innovator-centric” model on behalf of patients, away from a generics-centric one on behalf of a healthcare system.

We must maintain free enterprise as a driver of innovation, but recognize this will exist within a defined market framework.

Discordia: “The system today is configured to require pharmaceutical companies charge a king’s ransom to get their investment back, and generate a profit during the shortened commercial period. So it’s perfectly fine for us to say today’s problems are not going to be solved with yesterday’s solutions.

“We've had this system since the mid-1980s. We have a different set of circumstances today. We don’t like how healthcare has metastasized into something that isn’t serving patients well. Let's make changes.”

I say: Focusing energies on innovator drugs rather than generics is the change most needed.

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This is second in a three-part series on the use of generics in the U.S. healthcare system. Here are links to part one and part three.

*The views and opinions expressed in this article are Robert Discordia’s personal views and opinions and do not necessarily reflect those of Corbus Pharmaceuticals.)