Over the past few years, the focus of the entire health care industry has been on the Affordable Care Act. The law has had, and will continue to have, huge effects on hospitals, doctors, and pharmaceutical companies.
One of the law's lesser-known provisions is creating a legal and lobbying battle behind the scenes that could have a large, long-run impact on the pharmaceutical industry and healthcare costs.
For consumers in the United States, it's going to determine how much many of the world's most innovative and effective drugs will cost.
It's the battle over biotechnology drugs — those made in human cells rather than factories — and whether they'll face the same sort of generic competition that has eaten into the profits of many pharmaceutical giants.
Some of theworld's best selling drugs are in the category
It's a multi-billion dollar question. In 2011, two of the top 10 best-selling drugs (Humira, and Embrel) were biotechnology products, with Humira expected to be the top seller of 2012. According to The New York Times, these drugs account for around a quarter of the $320 billion spent on drugs in the United States.
And because they're so expensive, the Affordable Care Act has provisions designed to "improve competition" in the market, essentially to allow more generic versions.
The legal battle is over whether pharmacists will be allowed to substitute generic "biosimilars" for pharmaceutical companies' versions of these drugs. Because these are incredibly complex biological products — far more involved than something like Lipitor — any generic version is going to be slightly different, hence the name "biosimilar."
Those small differences give companies a legal angle which they're pursuing aggressively, because they have billions of dollars at stake when their drugs lose patent protection. Pfizer's best-selling Lipitor, for example, immediately lost billions in sales when generic competitors became available.
There's already heavy lobbying
According to a report from The New York Times' Andrew Pollack, Amgen and Genentech, which both depend heavily on biotechnology drugs that may lose patent protection, are pushing for laws that would prevent the substitution of biosimilars.
They've introduced bills in 8 states recently, with more pending, and one law already passed in Virginia's House of Delegates. There's also an ongoing battle on the federal level.
Companies argue that it's about patient safety. The complexity of the drugs means that those tiny changes could have large or unknown effects on the patients who use them.
The billion dollar question is whether companies can throw up enough legal restrictions and challenges to prevent adoption on a wide scale. Biosimilars are not yet available here, but they have been in Europe for some time.
Big implications for cost and research
This battle has massive consequences for the health care industry as a whole in major two directions. The first is on costs. These drugs, because they're so difficult to develop and get approved, are already among the most expensive on the market. Generic versions would be substantially cheaper, and preventing them could keep health care costs higher, contrary to the aims of the Affordable Care Act.
It's not the only factor; biosimilars are one thing that contribute to Europe's substantially lower health care costs.
On the other hand, these drugs can be incredibly effective, and it's an area that's barely been explored compared to more common chemical drugs. Companies will be more inclined to develop them if they're sure their profits are going to be protected, and if there's more legal certainty.
And the majority of health care innovation comes from the United States.
It's a battle between two long-term priorities: encouraging health care innovation, which is slow and getting slower; and reducing health care costs, the principle driver of the United States' deficit.
The incredible battle over the Affordable Care Act's passage shows how difficult resolving that fight is, and despite the end of the principal legal challenges, even the little fights have billion-dollar consequences.
Unfortunately, this one's mostly being fought out by lobbyists, legislators, and regulators, often outside of the public eye.
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