United States: Competition Among Biologic Products: A Renewed US Government Focus Suggests Biologics Manufacturers Should Expect Antitrust Scrutiny

US antitrust authorities and Congress have long been concerned with promoting competition in the pharmaceutical industry. That effort has increased in recent years. In particular, the antitrust authorities and Congress have focused on ensuring that generic drugs are able to compete effectively with branded drug products.

Recently, in addition to promoting generic drug competition, the antitrust authorities and Congress have placed a greater emphasis on improving competition among biologic products. The US Federal Trade Commission (FTC) has studied biologic product competition for more than a decade,1 and Congress passed the Biologics Price Competition and Innovation Act of 2009 (BPCIA) to foster competition among biologics by creating an abbreviated approval pathway for biosimilar and interchangeable biologics and thereby spur innovation. However, the limited market entry of such products to date has created a renewed interest in competition among biologic products by both antitrust enforcers and lawmakers.

What Are Biologic Products?

Biologic products are typically large, complex molecules from a natural source (i.e., human or animal tissues, microorganisms, etc.) produced through biotechnological methods.2 Biologic products range from vaccines to blood products, from gene therapies to recombinant therapeutic proteins, and can be used to treat a wide range of medical conditions. In recent years, biologic products have grown in importance, comprising approximately one-third of all medicines approved by the US Food and Drug Administration (FDA).3

FDA approval process for biologics is quite similar to that for small molecule drug products. A biologic product manufacturer must file a Biologics License Application (BLA) for any biologic product that does not already have an approved reference product that would permit a biosimilar/interchangeable product application. As with a New Drug Application for a branded drug, FDA approves a biologic product that is the subject of a BLA based on a full review of safety and effectiveness data.

Under the BPCIA, biologic product manufacturers may use an abbreviated FDA approval process for biosimilar/interchangeable products, similar to the one available to generic drug manufacturers. A biosimilar product is a biologic product that is "highly similar to the reference product notwithstanding minor differences in clinically inactive components," with "no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product."4

Although the two are frequently compared, a biosimilar product is not the same as a generic drug product. First, generic drugs are approved under a "sameness" standard, as opposed to being "highly similar" relative to the reference product. Another key difference is that, without physician intervention, a biosimilar cannot automatically be substituted for the reference biologic product (as a generic drug can be substituted for a branded drug product) unless it is "interchangeable" with the reference product. For a product to qualify as interchangeable, a biosimilar product manufacturer must submit additional data to FDA to show that its product is expected to achieve the same clinical result as the reference product in any given patient when the patient is switching between the biologic products.5

Efforts to Improve Competition Between Reference Biologic Products and Biosimilar Products

The US government has recently shown an increasing focus on promoting competition between reference biologic products and biosimilar products. On May 16, 2018, the Department of Health and Human Services (HHS) issued its Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs.6 The Blueprint focuses on, among other things, improving competition in the pharmaceutical industry to lower drug prices. To do so, the Blueprint specifically identifies "promoting innovation and competition for biologics" as a priority and notes that "FDA will issue new policies to improve the availability, competitiveness, and adoption of biosimilars as affordable alternatives to branded biologics."7

FTC Statement in Response

In response to the Blueprint, the FTC set forth in a July 16, 2018 statement its suggestions for spurring biologics competition.8 The FTC statement discussed factors the FTC identified in its 2009 report that limited biologic competition then and still are present today: "(1) lack of state-level automatic substitution laws for biosimilar products; (2) potential chilling effects if products do not share the same nonproprietary chemical names; and (3) market acceptance of biosimilar drugs."9

The FTC identified three recommendations for FDA:

  1. FDA should improve the pathway for approval of interchangeable biologics. To date, no interchangeable biologic products have been approved by FDA, and the FTC encouraged FDA to consider guidance that would reduce barriers to entry and encourage investment in interchangeable biologic products.10
  2. FDA should reconsider its current biologics naming guidance. The FTC stated that FDA's current naming guidance, which uses different suffixes for biosimilar products and their reference biologic products, creates confusion and limits substitution.11 By using a naming convention for biologics similar to that used for generic drugs, FDA could increase biosimilar substitution.
  3. FDA should improve the "Purple Book," which lists biologics products licensed by FDA.12 The FTC suggested that FDA should add additional information for each entry and make it more similar to the directory for drug products, the "Orange Book."

FDA Biosimilars Action Plan

Two days after the FTC's Statement, on July 18, 2018, FDA released its "Biosimilars Action Plan: Balancing Innovation and Competition," which outlined its policies to improve competition and affordability for biosimilar products (as promised by the HHS's Blueprint).13

The Biosimilar Action Plan focused on four key areas:

  1. improving the biosimilar and interchangeable product development and approval process by increasing efficiency and coordination within FDA and by creating information resources and development tools for biosimilar product sponsors;14
  2. maximizing scientific and regulatory clarity for the biosimilar product community by improving communications, developing additional guidance, and evaluating regulations (including by implementing the FTC's recommendations of better guidance on biosimilar labeling15 and an improved Purple Book);16
  3. improving patient, clinician, and payer understanding of biosimilar products by offering webinars, addressing knowledge gaps, and improving educational resources;17 and
  4. supporting biosimilar product competition by minimizing attempts to delay competition unfairly through the gaming of FDA regulations and by coordinating with the FTC to address anticompetitive behavior.18

Congressional Action

Congress also has taken steps to encourage competition between brand and biosimilar biologic products. On June 14, 2018, the Senate Judiciary Committee approved and reported to the full Senate the "Creating and Restoring Equal Access to Equivalent Samples Act of 2018," S 974 (CREATES Act). The proposed legislation, first introduced by Sen. Patrick J. Leahy (D-VT) on April 27, 2017 and now co-sponsored by a bipartisan group of 30 senators, provides a civil cause of action in federal district court for generic drug or biosimilar product manufacturers in the event a branded drug or reference biologic manufacturer declines to provide sufficient quantities for bioequivalence, biosimilarity, or interchangeability testing of the branded drug or reference biologic on commercially reasonable, market-based terms, with certain exceptions.19 The stated goal of the proposed legislation is to facilitate generic drug and biosimilar product entry by preventing branded drug or reference biologic manufacturers from using risk evaluation and mitigation strategies or other distribution restrictions as barriers to competition.20

In June 2018, Sens. Chuck Grassley (R-IA) and Amy Klobuchar (D-MN), the chairman and ranking member, respectively, of the Senate Judiciary Subcomittee on Antitrust, Competition Policy and Consumer Rights, sent a letter to FTC chairman Joseph Simons urging the FTC to examine whether biologic manufacturers are using anticompetitive means to delay biosimilar competition to reference biologic products.21 In particular, Sens. Grassley and Klobuchar asked the FTC to look into whether so-called "reverse-payment" patent settlement agreements22 are being used to delay biosimilar competition.

In the early 2000s, Congressional concern regarding patent settlement agreements in the small molecule drug space gave rise to certain provisions of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA).23 The MMA thus requires branded and generic drug manufacturers to submit a filing to the US Department of Justice, Antitrust Division (DOJ), and the FTC when manufacturers enter into an agreement regarding the manufacture, marketing or sale of generic versions of branded drug products. Congress now appears poised to consider legislation to extend similar filing requirements to agreements among biologics manufacturers.24

On July 23, 2018, Reps. John P. Sarbanes (D-MD) and Bill Johnson (R-OH) introduced the "Biosimilars Competition Act of 2018," HR 6478, which aims to enhance competition for prescription drugs by amending the Public Health Service Act to subject reference biologic and biosimilar product manufacturers to filing requirements similar to those imposed on branded and generic drug manufacturers under the MMA. HR 6478 would require a notification filing with the DOJ and FTC when reference biologic and biosimilar product manufacturers (or two or more biosimilar product manufacturers) enter into an agreement regarding the manufacture, marketing, or sale of the biosimilar product or the reference biologic product, excluding those agreements related solely to purchase orders for raw material supplies, equipment and facility contracts, employment or consulting contracts, or packaging and labeling contracts.25 A failure to file would be subject to the same civil penalty as in the MMA—up to $11,000 per day for each violation.26

Shortly thereafter, on July 31, 2018, Sen. Susan M. Collins (R-ME) and 18 co-sponsors introduced S 2554, the Patient Right to Know Drug Prices Act, which would amend the MMA to apply the same requirements that branded and generic drug manufacturers face today under the MMA27 to agreements between reference biologic and biosimilar product manufacturers.

Takeaways

The importance of biologic products to modern medicine continues to grow. Accordingly, we expect the US antitrust authorities and Congress to continue to focus on competition in the biologics/biosimilar products space. In the antitrust enforcement context, the FTC may build on its prior policy-making initiatives with respect to small-molecule drug products while expanding its efforts to include investigations into potentially anticompetitive conduct by reference biologic manufacturers. There has been public discussion of potentially anticompetitive abuse of FDA regulations to restrict competition, and the proposed legislation has focused on allegedly anticompetitive patent settlement agreements and distribution restrictions, but we expect the FTC also to focus its investigations on other traditional antitrust theories of harm in the biopharmaceutical industry, such as potentially anticompetitive tying, bundling or exclusive dealing arrangements. This focus, combined with potentially more biosimilar products being approved by FDA, suggests that biologic product manufacturers should carefully monitor compliance with antitrust laws, especially as they compete with an increasing number of biosimilar products entering the marketplace.

Footnotes

1. See Fed. Trade Comm'n, Public Workshop, Follow-On Biologic Drugs: Framework for Competition and Continued Innovation (Nov. 21, 2008); Fed. Trade Comm'n, Report, Emerging Health Care Issues: Follow-on Biologic Drug Competition (June 2009).

2. See 42 U.S.C. § 262(i)(1).

3. Scott Gottlieb, MD, Comm'r, FDA, Capturing the Benefits of Competition for Patients (Mar. 7, 2018).

4. 42 U.S.C. § 262(i)(2).

5. Id. at § 262(k)(4).

6. HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, 83 Fed. Reg. 22,692 (May 16, 2018), {hereinafter "Blueprint"}.

7. Blueprint at 22694.

8. Statement of the FTC to the Dep't of Health and Human Servs. Regarding the HHS Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs (Jul. 16, 2018).

9. Id. at 9.

10. Id. at 12.

11. Id. at 14-15.

12. Id. at 18.

13. FDA, Biosimilars Action Plan: Balancing Innovation and Competition (Jul. 2018), {hereinafter, {Biosimilars Action Plan"}.

14. Id. at 5-6.

15. US Dep't of Health & Human Servs., et al., Labeling for Biosimilar Products, Guidance for Industry (Jul. 2018).

16. Biosimilars Action Plan at 6-7.

17. Id. at 8.

18. Id. at 8-9.

19. S 974, 115th Cong. § 3 (2018).

20. Id. at § 2.

21. Sen. Chuck Grassley Website News Release, "Grassley, Klobuchar Urge Federal Trade Commission to Examine Whether 'Pay for Delay' Tactics Are Keeping Cheaper Biosimilar Medicines Off the Market" (Jun. 22, 2018).

22. Such as those at issue in the Supreme Court's 2013 decision in Federal Trade Commission v. Actavis, Inc., 133 S. Ct. 2223 (2013) (holding reverse-payment patent litigation settlements are subject to a rule of reason analysis).

23. Pub. L. No. 108-173, 117 Stat. 2066 (2003).

24. Id. at § 1112.

25. HR 6478,115th Cong. § 2 (2018).

26. Id.

27. S 2554, 115th Cong. § 2 (2018).

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