Will the Trans-Pacific Partnership Derail Biologics?

On October 5, 2015, trade ministers from the United States and 11 other Pacific Rim countries announced they reached a deal on the Trans-Pacific Partnership (TPP) trade agreement after five years of negotiations. The TPP, which was published on November 5, 2015, is the largest trade deal in history and aims to remove trade barriers and set common standards for goods ranging from dairy products to automobiles to drugs. U.S. biopharmaceutical companies should pay attention to Chapter 18 of the deal, which contains pharmaceutical-related intellectual property provisions.

Chapter 18 includes a provision relating to patent exclusivity for biologics, a type of drug prepared from living organisms which are gaining popularity for the treatment of various diseases including cancer, AIDS, rheumatoid arthritis, and diabetes. Biologics differ from small molecule drugs because they are structurally more complex, difficult to characterize and therefore, more difficult and expensive to make. It is estimated that biologics cost patients on average over 20 times more than non-biologic drugs.

Currently in the U.S., biologics manufacturers are granted four years of data exclusivity and 12 years of market exclusivity under the 2009 Biologics Price Competition and Innovation Act (BPCIA). Data exclusivity means that a follow-on product (biosimilar) cannot rely on data submitted by the innovator to support its application for marketing approval whereas market exclusivity prevents a follow-on product from entering the market even after any patents covering the originator product have expired. Other countries involved in the TPP negotiations provide shorter periods of exclusivity. For example, Japan and Canada provide eight years of market exclusivity.   In contrast, other TPP members such as Peru, Vietnam, Malaysia, Brunei, and Mexico provide no market protection for biologics. Australia also doesn’t have a market exclusivity provision, but instead provides a five-year data exclusivity period for all prescription medicines. Despite the U.S.’s attempts to get all countries to agree to a 12-year exclusivity period, negotiators agreed that countries can decide between two shorter exclusivity options: either an eight year or five year exclusivity period. Notably the five year option also includes effective market protection “through other measures” but does not clarify what those measures consist of. Additional details regarding the options, including how much market and/or data exclusivity is provided by either option, are not yet fully understood.

Proponents laud the agreement as providing patients with faster access to lower-cost generic versions of biologics. Critics of the agreement suggest that eight years of exclusivity is an insufficient period in which manufacturers can recoup the research and development costs associated with the development of new biologics, which can cost a billion dollars or more. As a result, these new TPP provisions may limit the availability of cheaper generic biologic drugs over the long haul as manufacturers may be less motivated or capable of investing in biologic research and development. Other critics – namely those in countries that do not provide market exclusivity for biologics – see the agreement as providing too much exclusivity. In these countries, generic entry will be delayed, resulting in higher drug prices for a longer period of time than would otherwise have been the case in the absence of the agreement.

Lawmakers in the U.S. and other TPP countries must still approve the deal. If the 12-year exclusivity period is shortened in the U.S. as the TPP requires (and the Obama administration has long advocated), innovators may find they have to recalibrate their biologic protection strategies in light of the decreasing role of exclusivity and an increasing role of patents.