The future of biotechnology will be determined largely by biologic follow-ons, pharmacogenomics, HIPAA, and the FDA’s direction on safety. Progress on many of these issues is painstakingly slow.
Abstract
Biologic follow-ons, pharmacogenomics, HIPAA, and the direction of the FDA all will shape, perhaps irrevocably, the future of biotechnology.
As 2005 passed its midpoint, biologic follow-ons were stalled; pharmacogenomics was moving forward, albeit quite slowly; the Health Insurance Portability and Accountability Act had set the stage for sweeping changes regarding patient confidentiality; and, once again, the U.S Food and Drug Administration was under fire — this time over drug safety. The regulatory aftermath of all four of these developments will profoundly affect the biotechnology industry and third-party payers into 2006 and beyond.
Here is how these four critical regulatory areas, defined by the editorial board of Biotechnology Healthcare, are playing out.
#1: BIOLOGIC FOLLOW-ONS
In a May 9 article, “Biotech Drugs: Where Are the Generics?”, Business Week declared that follow-on protein products — or FOPPs — has become the definitive term to describe generic-type alternatives to approved biotech drugs. Whether we call them FOPPs or biologic follow-ons, one thing is clear: Congress will not take any action this year, and may not for another two. The delay directly affects health plans, most of which are struggling to control pharmacy expenditures, as well as pharmaceutical and biotech companies that have lobbied intensively to protect their franchises.
Scott Gottlieb, MD, resident fellow at the American Enterprise Institute and editor of the Forbes/Gottlieb Medical Technology Investor newsletter, says he’s worried about public pressures that are forcing the FDA away from a culture of deliberative science and toward a process where the agency speaks before it reaches firm scientific conclusions.
PHOTOGRAPH BY ROB CRANDALL
The regulatory structure for biologic follow-ons cannot be built without blueprints, and the first such documents are on their way.
“By the end of the year we will get out the papers that we’ve been promising — first, a white paper; then, draft guidance on the actual issues relating to proteins and molecules that would be copies of, or similar to, molecules already on the market,” Janet Woodcock, MD, the FDA’s acting deputy commissioner of operations, tells Biotechnology Healthcare.
For the biologic follow-on industry, the delay must feel like greyhounds chasing — but never catching — the mechanical rabbit. According to IMS Health, U.S. spending on biotech drugs in 2004 was close to $30 billion and will increase as new products hit the market. Adding urgency to the situation is the FDA’s newly launched critical path initiative to spur development of prevention-oriented biologic drugs, the expiration of patents for human growth hormone and human insulin, and —within the next seven years — the expiration of highly successful but costly drugs, such as the anemia therapy epoetin alfa (Amgen’s Epogen and Johnson & Johnson’s Procrit), and Biogen Idec’s inter-feron beta-1a treatment for multiple sclerosis, Avonex.
Andrea Hofelich, director of media relations for the Generic Pharmaceutical Association (GPhA) — which has lobbied briskly for congressional action on biologic follow-ons — says that the science for developing follow-on products exists. “What is keeping the FDA from moving?” she asks. The FDA, she points out, has acknowledged that generic versions of insulin and human growth hormone — large protein molecules derived from living cells — can be characterized, and the FDA has labeled some biologic products as interchangeable. “We believe that the FDA should move ahead to approve any pending applications for products such as human growth hormone,” she says.
The FDA says it’s not so simple. “We have said that with current science, you can’t do a strict generic of a new protein. In fact, we have said that publicly and repeatedly,” says Woodcock. Also, she says, the FDA must rely on the innovator’s information regarding the manufacturing process of a follow-on — a potential pitfall.1 Although congressional action to create the needed regulatory pathway for approving follow-ons could take 2 to 3 years if discussions were to start now, Woodcock says, “We can lay out the scientific issues and have those parsed out, which would inform any legal debate going on.”
Scott Gottlieb, MD, resident fellow at the American Enterprise Institute and editor of the Forbes/ Gottlieb Medical Technology Investor newsletter, also doesn’t see follow-ons moving anytime soon. “The FDA needs new legal authority for an abbreviated process to approve follow-ons,” says Gottlieb, and adds, “They won’t be truly generic drugs — they won’t be AB-rated [bio-equivalent].”
For simple biologics, such as peptides and short-chain proteins, Gottlieb says, sufficient technical sophistication exists to demonstrate enough similarity to approve a second-generation drug with abbreviated clinical trials. “But that’s a very small universe of drugs,” adds Gottlieb, who worked on this issue in 2003 and 2004 when he was a senior advisor to then-FDA Commissioner Mark McClellan, MD, PhD. “The vast majority of biologic drugs — like monoclonal antibodies —are off the table, quite frankly.”
#2: PHARMACOGENOMICS
The FDA’s guidance on pharmacogenomic data submissions, issued in March, is another step forward for personalized medicine —the proverbial right drug to the right person at the right dose at the right time.
The document is as much a learning tool for the FDA as it is a guiding light for the biotech industry. It defines pharmacogenomics as “the use of a pharmacogenomics or pharmacogenetics test … in conjunction with drug therapy,” and specifies when and what kind of data must be submitted, and how the agency will interpret the data. It also asks for voluntary submission of supporting data by the biotech industry.
Henry I. Miller, MD, a fellow at Stanford University’s Hoover Institution, and the former founding director of the agency’s Office of Biotechnology, says, “The FDA is in the stage of information gathering, and I think that is a good thing. For biotech companies, of course, pharmacogenomics will be a double-edged sword.” On one hand, he says, the guidance will enable more effective stratification of patient populations for clinical trials, so that eventually, manufacturers will be able to conduct trials with fewer patients required to demonstrate drug efficacy. On the other hand, the stratification will be reflected in product labeling, which means an approved drug will be indicated for a smaller patient population.
Miller is optimistic about achieving a greater understanding and subdivision of conditions such as dyslipidemia, rheumatoid arthritis, and multiple sclerosis, where large patient populations are treated with the same drugs. “The approach is not new — we do some of that already,” Miller says. “We know, for example, that kids who lack the gene for producing human growth hormone — the so-called “type 1As” — do not do well when treated with the hormone, because they develop neutralizing antibodies to it. Now, we will have more of the tools needed to identify and administer the proper therapy.”
An essential aspect of moving toward this kind of individualized therapy is appropriate diagnostic testing. Michael Liebman, PhD, the chief scientific officer of the Pennsylvania-based Windber Research Institute, which conducts advanced genomic and proteomic research, offers as an example the drug that is always held out as the prototype for personalized therapy —trastuzumab (Herceptin) for treating breast cancer, which requires testing positive for an abnormality of the HER2/neu (human epidermal growth factor receptor 2) oncogene.
“Pharmacogenomics will be a double-edged sword,” says Henry I. Miller, MD, of Stanford, noting that a successful biodrug’s profitability will be tempered by use in smaller populations. But with big pharma stumbling over the blockbuster model, this could still be attractive.
“I happened to be with the [manufacturer] back in 1995 and 1996 when the HER2 test was being developed. The debate from the clinicians’ perspective today focuses on this question: Is FISH or IHC testing better in terms of reproducibility of results?”2 Ultimately, Liebman says, evidence showed that IHC was not uniform across the different antibodies that were available, and that IHC and FISH results are not always equivalent. From a scientist’s perspective, IHC and FISH measure totally different things. “Shouldn’t we be trying to figure out what functionality of HER2/neu should be measured?,” asks Liebman.
“I’m afraid that we’re going to push for diagnostics in a manner that may not be adequately researched,” he continues. “It’s going to be a lot more complicated than just screening patients for the pharmacogenomic component associated with the correct therapeutic use.”
The FDA is starting to scratch the surface of testing because the technology is there, Liebman says, “but, at some point, someone has to recognize that it’s not a technology issue; it’s still a science issue.”
With respect to the concern that trade secrets will be given away as a result of the guidance, Liebman thinks this is a nonstarter. “You are always going to have a conflict between what is in the interest of the patient and what is in the interest of the commercial factors associated with the drug. Any problem of this complexity needs to be examined as a component of a larger system, not as an isolated element.”
#3: HIPAA SECURITY RULE
The full impact of the HIPAA legislation hasn’t yet hit. As Jennifer J. Daniels, a healthcare attorney with Blank Rome, in Philadelphia, points out, maintaining the confidentiality of patient records is “an ongoing, larger process that providers must always consider as they create new processes and develop new systems that may contain identifiable information.”
Response to the April 20 deadline to meet the requirements of the HIPAA security rule — which pertains to electronic medical records — was “muted,” according to Stanley Nachimson, a senior technical advisor at the Centers for Medicare and Medicaid Services. “We saw an increase in the number of questions up to the deadline. It’s been fairly quiet since then, and we have not had many complaints in terms of noncompliance.” Under this voluntary, self-policing, complaint-driven system, providers and payers did not have to file or to show any signed papers.
That could be about to change. Under the Department of Health and Human Services’ enforcement rule, issued in April, penalties for noncompliance can range from $100 to $25,000 per violation. That may not seem like much for a large medical provider or payer, but repeated violations, with criminal penalties that now can be attached, could ratchet up the bill.
Brian Gradle, a lawyer with Washington-based Hogan and Hartson and who handles HIPAA litigation, says that complaints may increase as implementation proceeds. Nearly 12,000 complaints have been filed alleging violations of the HIPAA privacy rule, although HHS says that none has resulted in a civil penalty or fine.
Patients and privacy advocates have voiced concern about the sharing of medical records in electronic medical records systems, even bringing identity theft into the argument, fueled by recent events.
Patients and privacy advocates have voiced concern about the sharing of medical records in electronic medical records systems, even bringing identify theft into the argument — a scenario that was fueled further when two computers that stored patients’ records recently were stolen from the San Jose (Calif.) Medical Group.
“The goal of electronic medical records systems,” says Daniels, “is to be able to walk into any provider’s office, and they can pull out your entire health record. You can understand the benefit to the patient in an emergency, but you can also imagine [what could happen if] someone is taking a medication for depression or that person is sensitive about something [in the record] — and his dentist happens to be his brother-in-law. That person might not want his brother-in-law to see their entire medical record.”
A related concern is that, over time, physicians will accumulate genetic information about patients and their predisposition to certain ailments. “I don’t think that HIPAA is as strong a protection as people hoped it would be,” says Daniels. People must look to state laws, she says, to address that issue. The HIPAA privacy rule does prevent genetic information from being shared with an employer. As such, the rule technically prevents genetic information from being used in a way that discriminates against anyone seeking health insurance; employers don’t have a right to obtain that information unless their health plans are self-funded, and CMS has faith in these safeguards.
Gradle, who also sees the states playing a larger role in medical record keeping, sharing, and security, says that state-level regulation is itself a major issue. “With companies operating within multiple states — each with its own set of privacy laws — how are they to deal with compliance issues?”
A broader issue for providers and payers alike, though, lies in the transactions and code standards. Under the rubric of administrative simplification, standardization of data formatting, content, and codes is now mandated. “It has been incredibly arduous to implement this very simple concept,” Gradle says.
Delays in implementation would seem to work against the efforts of dozens of commercial health plans that are striving to standardize billing procedures for biologic therapies. Less HIPAA-driven than an attempt to track spending for biologics (such as requiring that biologics be billed under NDC codes rather than J-codes), the effort essentially could have the same effect as HIPAA transactions and code standards. Indeed, Nachimson expects to see more standardized insurance claims, remittance advices, and ineligibility inquiries over time.
“As of last July, Medicare has paid electronic claims using the HIPAA standards faster than claims not using the standards,” Nachimson says. Nonstandard electronic claims are treated like paper claims for payment purposes.
#4: THE FDA ITSELF
As has been well publicized, the FDA has run for cover following criticism of its seesaw approval approach to the COX-2 inhibitors, specifically rofecoxib (Vioxx), and political concern about public safety is making headlines. The FDA cannot be faulted for being conscientious about safety, but worries abound about its knee-jerk reaction to criticism on one side and pressure for action on the other.
“I think the [FDA’s] process internally has been very careful, born of deliberative science,” says Gottlieb. “What worries me right now is that public pressures are forcing the FDA away from that culture [of deliberative science] toward a process where the agency speaks before it reaches firm scientific conclusions. That can have a detrimental public health impact.
“You’ve seen that recently with drugs for which the agency has put out warnings about what it calls ‘emerging risks.’ That’s highly problematic,” he continues. “The agency needs to speak with a degree of certainty, because everything it says is taken so literally and picked up so carefully by patients.”
Where the agency can use help is in getting better data about drug side effects, says Gottlieb. In the absence of firm data, when the agency becomes aware of serious or potential side effects, it always makes the assumption it is seeing only the tip of the iceberg. In other words, Gottlieb says, the FDA assumes most side effects are not being reported, and so they have to extrapolate. “They say: ‘If we’ve seen 10 of these, there must be 1,000; and if there are 1,000, then that’s a problem.’”
There are ways that the FDA can do a better job of gathering safety data, but, Gottlieb says, investment in new systems and resources is needed — an investment Congress has been unwilling to make. “Congress always looks for the quick, easy fix,” he says. For example, Congress could fund studies where large, practical, data collection registries are done, or link into EMR systems to extract real-time data, Gottlieb says. “The FDA does this in small pilot projects, but it doesn’t do it on an agencywide basis. It could — it knows how to do it. The MEDSUN system, a vehicle for tracking adverse events with medical devices, could be a good model for what could be done on the drug side.”
Two issues will have a near-term effect on the biotech field, Gottlieb says. One is the benefit structure of Medicare Part D and its provision for covering the most expensive —the catastrophic — biotech drugs: “Will prescription drug plans take a hard look at those costs, or will they ignore them because, by and large, the government is picking them up and is paying for [95 percent of] catastrophic drug coverage above the [benefit] cap? There may be less incentive to manage the utilization of those drugs aggressively; although the biotechs remain very worried that their sole-source drugs could get left off formularies because it will be too expensive for some prescription drug plans to stock the drugs.”
The second issue with a near-term effect is the continuing transfer of some responsibilities that were once the province of the FDA’s Center for Biologics Evaluation and Research over to the Center for Drug Evaluation and Research.
“That’s going to play out in the next year or two and will have a big impact on the biotech companies, because they will face a new culture,” Gottlieb says. “It’s been progressing smoothly, but much of the hard work of integrating the people from both centers is still unfolding.”
Footnotes
Hofelich, of GPhA, disputes this. “Often, the process might be patented, so the generic might not be able to use it,” she says. “Therefore, [a manufacturer] would not be relying on the innovator’s process.”
Testing for overexpression of HER2/neu can be achieved by immunohistochem-istry (IHC), which uses a specific protein to identify the oncogene’s protein, or fluorescent in situ hybridization (FISH), which measures genes that direct the production of the protein.