Major Good News for Biotech Firms (Bad News For Generic Hopefuls)

Congressional action this week greatly reduces the risk of easy approval for "generic" version of biotech drugs. FDA User Fee legislation approved by a House Committee is similar to the already passed bipartisan Senate bill. The revised version of the House bill that came out of committee no longer contains some of the more controversial provisions.

Because a significant portion of the FDA budget comes from user fees that pharmaceutical companies pay when applying for FDA approval, this falls of such authorization makes passage of this legislation a necessity.

While there is no final version of the House bill, and the House and Senate bills will need to be reconciled, a picture of what the final bill will look like is emerging.

The bill will strengthen the FDA in a variety of ways, but will not include some of the harsher provisions proposed in earlier versions of the House bill. For instance, a measure which would have given FDA authority to limit direct to consumer advertising on new drugs, did not survive the committee. Removal of such controversial aspects of the legislation, removes almost all doubt that the final version of the bill will face any serious opposition from members of either party.

This legislation does not include efforts to allow generic drug makers to win quick approval of copies of biotech drugs in the same way generic firms make copies of traditional chemical compounds. Biotech innovators argued that unlike a simple copy of chemicals, the process involved in making a biotech drug makes it harder to simply copy precisely, and thus, "generic" versions of biotech drugs must undergo safety and efficacy trials anew, since indeed, they cannot be exact copies.

Biotech firms should be confident that, for at least this year, such a threat is off the table in the U.S. (as opposed to Europe), where biotech generics are treated more liberally.