Pfizer may serve as a good case study for the potential impact of new generics legislation, in light of its reports today of plunging profits due to generic competition.

Dow Jones Marketwatch reported:

Pfizer Inc. said Wednesday its second-quarter profit fell 48%, largely due to generic competition for its top-selling drugs Zoloft, Norvasc and Lipitor. . . .

Pfizer’s top line has been under pressure in recent quarters because of the loss of patent protection for several of its once-popular products, such as Zoloft, Zithromax and, most recently, Norvasc.

Once a patent expires, other drugmakers are legally permitted to make generic versions of the drug, which are often sold at considerable discount.

Pfizer has said that it expects revenue to be largely flat until 2009, when it sees sales of newer products compensating for those lost to patent expirations.

The House has passed legislation that will overhaul the Food and Drug Administration, but has declined to address the provisions of the legislation dealing with generics, which previously passed in the Senate.

The Wall Street Journal reported:

The House FDA bill, approved 403-16, mostly parallels a bill that passed the Senate in May. Both versions would devote more money to monitoring the safety of marketed drugs and increase the agency’s authority over medications that raise safety concerns. The agency would have the clear ability to order follow-up studies, restrict distribution and enforce changes to the medications’ labels. The bills don’t grant the FDA the power to force a moratorium on direct-to-consumer advertising, a tough restriction that was discussed earlier, though the agency would be able to levy fines for false and misleading promotions.

The conflict between the House and Senate legislation means that we can expect more debate over generics in the coming months.

According to The Wall Street Journal’s Health Blog, house leaders appear to be “cooler on biogenerics than their counterparts in the Senate.”

Does the House’s action signal the death knell for generics legislation this year?  It may be too soon to say for certain, but it is clear that the legislation still has a rocky road ahead.

Of course, even if the House ends up passing the legislation ultimately, it’s unclear whether it will be supported by President Bush.

The Los Angeles Times reported:

It’s unclear how the White House will react to the finished product. Before the Senate voted in May, the administration said it agreed with the goals of the legislation but had serious concerns about aspects of the risk plans.

So, if the generics provisions of this legislation were not passed by the House, what did make it through?  The Los Angeles Times explained as follows:

The House bill follows the same basic approach to safety as the Senate version, but consumer groups said it would give the FDA stronger regulatory powers in some areas.

Both bills would set up a computerized network to scan medical insurance and pharmacy records for patterns that could signal problems with new drugs. The FDA now relies on anecdotal reports submitted by doctors and drug companies, which are believed to capture only a small fraction of bad drug reactions.

A computerized system could take several years to deploy. The Senate bill sets some benchmarks for the FDA; the House version does not. . . . .

The House bill also includes stiffer fines for drug companies that violate FDA requirements and tighter rules to reduce conflicts of interest among outside scientists who advise the agency.

There is little doubt that we are in for a long battle ahead on the generics issue.  The biotech world will be following this issue closely over the next few months to see how it unfolds.

California Stem Cell Report provided more enlightening coverage today on how funds are being disbursed at the California Stem Cell Agency.

California Stem Cell Report reported as follows:

About ninety percent of the $209 million handed out so far by the California stem cell agency has gone to institutions that have “representatives” on the board that approves the funding. . . .

The group that approves the money is the 29-member Oversight Committee. Fourteen members of that committee have close links to the institutions that have received about $190 million in grants.

None of this is illegal but it illuminates the nature of the built-in conflicts of interest on the board. Prop. 71 created the situation. Nearly all the institutions in California that could be suitable recipients of stem cell research have some sort of representation on the decision-making board. The measure spelled out, for example, that five executive officers from University of California medical schools have seats on the board. It also stipulated that four executive officers from California research institutions sit on the Oversight Committee. . . .

Isn’t it comforting to know that millions of California’s taxpayer dollars have been entrusted to an entity, which is plagued by so many conflicts of interests?   Did voters unknowingly create just another bloated bureaucracy when they voted in favor of Proposition 71?  It is difficult not to think that this is exactly what has happened when you read these reports.

California biotech companies are rallying behind proposed new state legislation, which would extend the time period that biotech companies have for claiming a tax deduction based on net operating losses.

The Mercury News reports:

The business leaders say their companies often labor for 15 years or more at a cost of hundreds of millions of dollars before they can get a drug approved for sale and generate enough revenue to climb out of the red. Yet under California law, they typically have only 10 years to claim a tax deduction based on their net operating losses.

Consequently, by the time they earn enough to pay state income taxes, many of them have lost the opportunity to claim the deduction. .  . .

That’s why [Assemblywoman Sally] Lieber has introduced a bill to double that deduction period, mirroring federal law. The measure, AB1370, which specifically gives biopharmaceutical businesses 20 years to claim their tax credits, was unanimously approved by the Assembly on June 6.

If it becomes law, it could give the biotech industry a big boost, according to Matthew Gardner, president of BayBio, an industry trade group based in South San Francisco.

While similar measures have failed twice before, supporters claim that this time is different, as there is more biotech support within assembly than existed in the past.  Three states–Florida, Illinois, and New York–already have a law on the books similar to this one being considered.

According to The Mercury News, this bills is not  the only way in which states are attempting to establish tax breaks for biotech companies:

Some[states] – including New Jersey and Hawaii – allow the firms to sell or trade their net operating loss credits to other businesses.

The article raises an interesting issue regarding tax deductions.  Is the bill a good idea for California’s taxpayers, or does it mean that we just have to bear more of the state’s tax burdens?

The Biologics Price Competition and Innovation Act of 2007 (Senate bill S 623) was approved on Wednesday by the Senate Health, Education, Labor and Pensions ("HELP") Committee. 

According to a press release issued by Senator Orrin Hatch, the key provisions of the bill are as follows:

• Creates an abbreviated pathway the FDA will use to approve “safe, pure, and potent” biosimilar products, the legal standard for biological approvals.
• Gives incentives for innovators to continue developing new breakthroughs in biologics. The incentive is crucial because currently those incentives only lie in patent law. And because the low-cost versions will be only similar, but not identical, it was unclear if all of the innovator’s patents would be protected.
• Creates a mechanism to resolve legal challenges to the follow-on products. It allows innovators, generics, and the universities that partner with them in developing biologics, to adjudicate expeditiously whether or not follow-on products are violating an innovator’s intellectual property rights.
• Allows FDA to determine if a biosimilar product is interchangeable, meaning that it could be substituted at the pharmacy level under state law. Under the law, FDA can designate a product as interchangeable if it is biosimilar in composition and action in the body and if the patient is not harmed by switching from one product to another.
• Bases its guidance on scientific standards that FDA has always relied on, giving tremendous deference to FDA in developing and administering the new program. 

DrugResearcher.com reported:

[The draft bill] finally reaches a compromise between warring factions within the US senate over three main bones of contention regarding the new legislation, first proposed in February, which would be an amendment to the Public Health Service Act. .  . .

So firstly, under the proposed compromise bill, all follow-on biologics will be required to undergo appropriate animal studies along with one clinical trial in humans in order to demonstrate adequate comparability with the innovator drug, although the FDA will retain the discretionary power to deal with companies on an individual basis on the extent of testing actually required.

Secondly, on the thorny issue of whether or not to give the green light to interchangeability between a branded biologic and its follow-on counterpart, the bill will allow for this in certain cases where the FDA deems it appropriate.

Thirdly, in order to placate the industry who are fuming over the lack of incentive to innovation that allowing follow-on biologics may cause, the length of time a branded biologic would be protected under patent has been guaranteed at 12 years under the proposed compromise bill.

The Patent Baristas provided the following explanation on the bill:

The Act amends section 351 of the Public Health Service Act to provide for an approval pathway for safe biosimilar and interchangeable biological products (relying in part on the previous approval of a brand product) while preserving the incentives that have fueled the development of these life-saving medicines. . . .

The legislation allows, but does not require the FDA to issue guidance documents to inform with the public of the standards and criteria the agency will use in approving biosimilar and interchangeable products. Development of these guidance documents will require public input. Applications can be filed in the absence of guidance documents. . . .

The Act provides incentives for the development of both new life-saving biological products and interchangeable biosimilar products: 12 years of data exclusivity for the brand company during which a biosimilar product may not be approved, and 1 year of exclusivity for the first interchangeable biological product.

How is the biotech industry going to receive this proposed bill, in light of the concerns that the industry has had about biogenerics?

A press release issued by the Biotechnology Industry Organization ("BIO") gives an initial glimpse into the biotech response, stating as follows:

“Senators Kennedy, Enzi, Clinton and Hatch deserve credit for their hard work in crafting this complex legislation, and for the bipartisan support they have achieved for the bill.  Biotechnology innovators share the goal of ensuring all patients have access to life-enhancing and life-saving biologics.  We support the development of a pathway for the approval of follow-on biologics,” said BIO President and CEO Jim Greenwood.  “Toward that goal, we will continue to work with Congress to make certain the legislation is improved to ensure it supports the principles we have outlined for a pathway to follow-on products, namely providing better protections for patient safety and the patient-doctor relationship. 

“In addition, the patent litigation rules included in the bill must be revised to improve protections for the intellectual property rights of innovators, ensure timely resolution of all patent disputes and maintain incentives to develop future medical breakthroughs,” Greenwood stated.

It will be interesting to see how the introduction of this new legislation unfolds.  I suspect that it definitely will not be embraced by the industry, but I still don’t have a sense of how strong the opposition will be.  Is this legislation something that biotech companies can work with as the BIO press release suggests, or is this something that will be fiercely opposed?  Only time will tell.

We will be following this issue as this legislation is introduced outside of the committee, and we will keep you posted.

Well, it happened again–President Bush vetoed yet another stem cell bill.

MSNBC reported on the President’s action as follows:

This was the third veto of Bush’s presidency. His first occurred last year when he rejected legislation to allow funding of additional lines of embryonic stem cells — a measure that passed over the objections of Republicans then in control. The second legislation he vetoed would have set timetables for U.S. troop withdrawals from Iraq.

According to MSNBC, the Democrats do not currently have enough votes to override the veto; however, Senate Majority Leader Harry Reid is set to schedule an override vote. 

The President’s action today really should not have come as a surprise to anyone.  I certainly anticipated that this bill would be disposed of by veto when I discovered that a new bill was being considered by Congress.  But apparently Congress thought it was worth its time to send another bill through Congress.  Isn’t it nice to know our taxpayer dollars are being put to good use?

Patent Baristas and Peter Zura’s 271 patent blog reported today on the industry group letter that went out today to Congress on patent reform.  Sent by the Innovation Alliance group,  comprised of a number of California biotech companies, venture capitalists, and universities, the Letter to Congress was addressed to House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid, House Minority Leader , and Senate Minority Leader Mitch McConnell. 

An excerpt from the Letter to Congress states as follows:

[We] support The Innovation Agenda’s call to improve intellectual property protections, strengthen the patent system, and end the diversion of patent fees. . . . However, we strongly believe that certain provisions, such as those dealing with apportionment of monetary damages for patent infringement, expansive PTO rule making authority, an open-ended post grant opposition system, and a narrow grace period will not strengthen our patent system but instead will fundamentally undermine patent certainty, discourage investment in innovative technologies, and reduce publication and collaborative activities among academic scientists.

For companies (directly, and as university licensees) in industries such as ours, the consequences – greater bureaucracy, inability to rely on valid patents, weakened protections against infringement and a decreased access to capital — would be devastating. The harm to investment in tomorrow’s technologies would be felt immediately, and would hurt U.S. competitiveness for years to come. As the U.S. presses for strong patent protections abroad, Congress should preserve strong protections at home, so that we retain our competitive edge in the global economy.

California scored a final victory today in the ongoing legal battle over stem cell research, when the state’s Supreme Court affirmed a lower court ruling that Proposition 71 is constitutional and dismissed the two remaining suits. 

The San Jose Mercury News reported:

The 2005 suits – backed by the California Family Bioethics Council, People’s Advocate and the National Tax Limitation Foundation – had claimed the institute lacks adequate state supervision and is riddled with conflicts of interest.

Alameda County Superior Court Judge Bonnie Sabraw rejected those assertions in April last year. And the 1st District Court of Appeal in San Francisco reinforced her conclusion on Feb. 26 finding that "Proposition 71 suffers from no constitutional or other legal infirmity."

Now that the suits are dismissed, California can finally move forward with funding the California Institute for Regenerative Medicine.   The last obstacle to state-funded stem cell research has fallen by the wayside. 

So, what’s next for stem cell research in this state?  I personally am hoping for a $3 billion breakthrough. 

A new study by Nature Biotechnology urges caution with respect to anticipating the payoff of California’s $3 billion dollar investment in stem cell research, reports the San Jose Mercury News.

The San Jose Mercury News reported that the study warned that "assessing the benefits of stem cell research is likely to be a complex undertaking."  Moreover, any treatments that come out of the research could prove to be only "marginally useful or too costly for many patients to afford."

On the other hand, the up-side of the research could be tremendous.  The San Jose Mercury News reported:

[E]ven if the institute makes just one treatment – say, for juvenile onset diabetes mellitus, which strikes about 13,000 children every year in the United States – the economic implications could be enormous, the study concluded.

Assuming the treatment halves that ailment’s impact by about 2030, the study estimated, health care expenditures among diabetes sufferers might be reduced by $319 million in today’s dollars, and the patients’ productivity boosted by $4.5 billion.

An even bigger benefit might result from the patients’ improved quality of life, the study said. Assuming that each year of a patient’s improved life would be worth $50,000 – a figure sometimes used to assess the value of new drugs – the authors calculated an additional benefit of $10 billion.

Did California make a good investment when it allocated so much money to stem cell research?  Certainly, it was a boost to the biotech industry, but was it a good use of limited state resources?  Only time will tell.  I think I speak for most Californians when I say that I am hoping for the big payoff.

As I reported earlier this week, the Senate was considering a stem cell funding bill, which was passed today by a vote of 63-34.  (See the Newsvine.com and The Associated Press Roll Call).

CNN reported that President Bush has indicated that he would veto the new bill, but that he would sign a Republican alternative that would encourage other forms of stem-cell research without changing his 2001 policy.  That bill passed by a 70-28 vote.

There is not much reaction to report on this vote or President Bush’s response.  The outcome of the vote as well as the President’s response have gone as anticipated. 

I will keep you posted as news unfolds on this issue.