Harming Innovation Will Not Win the Future

Last week when President Obama submitted his second budget proposal, much of the criticism was aimed at the trillions of dollars in tax hikes included within the plan. Of course, tax increases are extremely bad policy but I will leave that argument to my colleagues at Americans for Tax Reform. Also included within the Obama proposal is a plan that harms medical innovation and threatens the future of life-saving medicines that have transformed health care in America.

The United States currently has one of the strongest and fastest growing biotech and pharmaceutical industries in the world. The reason for this is innovators have been afforded a period of time in which they are allowed to recoup the costs of their investments before a generic comes to market. Obama’s 2012 budget undermines this ability by calling for a decrease in the data exclusivity period, the time in which a generic manufacturer may use the innovator’s research data, for brand biologics from 12 years to 7 years.

Biologics are drugs derived from living organisms and much more complex than traditional single molecule pharmaceuticals. Biologic drugs being researched today have been proven effective against diseases like cancer, HIV/AIDS, multiple sclerosis and diabetes. Research and development is very expensive (the average price of bringing a new biologic to market exceeds $1 billion) and companies need to have an incentive to keep inventing life-saving drugs.

For years, a debate was waged in Congress, not on whether to establish an approval pathway, but rather how long a data exclusivity period, should be granted. At twelve years data exclusivity, companies are just beginning to counter-balance the billions of dollars spent in investments. Denying companies enough time to gain back their investments would be extremely damaging to future innovations in this important field. The right balance needs to be struck that promotes competition and innovation. Granting a seven-year exclusivity period falls far short.