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Thursday, Mar 28, 2024

Biotech Firms Face Lower Tech Generic Future

You don’t have to look far to get a sense of the changes that health care reform will bring to the biotech industry. Consider industry giant Amgen Inc. in Thousand Oaks. The company will undoubtedly benefit as tens of millions of Americans gain pharmaceutical coverage, yet its cash cows – anemia drug Epogen and its several variants – are expected to come under pricing pressure. One key way the reform bill seeks to reduce health care costs is by reducing government payments for brand-name drugs and encouraging the production of generic equivalents. “There will be a tug of war there for sure,” said David Gollaher, chief executive of the California Health Institute Inc., a San Diego biomedical research and advocacy group. “The expansion of coverage will create some tensions around pricing.” Amgen isn’t exactly unprepared. The company is working on several late-stage pipeline drugs, including a generic version of Pfizer Inc.’s Lipitor. The Food and Drug Administration is required under the law to establish a regulatory pathway that will speed such “biosimilar” drugs to market. It currently can take several years to do so. Amgen also reached a deal late last year with Parsippany, N.J. generic drug maker Watson Pharmaceuticals Inc. to jointly develop other biosimilar medications. “You can see that companies are already moving into that type of development,” Gollaher said. “Watson Pharmaceuticals and Amgen are looking forward to making generics. Pfizer, Merck & Co. Inc., most have (similar plans). That will accelerate. That is a very big deal for the biotech industry.” The generic drug market is worth $255 billion annually, and is expected to rise to $358 billion in the next five years, according to Wellesley, Mass. firm BCC Research LLC. And while Amgen’s current strategy has been attractive to investors, with shares trading near record highs in recent weeks, Gollaher worries that in the long run, large biotechs could be harmed by the new strategy. The biotech industry has made its mark by developing innovative drugs, but now they will be under pressure to spend far less on research and development. “It takes certainly over a billion dollars to get a new medicine to market,” Gollaher said. “And unless there’s a return in sight, they won’t make that investment. Expansion of coverage is a great thing, but we all want to make sure there isn’t a sacrifice in innovation. Amgen declined to comment for this article. Strategy in flux However, not all experts are as worried as Gollaher about the effects of health care reform on innovation. David Bermudes is an assistant professor of biology at California State University, Northridge, who specializes in biotech research. He noted that European governments with their extensive socialized medicine programs have long sought to curtail drug costs and encourage the use of generics. But that hasn’t altogether stifled innovation. Drug companies in Europe have found a way to develop new products within the context of government cost containment. “That’s something that happened in Europe already,” he said. “It’s a formula that’s been out there before, and will be a discussion they have here.” However, if a government program such as Medicare or Medicaid is unwilling to pay for a new drug with large development costs, then the market for the drug shrinks, further driving up the costs. “When a drug is first produced, especially if there isn’t a large market, it can be an expensive cost to bear,” he said. “Medicaid has restrictive regulations. And some manufacturers are concerned about what that means benefits will look like.” Amgen has started making changes to its strategy of late in an effort to hold down drug research and development costs. Aside from the deal with Watson, it also took the step of licensing out six pipeline drugs to a new spinoff, Atara Biotherapeutics, last month. The Westlake Village company is developing drugs for kidney and cancer treatments. Amgen maintained a minority stake in the firm, and apparently has similar deals underway according to industry sources.

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