Here It Goes, Here It Goes, Here It Goes Again: The Build Back Better Act (Redux)

The Build Back Better Act—the food and drug law implications of which we discussed last year—has popped up again in Congress, and it is just as dense as ever.  With 190 pages dedicated to prescription drug pricing reform, the program is ambitious…and complicated.

As we explained last year, the Act proposes to amend Title XI of the Social Security Act to require that HHS establish a “Drug Price Negotiation Program” to “negotiate and, if applicable, renegotiate maximum fair prices” for certain single-source drugs and biological products.  While some of the terminology has changed, the new iteration is pretty similar to the last version shopped around the hill: HHS will select certain drugs that will be subject to negotiations for purposes of reducing drug prices for products with limited competition, theoretically increasing access to these products.

The last iteration of the Build Back Better Act neglected to consider the impact on the generic and biosimilar industries.  Indeed, a major complaint we highlighted last year is that the discounts negotiated for the relevant selected products—at least 60% off of the average price—could undercut generic and biosimilar manufacturer’s development programs, ultimately disincentivizing investment in generic and biosimilar development for single-source products.  The new version makes an attempt to address that problem.

In the Build Back Better Act Redux, Congress has added a section that would delay the addition of certain biological products—and only biological products—to the negotiation list for up to two years if there is a “high likelihood” of biosimilar competition.  If a drug that has been approved for 12 years—but less than 16 years—is selected for the Drug Price Negotiation Program, a biosimilar manufacturer can request a one-year moratorium on negotiations for that product so that the biosimilar manufacturer has time to secure licensure and begin marketing of the biosimilar version.  If that biosimilar has not been licensed or marketed within 1 year, the product may be eligible for a second year of delay if there remains a high likelihood of licensure and a significant amount of progress toward both licensure and marketing has been made since the receipt of initial request.  If the biosimilar has not been licensed and marketed within the approved delay period (either 1 or 2 years depending on likelihood of licensure), the manufacturer of the biological product must pay a rebate to the government for the lost savings due to the delay.  Each product is limited to two years of delay.

As a threshold matter, the 2-year delay provision does not solve the core problem for biosimilars manufacturers: the lack of predictability that Build Back Better injects into biosimilar development.  Indeed, it is very difficult to predict whether and when a particular reference product will be negotiated, the specific terms for that negotiation – which are all subject to Secretarial discretion – and how that will map to a biosimilars development program.  Importantly, investment decisions about whether to develop a biosimilar – which can take 8-10 years on average – are made years in advance, and years before any of the relevant milestones in the bill.  Without any predictability or clarity, biosimilar manufacturers will be less likely to take on the risk of developing these critical medicines, and patients will ultimately have less options.

Moreover, there are some significant limitations to the application of this delay provision that appear to make it difficult to utilize.  First, the “delay” option is available only to biosimilar manufacturers who submit a request regarding a so-called “extended monopoly drug,” meaning a reference product that has been on the market between 12 and 16 years; products that have been on the market for longer than 16 years are not eligible for such a delay (unless the product transitions from 15 to 16 years during the delay period).  This period is seemingly arbitrary given that biosimilars have only existed since 2010, and it’s entirely possible that the development of a biosimilar version of a reference product approved 16 years ago could take longer than a product that was approved 8 years ago.  Given that patent life can also extend beyond 16 years on the biosimilar side, several products may never be eligible for delay.  Indeed, a number of biosimilars already on the marketed launched much closer to year 20 after BLA approval.  Given the number and length of the patents that frequently surround biologics, it is unlikely that the biosimilar manufacturer will have addressed all of them – or even some fraction of them –when the manufacturer would be required to make the request for delay under the statute.  Even a biosimilar manufacturer in the midst of invalidating patents in a patent litigation may not be able to make a request given the unpredictability of court deadlines.

Additionally, the definition of “high likelihood” limits eligibility to biological products for which a biosimilar application has been accepted and for which the biosimilar applicant has provided “clear and convincing evidence” that the biosimilar will be marketed within the applicable time period.  That “clear and convincing evidence” requires, amongst other things, submission of proposed manufacturing schedules, SEC disclosures, and patent settlement agreements.  Thus, there’s a significant burden on biosimilar manufacturers to prove that licensure likely will be granted that year and that marketing will follow soon after—that’s a tough showing to make.  Moreover, the clear and convincing evidence standard is known to be a high standard that is difficult to satisfy.

A biosimilar that has been approved for more than a year and not marketed is also ineligible for the 2-year delay option.  That removes biosimilars that, by definition, should meet the “high likelihood of biosimilar competition” criteria given that they have received a full approval.  Those biosimilars—particularly those who were approved before BBB and had no idea that an approval would start a clock for them—may be reasonably waiting for a number of different circumstances, yet cannot take advantage of the 2-year delay window

Finally, the option to request a delay is limited to certain biosimilar manufacturers.  Specifically, any biosimilar manufacturer that has been the subject of prior enforcement proceedings are not eligible.  The program is not available to:

• Biosimilar manufacturers currently subject to integrity agreements with HHS;
• Biosimilar manufacturers that have been subject to exclusion or civil monetary penalty within the last 5 years;
• Biosimilar manufacturers subject to cease and desist or injunction through the FTC; or
• Biosimilar manufacturers that have entered into any agreement with the reference product manufacturer that requires or incentivizes the manufacturer to submit a request for delay.

On the final condition, it’s not clear what “incentivizes . . . the manufacturer to submit a request” even means.  Patent settlements, by their nature, incentivize competition by providing a date certain for entry before patent expiration.  A “high likelihood” of competition will trigger the 2-year delay, so it’s not clear what the provision is targeting and whether it could be applied in a very overbroad manner.  It’s clear that Congress has heard the complaints about the impact of the Build Back Better Act on biosimilar competition, but it’s not clear that this “delay” provision fixes much.  The barrier to obtaining a delay is both high and subjective, and, in the grand scheme of drug development and approval, a year or two may not be enough time to allow for approval even if the application has been submitted—especially if inspections are necessary and time-consuming patent litigation is ongoing.  And while this provision seeks to help the biosimilar market, it does nothing for small molecules where costs can be just as prohibitively high.  This is particularly true for so-called “complex generics,” which require a significant investment and that can languish for years in the FDA approval process.

As we said back in November, the Build Back Better Act may have a serious effect on the generic drug and biosimilars markets.  The new provisions do not appear to change that conclusion.