The Biologics Price Competition and Innovation Act: Potential Problems in the Biologic-Drug Regulatory Scheme

Timmis, Ryan | October 1, 2015

In 2010, Congress passed the Patient Protection and Affordable Care Act, often referred to as “Obamacare.” Though little noticed in the fanfare surrounding this event, Title VII, the Biologic Price Competition and Innovation Act (BPCIA), was arguably one of the most important provisions. The BPCIA represents one of the more significant overhauls to the pharmaceutical industry in recent decades. For the first time, federal law established a pathway for the creation of generic versions of drugs produced by biotechnological means. Congress hoped by legalizing the production of generic biological drugs, generally known as “biosimilars,” that consumer prices for a variety of important drugs would decrease. In 1983, the Hatch-Waxman Act created a pathway to market for generic versions of traditional small-molecule drugs. Small-molecule drugs, which comprise the majority of commonly used drugs, are created by purely chemical processes and have relatively simple structures. As Congress hoped, Hatch-Waxman has had considerable success in lessening the cost of many pharmaceuticals. For instance, a Federal Trade Commission (FTC) study found that the entry of multiple generics into the market under the Hatch-Waxman Act reduced the price of some drugs by up to 80%. But consumers are unlikely to see comparable biosimilar price reductions resulting from the BPCIA’s enactment. First, biologic drugs are inherently more difficult and costly to manufacture than traditional pharmaceuticals, providing barriers to entry that the BPCIA cannot effectively address. Second, compared to Hatch-Waxman, the BPCIA imposes much longer exclusivity periods for both reference drugs and the first biosimilar produced. This will, at a minimum, delay the cost benefits stemming from increased competition. Lastly, the interchangeability provisions, which allow for automatic substitution of reference products similar to generic chemical drugs under Hatch-Waxman, are much stricter for biologics regulated under the BPCIA.