Unlike traditional pharmaceutical drugs, which are small molecule compounds synthesized by chemists, biologics are typically large molecules that are produced in living things.   Breakthroughs in the life sciences over the last two decades have led to new biologically derived treatments for debilitating diseases including autoimmune diseases, metabolic disorders, degenerative diseases, blood disorders, and cancer.  Several new biological treatments for diseases presently untreatable by other means are currently under development.  Despite these advances, new biologics come at a substantial cost for developers, consumers, and health care payers and providers. For developers, internal research, development, and production costs often exceeds a billion dollars per product brought to market.  For consumers, the purchase price of any given biologic treatment can be up to several thousand dollars per year.  For example, the cost per year per patient for Avastin®, a biologic used to treat colon cancer, is $100,000, and the cost for Cerezyme®, which is used to treat the metabolic disorder Gaucher Disease, is over $300,000.  On average, across treatments, the cost of medicinal biologics per patient is over $16,000 per year. 
For health care payers, the cost of biotech products is rising dramatically. According to IMS Health Inc., a provider of business intelligence for biotech and pharmaceutical companies, expenditures on biologics in the United States was over $40.3 billion dollars in 2006, which marks an increase of 20% from 2005.  Public and private insurance companies have declared that a continued increase is not sustainable without cuts to health care coverage.  Biologic medicines are of little benefit if they are too expensive for patients to afford.
Although Congress has made efforts to make biologics more affordable for the consumer market, such legislation must be carefully balanced to maintain incentives for innovators as they develop new therapeutic regimens.   Without adequate incentives for biotechnology companies to discover new market-viable biologic medicine, there would be a dearth of breakthrough products available to patients. The majority of new biologics are discovered by small to medium-sized innovative biotechnology companies.  Research and development of biologics is an extraordinarily high risk endeavor requiring a great deal of up-front capital investment,  and returns are often not realized for several years due to the length of time required for the product to be developed and go through the stringent regulatory approval process of the Food and Drug Administration (“FDA”). 
In an effort to reduce the costs of medicine for patients, Congress must be especially careful not to impair the ability of the biotechnology industry to thrive by substantially diminishing profitability. Currently, the biotechnology industry is “still relatively nascent” and is largely fueled by venture capital investment.  Of the approximately 1400 biotechnology companies operating in the United States today, only twenty are profitable.  Many of these companies are small, with revenues of under a million dollars per year, and do not even have a product on the market yet.  Leaders in the biotechnology industry have expressed concern over the ability to secure investments in the wake of new biologics legislation:
Biotechnology researchers must have some certainty that they can protect their investment in the development of new breakthrough therapies for a sufficient period of time in order to secure necessary financial resources. If … legislation were to fail to provide adequate protections, it could jeopardize the ability of biotechnology researchers to continue to innovate. 
In June 2007, a bipartisan bill sponsored by Edward Kennedy (D- Mass.), and co-sponsored by Hillary Clinton (D- N.Y.), Orrin Hatch (R- Utah), Mike Enzi (R-Wyo.), and Charles Schumer (D- N.Y.), titled the Biologics Price Competition and Innovation Act of 2007 (“BPCIA”), was introduced to and unanimously passed by the Senate Committee on Health, Education, Labor, and Pensions.  The BPCIA seeks to balance patients’ needs for affordable biologic medicine with the needs for innovation in the biotechnology industry to continue to develop new therapeutics. 
This Note will discuss key provisions of the BPCIA and will analyze the likely impact of its passage on innovation in the biotechnology industry and patient access to lower cost biologic medicine. Part I will provide a brief background on biologics and the complexity of their manufacture. Part II will describe the regulation of small molecule drugs under the Food Drug and Cosmetic Act (“FDCA”)  and the regulation of biologics under the Public Health Services Act (“PHSA”). In addition, the Hatch-Waxman amendments to the FDCA that allow for abbreviated new drug applications (e.g., generics) will be discussed.  Part III will explain why legislative action is necessary for a viable path forward to abbreviated FDA approval of biologics. Part IV will describe key provisions of the BPCIA that lay the framework for regulation of follow-on biologics. Finally, in Part V, this Note will analyze the impact that enactment of the BPCIA might have on innovation in the biotechnology industry and patient access to lower cost biologic medicine….
Robert N. Sahr*Read More