American Journal of Law & Medicine

Cheaper Clinical Trials: The Real Solution to the Biologic Industry's Gordian Knot


Biologics include a wide range of products, such as vaccines, allergenies, gene therapies, and tissues, among others. (1) Biologics are complex combinations of sugars, proteins, or nucleic acids that are produced by biotechnology methods or other advanced technology. (2) Biologics often represent the only medical treatment for complex medical conditions such as: Hepatitis B; Measles, Mumps, Rubella and Varicella; and Tetravalent meningococcal conjugate among others. (3) As a result, biologic sales are growing at twice the rate of chemical pharmaceuticals (4) and are expected to exceed $158 billion by 2015. (5) Various interest groups, including patients, insurers, and regulatory agencies, raised concerns about the financial impact that biologies may have on health care costs. Congress and the Food and Drug Administration (FDA) faced pressure to provide a solution to the soaring biologic costs, namely through a regulatory pathway for generic biologics ("follow-on biologics") to manufacture cheaper products. (6) Although a regulatory pathway for generic chemical pharmaceuticals ("generic") exists under the Hatch-Waxman Act, a similar regulatory pathway for follow-on biologics did not exist prior to 2010.

Under the Hatch-Waxman Act, generic manufacturers could create cheaper versions of chemical pharmaceuticals. (7) Many follow-on biologic manufacturers wanted the FDA to apply the Hatch-Waxman Act to biologics, enabling follow-on biologics to produce cheaper biologics. (8) However, the FDA refused to permit most biologics to fall under the Hatch-Waxman Act. (9) Instead, the FDA deferred to Congress to approve an appropriate regulatory pathway for follow-on biologics. (10)

On November 4, 2008, the American people elected Barack Obama as the 44th President of the United States. President Obama made it clear that health care reform would remain among his top initiatives. As a result, health care reform was the topic of heated debate between the Democrats and Republicans. Despite this disagreement, President Obama vowed to decrease expensive health care costs, such as biologics. Consequently, Congress approved the Biologics Price Competition and Innovation Act of 2009 ("BPCIA"), which created a regulatory pathway for follow-on biologics under the Patient Protection and Affordable Care Act ("PPACA") on March 23, 2010. (11) While the BPCIA attempts to create health care savings, it fails to adequately maintain incentives to innovate and protect consumer safety. Instead, Congress should have explored solutions to reduce clinical trial costs, such as cost-sharing, government subsidies, or imposing regulation to create efficiencies within the clinical trial markets, rather than approve a regulatory pathway for follow-on biologics. These solutions would target clinical trials, the true cause of expensive biologic costs, without risking patient safety, infringing on pioneer biologic manufacturers' constitutional rights, or threatening pioneer biologic manufacturers' incentives to innovate.

Part II of this note provides an overview of the biologic industry, and Part III describes the current regulatory pathways for chemical pharmaceuticals. Part IV explores the need for legislation to require interchangeability between pioneer and follow-on biologics. Part V reviews the constitutionality of applying the Hatch-Waxman Act to biologics, and Part VI analyzes the BPCIA. Finally, Part VII explores methods to reduce the price of clinical trials.


A biologic is a drug derived from a living organism that treats human diseases, such as a "virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, or analogous product, or arsphenamine or derivative of arsphenamine." (12) Some biologics stimulate an immune response in the body, which forms antibodies that fight a particular disease. (13) The biologic industry is important for the medical community because biologics are often the best medical treatment available for certain medical conditions, such as chronic kidney disease. (14) The biologic industry also attracts significant attention because the industry is extremely lucrative. For example, the biologic industry will likely generate over $158 billion in sales by 2015. (15)

Various interest groups, including patients, insurers, and regulatory agencies are concerned about the financial impact that biologics will have on health care costs. (16) For example, the kidney disease drug, epoiten alpha, has been off patent for several years, but there is still no generic competitor. Generic competition has been thwarted because no clear regulatory pathway existed for follow-on biologics. Consequently, Congress and the FDA faced pressure to provide a solution to the exorbitant biologic costs in the form of a regulatory pathway for follow-on biologic companies to manufacture cheaper biologics. (17)

Although Congress approved the Hatch-Waxman Act, which permits generic manufacturers to produce cheaper versions of chemical pharmaceuticals, the FDA refused to apply the Hatch-Waxman Act to biologics. (18) In fact, the FDA specifically required Congress to approve an appropriate regulatory pathway for follow-on biologics. (19) Over the past four years Congress considered The Access to Life Saving Medicine Act, the Patient Protection and Innovative Biologic Medicines Act of 2007, the BPCIA of 2007, and the Pathway for Biosimilar Act, all of which proposed a regulatory pathway for follow-on biologics to enter the market. (20) However, Congress struggled to approve legislation because of uncertainty about (1) scientific knowledge to compare the similarity between biologic products without reviewing the biologic manufacturing process; (21) (2) the constitutionality of reviewing the biologic manufacturing process; (22) and (3) the best method to preserve incentives for pioneer companies to innovate. (23) Despite strong criticism from the pioneer biologic industry, (24) Congress approved the BPCIA under the PPACA in 2010. (25) However, the BPCIA fails to adequately address the scientific and legal questions that a follow-on biologic regulatory pathway presents.


When a biologic manufacturer seeks to produce a biologic, the manufacturer must first develop and patent a product. (26) The manufacturer then ensures the safety and efficacy of the product by conducting three phases of clinical testing. (27) Finally, the manufacturer must receive FDA approval for the product to legally sell the product in interstate commerce. (28) Clinical trial testing is extremely expensive and prevents many generic manufacturers from entering the market. (29) Congress devised the Hatch-Waxman Act to permit generic chemical pharmaceutical manufacturers to enter the market. (30) However, the Hatch-Waxman Act generally does not apply to follow-on biologic manufacturers. (31) Congress faced the difficult task of developing a regulatory pathway that both promotes safety and protects biologic manufacturers' incentives to innovate.


The Framers granted Congress the ability to convey a monopoly right under Article 1, Section 8 of the Constitution to encourage invention. (32) Thus, Congress can issue an exclusive market right over an invention to an inventor. (33)

The Patent Act of 1952 ("Patent Act") established the current statutory requirements for an inventor to obtain a patent. (34) An individual must create a "useful process, machine, manufacture, or composition of matter" that represents a non-obvious and novel piece of technology. (35) Additionally, the inventor must submit a patent application specifically claiming the invention before making the invention available to the public. (36) Finally, the application must describe the invention in a way that permits an individual in the field to replicate the invention. (37)

The Patent and Trademark Office (PTO) examines the application to determine whether it satisfies the Patent Act requirements. (38) If the application is valid, the PTO issues a patent that prohibits an individual from engaging in infringing market competition with the patent holder for twenty years. (39) If an individual challenges a patent, the challenger bears the burden of proof to show by clear and convincing evidence that the patent is invalid. (40) After the PTO issues a drug manufacturer a patent, the drug manufacturer must receive FDA approval to sell the product on the market. (41)


Congress has the constitutional authority to regulate interstate commerce under the Commerce Clause, (42) and it vested the FDA with the authority to monitor the marketing of chemical pharmaceuticals and biologics. (43) Congress issued a federal regulatory scheme, which the FDA administers, that ensures the safety and efficacy of both chemical pharmaceuticals and biologics. (44)

Many generic manufacturers cannot enter the market because of the costly New Drug Application (NDA) and Biologic License Application (BLA) processes. A chemical pharmaceutical manufacturer seeking FDA approval must provide an NDA. (45) Conversely, a biologic manufacturer must submit a BLA. (46) The NDA and BLA must include:

(1) reports of investigations demonstrating the safety and efficacy of the drug; (47) (2) a list of the components of the drug; (3) a statement of the drug's composition; (4) a description of the methods and facilities used for the "manufacture, processing, and packing" of the drug; (5) samples of the drug as required; and (6) samples of the labeling. (48)

Generally, it is not difficult for drug manufacturers to produce information to satisfy requirements two through five. (49) However, a drug manufacturer may spend millions of dollars to provide information that meets the FDA's standards to demonstrate the safety and efficacy of the drug. (50)

Furthermore, new drugs must undergo three phases of clinical testing to demonstrate the drug's safety and efficacy. (51) During a Phase I clinical study, researchers administer the drug to a small group of subjects to determine the safest method and quantity of treatment to use. (52) Conversely, Phase II studies involve several hundred subjects. (53) Researchers closely monitor Phase II studies to gather initial information about the drug's effectiveness, side effects, and risks. (54) Similarly, Phase III involves studies of hundreds to several thousand patients and statistically evaluates the safety and efficacy of the drug in a large, diverse population. …

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