October 5, 2015 / 8:55 PM / 2 years ago

Pacific trade deal adds to U.S. price quandary for biotech drugs

NEW YORK/ATLANTA, Oct 5 (Reuters) - The Pacific trade deal agreed on Monday, which grants biotechnology drug producers less protection than offered by the United States, could put more downward pressures on the costly drugs' pricing in the industry's most lucrative market.

The United States and 11 trading partners, including Mexico, Japan, Canada and Australia, wrapped up five years of talks after securing a compromise on protection for biotech drugs that would help determine when less expensive versions known as biosimilars can enter the market. [ID: nL3N1252R6]

The terms of the Trans-Pacific Partnership give drugmakers at least five and potentially up to eight years of protection of data needed to produce biosimilar medicines. Countries can sign on for a minimum of five years of data exclusivity that with added time for regulatory processes, would in effect provide a "comparable outcome" to an eight-year time frame.

The agreement falls far short of the 12 years of data protection enforced in the United States and which U.S. lobby groups representing biotech and pharmaceutical companies from Amgen Inc to Pfizer Inc sought to extend to other nations.

The United States could still maintain 12 years in its own market, since the trade deal language only sets minimum standards.

Over time, however, the longer protection period compared with its trading partners could come under pressure at home, where anger over rising costs of medicines is growing among doctors, patients and some lawmakers.

"If you see too much of a price discrepancy (between the United States and trade partners), at some point you're going to see a push back," said Steve Brozak, president of WBB Securities which focuses on smaller biotechs.

U.S. lobbies representing pharmaceutical and biotech companies voiced their disappointment that the negotiators failed to uphold the 12-year period as an international standard.

"This term was not a random number, but the result of a long debate in Congress, which determined that this period of time captured the appropriate balance that stimulated research but gave access to biosimilars in a timely manner," Pharmaceutical Research and Manufacturers of America CEO John Castellani said.

Early launch of biosimilars outside the United States could hit overseas sales of the larger biotechs, such as Amgen, Celgene and Biogen, and pharmaceutical companies with important biotech drugs, such as new cancer treatments from Merck & Co and Bristol-Myers Squibb .

Many of those companies are hedging their bets by developing their own biosimilars of rivals' drugs, including copycat versions of AbbVie's rheumatoid arthritis drug Humira, the world's top-selling medicine which is on track for $14 billion in sales this year.

The Nasdaq Biotech Index, which had been up earlier on Monday, turned negative and was off about 0.7 percent.

However, the Generic Pharmaceutical Association, which supports the development of biosimilars, said the agreement hit the right balance between innovation and saving lives.

SIMILAR, NOT THE SAME

As the cost of biotech medicines for cancer and other diseases has surged to more than $100,000 per treatment regimen, U.S. health insurers, medical societies and politicians are pushing for greater discounts and the faster introduction of competing treatments.

Biologics, which are made from living cells and therefore tougher to replicate than conventional pharmaceuticals, now account for about one-quarter of U.S. spending on drugs. That amounted to $93 billion in 2013, according to consultancy EY. They are expected to contribute to a surge in costs over the next decade as new, and far more expensive, treatments reach the market.

As a result, some U.S. consumer advocates sided with countries looking to significantly shorten data protection, beyond the de-facto eight year period and the 12-year protection advocated by the industry.

Such critics say it protects the interests of the drug industry by making it almost impossible for Congress to set a shorter period even if it wanted to do so because the trade agreement would prevent this.

"Why should we pay more than the rest of the world?," said KJ Hertz, analyst with AARP, which lobbies on behalf of U.S. seniors. AARP sided with a 5-year minimum proposed by Australia and others. "We want an agreement that leaves flexibility to make changes to U.S. law."

Data protection, which refers to the information on a new biotech drug that is submitted to regulators, differs from traditional patent protection, which typically runs 20 years.

Since it is impossible to produce exact copies of biotech drugs, drugmakers fear that their original patents could be circumvented with access to the data on the molecules and other scientific research needed to produce them.

WBB Securities' Brozak said one of the biggest losers from the new trade pact could be smaller biotechs, many of which do not yet have revenue but are developing the breakthrough medicines of the future.

For example, the work of smaller company Pharmasset led to the development of the first drug that cured hepatitis C in nearly all patients. Gilead Sciences Inc bought the company in 2012 and has since seen billions of dollars in sales for the drug. But Gilead may never have made the bet if it could not enjoy a long enough period of protection, Brozak argues.

"The period of exclusivity draws the investors to these companies," said Brozak. "You could see material harm to people making investment decisions." (Additional reporting by Kevin Krolick in Atlanta, Toni Clarke in Washington and Caroline Humer in New York; Editing by Michele Gershberg and Tomasz Janowski)

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