Drug Money

While Big Pharma tries to protect its investment and research, Ramos and other patient-rights advocates also face a formidable obstacle: the increasing cost of brand-name biologics and the revenue stream they’re providing for companies like Roche’s Genentech, Amgen, Abbott, and Sanofi-Aventis. According to a Federal Trade Commission report released last summer, Americans spent $286.5 billion for prescription drugs in 2007; $40.3 billion of which was for biologics. This class of drugs is expected to account for 50 percent of all new product approvals by 2015 and 71 percent by 2025, according to BioWorld. In 2009, three of Genentech’s products were among the top-five biotech drugs in terms of revenue—raking in about $14 billion in revenue for those three drugs alone.

Now take one drug in particular—Avastin, by Genentech. The company has spent more than $2.5 billion to develop the cancer-battling biologic drug. The cost for one year’s treatment: about $100,000. In 2014, it is predicted to become the drug industry's biggest-selling product with revenues of $9.23 billion, according to a study released last June by EvaluatePharma. Generic firms, backed by consumer groups, argue that biologics are so expensive that it’s impossible for many people to afford them and that there needs to be an abbreviated regulatory pathway to bring biosimilars to market. Big Pharma cannot be allowed to corner the market, they argue, just to reap more profits, especially when generics save the health care system $1 billion every three days.

The economics for generics are an entirely different matter since long periods of brand-name exclusivity mean problems for their bottom line.

Generics represent 72 percent of prescriptions dispensed in the United States, but account for only 17 percent of all dollars spent on prescription drugs, according to the Generic Pharmaceutical Association. Generic companies prefer to argue, not that profits could take a hit because the brand focus on biologics, but that regular Americans would be impacted.

Several generic manufacturers such as Teva, an Israel-based company that is the world’s largest generic maker, and Mylan, the third biggest global player, contend that if brand companies are given too much exclusivity, generics may instead pursue branded biologic products. The problem with this approach: Consumers wouldn’t enjoy the significant cost savings associated with generics.

Big Pharma—not to mention biotech companies, universities, and venture capital groups—argue that in allowing generics to produce biosimilars too soon, biologics innovation will be stifled and there will be little incentive to pour millions of dollars and thousands of research hours into lifesaving drugs. But the money keeps pouring in: Last year, biotech was the single largest investment sector, with $3.5 billion going into 406 deals, according to a recent MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association.

Still, drug companies say the biologics industry can’t afford to have venture capital scared off. “It is an expensive, lengthy investment to develop a biologic. Without this sort of protection for creating a biosimilars market, investors are going to look elsewhere,” says BIO's Joseph.