Global Biologic Drug Development and the TTP

What do the biosimilars provisions of the TPP portend for global biologic drug development? By Kevin E. Noonan. 

Kevin E. Noonan

The diplomats negotiating the Trans-Pacific Partnership (TPP) agreement did the seemingly impossible: they kept the details of the draft agreement secret from the press and public in the US, Canada, Mexico, Australia, Singapore, Malaysia, Japan, Chile, Peru, Vietnam, New Zealand, and Brunei Darussalam (as well as the rest of the world) for over six years of deliberations until those details were released in early November. Some of the most controversial provisions of the TPP relate to exclusivities for pharmaceutical compounds, and in particular biosimilars (i.e., generic versions of biologic drugs) provided by the treaty.

Of concern are treaty provisions relating to market exclusivity; the term of market exclusivity for biologic drugs in the US is 12 years, but the treaty provides a minimum of only eight years (Article 18.52).  Conversely, the provisions relating to data exclusivity (Article 18.50) have the same term as the corresponding provisions under US law (for both biologic drugs and conventional pharmaceutical agents): five years.

What will be the effects of these provisions on biologic drug development? Most importantly, there is nothing in the agreement that mandates any reduction in the market exclusivity term in the US; Article 18.52 states that the term is “a period of at least eight years from the date of first marketing approval of that product.” Thus, despite the efforts of the Obama Administration to reduce the US market exclusivity term to only seven years, this treaty should have no effect on the length of market exclusivity for biologic drugs in the US.

In other signatory countries, on the other hand, the treaty (in many cases for the first time) provides market exclusivity for biologic drugs. This is the real benefit of the treaty; as with the GATT/TRIPs agreement that established the World Trade Organization (WTO), countries that heretofore were inhospitable to biologic drug innovators will now be bound by the TPP to establish a regulatory regime that blocks biosimilar competition for this limited period.

There are a significant number of alternative provisions (perhaps amounting to loopholes) in the agreement. Specifically, with regard to biologic drugs Article 18.52 provides, in the alterative, a period of only five years of market exclusivity. More worrisome are the provisions of Article 18.50.3, which provide that nothing in the treaty shall interfere with efforts of an signatory country to protect public health as provided for in the Declaration on TRIPS and Public Health (i.e., the Doha Declaration), waiver of market exclusivity protection under TRIPS, or any amendment to the TRIPS agreement. Such provisions have provided some WTO member countries with the means to circumvent patent protection provisions of GATT/TRIPS and it can be expected that similar avoidance of the market exclusivity provisions in the TPP will be provided by Article 50.3.1. Certain of the signatories of the TPP (such as Vietnam) have availed themselves of the exceptions putatively based on public health to GATT/TRIPS and it is likely that similar occurrences will arise under the TPP.

While unlikely, it is also possible that some of those countries will follow the US (12 years) or European (10 years) model and provide more than the minimum period. However, in view of the competing interests of political pressure for cheaper drugs (and biologic drugs are particularly expensive) and the need for sufficient return on investment for their development (wherein even the 12-year exclusivity term is thought inadequate by some economists), it is likely that biologic drug innovators in these countries will need to turn to the conventional way of protecting innovation: patents. While regulatory exclusivity may provide more certainty (not being subject to invalidation, for example), patenting (and supporting strong patent regimes in the signatory countries) can provide a robust alternative. However, unlike other provisions of US biosimilars law, adopting the litigation provisions in US law is not recommended.

Patenting does not provide a panacea, however; as with the market exclusivity provisions, the treaty provides a way for countries to reduce patent protection for certain inventions, e.g., that “[e]ach Party may also exclude from patentability: diagnostic, therapeutic, and surgical methods for the treatment of humans or animals; animals other than microorganisms; and essentially biological processes for the production of plants or animals, other than non-biological and microbiological processes" (Article 18.5.1.3).

And in footnote 60, the provisions of Article 18 exclude from exclusivity “(a) any second or subsequent marketing approval of such a pharmaceutical product; or (b) a pharmaceutical product that is or contains a previously approved biologic.”

If ratified, the TPP on balance is likely to promote development of biologic drugs globally and at the same time provide political protection for those in the signatory countries who understand the economic realities of biologic drug development, yet at the same time acknowledge the public pressure for cheaper alternatives to biologic drugs to come to market as quickly as possible.

In the US, Congress granted the president so-called "fast-track authority" for the TPP, which means that Congress can ratify the agreement, or not, but cannot amend the agreement or filibuster Senate consideration. Opposition to the TPP has been voiced by putative Democratic Party presidential nominee Hillary Clinton and her nearest challenger, Sen. Bernie Sanders (I-VT), as well as groups like the Electronic Frontier Foundation, Public Citizen, and several unions. Ratification of the TPP might be the crowning achievement of the Obama presidency, which includes normalizing relations with Cuba, reducing US military presence in Iraq and Afghanistan, and Obamacare. But there is sufficient opposition to the agreement that its ratification is not assured and provides a juicy target for political shenanigans as the 2016 election cycle approaches.

Kevin E. Noonan, PhD, is a Partner with McDonnell Boehnen Hulbert & Berghoff LLP. He can be reached at noonan@mbhb.com.