Will More Marketing Exclusivity be the 21st Century Cure? Hearing Witnesses Debate Incentives

June 17, 2014

By James E. Valentine –

On June 11, 2014, a panel before the House Energy and Commerce Committee’s Subcommittee on Health hosted its second hearing on the 21st Century Cures Initiative.  The Subcommittee sought input on whether current economic and regulatory incentives are sufficient to encourage robust investment in the research and development of innovative medical products, particularly for those patients with unmet medical needs.  The Subcommittee has cited that only 500 of 7,000 known diseases have effective treatments, and legislators are interested in closing this “innovation gap.”  While there was agreement with respect to the unmet medical need by patients, there was little consensus among hearing witnesses as to how to appropriately incentivize medical product development.

The primary policy recommendation presented at the hearing was the Modernizing Our Drug & Diagnostics Evaluation and Regulatory Network Cures Act of 2013, or MODDERN Cures Act of 2013 (H.R. 3116) (“Cures Act”), raised by Marc Boutin, Executive Vice President and Chief Operating Officer of the National Health Council.  As described by Mr. Boutin, current legal and market failures have led to a category of products for diseases that meet FDA’s definition of unmet medical need, but have insufficient patent protection.  This class of products is referred to as “dormant therapies.”  The Cures Act would provide designated therapies, if approved, 15 years of marketing exclusivity.  Mr. Boutin argued that because incentives for rare disease development under the Orphan Drug Act have been largely successful, more common diseases, such ALS and Alzheimer’s disease, would be prime candidates for dormant therapy development.

Dr. Samuel Gandy, on behalf of Dr. Kenneth Davis, President and CEO of Mt. Sinai Health System, seconded Mr. Boutin’s call for additional statutory exclusivity.  He proposed as an alternative that Congress create categories of exclusivity for specific areas with unmet medical need.  Citing the need for drugs to reduce the rate of disease progression in Alzheimer’s disease, Dr. Gandy recommended additional exclusivity for oral drugs for this indication.

Other witnesses were not optimistic about a statutory exclusivity program, such as the Cures Act, being able to foster innovation in drug development.  Dr. Steven Miller, Senior Vice President and Chief Medical Officer for Express Scripts Holding Company, stated that the burden of increased costs created by a wide range of products qualifying for long term exclusivity would fall to health plans and employers.  This concern was echoed by members of Congress who were concerned with creating monopolies in a time where the rising costs of health care are already creating barriers for access.  Dr. Miller presented the concern that statutory exclusivity would pervert the commercial market and actually inhibit innovation, while artificially restricting competition.  He even went on to suggest that the tax code ought to support the burden of additional exclusivity as a public good, rather than putting it solely on the backs of payers of health care.

There was also concern about the breadth of the statutory inclusion criteria for a “dormant therapy” designation under the Cures Act.  Mr. C. Scott Hemphill, a Professor of Law at the Columbia University Law School, argued that, under FDA’s definition of an “unmet medical need,” many products that would otherwise have sufficient market forces, and would otherwise be approved by the Agency, would prevent generic competition.  He instead recommended a narrowly tailored approach, like that of the Hatch-Waxman Act and Orphan Drug Act. 
Both Dr. Miller and Mr. Hemphill advocated for a targeted statutory exclusivity program that would reward truly innovative products.   Alternatively, Dr. Fred Ledley, Professor of Natural and Applied Sciences at Bentley University and Management Director of the Center for Integration of Science and Industry, expressed that, because innovation in medical product development is directly tied to innovation in basic science, a patent protection-based approach would support new discoveries.  Dr. Ledley did concede that statutory exclusivity could be useful when there is an unmet medical need based on true market failures.

There was consensus among the witnesses with respect to the need for greater certainty and consistency across in the application of regulatory standards, including in the use of expedited approval pathways from one review division to the next.  Expedited programs, such as breakthrough therapy and accelerated approval, were recognized as useful regulatory mechanisms to expedite the drug development process.  While not a direct incentive, if successful, these programs result in approvals with greater length of patent protection remaining. 

Each witness’s written testimony, as well as a transcript and recording of the hearing, can be found here.  See our previous post on HP&M Director Frank Sasinowski’s testimony at the first 21st Century Cures hearing on PCAST Report on Drug Innovation.