Why is health care so expensive? Why do drugs cost so much?

Biologics could stay exclusive up to 12 years

Senate proposal delays creation of generic drugs

By Nicole Gaouette and Catherine Larkin
Bloomberg News / July 15, 2009

WASHINGTON - Biotech companies such as Amgen Inc. and Biogen Idec Inc. wouldn’t face competition for 12 years after a drug is sold, a Senate panel agreed. That’s almost twice the time sought by the White House.

The amendment was added Monday, by a 16-to-7 vote, to the Senate Health, Education, Labor and Pensions committee’s proposal to overhaul the US healthcare system. The panel expected to finish work on the measure yesterday. It will be merged with legislation being written by the Senate Finance committee.

Americans spend $60 billion a year on biologics to treat diseases such as cancer and rheumatoid arthritis, at a cost of as much as $200,000 each. Current US laws, which provide for generic competition on chemical pills, don’t allow for cheaper copies of complex drugs made from living cells. The Obama administration backs letting generic biologics on the market after seven years of brand-name sales as a way to trim health costs.

In Europe, Teva Pharmaceutical Industries Ltd. of Israel, Switzerland-based Novartis AG’s Sandoz division, and Hospira Inc., of Lake Forest, Ill., sell “biosimilar’’ copies of three biologic drugs. The term comes from the biotech industry’s claims that their manufacturing process can’t be replicated and that finished products have slight variances. Generic-drug makers call their copies biogenerics.

Exclusivity refers to years of sales that a brand-name product gets before a lower-cost generic or an improved product that relies on the brand-name data can be approved by the Food and Drug Administration. It is separate from patent protection. Generic-drug makers would have to wait for both to run out before marketing their products.