this hearing of the subcommittee on courts and competition policy policy will now come to order without objection the chair will be authorized to declare recess of the hearing and under current law generic versions of the chemical pharmaceutical products may be introduced through an expedited pathway that allows generic makers to rely on the safety and efficacy test data of an original food and drug administration approved drug this dramatic plea reduces the cost of entry for generics which has translated into substantial savings to customers the congressional budget office has estimated that consumers say eight to ten billion dollars a year thanks to the price competition from generics there is however no equivalent statutory pathway for generic versions of biological pharmaceutical products otherwise known as bios emulous congress has six has explored the creation of a generic pathway for biosimilars for some time but it wasn't until this congress that real momentum has built behind such a level legislative endeavor this is in large part due to the effort by congress and the obama administration to pass comprehensive health care reform m believe that establishing a pathway for biosimilars will contribute to our efforts to reduce the cost of care creation of a pathway for biosimilars has been a contentious issue much of the debate concerning such pathway revolves around whether the science is perfected enough to determine if a bio bio similar that relies on an innovative has test data will have the same health benefits be innovative drug without additional health risks additional concerns center on the intellectual property protections afforded drug in a bit innovators and how the nature of those protections will impact competition future biotechnology industry investment and the cost of biological pharmaceutical products it is without a doubt that the development of new biologics is an expensive endeavor estimates put the average development costs as much as one point three seven billion dollars it is also without a doubt that the cost of pharmaceutical products and in particular biologics is huge in two thousand and seven pharmaceutical expenditures accounted but two hundred thirty one point three billion dollars in health care c biologics represented forty point three billion dollars of this total the question before us today is how to frame the intellectual property protections in a pathway for that incentivizes be extraordinary investment required to develop new biologics but does not discourage biosimilars introduction i look forward to our hearing with the distinguished witnesses that we have on board who will comment on whether this should be a long data exclusivity period that significantly delays biosimilar current competition with a biotechnology patent brought in to plug two bio similar products and processes and the extent to which other factors provide market his opening remarks so i thank you mr chairman and i thank you for having called a hearing which addressing that important health care issue and directly affect subject matter that is a portion of the judiciary committe chairman i'll try not to be too verbose but this is very detailed and very complex perhaps not so detailed and complex to a scientifically adept but i belong to the scientifically worked well but balancing the brand manufacturers generic companies and patients is generating a greater price competition in the pharmaceutical industry without destroying the incentive for brands to conduct further research how to roll out new products that men of patients worldwide and recent years mr chairman legislate or that other health care experts have contemplated the creation of a similar legislat pathway for a generic biologics industry there's discussion not only resurrects of the same issues confronting congress during consideration of hikes watchman and also invites debate over the basic difference between chemical pharmaceuticals and biologics chemical drugs are usually produced in pill form their chemically sent up synthesised and comprised of small molecules compared to biological chemical chemical pharmaceuticals are far easier to manufacture and replicate biologics are made as we know from living organisms they are normally comprised of protein and are increasingly a part of rick i'm bad at the research and production their characteristic properties include a molecule or weight varying levels of hard to remove biological impurities and i had agree of sensitivity to environmental conditions the manufacturing process is therefore critical to the final product this complex in the main one cannot guarantee that  but i would ask unanimous consent to have my entire statement put into the record and that we hope that we will have a balanced and talented roster of witnesses which we all which we will have to add to our understanding of this complex subject i look forward to participating and thank you again mr chairman for having called harry without objection that will be done mr cole and i thank the gentleman for his statement and without objection other members opening statements as will will be included in the record i'm pleased to introduce the witness for the first panel of today's hearing represents california's fourteenth congressional district which includes large portions so the kind ballot she serves on the house energy and commerce committee and on the house permanent select committee on intelligence in addition proceed with your testimony good afternoon mr chairman and thank you very much for allowing me to be here today to give testimony on the issue of biosimilars before this distinguished subcommittee to the ranking yet complex discussion to develop a regulatory pathway for biosimilars that as mr caldwell and others have said protect patients protects patients that must be number one our number one goal while balancing incentives for innovation the field of biotechnology is the future of medicine we're just beginning to scratch the surface of the potential to harness the extraordinary power of biology and the astounding natural processes which occur in the human body in animals and in other living organisms to advance breakthrough medical discoveries and treatments this vital future in my view and i'm sure yours must advance but the costs of biologic treatments are very expensive and i think the time has come to develop a pathway as the congress did many years ago and as was mentioned by the ranking member to develop a pathway for bio similar products in our country the way we did for pharmaceutical count pounds now what exactly do i mean when i say develop a pathway for biosimilars in one thousand nine hundred four the drug price competition and patent term restoration act better known as the hatch waxman act and in a new era of competition and cheaper drugs for traditional pharmaceutical called compounds it's now appropriate for us to create a pathway for follow on versions of biologics but biologics and traditional drugs are fundamentally different and they require different legal and scientific frameworks first we need to understand the differences between biologics and traditional drugs many of us take a priest a prescription or an over the counter drug frequently each time we reach for a pill we expect the same safety and efficacy whether we're using a brand name or a generic drug small molecule chemical compounds of traditional drugs are ideal for replication as generics these products have well defined structures that can be thoroughly characterized and copied and generic drugs are chemically identical chemically identical to the brand name products they copy doctors and patients can expect the generics will have the same properties the same efficacy and the same safety characteristics as the product that they copied biological products are fundamentally different a biologic is a large complex molecule which is grown in living cells in living systems such as a microorganism a plant or an animal cell the resulting protein is unique to the cell lines and the specific process  that are used to produce it and even slight differences even the slightest differences in the manufacturing of a biologic can alter its nature and that will have an effect on the patient as a result biologics are difficult and sometimes impossible to characterize and laboratory analysis of the finished product is instead vision to ensure its safety and efficacy and i brought a chart they say a picture is worth a thousand words you see on the on the stand here the chart now on the top these are both breast cancer treatments the top is to mock safin now that's a small molecule count pound and you can see its simplicity it did really the picture says it all below it is herceptin and that is a biologic and look at the complexity of that biologic even if a biosimilars proven to be safe and effective it will likely still have different properties than the original the original innovative product there may be differences in dosing different side effects or safety profiles and differences ineffectiveness for certain diseases or for different patient groups biologics are expensive and their risk eight to develop a recently released study sponsored by the national venture capital asian analyze the relative cost for investors in biotechnology and found that the cost of capital for start up biotech companies is more than double the costs than other companies must pay these costs developmental timelines of typically ten years or more and extraordinary extraordinary levels of risk fewer than one percent of biologics make it to the market imagine that fewer than one fewer than one percent and the large amounts of capital required to support this development are at the other end of the scale so to preserve the existing incentives for investment and innovation the pathway for biosimilars act provides a data exclusivity period equivalent to patent protections for small molecules the congressional budget office has determined that eleven and a half years is the average length of time that drugs are marketed under patent in other words innovative drugs and biologics typically stay on the market for about twelve years before facing competition my legislation maintains this level of protection for biologics now today innovators are assured that the costly clinical trial results and data that they developed during their approval process cannot be used by competitors to secure approval and enter the market even if their patents do not prevent entry in effect innovators today have infinite data protection which allows for competition but doesn't permit free riding on their data i am proposing to allow competitors access to their data and a short cut into the market but we preserve through the legislation the existing incentives for innovators by maintaining a twelve year period of exclusivity conquering data protection as a backstop to existing patent protections in order to protect the rights of all parties and ensure that all patent disputes involving a bio similar are resolved before and i emphasize the word before the expiration of the data exclusivity period a chart fifteen forty eight also establishes a simple streamlined patent resolution process this process would take place within a short window of time roughly six to eight months after the bio similar application has been filed with the f d a it will help ensure that litigation surrounding relevant relevant patents will be resolved expeditiously and prior to the launch of the biosimilar product providing certainty to the applicant the reference product manufacture and the public at large unlike any other proposal our legislation all sleep preserves the ability of third party pat holders such as universities and medical centers to defend their patents once a bio similar application is accepted by the f d a the agency will publish a notice identifying the reference product and a designated agent for the bio similar applicant after an exchange of information to identify the relevant patents that issue the applicant can decide to challenge any patents validity or pluck ability all information exchanged as part of this procedure will be maintained in strict confidence and use soley for the purpose of identity identifying patents relevant to the bio similar product the pat known or will then have two months to decide whether to enforce the patent and if the patent owner's case is excess full in court the final approval of the application will be deferred until the patent expires so this legislation i think sets forth a straightforward scientifically based process for an expedited approval of new biologics based on innovative products already on the market with patient safety coming first this new pathway will promote competition and lower prices and most importantly again protect patients and give them the safe and the effective treatments and i might say the hope that this represents to really conquer the most dreaded diseases that still plague human kind and all through the scrutiny and testing by the f d a the legislation enjoys today one hundred thirty bipartisan co sponsors many on this committee the house judicia y committee and it is known it is as the kennedy bill in the senate last evening the health subcommittee in the senate voted the bill out sixteen to seven which i think is really quite a victory for the legislation after all it is complicated and enormously complex as well as enormously important i also want to note that the bill is endorsed by the association of american universities the national venture asian the biotechnology industry organization the governors of four states and a wide array of patients and industry groups so mr chairman and distinguished members of the subcommittee i appreciate congresswoman and it's our pleasure to host you today and without objection your written statement will be placed into the record and i now call for bill and he was asked that the opportunity to come today but he's very much tied with the health care issue and so he could not make it and gentlemen our second panel will begin with bruce like sure mr life sure that their way all right mr life is senior vice president and general counsel that moment pharmaceuticals which is an innovative biotechnology company engaged in the development of novel and follow on biologics prior to joining moment served in leadership capacities in a number of the biotechnology companies there's still a chanel also served as a love clerk to the honorable thomas hogan in the united united states district court for the district of columbia welcome sir next will be jeffrey cushion who is a partner with sidney sidley austin and appeals and complex patent administration proceedings he represents several biotechnology clients including janet ted today he is representing the biotechnology industry organization welcome sir following  following will be mr alex brill who is a research fellow at the american enterprise institute and c e o of the consulting firm matrix global advisors he is former chief economist and senior advisor to the house committee on ways and means and has served on the staff of the white house council of economic advisors his expertise lies in u s federal tax policy budget trade and health care policy welcome sir and mr jack lazar song leads us and will be our next witness who is a  and he is a founding general partner of the vertical group one of the nation's oldest and most successful venture capital firms which focuses on health care venture capital investment mr  the laser sign has served on the board of directors of forty public and private companies and currently serves on the board of directors of the national venture capital association which he's representing health care advocate for united states public interest research groups otherwise known as us our jeanne mr mcneil nearly advocates for legislation that will time rising health care activists political organizer and union representative welcome sir last will be ms to research ray who is a partner in the washington d c office of crowell and more and more ring and is a member of the firm's intellectual property section her work focuses on complex patent litigation prosecution and procurement ms rae is also a registered pharmacist in the state of michigan and worked for years as a hospital pharmacist ms really ms ray is president of the american intellectual property law association  representing the association today welcome and thank you all for your willingness to put to sleep aid in today's hearing without objection your written statements will be placed into the record and we would ask that you limit your oral remarks to five minutes you'll note that we have a lighting system that starts with a green light at four minutes it turns yellow then  at after each witness has presented his or her testimony said committee members will be permitted to ask questions subject to the five minute mr life like sure would you please  your testimony thank you mr chairman good afternoon mr chairman and members of the committee thank you for the opportunity participate today fleischer senior vice president and general counsel of momenta pharmaceuticals i believe i offer a unique perspective serving as counsel to io tech companies for almost twenty years i worked on the development launch of some of the earliest breakthrough products including e p o recombinant factor eight and nine and many others i participated in numerous financings and collaborative research deals between biotech and large pharma i've served on product development committees that seek to balance risk versus reward have experienced the joy of meeting parents whose children's lives have been transformed by biologics have also participated in many of the seminal biotech patent cases that determine market exclusivity and biologic patent strengths i understand biotechnologies potential to save lives momenta also offers a unique perspective in this debate where a biotech company that develops both generic and novel therapeutics we use innovative technology to characterize or better understand the picture that that congressman issue presented earlier and we use this technology to control complex the manufacture of complex drugs and potentially biologics we're seeking a balanced approach we believe waxman deal offers that approach and i'll explain why issue barton does  not like to address three key points the law should let science drive both brand and biotech generic innovation so that we can deliver breakthrough therapies and affordable biologics to patients we must not use data exclusivity and other barriers to reward inefficient and non innovative r and d and the patent clearance process should promote health care reform so we timely access to affordable products it must be transparent efficient and respectful of both brand and bio generic intellectual property each of these objectives we believe are best served by the waxman deal bill patents drive innovation they drive speed to market and already favor biologics a complex web of patent rights substantial protection for each biologic its genetic code its biologic pathway technology uses its manufacture and formulation while some argue that individual patent claims may be somewhat less certain the aggregate of this web provides many multiple defenses notably biologics generally have more market exclusivity during their brand life than drugs add to this five years a patent extension and i have to ask why should biologics need more data exclusivity than drugs to recoup investment beyond that brand innovation and competitiveness are motivated by limited data exclude screw city as well extended data exclusivity will attract capital but the wrong kind it will promote low risk non innovative development and make biotech in the long run far less competitive biotech funding should be directed innovative  or is our goal to offer brand exclusivity profit for me to products bio generic innovation and safer biologics also need limited data exclusivity to attract capital momentous first project was to characterize low molecular weight heparin biologic like drug having and the pathway available made it possible to finance momenta and develop its innovative technology we thoroughly characterized heparin including its potential immunogenicity notably brand companies assert that this is not possible yet continue to market the products this matters today and tomorrow we're applying tools to develop the first biogenetic generics and to enhance patient safety last year moment to use these tools to assist mit and other academic centers in collaboration with the f d a to identify the contaminants in chinese sourced heparin because of the and the incentive in limited data exclusivity we were able to do the work and knew what should and should not be in the heparin act so let me sum up the wisdom of hatch waxman was that it did not dictate investment decisions rather it put guardrails and incentives in place that reward innovation and assured affordability at a time when products mature breakthrough innovation was aligned with the return on investment and biotech flourished in the eighty's and ninety's creating high paying jobs and critical new cures as the first generation of breakthrough biologics emerges from patent protection what we learned from this experience will be support legislation like waxman deal that uses the competitive incentive of bio generics to promote long term competitive advantage global leadership and job growth or we ignore this wisdom and allow r and d investment to veer off track where we create a fertile environment for biologics companies to invest in the hard science to understand to make biologic safer and better where we let the patent system and what we let the patent system drive efficiency and high rewards for breakthrough biologics as bio generics provide affordable access to mature products as i see it this is exactly what health care reform is all about thank you for this opportunity and i'd be pleased to answer any questions thank you mr lasher mr question will you proceed with your testimony now sir thank you mr chairman and members of the community for providing by us an opportunity to testify today by a supports creation of an abbreviated regulatory pathway for by a similar products a viable by a similar pathway will increase competition and improve access for the remarkable by medical advances our industry has delivered over the past twenty thirty years by a similar pathway will be successful only if it preserves the incentives that exist today in the in our vibrantly competitive and innovative biotechnology industry if it does not fear a new buyer logical products and treatments will ensue to the detriment of patients with unmet medical needs and given the decades plus time that it takes to bring a new biological product to market we simply cannot afford to guess wrong about the proper incentives for this field by i was encouraged to see there is widespread support for several critical elements of any by a similar regime first nearly all stakeholders agree that data access safety must be lot by a similar pathway data exclusivities a regulatory mechanism that functions by deferring when by a similar products can be approved on the basis of the innovator's clinical data the differences of opinion that exist now revolve around how long the data exclusivity period should be and how it should relate to continued clinical development of products currently as representative eshoo pointed out biological products have an unlimited period of data access seventy this is because there no pathway today that lets another biotech company free ride on the clinical investments of a new first innovator biotech innovation has flourished in this environment we have seen constant innovations resulting in new protein therapy a few ticks new ways of exploiting cellular processes to treat diseases new diagnostic tools and new manufacturing techniques for making proteins indeed the manufacturing of asians mr lasher just pointed out that his company has developed have been made in this environment where there is unlimited data actual experience shows that innovators also do not stop clinically developing their products in this environment despite being given essentially unlimited period of data protection instead it shows an inner baiters continue to invest heavily in new clinical development and research on their biological products and have brought hundreds of important new treatments to print to the market for the benefit of patients i think these are real world results are the simplest answer to the various theories we have heard suggesting that excessive data somehow hinder innovation and the delivery of new clinical benefits to patients the real question is not whether it should be provided it's how much should it be shortened by a by a similar pathway some suggested the data exclusivities provided today for small molecule drugs is will be adequate for biological products several factors explain why this is not true studies have shown that in the small molecule area on average generic competition starts around twelve to fourteen years after the innovator product is launched patents are why that happens patents can do that because any generic drug must be structurally identical to the innervate or product that means drug  do not need broad patent claims to protect their investments they can protect their innovative drug products with what we call picture claims on the exact molecule all this means that a small molecule drug innovator deciding whether to make the investment and start the ten to fifteen year path to develop and bring a new drug to market today can assume that their patents if they are upheld will prevent the marketing of an infringing dinero product until those patents expire this is not going to be true for biological and products by similar products will invariably have different structures and innovative products the by a similar bills we see today all do not require structural identity compound in this problem is the problem that most biotech patents issued today are narrow let me say very clear these are not weak patents they're very strong and effective patterns they're just narrow patents the same ones and certain science that makes it difficult to make an exact copy of a biological product is actually why we have narrow patent rights together these two factors make it impossible for an innovator to predict when it's deciding to invest in development of the product whether its patent estate is going to provide effective protection against a future by a similar product and that's why the hatch waxman model as it exists today cannot be actually applied to the by a similar environment this patent loophole must be closed by the day exclusive any provisions by a stronge civil provisions of h r fifteen forty eight rather introduced by representative eshoo we believe that provides the appropriate balance it also incorporates fair and balanced patent review procedures that will proceed approval of a by a similar and important includes regulatory linkage thank you thank you thank you chairman johnson ranking member coble and other members of the committee for the opportunity to appear before the committee today to testify on an important matter currently before congress creating a pathway to allow for more competition within the biologic drug sector my name is alex brill and i'm a research fellow at the american enterprise institute biologic drugs offer great promise for improving outcomes in health care while their costly and risky to produce products for development they offer some of the best hopes for treating some of the nation's most deadly and debilitating diseases as you noted in your opening statement mr chairman currently there is no expedited process by which a bio generic product could enter the u s market while many experts who discuss the expected market dynamic for by a generic competition make reference to small molecule drugs and generic small molecules that emerge after nachman of hacked waxman legislation is that improve it is important to understand critical differences between traditional pharmaceutical and biologic drug markets not only are there scientific differences between these drugs as congresswoman eshoo described in her testimony but because of the cost uncertainty and complex the in biologic drug development a competitive biologic drug market will be very different than the can then the market for small molecule generics as described in the recently released f t c report on this issue quote competition from follow on biologic drug entry is likely to resemble brand to brand competition rather than generic drug competition branded manufacturers are likely to continue to reap profits after follow on biologic entry as the c report high barriers to entry will limit the number of generic competitors to only a few the results according to f t c will be price declines for biogen generics of ten to thirty percent molecule drugs generic prices typically decline up to eighty percent these more modest price effects on a per cent basis relative to small molecule drugs means that the need for additional market protection for biologic drugs facing competition is weaker as innovator drug companies will continue to be able to profit from their innovations after a follow on competitor has entered the market the additional protection granted by the  molecule drugs gives innovators greater confidence that they would have sufficient time to generate the necessary rents to recoup their r and d cost this additional protection was deemed necessary due to the particular dynamics of that industry however the f t c argues that biologic drug patents are collectively stronger than small molecule drug patents making the need for additional protections unnecessary in the eyes of the f none of the problems inherent to small molecule drug patents applied to biologic drugs and they advocate no additional protection beyond that given by the patent system i do not take as strong a stand against an exclusivity period as does the federal trade commission the costs of providing modest additional intellectual property rights to drug originators will likely outweigh the potential costs research i conducted demonstrate that an exclusivity period of seven years is sufficient to ensure that innovator drug companies continue to learn the necessary economic rent modeling included in the recent f t c report further extend that model and find support for the view that seven years of market exclusivities will be sufficient proposals that establish a long period of market protection will lead to on reasonable a large rent for originated drug companies and provide no additional benefit to consumers ultimately it's a balancing act promoting innovation by shielding the company from market competitors and promoting innovation and price competition by allowing market entrants yet as these proposals have become more complex another important issue has come to the fore that of tiered exclusivity post launch r and d involves costs will be less than the original development cost and should be encouraged since it only stands to reason that a drug's original developer has the best knowledge of their own invention however when thinking about the optimal amount of protection to give an improvement to an existing drug we must once again return to the basic question of the particular market dynamic and improvement that enlarges market share increase profits further thereby mitigating the amount of needed exclusivity furthermore the more exclusivities that is expected to be attached to a drug for its improvements the shorter the period that needs to be given to a newly approved drug initially in my view the chairman thank you for inviting me to testify today on behalf of the national venture capital association which represents nearly five hundred venture capital firms who in turn invest more than ninety percent of all venture capital in the united states last year we invested over three billion dollars and over one hundred new biotechnology companies and currently manage over one thousand biotechnology companies in our portfolios is probably not well known that the venture community is the primary founder and funder of biotechnology states indeed it is not an exaggeration to say that venture capitalists founded the biotechnology industry in the one nine hundred seventy s and eighty's for example both amgen and gentex were founded by venture capital firms and even today supply virtually all of the capital for early stage biotechnology companies in turn are entrepreneurial biotechnology companies discover and develop the overwhelming majority of new biological drugs in the world i cannot emphasize this point enough last the last time we looked at this these companies were responsible for eighty percent of the new biological drugs in the entire pipeline of biotechnology development while we have been actively involved in this behind the scenes we have in fact not participated in testimony before the congress before and we did not have an opportunity to testify to the f t c if we had we would have said the following we absolutely support a well designed f o b process that will ultimately lower prices and improve access for biologicals for consumers while preserving investment and in discovery and development of revolutionary new biotechnology drugs the f o b system indorsed by the f t c will absolutely not accomplish these  instead it will result in a dramatic reduction in our ability to fund new drug discovery leading to a pyrrhic victory in which we have very cheap versions of old biologics and a vast in the pipeline of new drugs which have the potential to revolutionize medicine both goal goals are important now this may sound like a rehash of arguments against hatch waxman in one thousand nine hundred four but this really is different first the current biotechnology industry  no resemblance to the pharmaceutical industry in one thousand nine hundred for most small molecule drugs were discovered by large pharmaceutical companies in those days and still are today as i said in contrast virtually all new biological drug development today are discovered by small private v c funded startups this is an absolutely critical difference these companies have no cash flow depends entirely upon us for financing we in turn invest in these incredibly risky  illiquid and very long term investments and usually lose money on about fifty percent of them to justify this risk and time we must produce a return that is much higher than you can get from less risky investments and much higher than large biotechnology and pharmaceutical companies need to make if we don't get those returns in turn our investors will not give us money to invest in biotechnology and indeed that is already beginning to happen this return is our cost of capital and is much more than the ten percent that has been assumed by supporters of other more aggressive f o b systems in fact it is over twenty percent as a new harvard and boston university showed that was just published last week all of the publish models demonstrate that with a twenty percent cost of capital or even a blended cost of capital of ten twelve to fifteen percent we cannot break even on these enormously risky investments if generic follow on biologicals competition can enter the market immediately or as little as seven years after our drugs if we can break even we cannot invest the second difference is how patents work in the system as compared to the generic by logical system the difference is obvious and simple under hatch waxman a simple composition of matter patents gives you enormous certainty that you can preclude generic competition during the life of the patent gives you a reasonable period to recoup your investment under an f o b system you have no such certainty because an f o b does not have to be identical with the approved drug so a composition of matter patent which is the strongest type of patent may be completely irrelevant and unprotected the f t c does dismisses this point by arguing that other biological patents may offset this risk unfortunately this is just speculation with which many experts disagree and with and what matters to us most that it creates certainty which is what actually affects our investment decisions venture capital investment decisions i can tell you despite what the f t c argues that i and other v c s cannot rely on patents alone to continue to make investments in early stage biotechnology companies the data exclusivity period of twelve years that we are requesting is merely insurance against the possibility of the f t c and the proponents of more radical f o b systems are wrong in their speculations about how strong patents will be if they are correct patents will give us twelve years anyway and the x data exclusivity will be completely irrelevant but if they are wrong the data exclusivity will simply give us the same period to recoup or investments that the pharmaceutical industry already has under hatch waxman this seems to us ranking member and to members of the committee for the opportunity and really the honor to testify here today my name is larry mcneil lying on the health care advocate for us per u s public interest research group u s purpose a federation of state based public interest research groups it's a nonprofit nonpartisan public interest advocacy organization and you know i think much has been made about the truly miraculous results of some of these new biologic drugs and i think you know that's a value that we all hold but the one thing that hasn't changed with these new more complex biologic drugs we're here here to  discuss the laws of economics haven't changed it's still true that those with a monopoly are going to continue to fight to keep that monopoly whether it's in the marketplace or in the halls of public policy now i suppose you the members of this committee and congress have a balancing act to strike here  reward those who invested in the innovator drugs the pioneer drugs and also to encourage competition and to get that balance i'd like to actually return to helps women fight off particularly tough form of breast cancer and believe it's related to the protein h e r two herceptin has made a serious difference in the fight its use increases the disease free survival rate for this type of breast cancer by twelve percent and it did cost its maker i'd say that on average biologics like this cost the makers one point two million to bring a drug to market and frankly with that kind of risk genentech should the maker of the drug should profit from bringing a product to market that saves lives but there is a serious danger in conferring too much intellectual property protection in her cept in this case every year the drug manufacturer benefits from high monopoly prices conferred by exclusivity will cost patients both in dollars and in perceptions high monopoly prices make it less likely and more expensive for insurers to cover it in the us fewer patients with breast cancer have access to this lifesaving medicine per patent protection the legal mechanism that protects intellectual property in most industries expired in two thousand and five but genentech continues to enjoy effective monopoly pricing power they certainly made the most of it charging forty thousand a year wholesale for their septum treatment so how should a law strike a balance between access and future innovation on one hand and a manufactures need to profit from its investment in a great product rather than looking at research from one industry group or another to find the right balance we examine an independent source the federal trade commission's report  on follow on biologic drug competition the report found that the patent system has a proven record of protecting and stimulating biotech knology innovation in fact they found in some ways biologic patents are stronger than chemical drug patents and in summary f t c found that the pioneer biologic drug manufacturers can earn significant revenues many years after followed by biologic entry obviating the need for the twelve and fourteen drugs and conferred patent extensions in five years exclusivity distraught forgive me it makes sense to learn from those successes us per believes that an approach such as that included in the promoting innovation and access to life saving medicine act of two thousand and nine represents the best option before congress today mr chairman we need a strong vibrant market for biologic drugs in this country but we need markets that drive innovation members of the subcommittee i am teresa stanek the president of the american intellectual property law so see a show for purposes of my testimony today i represent and i am not speaking on behalf of my for any f clients i am pleased to have the opportunity to present the views of the a i p l a at this hearing as outlined in my biography i have spent a good portion of my legal career working with patents related to biotechnology and pharmaceutical chemistry i am also a registered pharmacist in the state of michigan and have worked for many years as a hospital pharmacist i think that the experience provides me with a unique perspective to discuss the issues before the subcommittee today a i p l a believes that should congress create an abbreviated regulatory approval process for a follow on biological product it is essential that such a process contained contain a patent and forstmann mechanism that preserves the value of intellectual property by including five specific provisions first a timely and confidential information exchange between pat owners and the biologic fall on companies second a streamlined efficient litigation mechanism that encourages prompt resolution a patent infringement claims third a corresponding opportunity a follow on product applicant to seek declaratory judgment fourth procedures which apply the existing law of venue and five have all remedies available to both parties including damages and injunctive relief the development of a new pharmaceutical or biological drug product is both expensive and unpredictable pharmaceutical and biotech companies depend on patents to protect their innovations and provide some expectation that they can recoup their investments in high risk research and costly clinical trials the value of a patent is undermined if there is no effective mechanism to enforce it with the act congress recognized the critical role of patents by creating a mechanism by which an innovator could enforce its patent before a generic product obtained f d a approval and is launched into the marketplace the pending bills in the house attempt to develop procedures parallel to the hatch waxman act they include mechanisms for pre launch patent dispute resolution which is the primary focus of my testimony today if there were no procedures or ones adopted were inefficient this may undermine the value of valid patent rights and potentially cause an unnecessary drain on the resources of all parties as well as the  these thoughts in mind i would like to share some specific observations regarding the patent dispute resolution procedures proposed in the two bills we believe that h r fifteen forty eight would encourage efficient streamlined pre launch patent litigation that would cover the follow on product and employ procedures that would be less subject to gamesmanship and abuse this bill addresses the need for an exchange of information concerning the follow product to allow a preliminary infringement analysis the notice and certification provisions in h r fifteen forty eight would limit the patents that may be challenged to those which the patent holder believes are infringed by the follow on product this bill will also allow the follow on applicant to bring a declaratory judgment action if an infringement suit is not filed on a timely basis conversely h r fourteen twenty seven has the potential to weaken the value of biotechnology patents by limiting the ability of the reference product holder to assert its patents prior to market launch of apollo one product we believe that the bill lacks sufficient mechanisms for reference product holders or third party patent owners such as universities to obtain access to product and manufacturing information necessary to determine whether there is a good faith basis for asserting an infringement claim at the same time h r fourteen twenty seven would appear to expand declaratory judgment jurisdiction to create opportunities for interested parties to challenge pa which may not cover either the reference product or the planned follow on biotech product lastly the the patent notification procedure in h r fourteen twenty seven includes ambiguous standards with severe penalties that may encourage additional patent challenges and create uncertainty in subsequent intellectual property transactions and litigation mr chairman i appreciate the opportunity to present these views and i look forward to any questions the subcommittee may have concerning the observations and comments that i have presented thank you thank you ms rae and at this time i will commit context we believe a similar system would work in the bio similar and bio generic context maybe it's worth taking a step back for a moment because there's been a use of the word by a similar but not the word bio generic this this afternoon which we we we discussed this and we testified at the f t c as well one of the things that we believe momentous doing and many other biologics companies will begin to do over the next several years is develop the technology and it's really the next generation of biologics to characterize what happens in a cell after a protein is created from its gene is understanding the black box that exists today in biologics manufacturing that's that's often referred to as post translational events i don't want to get too detailed but as that's what we've done at momenta with with the work with heparin we believe that once you're able to use this new technology you're going to be able to characterize proteins and biologics with the same kind of specificity that one sees today with with drugs and that's what we've done and they have power in world and so it's important to distinguish the two pathways and the reason i bring that up is i'm very concerned and we're very concerned that what if we adopt a law for the next twenty five years we're going to we're going to put in place a roof on the advancement of science we need to have the pathways so that there's a reason for venture capitalists to invest in biotech companies to actually develop this new technology and if we limit the world to biosimilars we're going to fall behind in the global race in the biotech industry regarding the time between the launch of the innovator drug and the time the generic competition begins and that in the hatch waxman system is predicated on the strength and the certainty that patent rights in that product will deliver so when you're thinking from investment in pre innovation points of view the hatchback from system is designed to provide you know the period that the patent will deliver for exclusivity when you look at the statistics that period is around twelve to fourteen years at this point so for small molecule drugs you're seeing generic competition start twelve to fourteen years now the big difference when  similar environment is that there's a loophole that's been created and that loophole is simply unlike hatch waxman where it is prohibited to do this by a similar manufacture essentially skirt the patent rights but then get the benefit of the clinical data to get onto the market much faster and it's that character of the buy a similar product that creates the risk that is answered and addressed by a data exclusively period that essentially provides a backstop for the patent rights now one important perspective on this i think representative eshoo pointed to this if you have the system work as it's been designed as if you have it work as the f t c hopes it would work where patents are delivering their intended purpose twelve years or so back to protection against by a similar competition then data ex vity that is coextensive with that period has no impact because the patents are working the way they should the concern that is driving the call for a stronger day excessive a period is precisely the uncertainty that exists that we can as innovators know that our patent rights will give us that protection and that's essentially the major difference you you have in the hatch waxman system the ability to kind of get around the patents here click your similar enough that you're important component to the calculation that investors would make when looking forward at a potential investment in a biologic and it's also an important component into the modeling work that i've done the my modeling and higher numbers such as the twenty percent figure that was cited earlier has to do with where in the process that cost of capital applies without question the hurdle rates a venture capital are significantly higher than they are in later stage development of biotech but that's only one stage of the process the proper cost of capital rate to consider is the average across the entire  development process of a biologic drug costs that capital is very expensive at the beginning but as a product develops and moves forward through the system the risks decline and the cost of capital decline as well so it may be expensive at the beginning to get funding but many of our biologic drugs are provided by enormously large corporations that have access to equity markets as well as sophisticated debt markets and cost of capital later in the process is much lower thereby reducing the average cost of capital and i think the simplest way to think about this is is  two key points the first is cost of capital is equivalent to going to a bank in borrowing money at ten percent if you borrow money from a bank in ten percent and invested in one percent you'll be bankrupt if you invested at eleven percent you'll have a positive cash flow and so the rate of return that you need to make on an investment is related to what your cost of capital is the problem with mr brill's analysis is that in fact we have a chain of development that starts from universities goes to the venture capital community and then and then later goes to a large pharmaceutical companies if you break that chain at any point if at any point the cost of capital the return on capital doesn't meet the requirements of whoever is supplying capital at that point in particular at that early link in the chain the chain is broken and nothing gets developed nothing ends up in the hands of large pharmaceutical companies so the that is really the key the point that we are trying to make if that chain is broken which it indeed will be if we have a data exclusivity for example if if if in fact our exclusivity is much less than what we think it needs to be for example under hatch waxman of twelve years that chain will be broken and there will be nothing left for the large pharmaceutical companies to buy and invest in because we will not have invested in them papers ok all right well what i would like to do is mis read like to ask you a question you indicate that h r fourteen twenty seven permits bias biosimilars makers to launch their pride it's at risk and if they do is there not the potential for triple damages if a patent has been found valid and infringed and isn't this a substantial enough risk to keep by a similar product so the market  i can't speak on behalf of all generic follow on biologic companies but the opportunity to law chip risk is rarely undertaken by most generic companies at this time business certainty is something that everyone wants whether you're the patent holder or you're the follow on biologic applicant yes if there is litigation there is the potential for trouble damages you run a potential risk that may be the payment of trouble day it may be difficult to pay trouble damages depending on the economics of any particular company so even if a patent holder succeeded in litigation and obtained trouble damages the likelihood of recovery is not something that would be guaranteed thank you in the last i'd like to ask mr make nearly most analysts miss to make nearly believe that biosimilars market entry will only result in modest price increases and if so how much would consumers and the federal government really say furthermore will the savings be worth any uncertainty we may cause in the now biotechnology company financing mr chairman thank you for the question i would say that especially given  the the value that the current market's putting on these high tech biologic medicines that in fact there is quite a bit to be saved  i believe the f t t f t season number was if you will correct me ten to thirty percent reduction in prices due to ten to thirty percent market penetration if there is a generic  competitor and that one would not have the effect of the generic competitors that now consume about take about seventy percent of the chemical market when they come in but the reality is when you're talking about a drug like herceptin with forty eight thousand dollars a year wholesale and we've seen reports of a lot more being charged to consumers every little bit helps and helps energy industry and a large industry and an important one the reality is that the benefits of enhanced innovation that would come through a pathway along the lines of matt waxman did for chemical drugs could actually benefit the industry as a whole over the long term and certainly would benefit consumers biological biologics as was noted the f t c or the and as well the congressional budget office have made estimates of how much prices will decline and it is far less than it does then the price declines and the savings  drug that we see in small molecule drugs in aggregate the savings will be quite substantial it could be billions of dollars a year for the federal government an equal amount for private payers but because the prices won't collapse at the same extent that they do for small molecules that means that there's still opportunities for the innovative drugs to earn profits they have a very large initial expense from developing this drug over a billion dollars to bring the drug to market initially we need a structure that ensures they that they can earn back profits to cover that expense what's different in this market is that even after we have generic entry we'll still have an opportunity for the innovat drug to make enough profit to help pay off that fixed that sunk cost that fixed cost one of the differences in the dynamics of the market it doesn't mean that there won't be savings it but there is a tradeoff between the price decline effect and and date exclusively so the less the prices are expected to klein the less important it is or rather the shorter duration to date exclusively that that we can have that those competitors will be innovators is something i have to admit i have heard over and over again and i don't understand the it is absolutely the case that the f o b companies will produce price reductions which ma benefit consumers but they have never been innovators and i don't think they're there suggesting in fact none of the ones i've talked to suggest that they're going to be innovators in developing new drugs that's my first point you know vision will continue to come from branded innovative small entrepreneurial d c back companies the second point is that the f t c is analysis was based on of what the effect of competition would be was based on many assumptions which i have to say i don't understand the one critical assumption is that their cost of entry would be very very high and that is much higher than generic drugs small molecules and that they that they would have to make that return back and this was in part based on the idea that they would have to spend one hundred or two hundred million dollars building plants to manufacture these drugs which i can tell you is just not the case i mean literally this morning we were approached our firm was approached by the chinese taiwanese government with an offer to subsidize to the tune of fifty million dollars to build a bio reactor that could be accessed by the biotechnology by a similar industry in essence many governments around the world are going to build these plants essentially for nothing at their nickel this is already happening in singapore taiwan and japan and japan and in china and the bio similar companies are not going to have to spend that kind of money as a result they're not going to have to make that money back biologics industry is not an innovative industry in fact that's exactly what we're doing at moment and we believe it other companies and that data exclusivity actually works against that innovation both on the brand side and on the innovator side let me just take a minute to say how it is you know if you set up an excessively lengthy data exclusivity period it's great from an investor point of view because it allows you to invest in low risk low risk development activities and that and that's what is being talked about when people are saying biosimilars or have a patent loophole if you if you invest in developing the second third and fourth version of of an existing mechanism of action all the hard science to discover the mechanism of action has already occurred and what you're doing is essentially a drug development program and that's a much lower risk product and you're not developing a new cure and that was the beauty of x men what has waxman did was it said to the to the brand industry stick to your knitting go out there and find new cures and get strong patent rights that let you get the exclusivity you need and it said to the generic industry apply your science to figure out how to make generic copies so that we can deliver affordable products that perform what the mature maturing bio biotech products today should be able to do in the years to come and if we are short sighted enough and this is what concerns us to pass a law that assumes that we're only going to have biosimilars and assumes that it's not possible to advance this science then what we're going to make ourselves captive to what's happening in china because they will move ahead of us and they will do and we will be competing with china if we build our technology base in the united states and actually own the science here in our biotech industry for innovative bio bio generic products we really create an opportunity that keeps us ahead of the rest of the rest of the world requested the water i don't want to go near the water so i'm thinking probably now be a good time to turn it over to  did you or other representatives of the innovator industry attempt to contribute to the study i'll take the second half of the question first and then we did i mean a number of  companies by a similar companies and innovator companies a lot of different people spoke to the f t c in the process they ran and it was a little bit surprising that they didn't listen to any of us when they came up with a number of their  that they then built a series of recommendations on i think one of the things we take away from their report is that they believe because patents will deliver twelve plus years of  market security before biosimilars come onto the market that justifies not providing any special day texas city period and the rules so that that's the foundation of kind of why they  why they're saying we don't need to create this data exclusivity period of twelve years when i look at that and then i kind of dig down into why they think there's no problem with patents that's where i think the problems arise they have looked at the patent standards and kind of an abstraction that doesn't reflect what actually happens in the patent office one of the big issues we've flagged was that what we see in our current practices under current pa standards is that if a company in does research on a protein and you put that into a pan application you send it to the patent office the patent office will say well you can have that protein as your patent claim and then you go back and forth and try to stretch out your claim to cover variations from this protein that you actually did your research on and the p t o pushes back and what that process ends up doing is give you a relatively small number of alterations covered by i typical protein patent claim now the f t c looked at the standards and they said oh well we think you can get variations up to thirty percent of the reference sequence  and that's where they heard so many different people practitioners talking to them saying this is not what's happening we're seeing numbers in the ninety eight ninety five percent as a common ones and they just disregarded that i think the other thing they failed to do was to really understand the impact of the loophole that we've been talking about today what they said again their assumption we don't need data exclusivities periods up to twelve years is resting on the assumption that these patents are going to be protecting us the design of the systems by a similar systems is they are being designed now to allow the proteins to change by a similar to be different from the reference proteins so that you don't have to infringe the patents but you can still get the benefit of the clinical data that supported the innovator and that's that's the whole that i think they didn't best way to resolve the patent dispute in a world that involves bio similar competition i think that it's critical to have timely and confidential information exchange between all of the parties pre launch in advance of any f d a approval of the drug product but you need a streamlined efficient litigation mechanism to make sure that everything can be resolved in an official manner we need things like declaratory judgment actions being creator obviously a very difficult question we do support representative bill that has a twelve year data exclusivity period and we believe that that is the most reasonable compromise which is of course what this is between the interests of consumers for lower prices versus innovation as it effects jobs the biotechnology industry doesn't ploy significant numbers of people in our companies specifically employ hundreds of thousands of people that is our venture backed biotechnology startup companies and our view is that data exclusively of much less than twelve years will jeopardize continued investment so i would have to say that that  represents more than two hundred fifty my constituent companies secondly i'd like to ask unanimous consent that a an article from bloomberg dot com and without objection to the f first and second and then the third one is simply a table of estimates that i am relying on for the return rate on pharmaceutical and r and d investments the fifteen year if you will faces without objection i gresham if i can start with you from bio standpoint assume for a moment that contract or sorry pattern historical sanctity want to wait and you had zero patent protection in the developments these large complex proteins and molecules wouldn't it be possible to protect in perpetuity or nearly in perpetuity using complex series of trade secrets in other words if we fail to protect through patent isn't it certainly possible that the bargain we have enjoyed for decades of you tell all you make a duplicate of a product we agreed to a limited per iod a defined limited period and when exhausted or as it's exhausting generics come on isn't that one of the risks if we don't get it right in either one of these pieces of legislation  you're correct in in several respects the historical trend of retracting patent protection has been to push innovators to kind of keep their you know innovation secret and you know that will have impacts and things like manufacturing technology or the way is that we make proteins the way we enhanced their properties there's a lot of things that are in that kind of the business of making our products that will probably be hit by that kind of  practice the other you know the the molecule patents and things like that as a practical matter we won't be able to use trade secrets to protect as will be publicly known and in circulation and how you use them to treat new diseases obviously those procedures be publicly known i think one general point to appreciate about the biotech industry this industry grew out of the university community and there's a cultural bias against keeping things confidential it's hard for me to but if you've had a discussion with a scientist telling him not to publish something so you can file a patent application you'll know what i mean there's there's just a real culture of disclosure which i think ultimately has helped our industry appreciate that although that's a culture of disclosure at our universities that's not true in china is it and i think i think in this my comment was really focused on just the practice and it's also against the backdrop of having that available when you look at the history of patents and the benefits versus those countries who either don't respect or don't have them in general isn't all to the trade secret route the only thing you could advise a client if they could not get a strong and durable pat it was impossible to get a strong and valid patent trade secret i like the term durable because valid doesn't keep them from ripping off ok it's durable patent i agree that trade secrets would be the only alternative  but in this day and age it's difficult to maintain things as trade secrets with the very mobile workforce that we have today but i guess you could do sequences of great secrets in different places and thereby unless somebody could put all the pieces of the puzzle together and every everybody but the cia managed to keep at least some secrets mr brill bio similar from a standpoint this is a committee that cares about patton our hook for today's legislation is the our constitutional obligation for patents but aren't we inherently heading toward if we're not careful similarity being defined as close enough but you take your chances on on the medical similarity actually not causing a problem isn't that inherently the problem if the entire technology string of both the patented item and all of the know how involved if that isn't passed on in some transparent way aren't we essentially going to end up with as i held up a couple years ago in committee  t you know everybody except mr waxman did he he cringe when i held up these various california wines and said not all california wines are created equal but they're all california congressman i may know more about wine that i know about some of the scientific aspects of the complexity of developing biologics and if you know enough to know that there's such a thing as a cabernet and something that you cook with but they're both called cabernet then you probably know about some of my concerns and i think that that the scientific issues are important given that significantly greater degrees of complexity for the products that we're talking date exclusivities period can help ensure that protection but i would also add that there is a period at which that protection is excessive and that the key here is is to balance these factors  and i have just one last question that has been asked but could chairman it's not currently in either bill but if this committee wanted to find a fair compromise between the bills if we provided for example missed eschews period but strengthened or member phrase that but made a bargain that in order to take advantage of it you must have exhausted all of your if you will similar patent claims so that small changes incremental changes that the bar would be risen would rise at the patent office and to get that protection you essentially forego later patent still in the process now whether we set that it two years or thirty years really is it doesn't matter is that something that any of you foresee being part of the bargain meaning if i'm going to give you fifteen years from the day your product is approved can i expect that your continuations that are still coming in mystery is you're laughing because you know how many of those sometimes are stacked up behind is that in fact part of part of the bargain that if you will if you get something extraordinary separate from the normal patent period this committee may have to consider whether or not that's a terminal disclaimer so to of some or all of your claims i'm not proposing it i'm just asking about it it's a good i do not think that it's a good idea but even so to change the entire patent office and how all patent applications are followed just to try and come up with a compromise in this area in the manner that you suggested i think is not viable would be difficult to implement and is not appropriate our patent system has existed the way it has for two hundred twenty years it's worked well i think it's why innovation drives our economy and we are where we are today so i don't think a compromise on the order that you suggested would be viable thank you and by the way i hope you feel the same on the patent reform that we're wrestling with in this congress but i know you might not be quite with us on that i just wanted to add that there is in fact a provision that relates to this in these bills which would have to have to do with the idea of evergreen in other words what is in title to the senate bill that was looked at very very carefully and i think a very reasonable balance was struck for the last one because the chairman will cut me off all right i'll try to be quick i think that approach would be a very bad approach for the way that the biotechnology innovates today because you don't you shouldn't think of biotechnology innovation as being limited to making new proteins that become blockbuster drugs it's a whole whole you know environment of innovation that has a lot of opportunities at marius levels it's not it should not be a problem when what happens typically is the innovations will be incremental they'll have limited protections and you can work around such as manufacturing techniques for doing a real good balancing act i think we have a team that can represent the issues that have been expressed by the issue bill and the waxman has still very very well let me anecdotally say that this this committee room seems to be the bastion of the the holding place for tensions between disparate but very important issues for those of you who well aware of something called the performance rights act h r eight forty eight you would  believe on the surface that the legislation is all about pop artists and and maybe reflecting on the man in the mirror and against radio stations but chairman as you well know we have worked for a very long time to recognize that both of those entities are needed and that they work working together in coming together to resolve how you would best effectuate a response to the art and talent of a performance artist and as well how would you respond to champing radio stations would provide an important and powerful service but the record is clear for those of us who are supporting that legislation that we want to strike a balance on now we've come full circle on questions that you are concerned about which are represented in the legislation by a very dear colleague congresswoman eshoo and as well interesting points that are being made by the  as well so my interest is to find that balance i think we did it well as you well know that we were working on patent reform and there was a whole intention on how you account for the work that has been put into using layman's terms so we've had that challenge and you did your and i think we have clearly worked through it for that reason let me try to raise these questions quickly  national venture capital association asserts that without twelve to fourteen years the cost of capital will drive away venture capital investment from biotech and the rail innovation but the lighter and let me to announce your name effort to balance what we drive venture capital which is the big farmer pharmaceuticals might make that argument yes is the is the short answer and the question is how much our view is that at the extreme that the f t c took for example where there'd be no data exclusivity and the ability for a cloture narrative bio similar to be introduced the day after a new drug was approved that that would have a devastating years the models for example mr brill's model other models that we have run when we use the real cost of capital of the of the innovation sector of this industry which is the venture the small entrepreneurial venture backed sector it relatively few drugs can make can be even it doesn't mean there might not be some investment continuing in the most extraordinary breakthroughs but the volume of that investment activity will clearly decline substantially even at seven years to give me an answer on that question remember now we believe you're talking to someone who really do believe we can get into a room and address this question that brings balance to what we're all trying to do but but i mean that put words in your mouth thank you for the opportunity and to file patents for us on on some of our novel products in the biologic space i have no doubt they would be strong affective and work as long as we were operating at the novel land of and of developing new mechanisms of action that really provide new cures and we'd be able to get patents that cover not just the product which is what he was talking about earlier but patents covering portions of the product patents covering the biologic pathway patents that would cover the whole range of biologic activity that could that could provide a lot of exclusivity and well more than that and then potentially more than twelve years in the experience of of biologics and what i think everyone is missing is if we provide an x excessive exclusivity period we're to create a huge incentive for the biotech industry to to deal risk their portfolios because now you without having to innovate without having to get patents you can get a product developed and by virtue of getting it approved by the f guaranteed twelve maybe fourteen years of exclusivity and when i you know i next kills innovation i think it kills innovation i love about investment i think it would do it would it would hurt invest it might not kill investment what it might do is but let's talk about that over the long term it's a little puzzling to in two thousand and nine you know in the in the year that g m declared bankruptcy and perhaps declared bankruptcy because it stopped innovating in the ninety's and focused on high margin you know s u v s as opposed to innovative cars and i'm concerned having lived in biotech for twenty years that we're going to push biotech from the innovative scale and the leadership in the world to the not innovative scale that's and if you step back from a historical point if you look at what it was and we think we thank you for your insights and i really i mean we may have to thank you very much i will look forward to visiting with you thank you you know about objectional enter into the record a bloomberg article  about my land's recent deal with india's biggest biotechnology company for the development production and marketing a biosimilars by contrast the innovative biotechnology industry is uniquely american and most of its companies are based in the united states in fact most of them are based in our best state california as the us is struggling with the highest unemployment numbers in recent memory now is not exactly the right time for congress to be taking actions that would imperil future jobs in the united states  and i realize a similar question has been asked i just wasn't here for the answer and actually before i ask a question i'll start with an observation there's there's been talk about the biotechnology industry being able to recover its sunk costs on a particular drug and if they can't recover their sunk costs on that drug obviously there will be no more innovation i think this massively understates the situation because the vast majority of drugs are drugs and the vast majority of drug development projects are failures and even when they lead to success they may be out marketed by some other cure for that disease so unless an innovator is able to recover double triple or quadruple sunk costs on the successful drug we can basically pack up this industry and say we're not going to newer firms and there's no denying that a lot of that investment is based on strong patent laws in your view is data exclusivities absolutely critical for continued development of biotech products and if so how long should that period of exclusive exclusivities be the easy part of the answer is yes i do think it's necessary the hard part is how long i guess we believe that twelve years is something that we have learned to live with our expert our best guide here is hatch waxman small molecule development has continued to exist under hatch waxman when we run our analysis of our cost of capital making exactly the point chairman that we must recover all of the losses that we also take on drugs twelve years appears to give us a break a reasonable chance to break even i might just add one other thing about data exclusivity i think there's a real misunderstanding use their data they can just go out and perhaps develop an entirely different way of curing that same disease was already in the clinical trials and or do that and if we did and the other key point is that the da exclusivity is merely a backstop for the patents the question to ask yourself is what if the f t c is wrong in their analysis i mean they're just speculating about what's going to happen with all the patent laws what if they're wrong if they're wrong and we don't have data exclusivity and they're they just turn out to be wrong about how good these patents really are we're in deep trouble if on the other hand we have data exclusivity it doesn't add anything more to the twelve years that the f t c is saying that we should have it simply suit was not initiated within the narrow window determined by the infringer how does this compare with all other litigation in america particularly patent litigation would this impose on the biotech industry a patent minus as compared to every other kind of patents issue i don't believe it would impose a patent minus i think there's a trade off in the waxman approach versus the current orange book approach in the in the current hatch waxman statute the trade off is that because we have a complex web of biologics patents that are often embracing the pathway and the biology it requires more of a process of identification and it not as susceptible to an orange book which was the criticism criticism raised by some in developing the bills there's an opportunity to to bring this suit and we don't of the pattern right and whether you call it a limitation on the recovery or just the lack of ability to enforce it khinjan that kind of a sanction on an administrative error is unprecedented in u s law and i think it's important also appreciate this will change patent rights in a way that i think go against our international obligations or are not supposed to make patent rights and biotech weaker compared to patent rights in other areas so if we pass this kind of law other countries  question all us patents and industries not even realizing we have a hearing today could be subjected to lawsuits in other countries saying well the united states is in violation of the international accepted rule that patents come in one flavor one level of strength if you will so there are a lot of people not here who could be hurt by that mr brill if i could just very quickly address y r comment about the cost the fixed cost and the modeling and as well as the differences between the industries if you can do it in thirty seconds ok very quickly the cost assumed for bringing a biologic to market generally discussed to be over a billion dollars that number in clue the cost of failure not just the cost of the successful drug the modeling that i've done that professor  includes the cost of that failure in addition that modeling work also assumes that the only protection provided is the data the models that you have to ask and i have and all used do not model the existence of the patents it's a very conservative assumption that though if you it be hard to figure out why we would try to protect a patent one way but not protected another way  an odd policy for us to say we want to encourage copying and we want to prevent copying both from the both in the same bill i'd also point out that i believe the waxman bill has limits on the forum in which the suit can be brought in the end this committee gets bills limiting where plaintiffs can bring lawsuits all the time and ninety nine percent of those proposals this committee  does not adopt i don't know if we've ever adopted anything quite as strict as congressman waxman's bill that i'd like to and at the same time i want to voice again murray my affection but my incredible for congress for chairman waxman and his knowledge of health care in general pharmaceuticals in particular i would like to thank all witnesses for their testimony today without objection members will have five legislative days to submit additional written questions which we will forward to the witnesses and ask that you answer promptly in writing and that will be made your answers of the questions of course we made part of the record without objection the record remain open for five legislative days for the submission of any additional materials with that we stand adjourned i would like to talk to the witnesses but i've got to rush off to the floor thank you