1

 1 FEDERAL TRADE COMMISSION

 2

 3

 4

 5 FTC ROUNDTABLE ON FOLLOW-ON BIOLOGIC DRUGS:

 6 FRAMEWORK FOR COMPETITION AND CONTINUED INNOVATION

 7

 8

 9 Friday, November 21, 2008

 10 8:30 to 5:00 p.m.

 11

 12

 13

 14 Federal Trade Commission

 15 600 Pennsylvania Avenue, N.W.

 16 Room HQ 432

 17 Washington, D.C. 20580

 18

 19

 20

 21

 22

 23

 24

 25 Reported by: Susanne Bergling and Debra Maheux

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 2

 1 FEDERAL TRADE COMMISSION

 2 I N D E X

 3

 4 Welcoming Remarks:

 5 Commissioner Pamela Jones Harbour 3

 6 Opening Remarks:

 7 Rachel Behrman 10

 8 Panel One:

 9 Likely Effects of Follow-On Biologic

 10 (FOB) Drug Competition 21

 11 Panel Two:

 12 Likely Competitive Effects of Reference

 13 Product Regulatory Exclusivity 84

 14 Panel Three:

 15 Biotechnology Patent Issues 135

 16 Panel Four:

 17 Likely Competitive Effects of Follow-On

 18 Biologic Regulatory Incentives 187

 19 Panel Five:

 20 Patent Dispute Resolution Processes 215

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 3

 1 P R O C E E D I N G S

 2 - - - - -

 3 WELCOMING REMARKS

 4 MR. WROBLEWSKI: I would like to say good

 5 morning and welcome to the FTC's roundtable discussion

 6 on the competition dynamics of follow-on drug product

 7 competition. And I apologize for the long security

 8 lines, but hopefully we will stay on schedule.

 9 My name is Michael Wroblewski, and I'm an

 10 attorney in the Bureau of Competition here at the FTC.

 11 Before we start, I'd like to go over a couple security

 12 and housekeeping details.

 13 First, if you would please turn off or place in

 14 silent mode any cell phones, BlackBerries, or any other

 15 electronic devices.

 16 Second, the restrooms are right outside the

 17 double doors to the left, and the cafeteria is upstairs

 18 on the seventh floor.

 19 Third, in the unlikely event that the building

 20 alarms go off, please proceed calmly and quickly as

 21 instructed. If we must leave the building, take the

 22 stairway to the right and follow the FTC people to the

 23 Sculpture Garden, which is across the intersection of

 24 Constitution Avenue and Seventh Street. We need to

 25 assemble there.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 4

 1 And last, if you spot any suspicious activity,

 2 please alert me and/or the FTC security staff.

 3 To open today's discussion, I'd like to

 4 introduce FTC Commissioner Pamela Jones Harbour. Over a

 5 year and a half ago, Commissioner Harbour suggested that

 6 the FTC engage in a principled and rigorous analysis of

 7 competition dynamics in the markets for follow-on

 8 biologic drugs. It's because of her leadership and

 9 interest in this issue that we've assembled here this

 10 morning.

 11 Commissioner Harbour.

 12 COMMISSIONER HARBOUR: Good morning, everyone.

 13 I am excited to see so many of you in the audience this

 14 early in the morning, and for those of you watching the

 15 webcast, I welcome you, also.

 16 I'd like to thank Michael for his kind

 17 introduction, but don't let him fool you. He and his

 18 team, including Elizabeth Jex, Susan Drennon, and Chris

 19 Garmon, deserve the lion's share of the credit for

 20 today's workshop, and I am very grateful to them and to

 21 the rest of our talented FTC staff for all of their

 22 efforts in crafting this event.

 23 But having said that, I will admit that I have

 24 played a role in getting us to this point, and I am very

 25 proud of that. In early 2007, I accepted an invitation

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 5

 1 to speak at a conference on antitrust and intellectual

 2 property. I had addressed this same group several years

 3 in a row, and in the past, I had spoken about a number

 4 of pharma issues, including the Commission's exclusion

 5 payment cases. I had also spoken about cases in the

 6 computer industry. This time, I was hoping to debut a

 7 new and innovative topic; While brainstorming for ideas,

 8 I remembered that I had carefully read and outlined the

 9 FTC's first IP report from October of 2003, and I had

 10 noted that buried in a footnote somewhere the concept of

 11 generic biologics had caught my attention, and I made a

 12 mental note to return to this topic.

 13 This led to a series of conversations between my

 14 office and FTC staff, and we began to explore the

 15 subject, and we identified some key competition

 16 questions that would need to be addressed if ever there

 17 might be an effective, abbreviated approval process for

 18 follow-on biologics. I knew I had hit upon an

 19 interesting topic, at least one that needed to be

 20 developed further. So, in June 2007, I gave a speech

 21 entitled, "The Competitive Implications of Generic

 22 Biologics."

 23 More recently, this September, I spoke at the

 24 Biosimilars 2008 Conference, where I highlighted the

 25 FTC's recent submission to the Subcommittee on Health of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 6

 1 the House Committee on Energy and Commerce. As most of

 2 you know, the Chairman and ranking member of the

 3 Subcommittee had sent a letter and multiple pages of

 4 questions to a long list of organizations to solicit

 5 views on biosimilars and to inform the development of

 6 legislation. I was gratified that the FTC was included

 7 on that list.

 8 In my first speech back in June 2007, I had

 9 urged the Commission to play an integral role in the

 10 dialogue on generic biologics, and when we received the

 11 subcommittee's letter, I viewed this outreach from the

 12 Hill as a signal that legislators had, indeed, heard the

 13 message loud and clear that the Commission had expertise

 14 to share and should be treated as an important

 15 stakeholder. Now, while some of you may disagree, I am

 16 convinced that this is a worthwhile expenditure of

 17 Commission resources and exactly the kind of work we

 18 should be doing to fulfill our mission to protect the

 19 interests of consumers.

 20 As Michael correctly noted, from the beginning,

 21 I have advocated for a principled and rigorous analysis

 22 of competition dynamics. Our letter to the Subcommittee

 23 was the Commission's first formal attempt to provide

 24 preliminary thoughts. And looking at the agenda for

 25 this workshop, I agree that we now have taken another

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 7

 1 great step down that path, and I am very pleased.

 2 As an enforcement agency, we have targeted a

 3 great number of resources to the healthcare industry

 4 over the years. We review mergers, examine potentially

 5 anticompetitive practices, and examine unfair and

 6 deceptive advertising claims, just to provide a few

 7 examples. In all of these efforts, we recognize that

 8 the regulatory structure governing the healthcare

 9 industry can and does have a direct impact on how

 10 competition works or does not work.

 11 Our goal today is to learn more about how

 12 competition is likely to develop in biologics markets, a

 13 critical and fast-growing sector of our economy. Once

 14 we begin to understand what competition might look like,

 15 our intent is to provide technical advice to

 16 policymakers who will be faced with different options to

 17 structure an abbreviated regulatory pathway for the

 18 approval of follow-on biologics. As legislators weigh

 19 these options, ideally, we can help them to evaluate the

 20 likely competitive effects of their choices.

 21 On behalf of the Federal Trade Commission, we

 22 are tremendously grateful to all of the panelists who

 23 will contribute their time and their expertise today and

 24 to everyone whose written submissions will also add to

 25 our knowledge database. Thank you for being part of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 8

 1 this important project, and I hope you enjoy today's

 2 event.

 3 (Applause.)

 4 MR. WROBLEWSKI: Thank you.

 5 Before we get going, I'd like to introduce our

 6 distinguished participants and panelists for this

 7 morning. I'm only going to give their names and their

 8 affiliations. More detailed biographical information is

 9 in the folders and on the FTC's website.

 10 First, my comoderator for this morning's session

 11 is Elizabeth Jex, my colleague in the Bureau of

 12 Competition.

 13 Starting on the right-hand side, your left-hand

 14 side of the room, we have Alexis Ahlstrom, Director of

 15 Avalere Health. To her left is Steve Brugger, Chief

 16 Operating Officer of Momenta Pharmaceuticals. Next is

 17 Ted Buckley, Director, Economic Policy, at the

 18 Biotechnology Industry Organization.

 19 Coming around the corner is Dave Golding,

 20 Executive Vice President For Specialty Pharmacy Services

 21 at CVS Caremark. Henry Grabowski I'm sure is downstairs

 22 in the 50-person line, will be coming up shortly,

 23 Professor of Economics at Duke University.

 24 To my left is Paul Heldman, Senior Health Policy

 25 Analyst for the Potomac Research Group. To his left is

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 9

 1 John Lane, Vice President, Biologics, at Hospira.

 2 Coming around the corner, Mateja Urlep, Head of

 3 Global Marketing and Pharmaceuticals for Sandoz

 4 International. Rounding out the panel this morning is

 5 Dr. Rachel Behrman, Director of the Office of Critical

 6 Path Programs, Office of Commissioner, at the U.S. Food

 7 and Drug Administration. Thank you all for joining us

 8 this morning.

 9 We will have two presentations first to lay a

 10 factual foundation for today's discussion. First, we'll

 11 hear from FDA's Dr. Rachel Behrman, who will describe

 12 how biologic drugs differ from small molecule drugs.

 13 Following her will be Paul Heldman of the Potomac

 14 Research Group, who will provide an overview of existing

 15 competition with follow-on biologic drugs.

 16 Dr. Behrman, you can start.

 17

 18

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 10

 1 OPENING REMARKS:

 2 "HOW DO BIOLOGIC DRUGS DIFFER

 3 FROM SMALL DRUG MOLECULE DRUGS?"

 4 DR. BEHRMAN: Thank you, and on behalf of the

 5 FDA, thank you for including us in this important

 6 meeting, and I would just like to say that I enjoyed the

 7 line downstairs, because the FDA always is accused or

 8 often is harangued for the pipeline problem or the

 9 bottleneck, and I know it's not just us.

 10 So, I was asked to provide an overview of the

 11 science and perhaps a little bit of the regulatory

 12 paradigm having to do with follow-on biologics, and I

 13 put in the word "brief" because in 15 minutes, I

 14 obviously can't do that methodically, but I hope to

 15 spend most of my time on the foundational issues, the

 16 terminology, and some of the concepts, and that may help

 17 you in your deliberations, because I think we're not all

 18 speaking the same language, and if we're not all

 19 speaking the same language, we really will not get to

 20 where you want to be, which is have a content

 21 conversation.

 22 And, Michael, you mentioned that I would be

 23 discussing a little bit the difference between small

 24 molecule drugs and biologics. So, right there is part

 25 of the problem, because what we really want to talk

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 11

 1 about is the difference between drugs and biological

 2 products and then talk a little bit about how small

 3 molecules may differ from those that are larger and more

 4 complex. So, I am going to start with some basic

 5 definitions from the Food, Drug and Cosmetic Act.

 6 Articles intended for the use in the diagnosis,

 7 cure, mitigation, treatment or prevention of disease in

 8 man or other animals; articles intended to affect the

 9 structure or function of the body of man or other

 10 animals. So, it doesn't have to do with the size or

 11 complexity. It's a product that, in fact, is approved

 12 under 505.

 13 Then, a biological product is, as defined in

 14 Section 351 of the Public Health Service Act, is a

 15 virus, therapeutic serum, toxin, antitoxin, vaccine,

 16 blood, blood component or derivative, allergenic

 17 product, or analogous product, and so forth. So, it's a

 18 very, very specific definition, and you'll notice there

 19 it doesn't say anything about coming from a living

 20 system, which is often the term that gets thrown around.

 21 Penicillin, if you think about it, is a mold;

 22 that's a living system. Insulin and recombinant

 23 insulin, so insulin is produced by DNA, their bacteria

 24 have been DNA altered for this insulin; it's a living

 25 system. So, there are many hormones, there are many

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 12

 1 proteins that, in fact, are regulated as drugs. So,

 2 when we think about biologics versus drugs, we're really

 3 talking about very specific definitions.

 4 Some biologics are defined by their origin, like

 5 blood, and some by their use, such as a vaccine, but

 6 that is the definition, and I think it's important to

 7 keep that in mind, because it will help you think about

 8 which products currently have -- a term I will define in

 9 a moment -- abbreviated pathways available to them and

 10 which do not.

 11 So, as I was mentioning, there's a very wide

 12 spectrum of biological products and products in general.

 13 Biological products can be thought of as cells, living

 14 tissues, vaccines, and so forth, and I think that's,

 15 again, a crucial point to keep in mind when thinking

 16 about potential economic, competitive implications,

 17 which will actually be right for some sort of follow-on

 18 process in the near term and which will not. And the

 19 bulk of the activity, we believe, will be in the protein

 20 world. So, sometimes you hear the term "follow-on

 21 proteins" kicked around.

 22 And proteins, for the nonphysicians or

 23 nonscientists in the audience, are chains of amino

 24 acids, like peptide bonds. That's very, very simple,

 25 but they can range from very simple to extremely

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 13

 1 complex, and when they're very complex, they are folded;

 2 they have things stuck on them; they can unfold again;

 3 and then they can aggregate. A lot can happen to a

 4 protein. So, it can go from something that I once did

 5 and could make in a laboratory to something that is

 6 extremely difficult to characterize. And as I said --

 7 and I want to reiterate -- they can be regulated as

 8 biological products under the PHS Act or as drugs under

 9 the Food, Drug and Cosmetic Act.

 10 And that is just a picture of what I said.

 11 There's a primary protein we can all draw, and then it

 12 increases in complexity. I'm fond of saying it's like a

 13 plate of spaghetti, and you really couldn't easily

 14 reproduce it.

 15 Just to give you a sense of size, a statin,

 16 everyone is familiar with a statin, that's the size of a

 17 statin, a more complex protein. So, there's a huge

 18 difference in size and complexity and our ability

 19 currently to characterize them.

 20 I'm sorry about this. This I got from a

 21 biochemist, who offered more slides, and you'll be

 22 pleased to know I declined them.

 23 Okay. So, what is an abbreviated application,

 24 because that's really what's at the heart of -- I

 25 believe of the legislative battle, and Liz Dickinson, my

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 14

 1 colleague and good friend from the Agency, is in the

 2 audience, so I'm very careful, surrounded by lawyers, on

 3 what I say. One that relies, to at least some extent,

 4 on the Agency's conclusions about the safety and

 5 effectiveness, that's in the case of a 505, or the

 6 safety, purity, and potency, in the case of the PHS, of

 7 an approved or unlicensed product. And as we all know,

 8 under the PHS Act, there is no explicit pathway. That's

 9 just a given. And that's where the legislative activity

 10 or interest might be.

 11 And under the Food, Drug and Cosmetic Act, there

 12 are two pathways, and just to very briefly review them

 13 so it's clear, because the term "biogenerics" and so

 14 forth gets tossed around little, but there's 505(j),

 15 which is the generic pathway, all right, so that's

 16 within a confidence interval of 80 to 120 percent, we

 17 believe that those products are the same, the same

 18 active ingredient, the same route, same dosage form, in

 19 general, and expected to have the same safety and

 20 efficacy profile. So, to the extent that we understand

 21 it, they are the same. And so they are what I will

 22 define as "therapeutic equivalents," so they can be

 23 substituted in many jurisdictions.

 24 Then there's 505(b)(2), which is, if you will, a

 25 similar pathway, and then in a 505(b)(2), the follow-on

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 15

 1 product has depended, to some extent, on information

 2 that already existed about another product, about an

 3 innovative product, and additional information has been

 4 developed. And in general, those are not therapeutic

 5 equivalents.

 6 So, pharmaceutical -- and, again, I think these

 7 terms are important, because they influence how we, at

 8 least at the Agency, think, and these are -- I'm using

 9 only terms that are -- that have regulatory meaning to

 10 us. I am not using any of the terms that float around

 11 that many of us use.

 12 So, "pharmaceutical equivalents" are drug

 13 products in identical dosage forms that contain

 14 identical amounts of the identical drug ingredient, that

 15 deliver identical amounts of the identical active drug

 16 ingredient. So, in other words, they are the same, but

 17 to get to a therapeutic equivalent, to get to the point

 18 where it can be substituted at the pharmacy level, you

 19 have to demonstrate bioequivalence, and bioequivalence

 20 means essentially that you get the same amount of the

 21 active ingredient where it's supposed to be producing

 22 the effect that you want, and you get a therapeutic

 23 equivalent and you get an AA equivalent evaluation code.

 24 So, that's the framework, the (j) versus (b)(2)

 25 framework, which leads us to substitutable, which leads

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 16

 1 us to an enormous amount of the savings that goes on in

 2 the drug world.

 3 Two terms that I think are also important to

 4 define, "comparability," and we hear comparability

 5 tossed around a lot in terms of would a follow-on be

 6 comparable, but for the Agency, we have guidance

 7 promulgated in 1996 that talks about comparability, and

 8 in our world, that means a comparison by the

 9 manufacturer of the product following a change in

 10 manufacturing, that we believe they're comparable and,

 11 therefore, are close enough. They're not -- again, you

 12 can't assure -- we can't assure ourselves they're the

 13 same, but they're close enough. We believe they're

 14 comparable. And that's the -- that, we believe, is the

 15 meaning of comparability. That's how we use the term.

 16 "Follow-on," which we all toss around, and I

 17 just thought -- and this is the only informal term I

 18 will define -- refers to products intended to be

 19 sufficiently similar to an approved product to permit

 20 the applicant and the agency to rely to some extent on

 21 that information and then add additional information

 22 that would be necessary to assure the safety and

 23 effectiveness or safety, purity, and potency of the

 24 product.

 25 So, where does that leave us? Some things that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 17

 1 we think about when we -- and we thought about this a

 2 lot over the last few years, not surprisingly -- when we

 3 think about what these applications might look like, and

 4 I do want to emphasize that we know how to review

 5 applications. We get asked that a lot. Are you, the

 6 Agency, ready to review applications? This is something

 7 we know. Every application we now look at has some

 8 uncertainty associated with it. We learn how to balance

 9 that uncertainty.

 10 But if we were to work through what we would

 11 need to know, we would first have to decide if the

 12 product was sufficiently similar to the licensed product

 13 to allow us to rely to some extent on existing

 14 information. That's a threshold, getting in the door.

 15 And then, as our colleagues in OCC remind us, do we have

 16 access? Do we have legal access to those data? And

 17 that's a big question.

 18 Then, we go back to the science. That's the

 19 policy, and now going back to the science, what

 20 additional information would we need to support the

 21 claim of safe, pure, and potent, because again, we're

 22 talking about a licensure under the PHS Act.

 23 And finally -- and this, I think, for those that

 24 are thinking about the economic potential benefits --

 25 are there any data provided that would support the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 18

 1 safety and efficacy of -- and there I used in quotes --

 2 "switching"? In other words, can one go back and forth

 3 between these compounds? And that's very tricky in the

 4 protein world and in the biologics world, in general,

 5 because these compounds have a much higher potential to

 6 create an immunogenic response that can diminish

 7 efficacy, that can also, obviously, reduce the safety.

 8 So, in our minds, that would be a separate data set,

 9 proof that, in fact, you could go back and forth. And

 10 we believe that unless there are data that one is safe

 11 going back and forth, the physician would have to make

 12 the decision about which product and whether, if ever,

 13 to, in fact, change that product.

 14 So, just sort of summing up, first of all, just

 15 put on the table that we believe, with current science,

 16 current technology, in most cases, at this point in

 17 time, it will be impossible to establish, in the

 18 biological world, because of complexity, that the active

 19 ingredients are identical, as we do now in the (j)

 20 world. And in terms of the -- we get asked not

 21 infrequently about the potential impact on the Agency

 22 and what the reviews might look like and so forth and

 23 the time lines, how quickly could these molecules be

 24 brought out. We believe that the more complex the

 25 product is, the more difficult and time-consuming it is

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 19

 1 to manufacture. So, that speaks to the time line for

 2 getting it out, and also perhaps speaks to the interest

 3 of how many companies -- and I'm surrounded by

 4 companies, actually -- how many companies are going to

 5 be lining up at the door to do this, and that's just

 6 that we think they're harder to make, and so there's

 7 more risk involved in trying to bring one out.

 8 Then, as I say, concerns about immunogenicity

 9 will likely need to be addressed in any and every

 10 application. And then finally, what I said before, that

 11 the review of any application, be it drug, be it

 12 biological product, makes an assessment of what is in

 13 the best interest of the public given the available

 14 information. There will always be uncertainty. There

 15 is uncertainty about the simplest small molecule drugs.

 16 We have seen repeatedly, for example, in the antibiotic

 17 world. So, that assessment, that judgment, is not new

 18 to us.

 19 And finally, I would like to leave you with a

 20 thought that some of us put into a paper we published as

 21 scientists a year or two ago in Nature Drug Discovery.

 22 We talked about historically what had happened, and as a

 23 physician, I would like to make the point that we are

 24 not just obviously talking about the economics and the

 25 legal ability to develop or not develop a product. We,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 20

 1 as a society, are facing -- and I made a joke about the

 2 line -- but we are facing a crisis in the availability

 3 of innovative medical products. And any resources we

 4 devote to developing information that already exists or

 5 researchers do not use to answer the pressing questions

 6 that face this society medically and in terms of

 7 development of medical products, and there's a huge

 8 ethical problem with exposing patients to studies that

 9 don't have to be conducted.

 10 So, what we said was, "The Agency has a

 11 long-standing policy of permitting appropriate reliance

 12 on what is already known about a drug, thereby saving

 13 time and resources...and avoiding ethical concerns

 14 associated with unnecessary duplication of...human

 15 testing."

 16 With that, I'll stop.

 17

 18

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 21

 1 PANEL ONE:

 2 LIKELY MARKET EFFECTS OF FOLLOW-ON BIOLOGIC

 3 (FOB) DRUG COMPETITION

 4 MR. WROBLEWSKI: Thank you.

 5 As Rachel's presentation made clear, there's a

 6 lot of uncertainty as to what various terms mean when we

 7 talk about follow-on biologic drugs. For the purposes

 8 of today's discussion and today's discussion only, we're

 9 defining three terms that we hope the panelists will use

 10 and that we'll ask people to be clear about when we're

 11 talking about these, and these don't necessarily tie

 12 exactly with what Rachel said, but it's looking at it

 13 from a different angle.

 14 The term "biosimilar drug product," we're going

 15 to mean -- refers to a product that is comparable or

 16 highly similar to the referenced product. The term

 17 "biogeneric," on the other hand, refers to a drug that

 18 is therapeutically equivalent, interchangeable, and

 19 substitutable at the pharmacy or the point-of-use level

 20 with the referenced product. A follow-on biologic

 21 includes both biosimilar and biogeneric drug products.

 22 And we understand that the FDA has not defined the terms

 23 biosimilar, biogeneric, or interchangeability.

 24 And with that terminology in mind, I am going to

 25 turn to Paul Heldman to provide an overview of biologic

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 22

 1 drug markets.

 2 MR. HELDMAN: Thank you, Michael, and thanks to

 3 Elizabeth and the agency for having me here. I am going

 4 to go to the podium to work off the nervous tension, and

 5 I'm just wondering where Dr. Behrman was when I was

 6 taking freshman biology. She makes it all so clear.

 7 It's an honor to present today. I'm with a new

 8 group called Potomac Research after spending four years

 9 at Citigroup, where I was able to join my colleagues in

 10 doing a lot of research on the potential market for

 11 follow-on biologics, and while I benefited from that

 12 effort, what I'm talking about today is fresh and

 13 unrelated to the work that I did at Citi.

 14 As you know, the market for biogenerics is in

 15 its infancy. The European Union from 2004 to 2006

 16 created the legal framework and the guidances for an

 17 abbreviated pathway to win approval of a similar version

 18 of brand name biotech drugs, and today, E.U. country

 19 biosimilar approvals are limited to versions of

 20 erythropoiesis-stimulating agents, or ESAs, or EPO, as

 21 they are known, and human growth hormone.

 22 In the U.S., Novartis, a Sandoz unit, is the

 23 only company to date to win FDA approval using

 24 abbreviated clinical data of a follow-on biotech drug

 25 using the 505(b)(2) pathway that Dr. Behrman mentioned.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 23

 1 In this case, a similar version of Genotropin made by

 2 Pfizer is what Sandoz used as the reference product, and

 3 it won marketing approval in May '06 and began selling

 4 it in the U.S. in January '07. The first prescriptions,

 5 based on IMS data, were in March of 2007.

 6 My presentation has three goals: To use what

 7 data we have to date on the sales of follow-on products

 8 to suggest how the U.S. biotech market might be affected

 9 if Congress and President Obama enact follow-on

 10 biologics legislation into law; to highlight key

 11 differences between the market for traditional chemical

 12 medicines and the biologics market; and to discuss three

 13 areas that could act as impediments to rapid share gains

 14 for follow-on biologic drugs.

 15 So, the short marketing history of Sandoz's

 16 Omnitrope shows some potential for follow-on versions of

 17 biotech drugs, and I think it's interesting to note

 18 there, early on, there's a spike in monthly

 19 prescriptions of the drug. The data is inconsistent,

 20 and it's been noted to me by stakeholders at companies

 21 that are dealing in this market that the IMS data is

 22 imperfect, but it looks to me, from what I've seen, that

 23 the greatest discounts in the marketplace were offered

 24 during that period where you see this large spike in

 25 sales before they dropped off a little bit.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 24

 1 So far, however, the market for follow-on

 2 biologics is limited, and for Sandoz's Omnitrope, it

 3 still has a very small market share. Some of that may

 4 be because the original version of Omnitrope had a

 5 delivery mechanism that was inferior to the branded

 6 competitors, and that's changed with the introduction of

 7 a pen liquid cartridge version of the drug, with FDA

 8 approvals at different doses in March and I think

 9 September of this year. And that improvement may show

 10 up later this year or in '09 in the sales numbers.

 11 The limited market to date may also be

 12 associated with saturated market with more than half a

 13 dozen other products, and with that many choices, there

 14 might be some resistance to use of an alternative that

 15 can be categorized as highly similar to Genotropin but

 16 not substitutable, and this gets to what the FDA was

 17 just talking about as a potential impediment to growth

 18 of this market.

 19 In addition, 15 to 18 percent of the market for

 20 human growth hormone is Medicaid for the poor, and I'm

 21 told that there may be some additional rebates to the

 22 states in those markets that might have enabled the

 23 innovator companies to maintain their market share, and

 24 that wouldn't necessarily show up in the data. So, that

 25 might allow them to stay on state-preferred drug lists

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 25

 1 and maintain market share.

 2 If you look at the wholesale acquisition cost --

 3 and it's important to note that that's before any

 4 discounts in the marketplace or rebates -- you can see

 5 that the price of the branded human growth hormone

 6 products continued to rise even after the introduction

 7 of Omnitrope. As I said, the wholesale acquisition cost

 8 doesn't take into account discounts offered in the

 9 marketplace by manufacturers, and there might be some

 10 discounting going on in the market to hold on to market

 11 share, especially in Medicaid.

 12 But I think this pricing trend, along with the

 13 market share data, shows the challenge of acceptance in

 14 the marketplace that makers of follow-on biologics will

 15 face, and until they convince regulators that their

 16 products should be considered interchangeable with the

 17 branded or reference product -- and the scientific

 18 challenges were just mentioned and I'm sure we will go

 19 into greater detail of that during the course of the

 20 morning and the afternoon.

 21 Regardless, there is some success in the

 22 marketplace if you characterize success in terms of

 23 discounts. I would say that the discounts are

 24 significant, and yet they're significantly below the 80

 25 percent discounts on drug prices that take place with

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 26

 1 traditional small molecule drugs once they face

 2 competition from multiple generics. Here again, I think

 3 one of the problems is the question of substitutability

 4 of the product; however, with the caveat that these are

 5 early days in the market. So, it takes time for those

 6 kinds of discounts to evolve.

 7 We find some of the same preliminary lessons

 8 with the ESAs in Europe. This slide is a little bit

 9 distorted in the sense that it shows market share for

 10 these products in the G7 European Union countries, when

 11 the biosimilars are only on the market in the E.U.

 12 countries of Germany and the UK. So, you see a very low

 13 market share there.

 14 It's a little bit higher if you just take a look

 15 at Germany. There, you can see that the market

 16 penetration, based on about a year of biosimilar sales,

 17 is modest, but it's a little bit higher. It's probably

 18 about 10 percent market penetration if you look in terms

 19 of sales; if you look at biosimilars, it's all folded

 20 into the line for Binocrit -- I hope I'm pronouncing

 21 that correctly -- okay -- and actually, I've looked at

 22 some prescription dispense numbers as well, and you're

 23 talking about a 10 percent market share or a little bit

 24 above to date.

 25 I think it's clear, even though you're talking

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 27

 1 about smaller market shares than what you will get in

 2 the traditional drug market, that this is a competitive

 3 market, and the introduction of follow-on biologics was

 4 a contributor to that in the ESA market from what data I

 5 could gather. Amgen cut its price for its second

 6 generation ESA, Aranesp, in early 2008 to try to

 7 maintain market share, I assume, and first generation

 8 brand name makers of EPO reduced their prices about 15

 9 percent, and biosimilars are sold at a 25 percent

 10 discount to the innovator product on top of that. So, I

 11 think those are significant discounts, especially when

 12 you consider the expense of biotech products.

 13 This slide is meant to get to a key barrier to

 14 maintaining market share. I'm really just focusing on

 15 the second bullet, that until the science evolves

 16 sufficiently to satisfy regulators that a follow-on can

 17 be declared interchangeable with a branded product, the

 18 take-up for the lower cost product will be hindered.

 19 And we go back and we think about passage of the

 20 landmark 1984 Waxman-Hatch law as creating the

 21 regulatory framework for growth of the generic drug

 22 industry, but many states had laid the groundwork

 23 already, and there was, I think, 19 percent market

 24 penetration in the generic drug market.

 25 States had passed laws allowing pharmacies to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 28

 1 substitute a generic for the branded version, and I

 2 think that was important for growth of the generic drug

 3 market, and I'm not sure that those laws would apply to

 4 follow-on biologics, especially because most drugs are

 5 delivered through a physician's office; most biotech

 6 drugs are still delivered through a physician's office

 7 or in a hospital setting.

 8 So, another potential impediment that actually

 9 exists in the small molecule medicine market as well is

 10 the question of a second generation product being on the

 11 market and either being perceived as or actually being

 12 better than the first generation product and thus

 13 maintaining market share. Amgen still commands a

 14 premium price to first generation ESAs, according to

 15 Amgen, and based on the data that I've seen, it still

 16 has a premium in Germany, although it's narrower than

 17 the 15 to 30 percent in the European Union, and it

 18 remains a leader in sales, with less market share

 19 erosion in Germany than first generation ESAs.

 20 Now, I would point out that even though second

 21 generation products, such as Aranesp, may allow the

 22 innovator to preserve market share, there's an

 23 interesting twist that I'd love to hear the scientists

 24 talk about in the follow-on biologics market, which is

 25 that it's conceivable that you could develop a follow-on

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 29

 1 biologic that has a better side effect profile or is

 2 more effective than the first generation product or

 3 maybe even the second generation product. So, you could

 4 develop a product that was lower development cost and

 5 come up with a better product, potentially.

 6 Now, the future of follow-on biologic products

 7 doesn't just depend on the science. It also depends on

 8 reimbursement and coverage policies by payers,

 9 especially the Medicare product. Almost two-thirds of

 10 biotech drugs are delivered through a doctor's office.

 11 Medicare actually spends about $10 billion a year on

 12 these drugs, and a physician's office spends another

 13 couple billion dollars a year for hospitals for delivery

 14 of these products in an outpatient setting and another

 15 couple billion dollars in a dialysis setting, and

 16 payment policies in this area are adopted by commercial

 17 insurers.

 18 The current reimbursement formula under Medicare

 19 provides a financial incentive for physicians and

 20 hospitals, when using the drugs in an outpatient

 21 setting, to use the higher cost drugs, the higher cost

 22 drug in a category. That's because Medicare reimburses

 23 at the average sales price plus a 6 percent markup.

 24 In addition, current law requires Medicare to

 25 give new single-source drugs that are not the same as

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 30

 1 other products -- the definition of single-source -- on

 2 the market a separate payment code, and thus, a

 3 follow-on biologic that the FDA doesn't deem

 4 interchangeable would get a separate billing code,

 5 presumably, although interestingly, I think human growth

 6 hormone is an exception to that, and it would be

 7 interesting to see how Medicare interprets the law going

 8 forward.

 9 So, if the follow-on, assuming that it has a

 10 separate payment code, is sold at a discount to the

 11 original brand name product, the physician actually

 12 would have a financial incentive to bill for the more

 13 expensive drug or, at the very least, less of an

 14 incentive to use the follow-on biologic.

 15 It also remains to be seen how much authority

 16 Medicare will exercise and will be able to use to use

 17 the coverage process to steer patients towards a

 18 follow-on biologic. I think that that gets into issues

 19 of medical necessity, and I can envision the litigation

 20 that probably is going to come with that.

 21 Actually, though, Congress has already taken

 22 some steps that will reduce the cost of biotech drugs to

 23 taxpayers, and that actually creates an incentive for

 24 the use of follow-on biologics. Congress, last summer,

 25 overrode President Bush's veto and passed Medicare

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 31

 1 legislation that will set, beginning in 2011, a single

 2 bundled Medicare payment for dialysis care, which is

 3 actually a policy within the legislation that the

 4 Administration supported.

 5 If a lower cost follow-on biologic comes on the

 6 market for Epogen, used in a nephrology setting, the

 7 dialysis provider will be incentivised, under the

 8 bundled payment system, to use the less expensive

 9 product. So, in that area, one of the highest cost

 10 products in the Medicare program, there's already a

 11 policy in place that would encourage the use of

 12 follow-on biologics.

 13 And another policy change by the Administration

 14 might, as a result of any sort of downward pressure on

 15 Epogen reimbursement, drive down reimbursement for

 16 Procrit, the same drug licensed to a different company,

 17 in an oncology setting, because the reimbursement rate,

 18 the ASPs, are blended, and as a result, if the average

 19 sales price for Epogen goes down, so does the average

 20 reimbursement for both products under the Medicare

 21 system.

 22 So, what do we know from our experience so far?

 23 There is a market with, I would argue, significant

 24 discounts for biosimilars, but several obstacles remain

 25 to their gaining the market share and driving down

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 32

 1 prices to the level that we see in traditional small

 2 molecule drugs. Some of that can be overcome if the

 3 Federal Government and the states, but especially the

 4 Federal Government, in addition to creating an

 5 abbreviated pathway for approval of follow-on biologics,

 6 change reimbursement incentives and create a process for

 7 allowing biogeneric substitution.

 8 And I recognize that there are safety arguments

 9 on the other side of this issue that I'm not going to

 10 pass judgment on, and I'm sure we'll hear about later.

 11 And to that point, it also requires scientific advances

 12 and evidence on the part of the biogeneric industry that

 13 these products are substitutable.

 14 So, thank you very much.

 15 (Applause.)

 16 MR. WROBLEWSKI: Thank you, Paul.

 17 You packed a lot into that presentation that

 18 we're going to explore in more detail throughout the

 19 day.

 20 The objectives of this first panel are really

 21 two: One, to discuss current market experience with

 22 follow-on biologics; and second, to identify the

 23 differences in likely market effects caused by

 24 biosimilar entry compared to potential biogeneric entry.

 25 The panels today are going to be moderated

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 33

 1 discussions. The moderators will pose a question and

 2 ask a specific panelist to start off with an answer. If

 3 another participant would like to add to that discussion

 4 on the same point, please just turn your name card on

 5 its side, and we'll be sure to call on you if time

 6 permits.

 7 The one other thing is, these microphones are

 8 always on. So, please, after you're finished, lift your

 9 microphone up.

 10 And one last thing, many of the questions in

 11 this first panel will focus on eliciting information

 12 from the FOBs' -- follow-on biologics' -- viewpoint.

 13 The second panel this morning will focus more on the

 14 innovators' point of view.

 15 So, with that background, the first issue that

 16 we would like to get a discussion about is following up

 17 on some of the things that Paul brought up in terms of

 18 the two markets that he examined, both the HGH market in

 19 the U.S. and Europe and the ESA market in Europe. And

 20 I'd like to ask Mateja and John, who are both

 21 competitors in those markets, to address two issues.

 22 First, on what reference product data did you

 23 rely on to obtain your authorizations in those markets?

 24 And second, have you engaged in primary marketing of

 25 your product?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 34

 1 So, I'll let John or Mateja, whoever would like

 2 to go first.

 3 MS. URLEP: Thank you very much, in the name of

 4 Sandoz, for inviting us here. We are happy to share our

 5 experience as a pioneer in this follow-on biosimilars

 6 arena.

 7 What kind of data did we rely on? Well,

 8 actually, we did rely on the agencies, the FDA or the

 9 EMEA, to approve products which are safe, potent, and

 10 pure, but the data we generated ourselves on our product

 11 as well as on reference to show comparability and high

 12 similarity and to gain the approval on our products,

 13 which were shown to be as effective and safe and of the

 14 required quality. So, there were no data which we would

 15 rely on that would be accessible for us from the

 16 reference product. We created our own data set.

 17 On the primary marketing, in U.S., we have one

 18 follow-on protein product on the market, which is

 19 Omnitrope, and we do not extensively advertise this

 20 product, whereas in the European Union, it is a

 21 different situation. We do primary marketing, and we do

 22 invest into, let's say, having a booth at professional

 23 meetings; calling on the physicians. So, we do have the

 24 calls and we do produce marketing materials and we do

 25 also advertise in the professional journals.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 35

 1 MR. WROBLEWSKI: Thank you.

 2 John?

 3 MR. LANE: Yes, thank you. I just want to make

 4 sure everyone knows who Hospira is. I know I have got a

 5 bio here, but many of you are probably not familiar with

 6 the company.

 7 Hospira is a global healthcare company that has

 8 businesses in specialty pharmaceuticals and medication

 9 delivery devices. We're the worldwide letter in generic

 10 injectable drugs. We're also the only U.S. company that

 11 has launched biosimilar EPO in Europe.

 12 So, having said that, a couple of things. Our

 13 reference product that we used to show comparability was

 14 Epoetin alfa. It was Eprex. We went through what the

 15 Agency would call an abbreviated pathway, where we had

 16 to run three Phase III pivotal trials: two on the renal

 17 side to demonstrate therapeutic equivalence; one on the

 18 oncology side to show safety. And then we had the

 19 individuals on the therapeutic equivalency side on the

 20 renal go through a full year for safety data as well.

 21 So, all in all, we tested roughly a thousand patients

 22 through our product.

 23 The other comment regarding marketing, we are

 24 engaged, like our competitors, in very aggressive

 25 marketing, because the innovators, frankly, are very

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 36

 1 aggressive in terms of combating messages against us.

 2 They are putting messages out there that we're not safe,

 3 not effective, inadequate pharmacovigilance, and we have

 4 had to combat that fairly aggressively.

 5 And one of the ways we do that is we hold up

 6 data like this (indicating), which are manuscripts of

 7 two key, pivotal Phase III trials, which demonstrate

 8 that we are therapeutically equivalent, and data like

 9 this can do a lot to diminish a lot of the comments that

 10 are being spread around to clinicians, et cetera, about

 11 the potential inferiority of biosimilars.

 12 If I could add just one other comment on the

 13 slide that Paul put up, I think it's important to note,

 14 in Germany, you mentioned that there was about a 10

 15 percent market share on sales dollars. If you look in

 16 Germany, biosimilars, on a unit basis, have actually

 17 captured 23 percent of the first gen market, 23 percent

 18 through August, and if you also take into effect that

 19 Aranesp sales, prices come down 10-15 percent, and you

 20 equate that to the U.S. market, where you have got a $4

 21 billion first gen EPO market and a $2 billion second gen

 22 Aranesp market, you would drive savings of well over a

 23 half a billion dollars. So, we have a different

 24 perspective in terms of how well biosimilars are doing

 25 and actually are very happy about the experience with

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 37

 1 EPO.

 2 MR. WROBLEWSKI: Let me ask one quick follow-up,

 3 John. What actual data did you rely on from the

 4 innovator product that you didn't have to do yourself --

 5 MR. LANE: Well, I mean, from --

 6 MR. WROBLEWSKI: -- in terms of clinical

 7 testing?

 8 MR. LANE: -- specific data?

 9 MR. WROBLEWSKI: Or in terms of just

 10 classification of the type of data.

 11 MR. LANE: Basically, what they had us do --

 12 MR. WROBLEWSKI: What didn't you have to do?

 13 MR. LANE: What we didn't have to do? In other

 14 words, we didn't have to do Phase II results. We had to

 15 do Phase I; we had to do preclinical studies; and we had

 16 to do pivotal Phase III studies. Phase III is the

 17 biggest area where we didn't have to do work on.

 18 MR. WROBLEWSKI: Is that similar?

 19 MS. URLEP: It is exactly the same. That was

 20 the only data we didn't have to generate to show

 21 comparability, because with Phase I, we had showed the

 22 comparability already, so that the PK/PD data showed

 23 that we didn't have to go into dose-defining clinical

 24 trials, which is Phase II.

 25 MR. WROBLEWSKI: Okay.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 38

 1 Rachel, you wanted to add something.

 2 DR. BEHRMAN: I did. Thank you.

 3 Omnitrope is a terrific example, because it's

 4 detailed in excruciating detail in a citizen's petition

 5 response, which is everything you ever want to know

 6 about 505(b)(2)s, and it's worth mentioning it's not the

 7 first follow-on protein approved by the FDA. It's the

 8 first follow-on human growth hormone. And replacement

 9 therapies, such as growth hormones, some things that we

 10 know a lot about, are different than things where we

 11 don't understand the mechanism as well.

 12 But I think for Omnitrope, an important point is

 13 that while the clinical data were developed with a

 14 pediatric indication, the clinical data were not

 15 developed for the adult indication. The Agency relied

 16 on existing information. So, a big chunk of the

 17 approval was, in fact, not de novo data.

 18 MR. WROBLEWSKI: Okay.

 19 Steve, you wanted to add something, and I wanted

 20 to ask you, are these the type of things that you would

 21 be saving as well as you develop your follow-on

 22 products?

 23 MR. BRUGGER: Yeah. Actually, my comment was, I

 24 just wanted to clarify, just for the completeness of the

 25 discussion, in Europe, EMEA does not have any real --

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 39

 1 doesn't take any authority to determine

 2 interchangeability. So, I think Mateja and John could

 3 probably comment on how each country in Europe

 4 determines whether or not these products should be

 5 substituted, and if so, how.

 6 I think the one challenge we have to keep in

 7 mind is that in the U.S., without an interchangeability

 8 status, the physicians will have to rely on these

 9 extensive data sets that Mateja and John described and

 10 their own personal experience, and I think as we look

 11 forward, that will be one of the issues in the U.S. that

 12 will initially blunt that market share, because

 13 physicians will have to rely on the product since it

 14 will be declared as not the same.

 15 MR. WROBLEWSKI: Right. Thank you.

 16 Professor Grabowski -- and thank you for joining

 17 us. We apologize for the line downstairs this morning.

 18 DR. GRABOWSKI: I just wanted to ask John and

 19 Mateja to give some feel for the cost of doing these

 20 studies. That may be, you know, competitive kinds of

 21 information, but in sort of your small molecules, we're

 22 generally talking a few million dollars to kind of get

 23 on the market, and for an innovator, when you figure in

 24 probability of success and discovery and all, we're

 25 talking hundreds of millions, and some generics, some I

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 40

 1 have heard the costs are in the $10 to $20 million, but,

 2 you know, I don't know if you could give us some feel

 3 for the barrier that might exist, if you want to

 4 characterize that way, or the cost to sort of doing

 5 these tests with a reference product.

 6 MR. LANE: No, that's a fair question. Thanks,

 7 Professor.

 8 With regard to our EPO product, we have a

 9 partner who actually did all the clinical work. So, we

 10 didn't do those trials. So, I can't comment on specific

 11 costs for that program.

 12 But in a more general sense, I would say for the

 13 less complex proteins that we're looking at, you could

 14 expect anywhere between, maybe, $30 and $50 million, and

 15 for the more complex proteins, it's not inconceivable

 16 that you could approach $75 to $100 million if you have

 17 to do full development. And a lot of that's going to be

 18 driven by what are the requirements that the Agency puts

 19 in place, so...

 20 MS. URLEP: Well, basically, the extent of the

 21 clinical trials for a similar biological additional

 22 product, as biosimilars are defined in the European

 23 Union, is defined by the guidelines, which are product-

 24 or class-specific, and, therefore, this was the

 25 guideline for the company, for the sponsor to do the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 41

 1 development work.

 2 But based on the fact that the developments have

 3 started far prior to the first guidelines being accepted

 4 and published and enforced, I have to say that our

 5 experience was that we have even overdone and did a lot

 6 more than was finally requested and required. So, the

 7 challenge here was even higher for the pioneer, for the

 8 first one, to do more than finally the agency would

 9 require.

 10 And if I may say, the European Agency has

 11 concluded -- and it's publicly available -- for both

 12 products, which are already approved from Sandoz's side,

 13 for Epoetin alfa as well as Somatropin, that the active

 14 ingredient, active substance, is the same as that for

 15 the reference. So, this is a conclusion of the EMEA.

 16 MR. WROBLEWSKI: Thank you.

 17 I'm going to change subjects just a little bit.

 18 Are the price discounts and the market share capture

 19 that Paul mentioned for the products that he examined,

 20 are they predictive of what the U.S. markets will look

 21 like?

 22 And I can either turn to Professor Grabowski or,

 23 Alexis, if you would like to add in some thoughts as

 24 well.

 25 DR. GRABOWSKI: I'll just make a brief comment.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 42

 1 I think you have to look at this as an

 2 evolutionary process in that initially, for the reasons

 3 that were mentioned earlier, there may be a slower

 4 uptake, but over time, given all the changes that we can

 5 expect in the healthcare system, wider coverage and all

 6 the cost savings are going to be a kind of key factor,

 7 and we are going to see evolutionary changes in the

 8 reimbursement system and otherwise. And so I would

 9 expect the uptake to kind of increase significantly as

 10 we gain experience.

 11 You just have to look back even to small

 12 molecules. I studied that. In the first decade, there

 13 wasn't the kind of rapid substitution that occurs now,

 14 where an innovator can lose 90 percent of the market

 15 within a few months if it's a big molecule drug. The

 16 erosions were much slower in the eighties until people

 17 even got comfortable with A-B rated drugs that the FDA

 18 said were interchangeable. So, I think you have got to

 19 keep in mind the evolutionary characteristics of the

 20 market.

 21 MR. WROBLEWSKI: Sure. Thank you.

 22 MS. AHLSTROM: I think there are three major

 23 differences that I would talk about --

 24 MR. WROBLEWSKI: If you can turn it towards you.

 25 MS. AHLSTROM: There are three major differences

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 43

 1 I would highlight relative to the small molecule market

 2 that Dr. Grabowski was talking about. I think first is

 3 that in the follow-on biologics or the biosimilars,

 4 you're going to have products that in the near term are

 5 not interchangeable, and so even though today people are

 6 used to substituting the lower cost product, I don't

 7 think that we will see that kind of uptake any time in

 8 the near future.

 9 You know, Omnitrope is probably not the best

 10 example for us to look at when we think about, you know,

 11 uptake. It is entering a very crowded market. First

 12 year, like Paul said, it didn't have the same kind of

 13 mechanism of action or it had a different delivery

 14 mechanism than the products that it was competing

 15 against.

 16 Omnitrope also has a really interesting

 17 background, because we looked at the formularies for

 18 Omnitrope and all the human growth hormones in the

 19 United States, and we found that Omnitrope, in its first

 20 year, was actually only covered about a quarter of the

 21 time. So, I think that there is an access issue right

 22 now for patients with Omnitrope. That may go away over

 23 time, but I think that while the plans and the PBMs

 24 immediately cover and immediately put in utilization

 25 management tools to get people to switch from the brand

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 44

 1 to the generic, you know, on the small molecule side,

 2 they haven't been that immediate on the biologic side.

 3 We've also looked at formularies for products

 4 that, you know, have multiple products within a class,

 5 like the rheumatoid arthritis and multiple sclerosis

 6 drugs, where clearly a plan or PBM could find a

 7 particular product that would be the lowest cost product

 8 for itself and for the consumer. And they are not

 9 really differentiating products. They're not picking a

 10 preferred biologic within a class and making other

 11 biologics in that class be less preferred. They're not

 12 really, at this time, driving share toward the cheapest

 13 biologic, and I think that's because the biologics are,

 14 you know, therapeutic alternatives to each other.

 15 They're not saying everybody must go to one,

 16 like they're doing on the -- you know, like -- and even

 17 there's more therapeutic substitution, I think, on the

 18 small molecule side. There's one preferred statin, you

 19 know, Simvastatin; then there is everything else is, you

 20 know, third or fourth tier. And I think that's really

 21 because of the science, and I think the science will

 22 drive the biologics, you know, substitution -- or,

 23 sorry, uptake in the near term.

 24 So, I don't really see, in the near term, any

 25 sense that we'll get towards, you know, the generic

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 45

 1 substitution rate of 90 percent or whatever it is for

 2 some of the small molecule products.

 3 MR. WROBLEWSKI: Thanks.

 4 Rachel, did you want to add something?

 5 DR. BEHRMAN: Yeah. In case I didn't make it

 6 clear in my remarks, I think that whether or not

 7 something can be substituted -- it's not a question of

 8 whether the company makes the effort to do it. It may

 9 not be possible, in contrast to a small molecule. So,

 10 we -- I think some of the discussion seems to me

 11 focusing a little bit on if the company made the effort,

 12 they might make it to substitution, and they may, in

 13 fact, never make it to the point where they are

 14 substituted.

 15 MR. WROBLEWSKI: Right. Thank you.

 16 John?

 17 MR. LANE: Yeah, one other comment.

 18 I guess Hospira believes that the opportunity in

 19 the U.S. could be certainly greater than what we're

 20 seeing with the EPO experience in Germany. If you think

 21 about it, Germany is kind of the proving ground. It's

 22 the first regulated market where we're starting to see

 23 this. There's a lot of trepidation among clinicians,

 24 and over time, clinicians are becoming more comfortable

 25 with biosimilars.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 46

 1 You know, a lot of these products aren't going

 2 to launch in the U.S. for several years. So, when they

 3 do launch, there's going to be a wealth of experience

 4 and data that we've garnered in Europe. And, again, if

 5 you think about Germany, in just about a year's time,

 6 the biosimilars -- two biosimilar molecules have

 7 captured 23 market share of the first gen, which is the

 8 product that they demonstrated biosimilarity to. That's

 9 significant.

 10 So, Hospira feels that there's a much greater

 11 opportunity, given time, when these launch, there will

 12 be probably more competitors, and even in a market where

 13 substitution does not exist automatically, at least for

 14 the early years, there's a lot of savings that could be

 15 generated without that.

 16 MR. WROBLEWSKI: Thank you.

 17 Let me change -- and, Ted, I am actually going

 18 to address this question to you in terms of -- and it's

 19 probably a follow-on to what John just mentioned, is

 20 what are the factors that are going to affect the uptake

 21 or the market acceptance of biosimilars, other than what

 22 we've been talking about already, which has been the

 23 kind of interchangeability?

 24 Are there patient population characteristics or

 25 other characteristics that would make this different

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 47

 1 than -- that would affect the uptake?

 2 DR. BUCKLEY: Well, first of all, just a couple

 3 of points.

 4 There has been this question around therapeutic

 5 equivalence and interchangeability. In Europe, to date,

 6 14 countries have ruled that these products are not

 7 interchangeable, and I think that that point needs to be

 8 made and brought out.

 9 Second of all, really, it's going to be the

 10 decision of the physician and the patient as to whether

 11 or not a drug will be substituted for a therapy that

 12 they may already be on or a therapy that they may be

 13 considering taking.

 14 In addition, you think about where health

 15 insurance was back in 1984 when Hatch-Waxman was passed.

 16 Formularies weren't very restrictive. Tiered

 17 formularies were almost unheard of. And so, the generic

 18 market, as Henry pointed out, evolved slowly. You know,

 19 fast-forward 24 years, you've got restrictive

 20 formularies that drive patient populations to certain

 21 preferred drugs; you've got tiered formularies, which

 22 also give patients incentives to take certain drugs; and

 23 so the health insurance market has also evolved to this

 24 new -- what's no longer a new landscape of generic

 25 drugs.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 48

 1 In the case of a biologic, you know, biologics

 2 are typically a -- you know, dose per dose are more

 3 expensive than most small molecules. If I were sitting

 4 in the insurer's shoes right now, I would be thinking,

 5 okay, my marginal benefit and the advantage of switching

 6 a person or steering a patient towards a biosimilar drug

 7 is potentially much greater than steering one patient

 8 towards a generic drug. So, how can I design an

 9 insurance mechanism that helps to encourage this sort of

 10 switching?

 11 MR. WROBLEWSKI: Thank you.

 12 Thanks, Dave. I was actually going to turn to

 13 you next for a comment, and what strategies do you

 14 anticipate using as a PBM and retail pharmacy?

 15 MR. GOLDING: First of all, I represent the

 16 payer side, so we have a lot of clients and payers who

 17 are paying for these very expensive medications, and on

 18 the other side, I also run a network of specialty

 19 pharmacies that run an enormous amount of these

 20 primarily branded biologics through it, so I'm both the

 21 payer side, and then the back end, depending on how all

 22 the regulations come out, I will be the administrator,

 23 so to speak, of executing this very important issue for

 24 me and for the company.

 25 But, the clients, I can tell you, certainly over

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 49

 1 the past 18 months, have a pretty enormous amount of

 2 focus and I spent most of my time talking to them about

 3 this trend, which is two and a half to 3X what their

 4 overall trend is. So, we've got their attention, and

 5 they are asking me and asking us around the table and

 6 beyond what they can do.

 7 So, we will see them get much more aggressive as

 8 it relates to what their temperament is going to be

 9 versus what it has been as it relates to taking some

 10 tactics, which I agree have been relatively modest in

 11 the past, and we, as the PBM, have experimented with

 12 some biologic, you know, tier two, tier three, but

 13 looking at a $25,000-a-year drug and a $50 difference

 14 between copays is just not -- the benefit is not going

 15 to do it.

 16 So, unlike the small molecules where as soon as

 17 a generic comes out, it trips it to a tier one

 18 typically, that is what's driving all the activity, and

 19 all the switching overnight should interchangeability

 20 not be here in whole or in part, it will act, at least

 21 in my opinion, more like a preferred branded product.

 22 So, me as the pharmacy and us as a PBM will need to put

 23 a lot more tactics in place in order to motivate.

 24 I believe what payers are going to be looking to

 25 do and are looking to do today is they are going to be

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 50

 1 looking to pay for an outcome. So, they are not going

 2 to get so tied up in what the drug is or are they

 3 equivalent or are they similar. I don't think that's

 4 the way that they're starting to look at it. They're

 5 saying, what is the outcome that we're willing to pay

 6 for?

 7 And many of them -- and this is a very personal

 8 preference from a health plan perspective -- will say,

 9 and we're not going to pay for convenience. So, I think

 10 that's where Omnitrope gets into a very interesting

 11 discussion, CVS Caremark is a very large dispenser of

 12 growth hormone, I believe some payers in the near term

 13 are going to say, if there's a short-stature individual,

 14 I am obligated and willing to pay for that growth, but

 15 not necessarily all the convenience and, therefore, the

 16 cost that some of these alternative products are

 17 premium-priced at today. And they're the payer, and I

 18 can understand that. So, we as a PBM and ultimately the

 19 advocate of the payer and dispenser will be looking to

 20 put that forth.

 21 I also think you'll see some different tiering,

 22 depending on how we ultimately work through this, that

 23 may actually create bigger spreads within certain

 24 products. Maybe it's stepped therapy. You need to

 25 start here, and if this doesn't work clinically, we will

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 51

 1 allow exception processes in order for you to submit

 2 those exceptions in order to get alternate products that

 3 clinically are comparable, theoretically, in the masses,

 4 although don't seem to work effectively for you as an

 5 individual.

 6 MR. WROBLEWSKI: Okay, thank you.

 7 Ted, you wanted to add something, and then,

 8 Alexis, we will turn to you.

 9 DR. BUCKLEY: Sure. Just quickly, we seem to be

 10 dancing or making this assumption that -- and I want to

 11 state, we don't think interchangeability is anywhere in

 12 the near term possible based on Dr. Behrman's comments,

 13 based on what the E.U. countries have said, et cetera,

 14 but there seems to be this assumption that if it were

 15 possible, all of a sudden, one generates much more

 16 savings, and I'm not sure that that's actually a true

 17 assumption, because if one were rated as a perfect

 18 substitute, you don't have to go out to market. You

 19 can, in fact, just shadow-price the reference product,

 20 say, with a 10 percent discount, and, you know, how the

 21 innovator responds to that is unclear.

 22 Maybe they keep the price or maybe they match

 23 the 10 percent discount and you wind up splitting the

 24 market and you wind up with about 10 percent savings in

 25 the market, versus what the CBO has modeled, where after

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 52

 1 four years, you have 16 percent savings overall with a

 2 40 percent market share or 40 percent price reduction

 3 and a 35 percent market share, because if you're not

 4 rated as interchangeable, you have to drop your price

 5 more to attract the market.

 6 And so in order to do this -- and it really is

 7 not -- if you look even in the generic context, it's not

 8 so much the A-B rating that drops the price, but rather,

 9 the number of entrants to the generic marketplace. So,

 10 with typical generic drugs, within a year, you see eight

 11 entrants, a price discount of around 60 percent, and a

 12 market share gain of about 80 percent.

 13 But if you look at a subsection of generic

 14 drugs, what we'll call more complex generic drugs, those

 15 that are prescribed by specialists, those that have a

 16 narrow therapeutic index, those that have a black box

 17 warning, you find, after a year, very few entrants, only

 18 three; price discount, instead of almost 60 percent, a

 19 price discount around 35 percent; market share, instead

 20 of 80 percent, market share around 58 percent.

 21 And so you see that it's the number of entrants

 22 that seems to be driving this price competition, not

 23 necessarily this interchangeable rating. And so I think

 24 that's something to really keep in mind going forward.

 25 MR. WROBLEWSKI: And do you anticipate the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 53

 1 number of entrants to be fewer?

 2 DR. BUCKLEY: The number of entrants will

 3 certainly be fewer. There are technological know-how,

 4 they alluded to the price of the clinical trials to

 5 deliver this, the length of approval process, the

 6 likelihood of a successful application, you know, and

 7 you just go down the list, and you start to see that the

 8 number of players that can submit a successful

 9 application for this is much smaller.

 10 MR. WROBLEWSKI: Okay.

 11 Alexis?

 12 MS. AHLSTROM: Thanks. One thing I would add to

 13 what Ted just said is that in addition to all the sort

 14 of barriers you might see in terms of the number of

 15 entrants, one of the things is the market share that the

 16 follow-on biologics will be going after, and I think

 17 there are some key products, like the ESA market, where

 18 you might see more entrants than products where the

 19 class itself does not have a lot of revenue, and so that

 20 a biosimilar would not be able to -- because of all of

 21 the costs of manufacturing and development and the

 22 potentially steeper regulatory approval process, that

 23 there would not be follow-on biologics in certain

 24 classes because they wouldn't be able to, you know,

 25 break even and make a profit.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 54

 1 MR. WROBLEWSKI: Okay. Thank you.

 2 Steve, you wanted to add a point.

 3 MR. BRUGGER: Yeah. I guess I take a slightly

 4 different position than Ted on the interchangeability

 5 status. I think if the FDA, at some point in the

 6 future -- and we certainly hope that's the case --

 7 designates one of these biologics as interchangeable, I

 8 think that has a huge impact on the kind of uptake it

 9 would have, because it would take physicians somewhat

 10 out of the decision-making that they are certainly are

 11 in with biosimilars.

 12 I guess I should comment a little bit on Momenta

 13 as a company, because we are somewhat atypical in this

 14 debate. We've developed an innovative analytical

 15 approach to these complex molecules, both in better

 16 understanding the product, but also a deeper

 17 understanding of the manufacturing process. We actually

 18 have two complex mixture of products, Lovenox and

 19 Copaxil, that we actually have 505(j) or ANDA

 20 applications currently under review, and the reason we

 21 are so passionate about the interchangeability language

 22 is, because that pathway was open to us for these two

 23 products, it actually allowed us to raise capital as a

 24 young company and invest in this.

 25 So, I think we have to not lose sight of the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 55

 1 importance of that legislative language for

 2 interchangeability, not just for the market advantage,

 3 but the innovation that will come from other companies

 4 like ourselves.

 5 MR. WROBLEWSKI: Thank you.

 6 Mateja, and then, John, I'll turn to you.

 7 MS. URLEP: I would also say to Steve that we do

 8 believe that interchangeability definitely would ensure

 9 that the full economic benefit and the patient access

 10 benefit for the follow-ones could be exercised, and I

 11 have to say that European countries did not take a

 12 position on interchangeability, but on substitution, and

 13 there are a few of the countries, and one of them being

 14 France, has only a temporary ban on substitution, for

 15 two years, and then they will assess this once again.

 16 So, therefore, there is no resolution on

 17 interchangeability, but on the substitution on the

 18 pharmacy level, whereas there is some examples in

 19 Germany where they have encouraged -- the payers have

 20 encouraged pharmacists to interchange and switch

 21 products on the pharmacy level; also biologics. This is

 22 our experience from the market.

 23 About the savings and about the discounts, where

 24 at the moment I have to say the same as John has said,

 25 we have to overcome the barriers that were imposed on us

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 56

 1 by the originators saying that the follow-on biologics

 2 or biosimilars, as they are called in Europe, could be

 3 substandard and that there could be some potential

 4 safety issues and pharmacovigilance issues with them.

 5 We have to invest into primary marketing to overcome

 6 this with our data, which we created during the

 7 development programs. And I would say that with the

 8 different market access, the discounts could be higher.

 9 MR. WROBLEWSKI: Okay, thank you.

 10 John?

 11 MR. LANE: Yeah. The only thing Hospira would

 12 add to this is, with regard to interchangeability, no

 13 longer would a company have to spend an excessive amount

 14 of money into a sales force, proprietary marketing

 15 campaign, et cetera, and they would be able to reduce

 16 their price potentially quite considerably and still

 17 maintain the same level of profitability for the

 18 business. So, I do think there's a significant impact

 19 there.

 20 To talk upon with my colleague here in terms of

 21 France, we have seen some of the nephrology associations

 22 in France say they could consider viewing EPO as being

 23 interchangeability if they saw two to three years of

 24 experience on the market. So, I have a feeling, in a

 25 short period of time, you are going to start seeing some

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 57

 1 of those activities take place.

 2 The other thing I would make a comment on, when

 3 we did one of our trials to demonstrate the therapeutic

 4 equivalence for Retacrit, Hospira, working with our

 5 partner, Stada, did a crossover study where we had a

 6 run-in of the innovator product, Eprex. Both products

 7 were switched, so then they switched patients to the

 8 other product for a period of three months, switched

 9 them back to the original product, and then followed

 10 them up for a full year.

 11 So, I'm not saying this may meet the FDA's

 12 standards of what it would take to prove

 13 interchangeability, but we have done studies in some

 14 form or fashion at Hospira and with our partners to show

 15 that the switching of products have shown no safety

 16 issues and have shown therapeutic equivalence. So, this

 17 kind of work can be done. We just leave it up to the

 18 FDA to tell us what their requirements will ultimately

 19 be.

 20 MR. WROBLEWSKI: I am going to turn to Rachel,

 21 but she doesn't have to answer that question, though.

 22 DR. BEHRMAN: Oh, good. No, I have a question,

 23 actually, because I know you have put it out. Is

 24 interchangeability being used as synonymous with

 25 substitutability in this conversation, because you made

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 58

 1 a distinction I didn't quite understand. Do you see

 2 a --

 3 MR. WROBLEWSKI: That's a good point, yeah.

 4 DR. BEHRMAN: Do you see a distinction between

 5 the two?

 6 MS. URLEP: Well, in Europe, we have

 7 substitutability. So, substitution is official term,

 8 where it means that products can be substituted on a

 9 pharmacy level, so at the level of dispensing, when they

 10 are dispensed. So, this is in the European Union.

 11 DR. BEHRMAN: And what's, then,

 12 interchangeability?

 13 MS. URLEP: Interchangeability means that the

 14 products can be interchanged for each other without any

 15 additional safety issues being accompanied with and that

 16 they both have the same therapeutic -- that they are

 17 therapeutically equivalent to each other.

 18 DR. BEHRMAN: So, you are using them as

 19 synonymous, then. In other words, it's not simply the

 20 initial prescription where you feel they can be -- a

 21 physician can choose from one or the other, but rather,

 22 a patient is on one form of therapy and can go back and

 23 forth?

 24 MS. URLEP: But that's the term used in Europe,

 25 not as it is used now here in the terms of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 59

 1 interchangeability claim, which would be given from the

 2 authority which does the approval.

 3 DR. BEHRMAN: Okay. And I can answer the

 4 question about what we require, and we require what is

 5 necessary.

 6 MR. WROBLEWSKI: Professor?

 7 DR. GRABOWSKI: Just a point that several people

 8 have made that I think will influence -- will be a

 9 positive course for uptake which is that we are seeing

 10 what's happening in Europe and the experience in Europe,

 11 which will lead us in several molecules in several

 12 years. To the extent that it gains acceptance, then I

 13 think that will also speed the acceptance.

 14 And a question for Rachel is, would the tests

 15 that are done to get into the E.U., could those be used

 16 at the FDA?

 17 DR. BEHRMAN: You mean data that was generated

 18 abroad?

 19 DR. GRABOWSKI: Yes.

 20 DR. BEHRMAN: Well, we recently published a

 21 rule, 120, and what we say is that data that are

 22 generated abroad -- we flip it slightly. We say we will

 23 not consider it or we may not consider it if GMPs are

 24 not followed. If GMPs are followed, then obviously, we

 25 would consider all data that were generated, yes.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 60

 1 Can I just ask a question on the other thing?

 2 With all this discussion around EPO, no one has brought

 3 up pure red cell aplasia. I was just surprised.

 4 MR. LANE: I wasn't going to bring it up.

 5 MR. WROBLEWSKI: Let me ask one other question

 6 just in terms of -- what effect the uptake of

 7 biosimilars, and does the difference that many of these

 8 biologic drug products are dispensed at the inpatient

 9 setting, either doctor's offices or hospitals, as

 10 opposed to actually at -- you know, at a retail

 11 pharmacy, does that affect the potency of, say, a

 12 payer's strategy?

 13 Dave, I'll turn to you, or anyone who has a

 14 comment.

 15 MR. GOLDING: Yeah. I'm not sure. Even though

 16 I saw the 64 percent number up there, I don't know what

 17 the right number is. I don't think it's 64 percent in

 18 hospitals or physicians, but it's something fairly

 19 large.

 20 I think there is still, today, outside of

 21 hospital and inpatient, a lot of these products going

 22 through, and I would estimate about 50 percent of them

 23 are going through a retail pharmacy, where unless there

 24 is very black and white interchangeability, the script,

 25 the way it's written, is going to be the script the way

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 61

 1 it's filled, with the exception of any interventions

 2 through, you know, a PBM or logic within the benefit

 3 design.

 4 A little bit different with the business that we

 5 work in. The other 50 percent, me and my competitors

 6 have within specialty pharmacies, where we are more apt

 7 to be able to take interventions independent of any

 8 other activity. So, we have wrapped ourselves around

 9 the model of which we would go out and we could

 10 intervene based upon a very refined strategy and

 11 primarily cost-benefit.

 12 So, they can operate two different ways, but I

 13 think the interchangeability will be very important in

 14 that subset that goes through retail pharmacies, at

 15 least as it exists today; less of a factor, because it

 16 will act more like the preferred brand within my space,

 17 where I will basically make the call, talk to the

 18 physician, exchange clinical information, and in some

 19 cases, switch that script over with his or her

 20 permission.

 21 MR. WROBLEWSKI: Okay, thank you.

 22 Alexis, did you want to add something or was

 23 it --

 24 MS. AHLSTROM: Oh, sure. I think David covered

 25 it pretty well. All I was going to say is that I think

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 62

 1 you have two different strategies. On the outpatient

 2 side, where the formulary is well understood by the

 3 beneficiary, you would have one strategy in terms of

 4 tiering, copays, et cetera, and on the physician side or

 5 the inpatient side, it's really about the payer and the

 6 manufacturer in terms of pricing and how you set up your

 7 incentives for physicians who may make more money by

 8 dispensing a higher cost product.

 9 And I think we're seeing, you know, some payers

 10 experiment with that by, for example, you know,

 11 incentivising a physician to use the lowest cost product

 12 and maybe even paying them more for using a lower cost

 13 product, but still netting some savings to the payer.

 14 And so I think we'll see more experimentation, but I

 15 think you have different strategies.

 16 MR. WROBLEWSKI: And how does -- if -- for many

 17 of the drugs that are -- have a substantial Medicare

 18 population, how does the Medicare pricing regime

 19 affect -- or reimbursement scheme affect prices for

 20 biosimilars?

 21 MS. AHLSTROM: Sure. You know, I think that

 22 question -- I think there's a lot of ambiguity around

 23 that question, because we haven't seen what CMS would

 24 do, and I wish there was somebody from CMS here on the

 25 panel to really maybe talk about what they think will

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 63

 1 happen.

 2 I think that -- remember, all products are not

 3 just Medicare Part B, and the price the Medicare Part B

 4 pays is the average sales price, which is made up of

 5 prices that the manufacturer gives across payers.

 6 Second of all, products that have both a Part B

 7 and a Part D component will have a potentially different

 8 pricing level than if they were just Part B. You know,

 9 I think Paul brought up that under Part B, if a product

 10 has a separate BLA, it would be given a separate code in

 11 Medicare, and that follow-on biologic could price at a

 12 premium; it could price ---it could parity price; or it

 13 could price at a discount to the reference product with

 14 its own code. It doesn't matter whether it has the same

 15 code or a different code. It can still choose a

 16 different pricing level.

 17 But I think, you know, I think there's a lot of

 18 ambiguity. I think sort of my perspective is that the

 19 first step should be, you know, the scientific

 20 regulatory process, and then, you know, I think the

 21 operationalization of the biosimilars will -- you know,

 22 should come later.

 23 MR. WROBLEWSKI: Paul, you wanted to add

 24 something?

 25 MR. HELDMAN: I would just add that regardless

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 64

 1 of what is actually taking place among the commercial

 2 payers and the PBMs in the marketplace with incentives,

 3 that what drives legislation, especially in an

 4 environment with a rising federal budget deficit, is the

 5 potential for the legislation saving money.

 6 So, if you change the incentives under the

 7 Medicare physician payment system and make it more

 8 attractive for physicians to use the lower cost product,

 9 that's going to generate more savings for the

 10 Congressional Budget Office, which is basically the

 11 chief umpire of determining the cost and savings of

 12 legislation. That's going to -- they're going to

 13 determine that follow-on biologics legislation saves

 14 more money, and then it becomes of greater interest to

 15 law-makers.

 16 MR. WROBLEWSKI: Okay, thank you.

 17 Dave, did you want to add something on this

 18 Medicare issue?

 19 MR. GOLDING: Two things, just one clarification

 20 on adoption, it is the tail of the dog in many cases on

 21 my pharmacy operations side. We can't forget about

 22 these products are primarily injectables. So, part of

 23 what we need to factor in, as it relates to adoption, is

 24 every time a patient switches from product A or product

 25 B, even in today's world, they've got to be trained

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 65

 1 differently and send nurses out differently, and it's

 2 just a barrier that I don't want to lose sight of,

 3 because it's not just about the product. It's a lot

 4 about the product, but there's a lot of ancillary

 5 services, training, and just, quite frankly, these

 6 individuals may have been on the product for a long

 7 time, and physicians are going to be less apt,

 8 regardless of any clinicals, just say I'm not going to

 9 mess with what is working.

 10 So, I just wanted to make that point, because

 11 that will mute it to a certain extent and/or put burden

 12 on me to get out there, which I do and try to do.

 13 Secondly, as it relates to the payers in general

 14 but CMS specifically, very important, because depending

 15 on what happens, that is either going to drive -- that

 16 is going to drive incentives or disincentives, and as an

 17 example, for those familiar with the IVIG CMS market,

 18 where you had similar products, all within a single J

 19 code, the pricing was different, both on WAC data, but

 20 then as a cost to the pharmacy.

 21 So, it's just created all kinds of incentives

 22 and disincentives, where I was taking scripts written by

 23 a physician, of which I had no control on, and some of

 24 the times I was filling it below my cost and sometimes I

 25 was filling it above my cost. That has been corrected,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 66

 1 fortunately, and those J codes have been corrected in

 2 order to align them within those various products, but I

 3 think hemophilia is another one that's similar to the

 4 IVIG today, where similar products, not like simply

 5 price, is in a similar J code, and depending on how CMS

 6 weighs in here, that will either drive or prohibit

 7 adoption.

 8 MR. WROBLEWSKI: Okay, thank you.

 9 Let me change gears a little bit. In terms

 10 of -- one of the things that, Paul, you had raised in

 11 your presentation was that there are a number of next

 12 generation products in the two markets that you had

 13 looked at, and I just wanted to understand or have some

 14 comment on what had spurred the innovators to develop

 15 those second generation products.

 16 I'll turn to -- really, Paul, you're smiling, so

 17 it sounds like you have something on the tip of your

 18 tongue, but I'll turn to anyone else who would like to

 19 answer.

 20 MR. HELDMAN: Well, I don't want to go too far

 21 afield, but as memory serves -- and the key market here,

 22 we're talking about the ESAs, and --

 23 MR. WROBLEWSKI: We can talk about the

 24 interferon alpha or the GCSFs if you want to, too, not

 25 just ESA.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 67

 1 MR. HELDMAN: Okay. Okay. But I guess what I

 2 would say is that in addition to whatever improvements

 3 were made as a result of bringing a second generation

 4 ESA onto the market, there's also a licensing agreement

 5 that Amgen --

 6 MR. WROBLEWSKI: Sure.

 7 MR. HELDMAN: -- entered into before it was a

 8 profitable, successful company, in which it licensed

 9 away the rights to the oncology market for Epogen to

 10 J&J. So, for that reason alone, the development and

 11 approval of Aranesp in the U.S. was important for them

 12 to get into that market.

 13 MR. WROBLEWSKI: What about in the other

 14 markets? Maybe I'll turn to John or to Mateja.

 15 MR. LANE: You know, Hospira believes, in the

 16 absence of anyone else answering this from the branded

 17 side, that a lot of this is just general life cycle

 18 management, and when you look at the second gen products

 19 that have launched, and if we take EPO, Neupogen, or

 20 even the interferons, the second gen products have

 21 launched anywhere between nine to eleven years after the

 22 first gen.

 23 Obviously, they're offering an enhanced benefit,

 24 but they're also certainly switching patients from one

 25 product to the other, to a product that theoretically

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 68

 1 has got longer patent protection. So, in many ways,

 2 it's an ability to maintain a monopoly position over a

 3 franchise. So, that's one perspective.

 4 MR. WROBLEWSKI: Okay.

 5 Mateja?

 6 MS. URLEP: Well, we believe there are multiple

 7 factors, because the technology, the medicine,

 8 everything is improving, and, therefore, you know, the

 9 improvement in various sectors of science is bringing

 10 also improvements into the medicine, and we also believe

 11 that once the patents -- the legitimate patents have

 12 expired, that it should bring out competition, and

 13 competition will spur innovation to the companies to

 14 give more effort to bring new products, to bring value

 15 to the patients.

 16 MR. WROBLEWSKI: Thank you.

 17 Professor Grabowski, you --

 18 DR. GRABOWSKI: Yeah, I just wanted to say, just

 19 in MS and rheumatoid arthritis and several of these

 20 areas, there are several therapeutic alternatives, and a

 21 first-in-class can't just sit back and say, well, I have

 22 a monopoly now. You have other competitors that are

 23 getting into that market. So, a lot of this innovation

 24 will be spurred by competition.

 25 MR. WROBLEWSKI: Thank you.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 69

 1 Steve, you wanted to add a point?

 2 MR. BRUGGER: Two quick points: We actually are

 3 also an innovator company, and because the pathway was

 4 open to us to try to tackle some complex NDAs, such as

 5 Lovenox and Copaxil, we have developed analytics to try

 6 to understand these products, and we have actually

 7 engineered novel drugs. We actually have one that's in

 8 Phase II clinical trials right now for acute coronary

 9 syndrome. So, just because a pathway was difficult to

 10 tackle, we innovated and actually are not only trying to

 11 make what I would call a biogeneric; we're also trying

 12 to make an innovator drug.

 13 The other comment I would make, having spent

 14 almost 30 years on the branded side of the industry, I

 15 know there's been a lot of concern on the part of the

 16 branded side that if such a legislation were to open up,

 17 it would stifle innovation. I guess if I put myself in

 18 the branded industry right now, with absolutely no

 19 potential threat of a generic, I wonder what R&D

 20 decisions I will be making with my very precious

 21 dollars.

 22 I think if -- and Aranesp and some of these

 23 other decisions, I think you can at least look at them

 24 on their own merit, but I think if legislation were

 25 there and there was really significant generic threat,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 70

 1 whether it was real or not -- because it may take some

 2 time. As we all know, these are challenging molecules.

 3 I would think that the R&D decisions that some of those

 4 branded companies would be making would be much more

 5 around innovative, novel advances in patient care,

 6 because that's how they're going to grow their market

 7 share.

 8 MR. WROBLEWSKI: When you said a generic threat,

 9 did you mean in the way we've defined the terms, a

 10 biosimilar threat or a biogeneric threat? And would the

 11 impact be different?

 12 MR. BRUGGER: I was referring more to the

 13 biogeneric threat, because I think the impact there

 14 would be much more substantial.

 15 MR. WROBLEWSKI: I see. Okay. Okay.

 16 Ted, you wanted to add something?

 17 DR. BUCKLEY: Sure. Actually, I'm not sure

 18 that, as I've said before, that the biogeneric threat

 19 would necessarily be -- or that the biosimilar threat

 20 would be less than the biogeneric threat. I mean, it's

 21 all about -- from the innovator's perspective, it's all

 22 about the amount of market share that is gained by the

 23 next generation -- by the biosimilar product, because to

 24 the innovator, every percentage of market share that's

 25 lost is revenue lost, whether or not the price discount

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 71

 1 is 10 percent or whether the price discount of the

 2 follow-on product is 30 percent. The effect of that 1

 3 percent market share decline is the same to the

 4 innovator.

 5 One question or one thing that I would like to

 6 point out is that if you look at the biopharmaceutical

 7 industry overall, in the past 20 years, I mean, there

 8 has been no pathway for a follow-on product, but yet,

 9 this has been one of the most innovative sectors around.

 10 We've got treatment for rheumatoid arthritis; we have

 11 got the erythropoiesis; we have got monoclonal

 12 antibodies that are treating forms of cancer that

 13 weren't treatable before. So, there has been a great

 14 deal of innovation in the innovator firms over the past

 15 20 years.

 16 As we're thinking through developing a follow-on

 17 pathway, it's important to make sure that the $1.2

 18 billion, on average, that it takes to bring a product to

 19 market, that there's enough time to recoup those costs,

 20 because if I were sitting in an innovator's shoes -- you

 21 know, our association represents innovator companies,

 22 but I'm not an -- I'm not a member of an innovator

 23 company.

 24 If I were sitting there and if the pathway was

 25 developed such that it introduced a great deal of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 72

 1 uncertainty to whether or not I could recoup my R&D

 2 costs, I would really consider whether or not I should

 3 even be in this business anymore.

 4 MR. WROBLEWSKI: Sure, that's a fair point, and

 5 we are going to examine that in depth in our second

 6 hour.

 7 John, you wanted to add a point?

 8 MR. LANE: Just a couple of comments. I mean,

 9 Hospira does believe that competition certainly provides

 10 an incentive to innovation. I guess I would want to

 11 respond to the comment Ted made. You know, how much

 12 time is enough to recoup the innovations? If you look

 13 at Epogen, that product launched in 1989, and it's not

 14 expected to receive competition until, you know, well

 15 after 2012, maybe 2015. Neupogen launched in 1991, and

 16 we are not going to see competition until well after

 17 2010. So --

 18 MR. WROBLEWSKI: Sure. And those are fair

 19 points, and I think we are going to get into that in

 20 more detail.

 21 MR. LANE: I understand, I understand, but

 22 there's a point to be made.

 23 But you also made a comment about how biologics,

 24 the industry, has provided innovations, and absolutely

 25 they have. The pharmaceutical industry provided

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 73

 1 tremendous innovations prior to Hatch-Waxman, but if you

 2 look at Hatch-Waxman and the effect that's had in terms

 3 of what Professor Kolikoff pointed out, you've seen an

 4 increase in the number of patent applications and

 5 approvals; an increase in the number of new molecular

 6 entity approvals.

 7 So, you have had an increase in the number -- in

 8 the spending that R&D is -- as a percent of sales for

 9 these pharmaceutical companies. So, there's no reason

 10 to believe that biosimilars eventually can drive that

 11 same type of innovation or at least incentive to

 12 innovate even above and beyond where we're at today.

 13 MR. WROBLEWSKI: Okay. Thank you.

 14 I am going to turn the discussion and really try

 15 to cover two more points before we break at 10:30. The

 16 first one is trying to examine the factors that FOB

 17 entrants will evaluate when they consider when and what

 18 they should consider when making an investment to

 19 develop an FOB product.

 20 I'd like to ask either Mateja, John, or Steve to

 21 comment on the most important factors that their

 22 companies considered as they were preparing their FOB

 23 applications.

 24 I'm going to start with Steve since I'm looking

 25 your way first.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 74

 1 MR. BRUGGER: Well, I will probably take a

 2 slightly different stance than Mateja and John, because

 3 we are much, much smaller, and actually, I think we've

 4 talked a lot about biosimilars and clinical data and

 5 comparability, but what is very important to us to make

 6 continued investment in this field is a very clear path

 7 towards interchangeability, and what that does is allows

 8 companies like ours to innovate in the analytical space

 9 and not in the clinical trial space. These clinical

 10 trials are a very crude way to detect similarities or

 11 differences between these very complex molecules, and

 12 the way that we will truly understand these complex

 13 macro molecules in the future is by innovating in this

 14 analytical space.

 15 And that's why it's so important to us that the

 16 legislation has that pathway so that we can make those

 17 investment decisions, because ultimately, we hope to

 18 minimize those clinical trials. We hope to better

 19 understand these molecules. We hope to have a better

 20 understanding of immunogenicity issues with these

 21 molecules, to shorten those development time lines,

 22 because for us, if it's a biosimilar game, and these are

 23 large, extensive, $40-$50 million dollar clinical

 24 programs, a company like ours are not going to invest in

 25 the space.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 75

 1 MR. WROBLEWSKI: Right. So, you're coming at it

 2 from much more of a biogeneric angle, as we have been

 3 talking about it this morning.

 4 Mateja, did you want to add something?

 5 MS. URLEP: Yes. Sandoz, one of the leading

 6 generic companies, namely, the second generic company in

 7 the world, is, of course, looking to future growth, and,

 8 therefore, the biologics actually do represent more than

 9 50 percent of the new approvals in the U.S., the place

 10 to go in the future. So, we cannot say that biologics

 11 are not the part of the market, pharmaceutical market,

 12 that our company will not enter.

 13 So, therefore, we are preparing to compete on

 14 the market the way it is and the way it will develop in

 15 the future, but, of course, the challenge is how to be

 16 sure what kind of the requirements are necessary to

 17 develop the product. Sandoz has a long-lasting, more

 18 than 25 years, experience in development and productions

 19 of biologics, as being one of the first companies in

 20 this arena, and we do supply a lot of originator

 21 companies with their products, because they're developed

 22 and produced at our premises.

 23 So, therefore, we have a lot of experience

 24 gained over time, and with this experience, we are ready

 25 to enter the market, and depending on the market access,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 76

 1 we can offer various discounts.

 2 MR. WROBLEWSKI: Thank you.

 3 Let me turn to John, and then, Rachel, I'll turn

 4 to you. John, go ahead.

 5 MR. LANE: Yeah. You know, based on Hospira's

 6 experience with Retacrit, we firmly believe there is a

 7 tremendous opportunity for biogenerics to exist.

 8 Regarding some of the things we think are

 9 important as we consider entering, the additional

 10 molecules, which markets, et cetera, you know, there is

 11 a number of provisions I think that people are talking

 12 about and have different perspectives on: the length of

 13 market exclusivity; whether evergreening is actually

 14 going to be an issue we have to deal with, where we

 15 could develop a biosimilar to the first product and

 16 patients switch over to the second gen product, that's

 17 certainly concerning; whether there's going to be a

 18 patent resolution system in place where you can resolve

 19 these patents in a timely manner; and certainly

 20 interchangeability is critical.

 21 The patients will not realize the ultimate

 22 benefit of the savings of these products will be just as

 23 safe and therapeutically equivalent if

 24 interchangeability at some point in time does not exist.

 25 MR. WROBLEWSKI: And you are using

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 77

 1 interchangeability, again, as biogeneric?

 2 MR. LANE: As, yeah, full substitution;

 3 automatic substitution.

 4 MR. WROBLEWSKI: Okay.

 5 Rachel, you wanted to add something?

 6 DR. BEHRMAN: I wanted to respond to something

 7 that Steve said, because I couldn't agree with you more

 8 that the real advances will come in the analytics and

 9 the ability to, to the best of our ability, realize how

 10 similar or different these products are and may minimize

 11 or shorten or decrease the extent to which certain types

 12 of clinical trials are necessary.

 13 I'm not sure that it will ever get you

 14 interchangeability, substitutability, whichever word

 15 we're using for substitutability. Those are not

 16 typically large and expensive clinical trials, by the

 17 way, but, again, I'm not a biochemist, I don't know, but

 18 knowing what we do know about protein products and even

 19 the multiplexed molecules, I'm not sure in the

 20 foreseeable future it will get you to what you've

 21 defined as the biogeneric world.

 22 MR. WROBLEWSKI: And are there any benefits to

 23 the innovator companies for having the analytics to

 24 determine what interchangeability is in terms of, say,

 25 batch stabilization?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 78

 1 DR. BEHRMAN: Well, that's why we came up with

 2 the comparability definition, in fact, huge, because

 3 when -- and pure red cell aplasia comes to mind. When

 4 innovators make changes to their manufacturing process

 5 and if they can't demonstrate to us and obviously to

 6 themselves that they are producing a similar enough or

 7 essentially the same but a similar enough compound, then

 8 they have a problem.

 9 So, yes, I think there are tremendous advantages

 10 to the innovators, and the innovators will do some of

 11 the second generation work, as has been pointed out, if

 12 for nothing else, maybe for the good of humanity.

 13 MR. WROBLEWSKI: Say that again. I didn't hear

 14 you.

 15 DR. BEHRMAN: Well, in other words, there was

 16 some discussion I didn't chime on, why second generation

 17 work? why innovate? why improve? Well, at the Agency,

 18 we hope that's done for the good of the public health.

 19 MR. WROBLEWSKI: Right. Okay. Thank you.

 20 Steve, did you want to respond to --

 21 MR. BRUGGER: Yes. So, Rachel, I didn't mean to

 22 suggest that we were going to tackle all these biologics

 23 and chemical characterization. I guess the issue for us

 24 is we've got to legislate something for 20 years from

 25 now, and I would like to think that someday that we will

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 79

 1 get there, and I think people thought we wouldn't get

 2 there with Heparins, and I think a great example of the

 3 innovation going across both generic and innovative

 4 industries was the work that we actually contributed

 5 with FDA and Mateja and others on the Heparin

 6 contamination issue.

 7 DR. BEHRMAN: Absolutely.

 8 MR. BRUGGER: And it was because the investments

 9 were made on trying to study and analyze this complex

 10 Heparin mixture that we were able to better understand

 11 how to approach those and very quickly adapt to somewhat

 12 of a major crisis.

 13 DR. BEHRMAN: That's right.

 14 MR. BRUGGER: So, we can't lose sight of the

 15 fact that this is where the future is. It's not in

 16 clinical trials; it's not in comparability of clinical

 17 trials. The future has to be around analytics. It may

 18 be five, ten, it may be 20 years, but we have to at

 19 least strive for that.

 20 MR. WROBLEWSKI: You know, we have been talking

 21 about biosimilars and biogenerics as new companies

 22 coming in. Do any of the panelists anticipate that

 23 current innovator companies will be using the biosimilar

 24 and/or biogeneric pathways if they are developed? Why

 25 not?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 80

 1 DR. GRABOWSKI: I think a lot of specialty

 2 companies, specialty pharma, are looking at this issue

 3 and see it as an opportunity. Perhaps some of the large

 4 pharma companies that aren't in the biologic space will

 5 see it as an opportunity. So, I think there could be

 6 lots of competition from different sources.

 7 MR. HELDMAN: Small biotech companies as well.

 8 MR. LANE: I was just going to say we've seen

 9 several big pharma firms make that statement, most

 10 notably, Pfizer has said they're evaluating that in

 11 their business model. So, it's not inconceivable, with

 12 these companies having an infrastructure already in

 13 place, that this would be part of the their model going

 14 forward.

 15 MR. WROBLEWSKI: Okay, thank you.

 16 I'd like to ask one other -- Steve, did you want

 17 to --

 18 MR. BRUGGER: I just want to make one comment,

 19 that actually, getting to John's earlier point, the

 20 final language around exclusivity and the patent process

 21 will dictate to a large extent the kinds of companies

 22 that will get into this space. So, the smaller biotech

 23 companies will be constrained from getting in if there's

 24 additional barriers, because they won't be able to make

 25 those kinds of investments that obviously large

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 81

 1 companies like Sandoz and Hospira could make.

 2 MR. WROBLEWSKI: Let me ask one question, and,

 3 you know, one of the interesting things about this

 4 market that we've talked about is that it's worldwide,

 5 that -- you know, the drug products, and I am interested

 6 to know about how -- and, Rachel, we touched on this

 7 briefly, and if you could maybe start off in terms of

 8 the ability to rely on innovator data that is generated

 9 abroad or should the pathway that is here be limited to

 10 an FDA-approved product or could it be data that's

 11 from -- do you see what I'm --

 12 DR. BEHRMAN: I know exactly what you're saying

 13 or I think I do.

 14 I don't want to touch on whether we can -- what

 15 innovator data we can legally look at. I think that's a

 16 question for the lawyers and the legislators. But

 17 philosophically, I did try to say that we do not -- as

 18 in a public health agency -- want to see studies

 19 duplicated. We don't want to see resources wasted. We

 20 don't want to see patients subjected to trials that, in

 21 that sense, would not be ethical.

 22 In terms of where it's generated, whether it's

 23 generated in Europe or here, the development of medical

 24 products is a global process. We routinely look at data

 25 generated overseas in support of NDAs and BLAs, and we

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 82

 1 will continue to do so. In some cases, there are some

 2 complexities, particularly from the research, monitoring

 3 and clinical practice realm, protection of human

 4 subjects realm, those are additional challenges, but

 5 yes, we want to look at all data.

 6 MR. WROBLEWSKI: Thank you.

 7 Did anyone else want to add to that discussion

 8 about --

 9 MS. URLEP: Basically, for us, it's a discussion

 10 about the reference product, where we see that various

 11 different jurisdictions, they say that we should use the

 12 reference product which is approved under that

 13 jurisdiction, and here, European Union wants to have a

 14 reference product being approved in the E.U., whereas

 15 the FDA would be on the side to have a reference product

 16 being approved in the U.S.

 17 MR. WROBLEWSKI: And what's the impact of that?

 18 What's the impact?

 19 MS. URLEP: The impact of that is even though

 20 the originator in most cases had developed one

 21 development program, but it is approved in different

 22 jurisdictions, and it is the fact of the same product,

 23 but in Europe, these are different products in different

 24 jurisdictions, and we would have to repeat some of the

 25 trials with the reference products from the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 83

 1 jurisdiction.

 2 Canadian authorities tend to be, at the moment,

 3 a bit more open for their subsequent entry biologics, as

 4 they call them, where they say that the reference

 5 product may not be approved in Canada, but it has to be

 6 approved in another prominent jurisdiction, such as U.S.

 7 or the E.U.

 8 MR. WROBLEWSKI: Okay, thank you.

 9 We're about one minute until 10:30. Any final

 10 comments before we break and I instruct people to where

 11 coffee is upstairs on the seventh floor?

 12 (No response.)

 13 MR. WROBLEWSKI: Okay. We'll start back at

 14 10:45. Coffee is on the seventh floor. If you do

 15 decide to go outside for any reason, please keep your

 16 name tag. You'll have to go through security again, but

 17 you won't have to sign those papers.

 18 (A brief recess was taken.)

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 84

 1 PANEL TWO:

 2 LIKELY COMPETITIVE EFFECTS OF

 3 REFERENCE PRODUCT REGULATORY EXCLUSIVITY

 4 MR. WROBLEWSKI: It's time to get started on the

 5 second panel, this morning. In this panel, we're going

 6 to examine the likely competitive effects of reference

 7 product data exclusivity. My comoderator of this panel

 8 is my colleague, Chris Garmon, from the Bureau of

 9 Economics.

 10 Joining us for this discussion, I'd like to

 11 introduce everyone. Even though I've introduced some of

 12 them before, some folks may have missed the earlier

 13 introductions.

 14 Starting at my far right is Alexis Ahlstrom,

 15 Director of Avalere Health. To her left is Geoff Allan,

 16 President and CEO of Insmed. To his left is Audrey

 17 Phillips, Executive Director of Biopharmaceutical Public

 18 Policy and Advocacy at Johnson & Johnson.

 19 Turning around the corner is Dave Golding,

 20 Executive Vice President for Specialty Pharmacy Services

 21 at CVS Caremark. Henry Grabowski, Professor at Duke

 22 University. Thank you for joining us.

 23 DR. GRABOWSKI: Thank you.

 24 MR. WROBLEWSKI: Paul Heldman is to my left,

 25 Senior Health Policy Analyst at Potomac Research Group.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 85

 1 Linda Horton, Partner at Hogan & Hartson, here in

 2 Washington. Mateja Urlep, Head of Global Marketing and

 3 Medical, Biopharmaceuticals, at Sandoz, International.

 4 And then at the very far end of the panel is Alex Brill,

 5 a Research Fellow at the American Enterprise Institute.

 6 More detailed biographical information about

 7 each one of the participants is in the folders and on

 8 the FTC website.

 9 Before we get started, someone came up to me at

 10 the break and made a really good point that I failed to

 11 mention earlier. The FTC is keeping the record open for

 12 another 30 days, until Monday, December 22nd, for any

 13 comments that you'd like to add. If there were certain

 14 things that we didn't cover in that first panel that you

 15 thought, geez, I wish they had discussed this point, we

 16 actually welcome your additional comments at that time.

 17 Before we get started on the second panel, Linda

 18 Horton has agreed to provide a brief presentation on how

 19 the EMEA, their regulatory pathway for the approval of

 20 biologics and how that approach can inform the U.S.

 21 approach.

 22 Linda?

 23 MS. HORTON: Thank you.

 24 First, a caveat. My views are my own, not those

 25 of my firm or any of our clients.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 86

 1 You've asked me to focus on the European

 2 experience with a particular emphasis on regulatory

 3 exclusivity periods there and also upon the

 4 interchangeability issue. I would like to note that

 5 there was a bit of a mixup in the photocopying of the

 6 slides, and what appears on the screen is different from

 7 what's in your folder, and I will refer you to the FTC

 8 website, which has a copy of the longer version of my

 9 presentation, which has slides from both of these. So,

 10 there will be some difference between what you have in

 11 your folder and what appears.

 12 First of all, these are the topics that the FTC

 13 has asked me to cover, and when we talk about U.S. and

 14 Europe, there are some similarities in this class of

 15 products. Here in the U.S., we're quite accustomed to

 16 having our unitary FDA system. In Europe, we do have

 17 much more centralization of the decision-making on these

 18 type of products, and since 1975, all biotech products

 19 have been required to go through the EMEA process, and

 20 now, since the year 2004, effective late 2005, there has

 21 been a biosimilar pathway, at least when it's a biotech

 22 biosimilar, it must likewise go through the centralized

 23 EMEA process, which the European Commission actually

 24 issues the decision.

 25 There's a great deal of harmonization between

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 87

 1 the content of the review, the depth of the review, much

 2 harmonization through the International Conference on

 3 Harmonization, although the FDA and the European

 4 Medicines Agency took a somewhat different approach to

 5 comparability. As it may come up, Dr. Behrman's slides

 6 showed the FDA approach to comparability was more the

 7 evolution of one company's product, whereas the European

 8 Medicines Agency, back a few years, was willing to take

 9 the position that they would consider comparability

 10 among different firms. But if we talk about guidelines,

 11 the ICH is a good place to do it, because it includes a

 12 place at the table for industry.

 13 Patent life, this has now been harmonized at an

 14 international level to 20 years. In both the U.S. and

 15 the E.U., there's a shared belief in both patents and

 16 also in regulatory exclusivities as ways to incent

 17 innovation and to give companies a chance to recoup for

 18 their investments.

 19 Some cautionary notes: We're not looking in the

 20 mirror when we look across the Atlantic. Each of the 27

 21 member states has its own healthcare system, makes its

 22 own decisions about reimbursement, pricing, and medicine

 23 substitutability.

 24 There also are persistent national differences

 25 in patents, and as here, a lack of complete security

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 88

 1 that a patent will hold up. There is the European

 2 Patent Office, but when you get a European patent, it's

 3 a bundle of national rights.

 4 My next bullet point I started worrying about,

 5 because you do need to understand that all of these

 6 provisions in the legislation are subject to

 7 intellectual property, so that it's not saying that the

 8 regulatory decisions can override patents, but at the

 9 same time, the listings you'll find, say, on the

 10 European Medicines Agency website or the European

 11 Commission website will not include any information

 12 about patents. So, you don't have any kind of Orange

 13 Book patent listing system in Europe, nor do you have a

 14 system of Paragraph IV notices, nor do you have 180-day

 15 generic exclusivities in the E.U.

 16 In general, the pharmaceutical regulators --

 17 there is nothing -- at member state level, there could

 18 be some taking into account of patents, but there's

 19 nothing in the legislation that tries to link together

 20 or relate how the resolution of a patent might relate to

 21 the approval of a generic.

 22 You need to understand, too, that the origin of

 23 the ten-year exclusivity period goes back 21 years, to

 24 1987 legislation in Europe, which was its kind of

 25 Hatch-Waxman law. It was not designed particularly with

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 89

 1 biologics in mind. Indeed, it was only four years ago,

 2 effective three years ago, that the bioapproval pathway,

 3 biosimilar pathway, came into existence in Europe.

 4 And so I think I would give a cautionary note

 5 about just, you know, we already have issues about

 6 should we copy the Hatch-Waxman formulation for

 7 biologics in the U.S.? I likewise would give a caution

 8 about just looking at the European system and assuming

 9 automatically that's the way to go. I think there are

 10 studies by Professor Grabowski and others that provide

 11 more empirical data than these experience models

 12 suggest.

 13 On the eight plus two plus one, you need to

 14 understand that this system will apply only to

 15 submissions that were made to the European regulatory

 16 authorities after late 2005, after November the 20th,

 17 2005 in the case of applications going to the EMEA

 18 process; slightly different time frames for those going

 19 through the national agencies, which we don't talk much

 20 about in this presentation, because when we're talking

 21 about biotech biosimilars, it's EMEA.

 22 And this is the short description of the system

 23 is eight plus two plus one, which means eight years data

 24 exclusivity dating from the European Commission

 25 authorization filable. Before that, generic decisions

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 90

 1 are not even filable. Then, for two years, no generic

 2 applications can enter the marketplace. If, before the

 3 eighth anniversary of the original authorization, the

 4 reference product's marketing authorization holder

 5 manages to get a new indication approved that

 6 constitutes significant clinical benefit, then any

 7 competitors are shut off the market for an additional

 8 year, which would give a total of 11 years of time on

 9 the market for the innovator product. And, again, I'll

 10 emphasize that this system kicks in effective with

 11 applications that were submitted late 2005 or after.

 12 So, what happened before that? Well, for the

 13 European Medicines Agency, it opened its doors on the

 14 1st of January, 1995, with legislation making it ten

 15 years, period. Before that, there had been a few

 16 products that were approved, high-tech products, that

 17 likewise got ten years under the 1987 legislation I

 18 referenced. At member state level, there was

 19 disharmony. Member states were permitted to pick

 20 between six and ten years, and in my longer

 21 presentation, you can see which ones picked which,

 22 because this old system continues to be relevant now

 23 until, you know, 2011, 2012, you know, on into the

 24 future.

 25 So, when we talk about the plus one year,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 91

 1 there's a very good European Commission guideline, but

 2 it won't really kick in until around 2016, 2017.

 3 There's also, in the European legislation, a number of

 4 stand-alone exclusivities that, you know, we don't have

 5 time to go into, but there's one I might mention, an

 6 independent plus one for a new indication of a

 7 well-established medicinal product.

 8 There's also the chance for ten years or the

 9 normal eight plus two plus one, rather, for a new

 10 product that combines two older products. That's

 11 treated as a new product, according to the European

 12 Commission. You can get a year of exclusivity for

 13 effecting a switch of a product from prescription to

 14 OTC, and I think we're about to have the first example

 15 of that at E.U. level with a diet product, alli, from

 16 GSK. And then orphan exclusivity in Europe, it's ten

 17 years of marketing exclusivity, unlike data exclusivity,

 18 where you can test your way onto the market with your

 19 own data set.

 20 With marketing exclusivity, if the product is

 21 very similar to the orphan product and also with

 22 reference to the indication that's being used, then the

 23 product can enjoy ten years of marketing exclusivity and

 24 can even be extended with the new pediatric legislation.

 25 So, it's a very complex system, as you can see, and so

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 92

 1 there's a lot of nuance to it.

 2 Concerning improvements, this I know is a big

 3 debate in the U.S., and there are some issues in Europe

 4 that are not 100 percent clear. What is clear is that

 5 when we're talking about products going through the

 6 centralized procedure, the legislative provision to

 7 reference is not Article 10.4 of the Community Code of

 8 Medicinal Products, but Article 14.11 in the EMEA

 9 regulation. They do have uniform time periods, but they

 10 are separate, stand-alone provisions.

 11 I am not going to read through all that. You

 12 are perfectly capable of doing that.

 13 You know, on the face of this provision looked

 14 at by itself, any product that goes through the process

 15 of the EMEA shall benefit from an eight-year period of

 16 data protection. Applicants wishing to market their own

 17 versions of high-tech biologics, you know, already on

 18 the market could, by submitting full applications, enjoy

 19 the benefits. If somebody goes the biosimilar route,

 20 the same thing will not be possible.

 21 Okay. There is, however, in the Community Code

 22 of Medicinal Products a provision that does appear to

 23 apply both to centrally authorized products and to those

 24 approved at member state level called the global

 25 marketing authorization, and this has nothing to do with

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 93

 1 the ICH common technical document or anything like that.

 2 It's just a legal construct that was intended to codify

 3 certain case law that we will touch on next, basically

 4 trying to wrap up into one authorization various kinds

 5 of changes that can be made.

 6 There is a European Commission guidance stating

 7 that where the applications come from different

 8 marketing authorization holders, then those different

 9 applications are not treated as being under the same

 10 global marketing authorization. This was one of the

 11 issues. So, this -- oh, dear. I keep pushing the

 12 wrong -- okay.

 13 When we look at this definition of global

 14 marketing authorization, it will become very important

 15 to know what is a medicinal product, because it's only

 16 when we're talking about the medicinal product that all

 17 these changes and so forth will be treated as wrapped up

 18 in one variation. If you have a product that's very

 19 different, such as one that's been glycosylated and

 20 offers a very different profile in terms of the clinical

 21 testing and preclinical testing, native and the CMD, the

 22 chemistry and manufacturing data, and complete studies

 23 are done, there's no reason why that should be treated

 24 as being under the same global marketing authorization

 25 holder as the earlier protein that is very different.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 94

 1 However, if you look at the EMEA website or the

 2 FDA website, for that matter, and all the kinds of

 3 changes and evolutions and variations and more minor

 4 changes, those types of things will be treated as part

 5 of the original global marketing authorization holder.

 6 And why is this important? Well, it has to do

 7 with two things, really: One is whether the follow-on

 8 company is kind of locked into the oldest original

 9 product or whether they can copy not only traits of the

 10 original product but also follow-on traits; and also it

 11 has to do with whether there's a restart of the

 12 exclusivity period, whether ten or eight plus two plus

 13 one, depending on when it entered.

 14 There was a case in 2004, which in your

 15 handouts, you have a summary of two cases, a generics

 16 case of 1998 and the Novartis-Sangstat case of 2004,

 17 that both are relevant to how this whole area is

 18 interpreted. It's not in what will go up on the screen,

 19 but there is a degree of uncertainty, and many lawyers

 20 believe that the European Court of Justice decided the

 21 Novartis-Sangstat case improperly, and there's a lot of

 22 confusion in this area about what exactly will be

 23 treated as part of the global marketing authorization.

 24 Now, as I mentioned, it's too soon to have

 25 experience here. The European law-makers -- and this

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 95

 1 came from basically the industry, it came from the

 2 European Commission, whereas from 1995 through 2004,

 3 there was no kind of extra exclusivity period for the

 4 second indication, the decision was made that this was

 5 very important to add on, and so this guidance takes a

 6 very broad view of the types of benefit that would

 7 justify getting the eleventh year, but it's all

 8 indication-related. You won't find anything in the

 9 guidance that has to do with product improvements, other

 10 than new indications.

 11 Also, I would point out, Michael, that a number

 12 of the companies that made submissions to the FTC docket

 13 took the position that one year is not enough time, and,

 14 you know, I won't get into that, but that's...

 15 I'll just say, too, that as in the United

 16 States, in Europe, oftentimes the patent life extends

 17 longer than any regulatory exclusivity period,

 18 particularly when you consider that it's not just the 20

 19 years but also the supplementary protection certificate

 20 that in Europe will add on five years. So, the

 21 regulatory exclusivity period operates as a kind of

 22 secondary type of protection.

 23 It's important in some cases where there are

 24 very long development and registration periods, such

 25 patent has expired or is nearing expiry at the time of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 96

 1 the product approval. There also are some areas where,

 2 at least in the past and in some member states, the

 3 patent protection has not been as robust as it perhaps

 4 should be, and so in terms of innovation and

 5 incentivization, the regulatory exclusivity periods have

 6 provided a degree of certainty that the patents have

 7 not. And there also have been some differences, too, in

 8 the patentability of new uses, and that's where this can

 9 become important.

 10 Turning now to interchangeability, we have up

 11 there on the screen a quote from the EMEA Executive

 12 Director pointing out that the Agency is in no position

 13 to guarantee that a biosimilar is interchangeable. This

 14 relates, in part, to the type of data which have been

 15 submitted, which the biosimilar applicants were not

 16 really forced to submit data showing their products

 17 would be interchangeable. The EMEA takes the position

 18 that substitution is a national competency, and we'll

 19 talk in a minute about what the member state experience

 20 should be.

 21 There's a couple of other -- you know, I think

 22 on this definitional thing, what I find useful to say is

 23 interchangeability is a matter of science and

 24 substitutability is a matter of law, and I think what

 25 doctors do is really something different. I think

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 97

 1 that's practice of medicine.

 2 Interchangeability is when FDA says we do not

 3 think that Omnitrope is interchangeable with other

 4 products, nor do we think the innovator products are

 5 interchangeable, nor do we think insulins are

 6 interchangeable. That's where the expert authority

 7 makes a pronouncement in an area that is intended to set

 8 a standard of care and guide the world or guide the

 9 country, and there have been other statements beyond

 10 what is on the screen in the couple years following, and

 11 I won't go through all that. It's in the longer

 12 presentation.

 13 Substitutability is handled -- there's not any

 14 more slides on this, but in your handout, there is --

 15 you have partial information about which member states

 16 have forbidden exclusivity, because you've got slide

 17 one, and there's a second slide that's posted. So, if

 18 you have your handouts -- I'm sorry for this -- there's

 19 also some new European pharmacovigilance guidance that

 20 advises the inclusion of brand-specific information in

 21 adverse event reports, which really means that it's

 22 going to be very difficult to get that information if

 23 there's not prescribing by brand name and dispensing by

 24 brand name, since the INN, the International

 25 Nonproprietary Names, do not differentiate among the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 98

 1 different manufacturers' products.

 2 There also had been a letter to member states

 3 from senior European Commission official Georgette Lalis

 4 in mid-2007 cautioning member states that they should

 5 not assume that glycoproteins are all interchangeable

 6 one with another, and this related directly to the

 7 experience with Eprex just a few years ago.

 8 So, in addition to the nine countries listed in

 9 your handout, The Netherlands, Norway, Slovakia,

 10 Slovenia, Spain, Sweden, and the U.K. all have legal

 11 provisions forbidding substitution generally of biotech

 12 medicines or some say injectable medicines, some

 13 biologicals, some say biosimilars, but that's 16 out of

 14 the 27 member states -- or 28, I guess, because Norway

 15 is not a member state, but a sister country. So, more

 16 than half.

 17 MR. WROBLEWSKI: Linda, could I ask you to do

 18 the one final slide, and we'll start with the

 19 discussion?

 20 MS. HORTON: That's it. Thank you.

 21 MR. WROBLEWSKI: Thank you.

 22 MS. HORTON: I hope I didn't overrun. It's a

 23 lot of material.

 24 MR. WROBLEWSKI: No, thank you.

 25 You know, the objectives of today's discussion

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 99

 1 on this second panel this morning are to identify the

 2 purpose of a reference product data exclusivity period

 3 and to examine the likely competitive effects of various

 4 ways to structure a data exclusivity period. As with

 5 the morning panel, we were going to try to stick to

 6 using these terms to distinguish really what the market

 7 effect is.

 8 I think, Dave, you had made the point that a

 9 biosimilar drug in some ways, from an economic point of

 10 view, acts as though it were another brand product in

 11 that class; a biogeneric would be the one that would be

 12 interchangeable that would have the same economic effect

 13 as a generic drug; and that a follow-on would really

 14 include both of those. Those were the terms we were

 15 looking at from an economic point of view.

 16 First, we're going to run the panel the same way

 17 as we did with the first panel, in which we'll pose a

 18 question, address it to a particular participant, and

 19 then ask for any follow-up. And please just turn your

 20 card on the side if you'd like to be called on, and

 21 we'll try to do that if time permits.

 22 And the one other thing is that these

 23 microphones are always on, so if you are not speaking,

 24 if you can just move it up so there won't be any chatter

 25 in the background.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 100

 1 I'd like to open up really the first question to

 2 the panel, and I'm going to turn to -- I'll turn to

 3 Audrey first. What is a data exclusivity period and

 4 what is its purpose?

 5 MS. PHILLIPS: Well, I first would like to thank

 6 the FTC on behalf of Johnson & Johnson for inviting us

 7 to participate in this dialogue, very important and

 8 we're happy to be here.

 9 In terms of a data exclusivity period, we talked

 10 about in the first panel a lot on the tail end of this

 11 and what is important, but I think for data exclusivity,

 12 what we want to do is talk about its purpose when

 13 investment decisions are made and remember what it is

 14 and what it isn't, because there are a lot of terms that

 15 we're talking about here, and I think this confusion in

 16 terms probably will continue to go on for a little

 17 while.

 18 But we need to make sure that we understand that

 19 data exclusivity is about protecting the data. It's not

 20 about market exclusivity, and it's not about monopoly.

 21 It is about the data itself and a period of time where

 22 the Government cannot rely upon that data and, in

 23 essence, cannot tap into the investment of the

 24 innovator.

 25 I think it's also important that we understand

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 101

 1 that just like all other industries, when patents expire

 2 in this industry, competitors are free to come to

 3 market. They're free to invest in their own development

 4 program and come to market. It's no different in this

 5 industry than it is to other industries.

 6 Data exclusivity actually facilitates

 7 competition, because what it does, it allows the

 8 Government, at some point in time, to be able to rely

 9 upon the innovator's data, to rely upon the innovator's

 10 investment, if you will, to bring a competitive product

 11 to market, and that's how investors look at it as well.

 12 When investors are making decisions in their products

 13 and in -- decisions along the way, whether it be in

 14 large companies or whether it be in small biotech

 15 companies, they're looking at the future, and they're

 16 looking at the point at which their investment might be

 17 used to generate competition. So, it's an important

 18 factor.

 19 I think some of the things that we need to think

 20 about when we're thinking about what that needs to be is

 21 that legislation moving forward for biosimilars is going

 22 to change the status quo for investment decisions, very

 23 clearly. So, as we consider this moving forward, as we

 24 consider investment moving forward in biotech, we need

 25 to understand that the game has changed, the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 102

 1 considerations are changed, the valuations are changed,

 2 the downside risk has changed, the upside potential has

 3 changed for these investment decisions. So, it's

 4 important that we get it right.

 5 MR. WROBLEWSKI: Thank you.

 6 Dr. Grabowski, would you like to add anything?

 7 DR. GRABOWSKI: Yes. I would just say that,

 8 echoing Linda's earlier point, that the data exclusivity

 9 will run with patents, and so it will be important,

 10 selectively, in selective cases, essentially either

 11 situations where there's very long regulatory periods,

 12 review periods, so there's very little effective patent

 13 time left, or situations, as you put it, where the

 14 patents may be more -- not as robust and subject to

 15 challenges.

 16 So, it is a -- it's designed more -- some people

 17 would use the word insurance policy to investors who are

 18 thinking about the future, and this would start way back

 19 in the biologic industry in many cases with venture

 20 capital, private equity. Are we going to be able to, at

 21 the end of the day, be able to recover our R&D

 22 investments? I think looking at it from an innovator's

 23 standpoint, it's how will it affect returns on

 24 investment, and it's a complementary feature to the

 25 patent system. In many cases, the patent system may be

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 103

 1 sufficient; in some cases, it may not be.

 2 MR. WROBLEWSKI: Thank you.

 3 You know, in the earlier panel, the work that

 4 Mateja indicated that she didn't have to do was -- or

 5 the testing that they didn't have to do were Phase II

 6 clinical trials. How do you quantify the investment

 7 that is being relied upon? Do you look at it only as

 8 what the follow-on biologic doesn't have to do? Is that

 9 the investment? Or do you look at something broader?

 10 MS. PHILLIPS: The relied-upon allows the FDA to

 11 proceed and depend on abbreviated data. So, what is

 12 accomplished with the relied-upon is the abbreviated

 13 patent. So, the investment is decreased.

 14 In most of the guidelines that I've seen going

 15 forward, the Phase III clinical trials are also

 16 abbreviated, and I think that's the basis for moving

 17 ahead. So, there clearly is some economies to be had on

 18 the part of the biosimilar competitors in their

 19 development program, and that's what this is about.

 20 I'd like to clarify, if I will, and perhaps

 21 apologize before the fact. I'm using the term

 22 "biosimilar" in a way that probably doesn't conform to

 23 what you've said up there, but we internally, in all

 24 discussions, have defined it in a way that I've kind of

 25 gotten used to. So, I'm going to try to hold to there,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 104

 1 if I can, but it does relate specifically to the

 2 question that you've just asked, because for us,

 3 biosimilar means a path forward where in analytical

 4 quality analysis and preclinical studies you demonstrate

 5 that this new product, this biosimilar product, is as

 6 highly similar to the reference standard and the

 7 innovative product as possible. And because of that,

 8 you are granted an abbreviated clinical program moving

 9 forward, because you've established that high

 10 similarity.

 11 That's why you do -- you are able and the FDA is

 12 able to say, okay, because you're so similar, we will

 13 allow that clinical program in Phase III to be somewhat

 14 abbreviated on a case-by-case basis, and there certainly

 15 is savings there as we move forward with all these

 16 products. There could be some exceptions to that with

 17 some products that came out first, but in terms of

 18 moving forward, that would be the consideration. So,

 19 there would be abbreviation there, and it is relied upon

 20 in that way.

 21 It's also relied upon ultimately in how these

 22 play out in the marketplace. There clearly will be a

 23 few years after market entry where these biosimilars

 24 will need to prove themselves on safety terms and

 25 post-marketing pharmacovigilance to follow up, and if

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 105

 1 all is well, eventually they will be able to, in many

 2 ways, piggy-back on the investment and the marketing

 3 costs, et cetera, moving forward of the innovator

 4 program.

 5 We do not, however, see how a biosimilar product

 6 and the biosimilar path, as we've thought about it for

 7 many years, would and could be used for improved

 8 products. So, I'm a little confused as to why that's

 9 grouped together, but clearly, in answers to my

 10 questions, I'm talking about a highly similar product

 11 and certainly not one that would be improved.

 12 MR. WROBLEWSKI: Thank you.

 13 Before I change topics in terms of the purpose

 14 of the data exclusivity period or how you would go

 15 about recovering your investment, did anyone else have

 16 any additional comments before we then move on?

 17 Linda, go ahead. I'm sorry, I didn't see your

 18 card.

 19 MS. HORTON: One of the most fundamental types

 20 of changes enjoyed by biosimilar companies -- and this

 21 is one that's often overlooked -- is the fact that they

 22 know what the target of the product development program

 23 is. If you think about the original discovery of

 24 interferons back in the eighties, those were tried on

 25 all kinds of things before -- interferon beta, for

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 106

 1 example, was focused on MS, and so the biosimilar

 2 company comes into the area knowing already what disease

 3 state that they're targeting, and that's a very

 4 significant saving, and we can't ignore the contribution

 5 of the innovative companies in discovering that path.

 6 MR. WROBLEWSKI: Thank you.

 7 I'm going to turn to the next question in terms

 8 of if we have a data exclusivity period, what's the

 9 optimal way to determine the length of that period?

 10 It's kind of an open-ended question.

 11 I'm going to turn to Alex first, just because I

 12 know Professor Grabowski has some comments on that as

 13 well.

 14 MR. BRILL: Thank you, Michael, and thank you to

 15 the FTC. I will open with a comment similar to Linda's,

 16 which is that my views are my own, and my employer

 17 doesn't have opinions about these issues. So, I'm

 18 speaking here for myself, and the work that I've done on

 19 this issue is my own and not that of my employer.

 20 I guess I would open by saying that the

 21 importance -- the data exclusivity is absolutely an

 22 important issue and an important protection, and the

 23 question that I think is the relevant one is not whether

 24 or not -- is not the question of if, but the question of

 25 how, and there is a balancing act here, and this is a

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 107

 1 question of -- it's a trade-off between setting policies

 2 to encourage innovation and setting policies to

 3 encourage competition, and both factors are important.

 4 There are a couple of ways to think about this

 5 question of what is the appropriate duration. Professor

 6 Grabowski has done, I think, incredibly important work

 7 on this area setting forth a framework for how to think

 8 about this question. I don't want to take too much time

 9 to explain what he did. I want to give him the

 10 opportunity to explain what he did.

 11 But the framework that Professor Grabowski has

 12 laid out is a framework that he refers to and that I

 13 refer to in my work as break-even analysis, which is

 14 asking the key question, which is the investment

 15 question, I think -- I agree this is about investment --

 16 of recouping the costs, recouping the R&D costs and

 17 recouping the costs of the money that's used in that

 18 investment. So, recouping the cost of capital as well

 19 and a whole associated number of costs that go into the

 20 risky development of developing or bringing to market

 21 new drugs.

 22 If there was sort of one point that I would want

 23 to stress this morning is that the question of

 24 break-even point and where that is on average for a

 25 portfolio, when we think in the aggregate, that is an

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 108

 1 important question to answer, but the answer to that

 2 question is not the answer to what is the right duration

 3 for data exclusivity. And the reason that there's a

 4 difference between what the break-even point might be

 5 and what the right data exclusivity duration may be is

 6 for the very issue that was discussed in the last panel,

 7 which is that post data exclusivity, when competition

 8 begins to enter the market, the innovator drug is, by

 9 all expectations, expected to continue to have market

 10 share, and while prices may fall, it's no one's

 11 expectation that prices are going to collapse.

 12 What this means is that in the period following

 13 the end of data exclusivity, the innovator drug will

 14 continue to have the opportunity to recoup their R&D

 15 costs, and that's the relationship between data

 16 exclusivity and the break-even point.

 17 MR. WROBLEWSKI: Thank you.

 18 Dr. Grabowski, would you like to add some

 19 comments?

 20 DR. GRABOWSKI: Sure. I'm happy to see that

 21 Alex is accepting the general framework, and in my

 22 original Nature article, I pointed out that the

 23 innovator would keep a part of the market, and so,

 24 therefore, that was one factor, and then I pointed out

 25 other factors. But I welcome additions and further

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 109

 1 sensitivity analysis, and I have been working on

 2 extending the model, and some new results I can report,

 3 that if you take the CBO assumptions that essentially we

 4 talked about earlier, the CBO assumptions that at least

 5 initially, in the period that they were scoring, they

 6 expect the biosimilars to take maybe 35 percent of the

 7 market, the innovators to keep 65 percent, and then

 8 the -- but the branded firms would compete on price, and

 9 price would decline 20 to 40 percent.

 10 If you take those assumptions and enter them

 11 into my model, then you can frame the question, you

 12 know, what exclusivity periods are consistent with the

 13 break-even point? And when you do that, you don't

 14 get -- when you look at things like how long would it

 15 take to converge, if ever, and when we put in a

 16 seven-year or a ten-year exclusivity period and then

 17 combine that with the CBO assumptions, you don't get

 18 convergence within 50 years. You don't get break-even.

 19 So, you know, this is one set of sensitivity

 20 analysis. We're doing others. You have to get into the

 21 12- to 14-year periods before you start to see a

 22 break-even analysis that's consistent with an

 23 exclusivity period, and, you know, I welcome balanced

 24 sensitivity that will look at a lot of the parameters

 25 that would be at work here, and I'll be addressing some

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 110

 1 that Alex has put forth in a new paper that just came

 2 out this week.

 3 MR. WROBLEWSKI: Okay, thank you. Let me ask

 4 you a quick question about -- oh, go ahead.

 5 MS. URLEP: I would just have a comment here,

 6 just to support what Alex has said. Our data, which

 7 would show previously that suggests that even one year

 8 after the market entry of a biosimilar in Europe, there

 9 was still considerable market share of the originator

 10 brands on the market. So, they still continue to recoup

 11 their development investment.

 12 DR. GRABOWSKI: But it looks like it's moving

 13 even much faster than what the CBO -- I mean, the CBO I

 14 think is an intermediate position. We've had payers say

 15 it's going to be 60 percent or more within a very quick

 16 period. We've had other people say it's going to be 5

 17 percent. I think the CBO is a reasonable first starting

 18 point.

 19 MR. WROBLEWSKI: Geoff, you had a point you

 20 wanted to make?

 21 DR. ALLAN: Yes.

 22 First of all, I'd like to echo the remarks that

 23 Audrey and Linda made. Data exclusivity is critically

 24 important, because it does allow the FOB developer a

 25 very focused, targeted approach to the development of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 111

 1 the product. So, that's a given.

 2 So, it boils down to what is the purpose of it?

 3 It's a return on investment. And if I look at our

 4 personal experience, I work for a small biotech company

 5 called Insmed. We wear both an innovator hat and we

 6 wear a biosimilar hat. We're developing an innovator

 7 product right now. We're in Phase II clinical trials,

 8 and if that -- we've worked out all of the return on

 9 investment that we would require for that product, we've

 10 looked at all of the costs of development of that

 11 product, and if I look at the data exclusivity that had

 12 been talked about, I would say very, very comfortably

 13 that the costs -- that the price it takes us to develop

 14 the product, we can certainly recoup all of our costs

 15 within five years of -- five years' data exclusivity.

 16 So, I think the factors that come into play are

 17 the factors of how much does it cost to develop a drug

 18 in the first place? And it doesn't cost us $1.2

 19 billion. What happens to the product when the period of

 20 data -- when the FOB developer comes into the

 21 marketplace? And as Alex pointed out, there's a lot of

 22 rapid drop-off of profits. And then there's the other

 23 issue I don't think anybody has talked about, is the

 24 ability of the innovator to evergreen the product and

 25 continue to build a franchise that brings out more and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 112

 1 more profit and revenue.

 2 MR. WROBLEWSKI: Okay, thank you.

 3 You make a good point in terms of recouping the

 4 investment. What should be included in that -- from a

 5 conceptual point of view, what should be included in the

 6 amount to be recouped? Obviously it's all the clinical

 7 trials and those types of things, but should sales and

 8 marketing, should research for post-approval of new

 9 indications be included in that -- you know, the number

 10 from Dr. Grabowski's paper is 1.2 million -- billion --

 11 million -- billion?

 12 DR. GRABOWSKI: Billion.

 13 MR. WROBLEWSKI: Seven hundred billion,

 14 whatever.

 15 (Laughter.)

 16 MR. WROBLEWSKI: 1.2 billion.

 17 From a conceptual point of view, what should be

 18 included in that to be recouped? It's the investment,

 19 but what piece of that investment? I'd like comment on

 20 that. Anyone can start. If Alex wants to start?

 21 Audrey? Geoff?

 22 DR. ALLAN: Well, as the CEO of a company, I'd

 23 like to see it all come back. So, I think you've got

 24 to -- if you choose to develop a certain product, you

 25 want to be able to obviously recoup all of the R&D

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 113

 1 expenses, all of the market and sales expenses, all of

 2 the -- you know, all of the expenses of running the

 3 company. You want to be able to recoup that in an

 4 adequate period of time.

 5 DR. GRABOWSKI: You have to do a cash flow

 6 analysis, right?

 7 DR. ALLAN: Absolutely.

 8 DR. GRABOWSKI: And would you include in that

 9 the probability of success and risk adjustment and all

 10 of those? So, you can't do it on a single product that

 11 just says, well, this has a high probability of success,

 12 so -- you have to -- you have to look at a universe of

 13 products and risk-adjust for probability of success, for

 14 discovery research, for a whole -- you know, the whole

 15 process.

 16 And it's true that one company may be able to

 17 develop a product for much less than 1.2 billion. There

 18 are other cases where it could be more, and that -- what

 19 DeMassi and I have tried to do is look at it from, you

 20 know, what's the probability of success; what's the

 21 time; what's the opportunity cost of capital; what's the

 22 actual outlays that you make. All of those come into a

 23 kind of rate of return analysis.

 24 MR. WROBLEWSKI: Audrey, you wanted to make a

 25 point?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 114

 1 MS. PHILLIPS: I will leave to the economists,

 2 which I am very much not, the discussion as to exactly

 3 what goes in a return on investment on the economic

 4 side, but I do think there's an important component of

 5 that that we haven't talked about yet, and it relates to

 6 what we spoke about earlier in this panel where you

 7 asked me what are the biosimilar companies getting

 8 that's abbreviated. There's one important piece that

 9 they don't experience and doesn't go into their

 10 analyses, and that's the risk.

 11 The risk has been accepted by the innovator

 12 early on, and the biosimilar company doesn't have to

 13 integrate that risk into their own thinking. So, when

 14 we think about what data exclusivity and what the

 15 purposes are, a significant purpose -- we think the key

 16 purpose -- is to decrease the downside risk in moving

 17 forward.

 18 I know you're going to have a panel where you're

 19 talking about patents, and we're not going to get into

 20 that here, but just to mention that patent circumvention

 21 is a significant risk moving forward. It's a new risk.

 22 I said before that the landscape on investment decisions

 23 is changing. The status quo is what it is today. It's

 24 changed a little bit in the last month, as well as it

 25 has for all of our pocketbooks, but it is what it is

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 115

 1 today.

 2 We're introducing two things, two differences,

 3 for investment decisions moving forward: One is a

 4 decrease in the value, because there will be more

 5 competition on the market in the future in biosimilars,

 6 and that is something that's inherent in a biosimilar

 7 path forward, and it's one that's appropriate and makes

 8 sense and is necessary. But there is also another

 9 downside risk that's being figured into investment

 10 decisions, and that's the potential risk of patent

 11 circumvention moving forward. So, as we talk about

 12 return on investment, let's not forget that that risk at

 13 the investment decision across, as Henry has reminded

 14 us, across portfolios, to be able to also use the

 15 successes to pay for the failures, is critically

 16 important for us to keep in mind.

 17 MR. WROBLEWSKI: Sure.

 18 Alex?

 19 MR. BRILL: Sure. I just wanted to -- I think

 20 to extend a little bit of what your question was. Your

 21 question was what are the costs that need to be

 22 recouped, and just to give a sense of the framework that

 23 Henry and I are working from, there's sort of two sides

 24 to the ledger in this analysis. There is the cost that

 25 is sunk up front for the development of a portfolio

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 116

 1 product, and that -- the portfolio notion is key,

 2 because this is not just a cost of succeeding, but it

 3 includes the cost of your attempts that fail, and that

 4 is, in part, driving what makes this number $1.2

 5 billion.

 6 And then the other side is how are we paying off

 7 those fixed, sunk costs? And obviously it's from the

 8 sale of the drug, but what we also know is that when

 9 we're selling the drug, we can't take all of those

 10 revenues and apply them to offset our initial costs.

 11 Some of those costs -- some portion of our revenue -- of

 12 the revenue from the sales of these products go to the

 13 production of those products, and I think that that's

 14 sort of a critical estimate in any analysis, and it's

 15 one of the points that Henry and I differ on. It's one

 16 of the few points that we differ on, is what -- how we

 17 split the share of the revenues to allocate to the

 18 pay-back of the investment costs.

 19 And you can run a sensitivity analysis on the

 20 work that I've done using a historical average of this

 21 contribution margin, and you can plug in a couple

 22 different costs of capital, and you can still see that a

 23 portfolio is likely to break even with a period of

 24 exclusivity that could be seven and considerably shorter

 25 than some of the other estimates.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 117

 1 MR. WROBLEWSKI: Thank you.

 2 MR. HELDMAN: I guess I would just ask, since

 3 the whole point of -- key point of biosimilars is -- and

 4 follow-on biologics is to bring down cost, is how

 5 does -- have you done any work -- has anybody done any

 6 work that takes a look at how each year of additional

 7 exclusivity affects the price of the innovator product

 8 when it comes on the market and how do you factor price

 9 into your -- back into your analysis?

 10 DR. GRABOWSKI: What is the question? I

 11 didn't --

 12 MR. HELDMAN: I'm wondering, if you shorten

 13 the -- if people are discussing different lengths of

 14 data exclusivity, I'm wondering whether you think that

 15 the product will be priced differently if the data

 16 exclusivity period is seven years versus if it's ten

 17 years and how much each -- how much of a difference each

 18 year makes.

 19 DR. GRABOWSKI: Well, I think the key driver of

 20 prices will be if you're in a market where there's

 21 competition or anticipated competition; What is the

 22 price that will be set among other therapeutic

 23 alternatives? So, I don't see the length of the

 24 expected life being the first factor. It may have some

 25 influence, but price is going to be driven by your

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 118

 1 interaction with payers and other competitors, and

 2 that's, I think that's the first order of business.

 3 MR. WROBLEWSKI: Let me change gears here for

 4 just a quick second --

 5 DR. GRABOWSKI: Just to respond to Alex, you

 6 know, he indicates that you can get with reasonable

 7 contribution margins and cost of capital, but I would

 8 point out a few points that I will elaborate on in a

 9 paper, but he's drawing his contribution margin from the

 10 six most or six of the most successful biologic firms.

 11 So, it's important that you also include firms earlier

 12 in the life cycle. He's using Amgen, Genentech, Biogen

 13 to get these margins, which we will take a closer look

 14 at.

 15 Also, his cost of capital is very much focused

 16 on the larger, established firms and doesn't really

 17 account for all of even private equity firms that have

 18 to go to the capital markets for venture capital and who

 19 have cost of capital. You know, I've been with

 20 companies that have had to do that, and you're talking

 21 about giving up significant equity and cost of capital

 22 in excess of 20 percent.

 23 So, I think that without getting into the

 24 numbers, but there will be an exchange, and I think a

 25 balanced look at that will not support a seven-year

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 119

 1 exclusivity period.

 2 MR. WROBLEWSKI: Chris and the FTC developed,

 3 anticipating this discussion, if you'll look at the

 4 graph, we tried to borrow from the model that was there.

 5 If you have cumulative cash flows on the left-hand.

 6 MR. GARMON: Net present value.

 7 MR. WROBLEWSKI: -- net present value on the

 8 vertical axis and along the horizontal axis is time.

 9 The line is the investment, you know, as you start at

 10 the beginning of the investment period or the research

 11 and development. As you go along the line just losing,

 12 going down, investing more and more. Then, the point

 13 zero is basically when you have gotten marketing

 14 approval. And then that's where you start recouping

 15 because you're now marketing the product, and that line

 16 is, we're going to say, without competition.

 17 Okay, so now, if there is branded competition,

 18 if it's maybe a more crowded therapeutic class or had

 19 more competitors, the line looking at it from the point

 20 of view of the innovator, that would be kind of the

 21 curve. If you had, let's say at that point, FOB entry

 22 at some point after approval, a biosimilar FOB comes in,

 23 similar to the terminology that we had used before,

 24 that's the way the curve would be. And if a biogeneric

 25 FOB came in, that's the way the curve would look.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 120

 1 Would that be a fair summary of the discussion

 2 in terms of if we looked at it from a break-even point

 3 of view, assuming the investment is -- you know, we had

 4 discussion of what's in that investment, but would that

 5 graph be a fair conceptual representation?

 6 DR. GRABOWSKI: I don't know about fairness.

 7 I'm an economist.

 8 MR. WROBLEWSKI: Efficient. Efficient.

 9 DR. GRABOWSKI: You know, I think over time, you

 10 are going to get some convergence of those curves. As

 11 we talked earlier, there's the science and there's the

 12 reimbursement agencies, and as they get comfortable with

 13 biosimilars, that curve will shift maybe closer to what

 14 you label as a biogeneric.

 15 I think it's fair to say if you had

 16 interchangeability, which we don't have and we don't

 17 know when we'll have it, the curve would be a little

 18 lower. I would agree with that.

 19 MR. WROBLEWSKI: Okay.

 20 DR. GRABOWSKI: Initially, anyway.

 21 MR. WROBLEWSKI: Okay, thanks.

 22 Geoff, did you have a point you wanted to raise?

 23 Then I'm going to change topics.

 24 DR. ALLAN: Well, maybe I'm not understanding

 25 the graph, but that would strike me as it's telling me

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 121

 1 that the innovator product never becomes cash flow

 2 positive.

 3 MR. WROBLEWSKI: No. You become cash flow

 4 positive right when you cross the dotted horizontal

 5 line.

 6 DR. ALLAN: Right.

 7 MR. WROBLEWSKI: Cumulative, because that's a

 8 cumulative cash flow. You would be getting all of --

 9 that would be the point that -- assuming an

 10 appropriate --

 11 DR. ALLAN: Sorry. The FOB entry comes in

 12 before the product itself has become cash flow positive.

 13 MR. WROBLEWSKI: In this example, that's exactly

 14 right. In this example, yes, that would be entry comes

 15 before it's cash flow positive.

 16 DR. ALLAN: The only point I would make

 17 regarding that is if you looked at every biologic that's

 18 been generating sales in the last few years, the

 19 cumulative revenue of every major biologic exceeds $5

 20 billion or more after the first five years of sales.

 21 MR. WROBLEWSKI: Right. That's all included

 22 in the kind of the V.

 23 MR. GARMON: Again, this is cash flow, not just

 24 revenue. This is profit.

 25 DR. GRABOWSKI: But it's not discounted cash

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 122

 1 flow.

 2 MR. GARMON: This is discounted. I wasn't

 3 trying to make any specific assumptions about anything.

 4 It's just are the shapes of the curves correct.

 5 DR. GRABOWSKI: So, these are not just dollar

 6 lines.

 7 MR. GARMON: This is just the same kind of

 8 curves that are in your paper and in Alex's papers.

 9 DR. GRABOWSKI: Okay, just you haven't used the

 10 word "discount."

 11 MR. WROBLEWSKI: It is discounted.

 12 MR. GARMON: It is net present value, and

 13 something I would also like to ask, is the correct way

 14 of -- let's see if I can get the -- is the correct

 15 way -- the correct data exclusivity period one in which

 16 the curve would essentially become asymptotic? If we

 17 could all agree on the assumptions and find the data

 18 exclusivity period that would make it so that this

 19 cumulative net present value becomes asymptotic to zero,

 20 is that the correct criteria for figuring out the data

 21 exclusivity period?

 22 MS. URLEP: Asymptotic?

 23 MR. BRILL: Touching the zero line but not going

 24 over.

 25 MR. GARMON: Just approaching it over time just

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 123

 1 to get right there so that you just break even.

 2 DR. GRABOWSKI: Well, you know, as I mentioned,

 3 and I have some slides that can be part of the record,

 4 but when we look at seven- and ten-year exclusivity

 5 periods with the CBO assumptions, we never get

 6 convergence for 50 years. You know, maybe if we went

 7 out to 100 years, we might touch the line, but, you

 8 know, I don't think we are going to base laws on, you

 9 know, what happens after 50 years.

 10 MR. WROBLEWSKI: Okay, thanks.

 11 Let's change gears for one quick second, and

 12 it's really raising -- following up on a point that

 13 Rachel had made earlier this morning.

 14 If we use this model or a recoupment model as

 15 the -- as one way to gauge the length of a data

 16 exclusivity period, does this model provide for an

 17 optimal amount of incentive for new innovation or does

 18 it reward inefficient innovation because it recoups all

 19 investment? I think she had mentioned there was a

 20 crisis in new innovative medicines. So, I wonder, is

 21 this type of model -- is this the right way to go or do

 22 we have any comments on that point?

 23 DR. GRABOWSKI: Well, I think you're looking at

 24 this as -- again, as a complement to the patent system,

 25 and we don't want innovative medicines to sit on the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 124

 1 shelf. You know, if you talk to research directors, as

 2 I do on an occasional basis, they say, you know, when we

 3 look at a new molecule, we want to look at unmet medical

 4 needs; we want to look at, you know, a period that we

 5 can recoup our investment, and so forth. And if we

 6 determine either that we can't get a patent on it or the

 7 patent's too short or the patent may be vulnerable, then

 8 we put that medicine on the shelf, and we go to

 9 something else.

 10 And so we don't want a lot of medicines that

 11 could be innovative for patients to languish because of

 12 problems with the patent system or shortcomings, and,

 13 therefore, seen in that light, I think trying to do an

 14 exclusivity period that would allow these innovative

 15 incentives to operate, even in those cases where the

 16 company determines that there's issues with the expected

 17 life, I think this provides a framework for that.

 18 MR. WROBLEWSKI: Okay, thank you.

 19 Alex?

 20 MR. BRILL: Yeah. If I understood the question

 21 correctly, I mean, I think the answer is yes, it is --

 22 it's important to include, in the development, all of

 23 the costs of those who are successful, as well as those

 24 who are not, because it's not until we get to market

 25 that we -- and, in fact, oftentimes post market -- that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 125

 1 we can really measure those successes.

 2 If I could also just add, on the question about

 3 asymptotic to the zero point, I would, if I put only the

 4 theoretical economist hat on, I think that that would be

 5 the right answer, that the goal would be to come to the

 6 point that's asymptotic to zero, but this comes --

 7 however, that's not the approach that I took in my

 8 paper.

 9 I took what I consider a more balanced approach,

 10 similar to what Professor Grabowski undertook, which is

 11 more along the lines of the maroon or purple line, which

 12 is the biosimilar FOBs line, which is allowing for there

 13 to be profits in excess of break-even. And this comes

 14 to this balancing point question, and it's my view that

 15 it is important to encourage innovation. There's

 16 uncertainties in the model, and that this extra cushion,

 17 which is the -- in some sense, it's cream on top, but it

 18 may be important to the investors.

 19 And as Henry just mentioned, one of the criteria

 20 in the investment decision is not just will we break

 21 even, but the question is also when, and the paper and

 22 the results that I released earlier this week, under

 23 those specifications, a seven-year data exclusivity

 24 period has a fairly modest impact on the point at which

 25 break-even occurs, and that may be important to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 126

 1 investors, not just that they get their money back, but

 2 the duration. If that's a critical factor, then you

 3 wouldn't want to just be asymptotic to zero, but sort of

 4 from a pure cash flow analysis, it would be.

 5 MR. WROBLEWSKI: Did you want to add something?

 6 Your thing's up.

 7 Okay --

 8 DR. GRABOWSKI: Oh, sorry.

 9 MR. WROBLEWSKI: Okay, that's an old one.

 10 If we're using -- are there other policies that

 11 could be used to encourage R&D, such as, you know, tax

 12 credits for investments rather than a data exclusivity

 13 period, and would that be more inefficient or more

 14 efficient than using a recoupment model?

 15 DR. GRABOWSKI: Well, I think tax credits are

 16 always useful in things like the Orphan Drug Act has

 17 played a role, but also the market exclusivity was even

 18 more critical to many companies than the Orphan Drug

 19 Act. You know, I think the issue with tax credits,

 20 everyone is besieging Congress for tax credits, and --

 21 you know, chemo prevention drugs and much broader than

 22 pharmaceuticals. So, when you do tax credits, you get

 23 into further CBO scoring. You know, I think it's a

 24 welcome incentive, but then you're competing with, you

 25 know, food stamps and everything that's in the budget.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 127

 1 MR. WROBLEWSKI: Okay, thank you.

 2 Alex?

 3 MR. BRILL: The politics are certainly something

 4 it's important to consider, but it's, in my view, no

 5 question that the Tax Code is interacting with this

 6 process here, and not just are credits a way to offset

 7 some of the cost that's trying to be recouped, but I

 8 think more importantly and more broadly, the Tax Code

 9 imposes a tax on capital which raises that cost.

 10 I don't want to go too far afield into the world

 11 of tax, but the structure, including the very concept of

 12 a corporate income tax, is affecting the cost of

 13 capital, and that is affecting the decision processes

 14 for the investments, and that's -- that is part of what

 15 will be affecting the -- you know, the decision to

 16 innovate.

 17 MR. WROBLEWSKI: Thank you.

 18 You know, in Linda's presentation, she talked

 19 about how the European approach has been an eight plus

 20 two plus one, and the plus two was for -- plus one was

 21 for additional indications -- yeah, I think --

 22 MS. HORTON: Do you want me to explain again?

 23 MR. WROBLEWSKI: No, I was just verifying that

 24 plus one was for additional indications. What type of

 25 incentive is necessary if we do a data exclusivity

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 128

 1 period in the U.S.? How do you determine what that plus

 2 should be? How much time? Do you look at the R&D

 3 expenditures for post-approval R&D and then kind of try

 4 to figure out what that is and then try to put a year to

 5 it, so to speak, and then add that on? How's the best

 6 way to go about doing that?

 7 DR. GRABOWSKI: I think all of the bills that

 8 are -- say a plus one or two or three years in some

 9 bills for products that the FDA just deems as clinically

 10 significant. So, there will be a novelty test, first of

 11 all, on the indication.

 12 Then, I think you -- it's fair to say that

 13 some -- some investment or some reward for the

 14 additional investment is appropriate for clinically

 15 significant new indications, and a biologic that's

 16 particularly rich with this -- you know, you go down one

 17 pathway, and then you discover it affects all kinds of

 18 other indications. Jack Calfey at AEI has discussed

 19 that process, and there's just a very rich kind of

 20 pathway for new indications in oncology and several

 21 other things. And I think the investment decision would

 22 weigh in to try to pick that one, but also the novelty

 23 will weigh into it, as well.

 24 MR. WROBLEWSKI: Okay, thank you.

 25 Linda, did you want to add something?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 129

 1 MS. HORTON: Yeah. I just wanted to say that

 2 this appears to be a somewhat difficult area of

 3 policy-making. If you look at the submissions to your

 4 docket, very few companies kind of gave you a number on

 5 this, and I suspect it will end up being a large issue

 6 in the coming debate, but I just wanted to say, you

 7 know, again, you know, coming from the FDA background,

 8 that -- where I worked for a long time, the FDA views

 9 the -- each new indication as being a new, distinct new

 10 drug or biologic, as the case may be.

 11 It's true that the data package for -- the part

 12 of the data package dealing with chemistry and

 13 manufacturing and some of the basic safety is referred

 14 to -- you know, the company's referring to its own

 15 earlier data set when it comes along with a new

 16 indication, but there's a lot of clinical data that must

 17 be generated by the innovator company to support each

 18 new indication, and this needs to be recognized.

 19 Now, this has developed into somewhat of a

 20 problem in the European system, because although the

 21 overall umbrella guidelines issued by the European

 22 Medicines Agency in late 2005 said that there would need

 23 to be studies done in each indication to support new

 24 indications, in fact, what has happened in each of the

 25 three tranches of biosimilar approvals that have come

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 130

 1 along is that the biosimilar companies have gotten all

 2 the indications, even though they may have done studies

 3 just in one disease, and this may be unique to those

 4 proteins that were being considered, that these were

 5 among the older and, at least in some cases, better

 6 characterized proteins. But I think this will come to

 7 be an important issue.

 8 We have several different viewpoints on the U.S.

 9 side on this issue. The letter from Secretary Levitt of

 10 June last year says FDA believes that each indication

 11 will need to have -- be supported by its own clinical

 12 studies. Biosimilar applicants cannot assume, as a

 13 matter of science, that their product qualifies for each

 14 indication the pioneer has qualified for without doing

 15 studies.

 16 We also have some bills in Congress that try to

 17 legislate the science in this area, which also doesn't

 18 seem to be the way to go, and I think probably this is

 19 an area where maybe, you know, whether it's your docket

 20 or the Congress, I think, you know, there's need for

 21 more thought going into this, because I would just

 22 caution that we're dealing with a statute that's 106

 23 years old, and we're dealing with an economic and

 24 scientific environment in which companies have entered

 25 this field on the belief that anybody else coming along

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 131

 1 was going to likewise produce a full data set of their

 2 own.

 3 So, we're kind of -- this chart, there's a very

 4 small piece there, you know, so I think this is an area

 5 where we want to tread lightly, because this has been an

 6 area of great innovation, and we don't want to

 7 disincentivise research.

 8 MR. WROBLEWSKI: Thank you.

 9 I am going to turn to Mateja and then Audrey,

 10 and then I will have one last question as a segue for

 11 our afternoon panelists.

 12 MS. URLEP: Thank you.

 13 Well, the Novartis group of companies, which

 14 Sandoz is member, we do support fully that innovation

 15 has to be incentivised. Therefore, our position is that

 16 a model on exclusivity should be taken into

 17 consideration, but on the other hand, as well, we should

 18 allow for competition when the time comes, when the

 19 patents, which are legitimate patents, expire and

 20 exclusivity is over.

 21 And just to mention, for the European Medicines

 22 Agency, the biosimilar sponsor could argue for all of

 23 the indications where we could, as a matter of science,

 24 prove and justify that mechanism of action if each of

 25 the other indications is just the same, and, therefore,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 132

 1 the repetition of unnecessary trials in humans would not

 2 be necessary to be done.

 3 MR. WROBLEWSKI: Thank you.

 4 Audrey?

 5 MS. PHILLIPS: I can't comment on the math. I

 6 get the impression that you want to do a mathematical

 7 kind of formula --

 8 MR. WROBLEWSKI: I think what we were trying

 9 just to do is make sure we understood conceptually what

 10 was going on. We think that the -- kind of a model like

 11 this is informative, but there are certainly many other

 12 policy things that you have to balance. This is just

 13 one way, and there seemed to be some disagreement, so we

 14 were trying to provide some clarity around that, but

 15 that's only just one take.

 16 MS. PHILLIPS: I can't help you with the

 17 numbers, because I really don't know what that would be

 18 or whether there really is a mathematical formula, but I

 19 will say that medicine has changed over the last ten to

 20 15 years. Discovery and development has changed. So,

 21 if you look at products today that are coming to the

 22 market, you'll see that they are often used for a broad

 23 range of different diseases, and that wasn't true in the

 24 past or it's true to a greater degree now. So, with

 25 whatever formula you use and wherever you end up, you

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 133

 1 need to be mindful that there needs to be that time

 2 period to invest in those new indications.

 3 We tend to think of new indications as kind of a

 4 product improvement, but for a patient who is finally

 5 treated with rheumatoid arthritis, it doesn't matter

 6 that that's a product that had been used before only for

 7 serious GI diseases. That is just as important.

 8 So, the -- and as you're looking at more varied

 9 indications over time, getting back again to investment,

 10 it is more expensive and more risky to go into other

 11 therapeutic fields to investigate those new indications

 12 than the one that you started in. So, there is this

 13 additional investment consideration and risk, on top of

 14 all these things, that you try to figure in. So, in the

 15 end, there needs to be that incentive, but I can't help

 16 you with the numbers on that one.

 17 MR. WROBLEWSKI: One last -- Alex?

 18 MR. BRILL: Just very quickly.

 19 Like Audrey, I can't help you with the numbers

 20 on this question either, but I would just stress that

 21 there is a -- I believe a very large interaction effect

 22 between how much exclusivity is granted for a secondary

 23 indication and how much initial exclusivity is granted,

 24 that there's an important trade-off here, so that it is

 25 important, and Jack Calfey's work is important in this

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 134

 1 area, as are Audrey's comments. These other indications

 2 are important to the market, but the more protection

 3 that's provided for those, that's a trade-off against

 4 the necessary amount of data exclusivity on the original

 5 approval.

 6 MR. WROBLEWSKI: Okay. Thank you.

 7 We're going to take a break. This afternoon's

 8 panels are looking at kind of the nexus between patent

 9 protection and data exclusivity and innovation. We're

 10 going to start back at 1:00.

 11 We have a cafeteria on the seventh floor. I've

 12 hopefully prepared them better than I prepared the

 13 security office this morning for the additional people

 14 that we have in the building this morning. If you do go

 15 outside, please keep your badges. That will maybe

 16 quicken coming back in. And we'll start back at 1:00.

 17 Thank you all very much, very much.

 18 (Whereupon, at 12:03 p.m., a lunch recess was

 19 taken.)

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 135

 1 AFTERNOON SESSION

 2 (1:00 p.m.)

 3 PANEL THREE:

 4 BIOTECHNOLOGY PATENT ISSUES

 5 MS. DRENNON: I'm not following the first rule

 6 of moderating. I think we have enough seats for the

 7 afternoon, but if anyone wants to come and sit in the

 8 panelists' part, that is just to make sure that at the

 9 breaks we have room for everyone, so I think we're good.

 10 I think we may still have someone in the overflow room.

 11 Overflow people, if you want to come down, we have room

 12 for you. I feel like I'm calling to the greater powers,

 13 good.

 14 So this is the afternoon session of our workshop

 15 today. I'm just going to run over the matters. Please

 16 turn off your cell phones because as we all know, that's

 17 kind of distracting sometimes. Security issues, talk to

 18 any of us. Bathrooms, I assume that every one knows

 19 where they are. If you're new and need some help, grab

 20 Elizabeth Jex. She's sitting right in the front raising

 21 her hand, and she will help you out. I will help you

 22 out. We'll all help you out, excellent. Okay.

 23 My name is Suzanne Drennon, and I am an attorney

 24 with the Federal Trade Commission's Bureau of

 25 Competition, Office of Policy and Coordination.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 136

 1 Welcome to today's roundtable discussion on

 2 biotechnology patent issues. With me today is my boss,

 3 so no pressure, my co-moderator, as we're calling her

 4 today, is Suzanne Michel. She is the Assistant Director

 5 of Policy with the Federal Trade Commission's Bureau of

 6 Competition Office of Policy and Coordination.

 7 And before we begin our roundtable today, I

 8 would like to introduce our distinguished and expert

 9 participants for this afternoon session. I'm only going

 10 to give their names and affiliations, but their full

 11 bios are in your packets so you have those as well.

 12 We have Ken Dow. Ken is the assistant patent

 13 counsel for Johnson & Johnson. Next to him, we keep the

 14 Kens together, we have Ken Goldman. He is the vice

 15 president of intellectual property strategies for

 16 Novartis International AG. Ester Kepplinger is sitting

 17 next to me now. You are the director of patent

 18 operations at Wilson Sonsini.

 19 Jeff Kushan is a partner with Sidley & Austin.

 20 Bruce Leicher is the senior vice president and general

 21 counsel for Momenta Pharmaceuticals. David Manspeizer

 22 is the vice president for intellectual property and the

 23 associate general counsel for Wyeth.

 24 Doug Norman is general counsel, patent counsel

 25 for Eli Lilly & Company. Naomi Pearce is IP director

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 137

 1 and counsel for Hospira, and Rochelle Seide is senior

 2 counsel for Schwegman Lundberg.

 3 So thank you all for joining us today, and we

 4 will be comoderating, but Suzanne is going to lead with

 5 the questions.

 6 MS. MICHEL: Thank you. Thank you, and thank

 7 you for inviting me to moderate, which she really did

 8 not have to do.

 9 The objective for this afternoon's session is to

 10 examine the differences between biotech and small

 11 molecule patents. To do that, we've put the objectives

 12 up on the slide there for you. We are going to consider

 13 both the differences between the biotech and small

 14 molecule patents, but also consider the relationships

 15 between the biotech patents and data exclusivity

 16 periods.

 17 During this session, we're going to discuss four

 18 questions. I'll lay them out first, and then we will go

 19 through them one at a time.

 20 First, are patents and patent portfolios

 21 claiming biologic drug products different from patents

 22 claiming small molecule drug patents, small molecules,

 23 and if so how?

 24 In a second but related issue we will consider

 25 the susceptibility of biotech patents to infringement

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 138

 1 and validity challenges. For instance, what are the

 2 issues that are being litigated in biotech patents and

 3 how do they differ from other industries?

 4 Third, we'll talk about how an innovator's

 5 biotechnology patents preclude competition from either

 6 biosimilar follow-on biologic or a biogeneric follow-on

 7 biologic.

 8 Finally, do the existing patent protection

 9 rights including patent term restoration help cover the

 10 investment in follow-on biologics and the relied upon

 11 data?

 12 Well, let's start first with the first question.

 13 Like this morning, this afternoon's panels will be

 14 moderated discussions. I will pose a question, and if

 15 anyone would like to address that question, please just

 16 turn your name tent on its end, and we'll call on you to

 17 speak.

 18 For the next 15 minutes, let's talk about the

 19 facts surrounding biologic and small molecule patents.

 20 How are the patent portfolios claiming biologic drug

 21 products different from the patent portfolios that claim

 22 small molecules? Jeff, would you like to start with

 23 that?

 24 MR. KUSHAN: Sure. I'm going to start, and I'm

 25 sure we're going to have a lot of contributions because

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 139

 1 the patent estates are always complicated.

 2 I guess you can look at a biotech patent estate

 3 as implicating a few different types of patents. You

 4 will have a number of patents that derive from the

 5 initial discovery of a sequence. This will be a

 6 polypeptide sequence coating an interest, a protein of

 7 interest.

 8 Around that you will see complimentary

 9 inventions of the nucleic acids and sequencing codes and

 10 post cells that have been transformed to produce that,

 11 things that are made against that such as a monoclonal

 12 antibody that have been produced against the protein.

 13 This is an array I guess, the way I look at it

 14 is as kind of an initial wave of related technologies

 15 off of a first discovery. As you look at the

 16 development of the technology over time, you see

 17 additional portfolios of patents.

 18 Some patents come into play because they are

 19 kind of generic techniques that are used to make

 20 proteins. Those can be more or less independent of the

 21 sequence that you're working with, but they're more

 22 platform technologies that have been license generally

 23 that cover many different approaches of making the

 24 protein.

 25 You will see techniques for developing

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 140

 1 specialized versions or improved versions of a protein,

 2 so, for example, if you have an initial wave of effort

 3 that produces a monoclonal antibody, effort will go on

 4 toward optimizing that monoclonal antibody, binding

 5 properties, profile and characteristics.

 6 You will see an array of process technologies

 7 that evolve around making these proteins, in particular

 8 the specific one that may be from a candidate for a drug

 9 product.

 10 Then there are an array of other technologies

 11 that are developed as you're moving forward. You find

 12 out typically the thing that drives you to do their

 13 initial research isn't the mechanism and the cell that

 14 you're trying to exploit or influence. As you do more

 15 research, you will find how to exploit that to treat

 16 different things so you can find additional applications

 17 of treatment methods and things of that nature.

 18 Then as you're moving closer to the market, you

 19 will see some analogous technologies or analogous

 20 patenting strategies around -- compared to the small

 21 molecule drugs where you're trying to make an optimized

 22 formulation and how to deliver the drug as a viable

 23 product.

 24 If I had to look at that and contrast it to the

 25 small molecule area, typically you will find an active

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 141

 1 molecule, and then you will do some research to find out

 2 what a reasonable group of related compounds are to that

 3 that you can then base a patent on. There's a lot of

 4 processing technology in the small molecule space as

 5 well, but in terms of how that connects into the overall

 6 regulatory process is less important relative to the

 7 biologics.

 8 Biologics obviously have a very important

 9 element of how they're made tied to what the basis of

 10 approval is. In the small molecule space, you will see

 11 less dependence on how the particular molecule is made.

 12 Often it's important but it doesn't form part of the

 13 approval conditions for the product.

 14 Analogous to the biologics area, you will also

 15 see in the small molecule patents space new

 16 applications. Once you figure out what the molecule is

 17 doing in the body, you can see how to exploit that to

 18 treat new indications, new diseases, but I guess if I

 19 had to kind of distill it down, in that initial wave of

 20 activity around the biologic, you will see a few

 21 different reflections of the inventive activity.

 22 You will see the nucleic acid sequence, the

 23 protein, the whole cell that makes it, things that are

 24 derived making the protein at the initial outset,

 25 whereas kind of the core innovative element in the NDA

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 142

 1 space would be the molecule and what its biologic

 2 properties might be.

 3 MS. MICHEL: So if I wanted to draw an analogy,

 4 core patents and small molecules are I think of as the

 5 active ingredient patent, the core molecule then for a

 6 biotech drug would be the protein?

 7 MR. KUSHAN: Yes and no. So if you find the

 8 protein that is a receptor on a cell, sometimes that

 9 might be the thing you want to give people as a

 10 therapeutic, but many times it's not, so a lot of times

 11 you're going to want to make something that blocks

 12 whatever normally binds that receptor in the cell or

 13 mimics what should be binding to that receptor in the

 14 cell.

 15 So your therapeutic might become the thing that

 16 is made that modulates a behavior that the receptor is

 17 involved in. So it's not necessarily the thing that you

 18 first find that becomes the agent. I guess in the early

 19 days, the kind of low hanging fruit in the biotech area

 20 was the hormones and the things that you find in your

 21 bloodstream. Take those proteins, and you make them

 22 using biologics techniques. Now you're doing it on

 23 different approaches.

 24 MS. MICHEL: Great, we have an invention.

 25 MR. KUSHAN: I'm turning off my mike.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 143

 1 MS. MICHEL: Well, let's start with Naomi then,

 2 and we're trying to also draw out -- that was extremely

 3 helpful to layout that background, I think, and we're

 4 also trying to draw out to understand better how patents

 5 operate differently in protecting biotech products from

 6 small molecule products, so whatever you can contribute

 7 to that, we would very much appreciate.

 8 MS. PEARCE: Thanks very much, Suzanne. Hospira

 9 is happy to be involved in this discussion today.

 10 Hospira, as you've always heard this morning, a

 11 specialist injectable pharmaceutical company, which is

 12 the first U.S. based company that has launched Retacrit,

 13 Albaicin (phonetic) into Europe.

 14 We structure our IP group so that a person who

 15 is responsible for a product clears the product on a

 16 global basis. I'm the IP director for

 17 biopharmaceuticals, and so I'm personally responsible

 18 for ensuring that each biopharmaceutical product that

 19 Hospira has an interest in is cleared global, and so I

 20 am as qualified to speak to the position in the U.S. as

 21 I am in Europe and Australia and Canada and Asia, et

 22 cetera. So thanks for the opportunity for being part of

 23 this discussion today.

 24 So firstly, I agree with Jeff's summary about

 25 the complexity of the patent landscape, and I think we

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 144

 1 sort of saw a nice slide this morning from Rachel

 2 setting out the differences in structure between a small

 3 molecule and a biopharmaceutical molecule. I think it's

 4 great. It's great to at least be able to pictorially

 5 see they look nothing alike, and there are complexities

 6 involved in the biopharmaceutical space that do not

 7 equate -- that there is no equivalent in the small

 8 molecule space. I think we'll all agree to that.

 9 I also agree which Jeff's summary of the

 10 importance of process patents in the biopharmaceutical

 11 summary although I think my take on it is slightly

 12 different.

 13 Certainly I agree that the process patent has

 14 elevated importance, and it will continue to have

 15 elevated importance in litigation space moving forward,

 16 but the reason is mostly due to the immaturity of the

 17 biopharmaceutical industry compared to the

 18 pharmaceutical industry. Hospira of course has a

 19 presence in both of those.

 20 In the small molecule space, a process patent is

 21 generally circumventable because the industry is mature

 22 enough to have created a number of ways to circumvent

 23 such a patent. However, the biopharmaceutical industry

 24 globally is immature, and there may not be another

 25 commercially appropriate way to circumvent a process

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 145

 1 patent.

 2 I am not saying it's impossible to circumvent,

 3 but I am saying it's quite difficult, so compared to the

 4 small molecule space where it is unlikely or in most

 5 cases a process patent would not be a market entry

 6 barrier, in the biopharmaceutical space, it may very

 7 well be.

 8 MS. MICHEL: Isn't that also because the process

 9 affects the product more when you're dealing with

 10 biologic molecules rather than small molecules?

 11 MS. PEARCE: As a matter of theory, there may

 12 well be many ways to make a product that is identical,

 13 but as a matter of practice, because the industry is

 14 immature, industry has -- technology has not yet created

 15 those many ways in the biopharm space as compared to the

 16 pharmaceutical space. So that is the first main

 17 difference that I think we see.

 18 The second main difference is a practical

 19 difference, and so in the small molecule space, it is

 20 extremely rare to see patent term adjustments. We see

 21 patent term extensions, which is of course a quid pro

 22 quo for regulatory delay, but we do not see patent term

 23 adjustments routinely, which is a quid pro quo for

 24 prosecution delay.

 25 In the biopharmaceutical space, that is simply

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 146

 1 not the case. We see patent extensions, but we also

 2 routinely see patent term adjustments, so if you look

 3 at -- if you take the top three selling small molecule

 4 injectable oncology drugs, there is no patent which has

 5 received a patent term adjustment for those three

 6 molecules.

 7 If you take the equivalent top selling

 8 biopharmaceutical molecules in the oncology space, you

 9 will see an average between four -- somewhere between

 10 four and 15 patents which have received a patent term

 11 adjustment, and the period of that adjustment is on

 12 average just under one year, the maximum being just

 13 under four years. So it's a second important defense in

 14 this space.

 15 The third important difference is the existence

 16 of submarine patents being fairly routine in Hospira's

 17 experience in the biopharmaceutical space.

 18 Now, we all would agree that submarine patents

 19 being patents that are not published until grant. A

 20 theoretical risk, the small molecule products, as much

 21 as they are a theoretical risk for the biopharmaceutical

 22 products, but in Hospira's experience, every single

 23 biopharmaceutical product that we have looked at, there

 24 are submarine patents in effect.

 25 Now, that may be because they have been granted

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 147

 1 and because they have a 17 year period from grant

 2 because they'll get pre get filed, or it may well be

 3 because we found out information that there are pending

 4 submarine patents, so it's something that in practice

 5 really affects the biopharmaceutical space in a way that

 6 it does not affect the small molecule space. That's as

 7 a result of the complicated and complex prosecution

 8 history of a complicated and complex industry.

 9 MS. MICHEL: All right. Thank you. David? I

 10 think we'll go around the table, just to warn you.

 11 MR. MANSPEIZER: Well, there's a lot to choose

 12 from there. Let me start by saying that patents don't

 13 provide certainty, and that's something we'll get to

 14 later in this discussion about what kind of certainty is

 15 needed in order to encourage innovation and to properly

 16 balance competition and innovation, but biotech patents

 17 provide even less certainty than small molecule patents

 18 do.

 19 One of the reasons they do, particularly when

 20 we're talking about potential biosimilar legislation, is

 21 we don't know what exactly the legal and regulatory

 22 schemes will permit in terms of adjustment to the

 23 product. When I say the product, I mean the innovator

 24 product, which is typically defined in our patents by

 25 its aminoacid sequence.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 148

 1 Now, if the biosimilar product has to have amino

 2 acid sequence identity to my product, then the patents

 3 that I own will likely be stronger from infringement

 4 standpoint, and I'm not talking validity.

 5 At the same time, if I can change one amino

 6 acid, two amino acids, five amino acids, ten amino acids

 7 in this very large molecule and yet still be able to

 8 argue that I have an equivalent molecule or molecule

 9 that has biosimilar activity, then the patents that I

 10 own that cover my product are less likely, a lot less

 11 likely to be able to be enforced against the biosimilar

 12 product.

 13 MS. MICHEL: You're suggesting that the scope of

 14 the claim is limited to the exact aminoacid sequence

 15 then aren't you?

 16 MR. MANSPEIZER: I am suggesting that we don't

 17 see, as we see in small molecule claims -- and let's

 18 concentrate on the claim that covers the API. In a

 19 small molecule case, typically you will have a claim

 20 that covers the precise molecule. You will have a claim

 21 that covers a genus surrounding that molecule, and maybe

 22 a million compounds around that molecule.

 23 When you try to do that in the biotech space,

 24 and there's people here more able to speak to that than

 25 I am, you run afoul of both the enablement and the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 149

 1 written description requirements of Section 112, and

 2 they render -- the Patent Office simply won't give you

 3 the claims of that scope.

 4 The other thing that's very important to

 5 remember is, and somebody said it this morning, we're

 6 designing a system today that really is going to have

 7 very little impact on what happened already. That

 8 innovation has happened. Those patents have been filed.

 9 The research dollars have been invested. We've got to

 10 remember that the biggest impact of what we do, whether

 11 it's in the patent system or in the bid exclusivity, is

 12 on the future.

 13 It's not on EPO and Enbrel and Remicade that the

 14 enormous impact is going to be. It's on the drugs that

 15 are bubbling up through small companies and large

 16 companies' labs today and the ones that haven't bubbled

 17 up yet. That's where the major impact of this

 18 legislation is going to be.

 19 MS. MICHEL: Thank you. Rochelle, and also

 20 everyone else, I am trying to understand better this

 21 issue of the scope of the claims and how it will impact

 22 the infringement analysis, and in particular, I don't

 23 mean to limit your comments, so please add more to what

 24 I'm saying here, but I am trying to understand to what

 25 extent claims are limited to only the sequence claimed

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 150

 1 or to what extent they might also cover protein that has

 2 ten different amino acids because it's not clear to me

 3 that the claim would exclude those minor differences.

 4 MS. SEIDE: I'll be happy to explain that to

 5 you. I've been practicing in this area for almost 23

 6 years, and the kinds of claims I could get now on a

 7 biologic are vastly different from what I could have

 8 done in the mid '80s to early '90s in regard to the

 9 scope of the claims.

 10 And, I mean, probably patents that we've all

 11 sitting around this table obtained for clients in those

 12 days may be rendered invalid now if they get litigated.

 13 If they're still in existence they would probably be

 14 rendered invalid.

 15 The reason, and when I was talking to Suzanne

 16 about this awhile back, there seemed to have been a

 17 perception that patents on biotech products were weaker,

 18 and that's not really the right term. They're not

 19 weaker. They're narrower, and again to reiterate what

 20 they have said, that you almost get what you have

 21 exemplified.

 22 If you file a patent application now, and you

 23 are sort of forced to, in some cases, filing very early,

 24 and you may not have 25 examples of what you're trying

 25 to claim to get a genus claim. You have one. Maybe

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 151

 1 along the way you get two or three.

 2 You've been forced into it by decisions of the

 3 Court of Appeals For the Federal Circuit and the Patent

 4 and Trademark Office taking those decisions and making

 5 things narrower and narrower to what's allowed and then

 6 what you can actually litigate at a later time.

 7 You're sort of forced into getting a claim

 8 that's almost what we would call a snapshot claim. It's

 9 a picture claim. You've identified a protein or an

 10 antibody, and it has a particular activity or a

 11 particular sequence or you've characterized it. You've

 12 humanized it. You've done a variety of things to it,

 13 and you set that up, and you've exemplified it in your

 14 application, and you get a patent out of it.

 15 You only get a patent on pretty much what you've

 16 exemplified because the court considers this very

 17 unpredictable technology. They consider chemistry

 18 unpredictable technology, but biotech is really

 19 unpredictable.

 20 MS. MICHEL: I think you're referring to the 112

 21 enablement.

 22 MS. SEIDE: I'm referring both to 112 enablement

 23 and 112 written description, both of which are at play.

 24 MS. DRENNON: One of the questions I have with

 25 respect to the narrowness point you're making is: How

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 152

 1 does the narrowness of the patent effect the strength of

 2 the patent?

 3 MS. SEIDE: It's not the -- the narrowness of it

 4 is exactly what David said. If you have and all you get

 5 is a claim to a particular protein with a particular

 6 sequence, let's just exemplify with a protein, and say

 7 the biosimilar comes along, and it has an amino acid

 8 difference or two amino acid differences.

 9 Back in the day, a few number of years ago, you

 10 might be able to litigate against a company that makes

 11 the biosimilar, and argue maybe not literal infringement

 12 but infringement under the Doctrine of Equivalence,

 13 which said it didn't have to be identical, but it had to

 14 have enough similarity to say being the same invention

 15 or a pretty similar invention, and the court had set out

 16 a test for it.

 17 That has been severely curtailed over the last

 18 ten years by decisions of the Supreme Court and the

 19 Federal Circuit taking that to heart, saying that you

 20 cannot broaden out the scope of the patent at all to

 21 cover the equivalent.

 22 So you're sort of hammered on both sides. You

 23 can't get the claim in the first place that's broad, and

 24 once you get the claim, you can't litigate it against

 25 something that's not absolutely identical.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 153

 1 MS. MICHEL: All right. And Doug?

 2 MR. NORMAN: I'll try to be pretty quick.

 3 Thanks for inviting us here today. I look at small

 4 molecule drug patents, and actually if you think of

 5 small molecule, the chemical compound itself is

 6 something that always looks like chicken wire, so it's

 7 got a methyl on one end and maybe an ethyl on the other,

 8 but it's going to look like methyl ethyl chicken wire,

 9 and everybody that makes that molecule and puts it in a

 10 pill and tries to sell it is going to make methyl ethyl,

 11 and you're always going to be able to catch them for

 12 infringement.

 13 If we look at biologic patents, we have to look

 14 at two different things. First of all, there are two

 15 types of biotechnologies that we're talking about.

 16 There are sort of the old biotechnology products, let's

 17 talk about human growth hormone, parathyroid hormone

 18 insulin, that look a lot like methyl ethyl chicken wire.

 19 They have a primary aminoacid sequence, and it looks the

 20 same way every time you make it.

 21 And so you can get a patent on that, if you meet

 22 all the other requirements that you have under the

 23 patent law, and you can catch any infringer who is

 24 making insulin or human growth hormone or parathyroid

 25 hormone and you can always find that.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 154

 1 The more difficult aspect of all of this are

 2 from some of the larger sort of huge molecules that one

 3 would find, like a erythropoietin or human protein C,

 4 big blood proteins where you may know the primary

 5 aminoacid sequence, but when you go to manufacture that

 6 drug, you can never make it perfectly.

 7 There's no way that any biotechnologist in the

 8 world can make that exactly how it's produced in the

 9 human body, so the front end of the molecule may be

 10 clipped off 40 percent of the time. The back end may be

 11 clipped off 5 percent of the time. You may have cross

 12 linkages that didn't quite work. You may have post

 13 translational modifications. You may have sugar

 14 molecules attached to it in different ways, all

 15 dependent upon the way you manufacture it, and that's

 16 how the FDA regulates those large molecules is by

 17 defining that manufacturing process.

 18 We in the innovator industry, when we're trying

 19 to get life saving drugs on the market, have the time

 20 and the resources to figure out how to do that once, and

 21 we put together a cell line, and we put together a

 22 manufacturing process, and we put together a patent

 23 portfolio to try to protect the way we're going about

 24 doing it.

 25 The weakness in the biotech patenting scheme

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 155

 1 that we look at now is the fact that anyone, given the

 2 guidepost that we have laid out, we've already hacked

 3 away through the jungle, but many other people can

 4 follow along behind. They can walk through the trail

 5 we've made. They can ride a horse through the trail

 6 we've made. They can ride a mule or they can ride a

 7 motorcycle. They can find a dozen different ways to

 8 make the same sort of molecule that will not fall within

 9 the scope of the patent that we have made.

 10 Therefore, that's why we look at trying to find

 11 some sort of data package exclusivity regime whereby we

 12 can have certainty when we're going to invest 1.4

 13 billion dollars in the production of a molecule, we can

 14 protect that on something better than a break even

 15 aspect.

 16 MS. MICHEL: What about the patent means that

 17 the follow-on product is not going to fall within the

 18 scope of that patent? Is it because the claim literally

 19 covers only exactly the aminoacid sequence cited, or is

 20 it something -- getting beyond the 112 issues, I'm

 21 trying to just get at the infringement analysis issue.

 22 MR. NORMAN: Many times by the time you're on

 23 the market with your molecule, your initial primary

 24 patent has expired because it often takes that long, and

 25 so you're trying to product a claim around a molecule

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 156

 1 that's posttranslationally modified or which has to be

 2 defined in some way by the way that it is manufactured.

 3 And that is a major weakness in the current

 4 regime we have trying to rely upon any sort of patent is

 5 because we generally only expend the resources to get

 6 patent rights that cover the way we manufacture the

 7 molecule. We don't spend another several hundred

 8 million dollars trying to get patents on the way someone

 9 else may also try to make an equivalent product.

 10 MS. MICHEL: Your non-infringement argument

 11 seems to focus more on the idea that different processes

 12 could be used to make biosimilar molecules.

 13 MR. NORMAN: Sure.

 14 MS. MICHEL: And your argument seems less

 15 dependent on the fact that a protein patent would not

 16 cover an amino acid sequence that was essentially ten

 17 amino acids different, not cover a protein that was

 18 simply ten amino acids different.

 19 MR. NORMAN: Right. That would be another

 20 infringement analysis.

 21 MS. MICHEL: Thank you. Let's go to Ester.

 22 MS. KEPPLINGER: Well, I spent the bulk of my

 23 career at the Patent and Trademark Office, and as

 24 Rochelle said, I'm sure if I look at the patents that I

 25 granted or Jeff when he was there, they are now being

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 157

 1 attacked or litigated under a different set of criteria

 2 than when we examined them.

 3 At the time we examined some of those old

 4 biotech applications, the current written description

 5 requirement did not exist as the way the Fed Circuit has

 6 applied it. An enablement requirement was there, but

 7 that too has changed over the years.

 8 So some of the old patents that were examined

 9 and that were granted in the old days and are now being

 10 litigated were broader patents, so they are much more

 11 vulnerable in the litigation because of the Federal

 12 Circuit decisions that have come out in the meantime.

 13 MS. MICHEL: Ester, a quick questions about

 14 that. Most patents include a range of claims from broad

 15 to narrow. Is it necessarily all the claims that are

 16 susceptible to a 112 attack or just the more broad

 17 claims in a patent?

 18 MS. KEPPLINGER: Well, it varies but, yes, there

 19 are typically a range of patents, but the way the Patent

 20 Office now is applying the written description

 21 requirements, it is very difficult to get much scope at

 22 all around what you show.

 23 And they recently -- the Patent Office recently

 24 put out new written description guidelines, so you're

 25 caught between -- if you have a sequence of certain

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 158

 1 number of amino acids and you try to get a percent

 2 identity or something that says, I'm claiming everything

 3 that's with 85 percent like this, they're saying that

 4 that would meet written description, but what they don't

 5 say is it won't meet enablement.

 6 Then if you put the function, you say this

 7 particular protein and, oh, by the way it does this

 8 particular function, then they're saying that you have

 9 not -- you probably will not have met written

 10 description because you have not identified enough of

 11 the molecules that are within that genus that actually

 12 have that function.

 13 So it is very difficult to get any kind of

 14 scope. Additionally, one other point I wanted to make

 15 with respect to the PTA, the patent term adjustment.

 16 The patent term adjustment is, of course, for any delays

 17 during the prosecution of the application, and patent

 18 term adjustments are relatively recent, but they are

 19 becoming somewhat significant because of the backlog at

 20 the Patent and Trademark Office, so there are a number

 21 of times that the office doesn't pick the case up at the

 22 time it should.

 23 I would think that this would apply to both

 24 biotech and to the small molecule applications as they

 25 move forward. It just depends on how many applications

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 159

 1 are there, how many examiners they have that are

 2 available to act on them.

 3 MS. MICHEL: Follow-up one question there. I

 4 thought I did hear you say that a claim to a protein is

 5 going to have some breadth beyond the exact aminoacid

 6 sequence decided there.

 7 MS. KEPPLINGER: Well, it depends. Obviously

 8 that's everybody's objective, to get some kind of scope,

 9 but it's not easy to get.

 10 MS. MICHEL: It's not easy to get in terms of

 11 getting the Patent Office to grant?

 12 MS. KEPPLINGER: Yes. As I say, in the old days

 13 you could get scope. We gave out patents with scope,

 14 but the way the Fed Circuit has been moving, they are

 15 not -- well, I think you did. They were not -- they are

 16 not permitting you much scope without significant

 17 additional showings of other exact compounds that will

 18 work.

 19 MS. MICHEL: I understand, and I don't mean to

 20 belabor this point. A lot of the 112 cases out there

 21 like the Carnegie Mellon case from last month was

 22 about -- you've made a showing in E. Coli, are you then

 23 going to get the rights. It's like a whole other -- and

 24 I'm trying to understand the importance of that doctrine

 25 to other types of claims, and Jeff actually wants to say

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 160

 1 something. Sorry to skip you, Bruce.

 2 MR. KUSHAN: I'll be very brief. I just want to

 3 make sure you understand it's not that simple.

 4 MS. MICHEL: Okay, thank you.

 5 MR. KUSHAN: Because when you look at a claim

 6 scope question, you have to look at the scientific

 7 context of the molecule, so sometimes you can have these

 8 three domains of a protein in any protein and it will do

 9 the same thing, and in other protein, you can make one

 10 change to one residue, and it doesn't do like the one,

 11 so don't disassociate the scientific foundation of the

 12 discussion from the legal foundation.

 13 A lot of the claim scope turns on the nature of

 14 the class of proteins you're dealing with.

 15 MS. MICHEL: All right. I skipped Bruce, and I

 16 apologize. So let's go to Bruce.

 17 MS. KEPPLINGER: If I can just say one thing.

 18 One of the things that the Patent Office is looking for

 19 is just that, structure function relationship.

 20 MS. MICHEL: Thanks.

 21 MR. LEICHER: I may be coming at this from

 22 probably a different perspective, which is -- and I'll

 23 take it back to what Jeff was saying at the beginning.

 24 If you look at small molecules, a particular small

 25 molecule may, as I think David was saying, in some ways

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 161

 1 have a stronger opportunity for protection over the

 2 validity, but a small molecule hits on a target, and

 3 there are many, many other molecules that may hit on the

 4 same target.

 5 So that they don't really provide the breath in

 6 that respect of protection that you often have in the

 7 biotechnology area. If you look at -- and I think we're

 8 all doing the economic analyses this morning based on

 9 what's going to happen in the next ten years, but then

 10 we're switching the patent analysis to what's going to

 11 happen 30 years from now, and I'm not sure that's

 12 necessarily -- it may be mixing apples and originals.

 13 If you look at the existing set of -- I'll cite

 14 a few examples of products that are out there today and

 15 the types of claims they have, I'm not going to opine as

 16 to whether they're valid, invalid or whatever. If you

 17 look at something like Avinex, it claims on its face

 18 that it's not limited to specific sequences, and those

 19 patents are out there.

 20 If you look at Rotoxin, it's something that

 21 covers on its face any antibody that binds to a

 22 particular receptor, so what you're doing and what

 23 historically was done in biotech is you look for a way,

 24 and it's what Jeff described, of patenting as much of

 25 the patentable invention that covers as much of the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 162

 1 biology as possible so that you can give yourself the

 2 greatest protection as possible.

 3 And from my perspective, what that means is it's

 4 actually much broader protection for biotechnology

 5 patents. That doesn't mean there's uncertainty, but

 6 there's broader protection, and if you look at the track

 7 record of what's happened in the marketplace, which I

 8 think is what's important, you have products like EPO

 9 that were patented back in 1984 that are still keeping

 10 competition out today in the U.S.

 11 MS. SEIDE: That's a unique situation, EPO.

 12 That's a pre GATT case, and I think the whole issue --

 13 we're not going to have a lot of GATT like or I mean EPO

 14 like or maybe Neupogen like cases going forward because

 15 we're going to --

 16 MR. LEICHER: No, I recognize the GATT issue

 17 there.

 18 MS. SEIDE: That's a different issue.

 19 MR. LEICHER: The point being that if there are

 20 all these patents out there today, there's no mechanism

 21 absent some change in adopting a pathway for people to

 22 challenge them early.

 23 One of the reasons there's data exclusivity in

 24 Europe that goes eight plus two plus one is there's

 25 opportunity under the Europe system to deal with patents

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 163

 1 that are uncertain, and so let me just make one last

 2 point, which is one of the compromises that was struck

 3 in 1984 with Hatch-Waxman was to trade-off the patent

 4 term extension for some of the advantages of being able

 5 to challenge patents early and some certainty with the

 6 patent system.

 7 Biologics got the benefit, and we all did in the

 8 biotech industry, of those patent term extensions. We

 9 got the quid without the quo, and that seems like

 10 there's a need for remedy here.

 11 MS. MICHEL: And before I move to Ken, another

 12 topic in this area, and don't feel that you have to

 13 address this just because I'm raising it now, but we've

 14 talked a lot about the 112 issues, the enablement and

 15 written description requirement issues.

 16 If anyone was able to address what that meant

 17 for obviousness and other issues of validity, I think

 18 that would be interesting in that I think there's at

 19 least an argument that if you have a very narrow patent

 20 in a unpredictable art, you therefore have a patent that

 21 is not very susceptible to an obviousness challenge.

 22 Another topic, so if anyone could address that,

 23 that would be interesting. I'm going to move on --

 24 MS. SEIDE: I can address -- I think I can

 25 address that.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 164

 1 MS. MICHEL: Let me go to Ken.

 2 MS. SEIDE: Go ahead.

 3 MS. MICHEL: Unless in a somewhat different

 4 issue, but I think it's been encompassed in some of the

 5 points we've been discussing is trying to understand why

 6 the narrowness of biotech patents creates an

 7 infringement problem for follow-on biologics, which you

 8 think would be molecules that would have very similar

 9 structure and identical function.

 10 So I understand the 112 problem in biotech. I

 11 need more input on to why it's an issue for follow-on

 12 biologics.

 13 MR. GOLDMAN: I think you're absolutely right.

 14 I don't believe -- I think it's an issue for patent law,

 15 not an issue for follow-on biologics. Clearly what

 16 we've seen from everyone on this panel is that the

 17 biotech patent law is a complex and difficult area to

 18 understand, and everyone has their own viewpoint.

 19 I certainly would agree with Rochelle and Ester

 20 and would agree that patents have been narrowed, the

 21 scope of biotech patent claims have been narrowed in the

 22 past ten years very much more than what we saw in the

 23 '80s and '90s.

 24 I also, since we're back on this side of the

 25 table, would also agree with Jeffrey that biotech

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 165

 1 patents in another sense are far more broad since they

 2 cover what may be a receptor that the patent might

 3 encompass claims for antagonists to treat diseases that

 4 are caused by over-activity, and they might also treat

 5 diseases that are with agonists that are caused by

 6 suppression of that receptor.

 7 They might cover diagnostics, research tools,

 8 manufacturing platforms, and there's so many different

 9 areas that one -- that can be covered by one patent as

 10 well as I think Jeffrey mentioned another others, that

 11 there's an incredible array of rights that are available

 12 and out of one single invention, so it's a very complex

 13 issue.

 14 I'm not sure that a regime that's going to deal

 15 with follow-on biologics, which are highly similar under

 16 the comparability standards as put forth by the FDA in

 17 1996 and the ICH guidelines is the right place to

 18 address those kinds of issues.

 19 I also wanted to address one thing that Bruce

 20 just said which is about the patent term extension. I

 21 believe that the patent term extension was a quid pro

 22 quo, and the quo was the 271(E)(1) research use

 23 exemption. So there was a quid and a quo there I think.

 24 It's not the Paragraph IV certification stuff that was

 25 the quo.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 166

 1 So I know we're running late, and I'll try --

 2 there's a couple points I wanted to say. I agree with

 3 Naomi that one of the most important things that need to

 4 be done in any sort of development of a product, whether

 5 it be follow-on or innovator, is to have these freedom

 6 of operation studies done, and they're very complex and

 7 they're very difficult, and it's very important for a

 8 company like Hospira.

 9 I've been a patent attorney for 20 years, 16

 10 years in-house. I can't remember a single project that

 11 I worked on that didn't have that type of analysis, even

 12 for the innovator; in other words, the detailed freedom

 13 of operation, and there's always going to be risks

 14 associated with products, whether they be innovative

 15 products or follow-on biologics, so I don't think that

 16 that issue is particular to follow-on biologics.

 17 So all of this I think points towards nothing

 18 particular about follow-on biologics, you know, changes

 19 the patents, requires a change in the patent scheme as

 20 part of the legislation.

 21 MS. MICHEL: Thank you. And Ken Dow?

 22 MR. DOW: I just have a couple things to add to

 23 what's been said. I've been working on biologics for

 24 the past ten years at Centocor, trying to obtain patents

 25 on biologics in this area, and I do agree that I think

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 167

 1 that over the past ten years, it's become more difficult

 2 over time to satisfy the written description and

 3 enablement requirements and get the kinds of breadth of

 4 claims that we were able to get years ago, and there's a

 5 lot of reasons for that.

 6 I think a lot has to do with the change in the

 7 law and the guidance that we've gotten from the Federal

 8 Circuit, and the other thing, the other reason for that

 9 is because in the small molecule area when you have a

 10 target or you have an initial pharmaco for it, it's easy

 11 to crank out a lot of compounds around that that can

 12 support a broad genous.

 13 It's not that easy with large molecules to make

 14 so many variance, and we're starting to be able to do a

 15 little bit of that, but it's much more difficult to make

 16 the kinds of variance that would give -- that would

 17 support a broader claim and would support that written

 18 description and enablement requirement.

 19 To be sure, we will go in there, and in our

 20 first instance we will try to get as broad a claims as

 21 we can. We'll put functional claims limitations in

 22 there. We'll try to get homology claims. We will do

 23 all that, but we get beaten back in the Patent Office,

 24 and in the process of cutting back our claims, we then

 25 surrender any kinds of Doctrine of Equivalence that we

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 168

 1 might want to get in the courts because of recent cases,

 2 prosecution history estoppel.

 3 So when you combine that with a similarity

 4 standard for biosimilars, it seems to me you're opening

 5 the door for design-arounds that make it very difficult

 6 for us to predict whether the patents are going to

 7 prevent competition.

 8 MS. PEARCE: I would like to make a couple of

 9 comments to that, if I may. Firstly, I would just like

 10 to address a comment that Doug has made.

 11 In my experience, in Hospira's experience, it is

 12 simply not correct that by the time a biopharmaceutical

 13 reaches the market, that its sequence patent has

 14 expired. If you take again the top three selling bio

 15 oncology products that were referred to earlier in this

 16 panel, the time between the sequence patent's earliest

 17 priority date and sale in the U.S. is seven years, seven

 18 years and five years.

 19 MR. NORMAN: All pre GATT.

 20 MS. PEARCE: Simply not correct.

 21 MR. NORMAN: All pre GATT.

 22 MS. PEARCE: But that's the difference between

 23 launch and priority date. It's not the difference

 24 between patent expiry or grant, priority date earliest

 25 invention of the sequence itself.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 169

 1 The second point I would like to make is that I

 2 agree with Bruce that it's simply not correct to say

 3 that these patents, especially -- if we're talking about

 4 an EPO sequence patent, which has been referred to a

 5 number of times in the panel today, of course there are

 6 small the biopharmaceutical patents, products, full

 7 sequence information that's patented out there.

 8 For the large monoclonal antibiotics, it's

 9 simply not correct to suggest that there is a full

 10 sequence. What is generally patented in this space is

 11 CDRs, and the CDR is approximately 12 percent of the

 12 light chain of the molecule or 7 to 9 percent of the

 13 heavy chain of the molecule.

 14 It's simply not correct to say that that full

 15 sequence is what is getting granted here, and when I

 16 look at obtaining clearance in this space, you are

 17 looking at the CDRs, and it covers any other part of the

 18 molecule. Any point in mutation that I would like to

 19 make outside of that will still infringe that.

 20 I think it's important to say that a minor and

 21 immaterial sequence change is very likely to expose a

 22 follow-on biologic to an infringement risk, if it is

 23 material, then it's going to be patentable of course.

 24 MS. MICHEL: And we'll go to David, and in

 25 discussing this very interesting conversation, and we

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 170

 1 can go a little past two I've been told, I will throw

 2 another point out there, so please say whatever you were

 3 going to say, and if you can respond, that's great too.

 4 It sounds like some of this debate is really

 5 turning on a question of how similar does a follow-on

 6 biologic have to be that even if we all agreed about the

 7 scope of the patents and to some extent whether or not

 8 those patents are of sufficient protection is going to

 9 turn on how different, and we've been using the word

 10 similar -- but how similar or different can the

 11 follow-on biologic be? What is going to be the ability

 12 of that follow-on product to go outside the scope of

 13 that claim.

 14 That's something that we haven't addressed, if

 15 anyone has a thought on that, in order to talk about how

 16 well existing patent rights cover the investment in the

 17 innovative product. Maybe it's unanswerable.

 18 MR. MANSPEIZER: Well, I don't think that any of

 19 us have that expertise, but perhaps if our FDA

 20 representatives are still here, maybe we can ask them,

 21 but to get back to the crux of the matter is again: Do

 22 patents provide the necessary certainty that people need

 23 to make the enormous investments in R&D? Whether we're

 24 talking about $1.2B, $1.4B or $700B, God forbid, the

 25 point is that patents are by definition uncertain.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 171

 1 There is no certainty.

 2 We see that in the small molecule space. We

 3 will see that in a biosimilar space, and I don't think

 4 that anybody would debate that, and whether you're on

 5 the innovator side or the biosimilar side, everybody's

 6 going to agree that patents are by definition uncertain.

 7 Once you accept that, you have to realize that

 8 in order to allow this industry to continue to thrive,

 9 you need to strike an appropriate balance between

 10 competition and invasion, and I'm not just speaking

 11 about the competition between the innovator company and

 12 the biosimilar filer.

 13 I'm talking about competition between innovator

 14 companies. I'm talking about the kind of innovation we

 15 see where -- with sufficient data exclusivity, as you

 16 see today in the biologics area but as you're seeing a

 17 lot less in the small molecule area where drugs,

 18 proteins are being used outside of their original

 19 therapeutic area or even we see it with a lot of the

 20 monoclonal antibiotics where originally this was a

 21 product that was approved for the treatment of breast

 22 cancer, and then there's studies on lungs cancer and

 23 renal cancer and brain cancer, and the public benefits

 24 in the end from those studies.

 25 Nobody is saying that that should go on forever.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 172

 1 That's not an appropriate balance. We need to find what

 2 is the appropriate balance that will protect both sides

 3 and benefit the public, but benefit the public both by

 4 providing the proper incentive to innovate, and the

 5 benefit of low cost drugs.

 6 MS. MICHEL: Thank you. It looks like we'll

 7 have time to go around the table one more time, and

 8 we'll try to pace ourselves to do that over about a

 9 ten-minute timeframe. Hopefully that's a doable thing.

 10 Rochelle?

 11 MS. SEIDE: Well, I want to address a couple of

 12 the points that were made, one of which is: We talked

 13 earlier, and I want to say what David said, most of the

 14 litigation that has been in the biotech sphere has not

 15 been between an innovator and a generic. It's between

 16 innovator and innovator.

 17 Doug and I were talking about way back when, and

 18 we mentioned there are eight growth hormones on the

 19 market. The growth hormone patents are among the most

 20 litigated biotech patents that ever came down the pike.

 21 I mean, they were subject to litigation for 15, 20 years

 22 almost. Same thing with EPO, it's a different situation

 23 but there are eight growth hormone products on the

 24 market. It's not precluded entry of -- ultimately entry

 25 of other competing products.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 173

 1 The other aspect that I want to address that

 2 Bruce mentioned about breadth of claim, yes, you can get

 3 lots of different, kinds of claims around a biotech

 4 invention. You can get a research tool.

 5 Research tools, you know, I mean, they don't

 6 have -- I would say they don't have a lot of value. I

 7 mean, one person's product may be another person's tool

 8 depending on how you use it. Certainly there are a lot

 9 of targets that are druggable targets that are patented,

 10 either on the DNA side or on the protein side, and

 11 certainly innovator companies, I've come to clear a lot

 12 of them for innovator companies because there are

 13 patents that are held by universities or small

 14 companies, technology companies that have target

 15 patents, and they're looking to develop a small molecule

 16 that will interact with these targets.

 17 That hasn't precluded that kind of research

 18 either because you're protected by the research

 19 exemption for a long period of time, until you're on the

 20 market, and you may even be protected until the patent

 21 expires to some extent, and the Supreme Court has put a

 22 pretty big crimp into the ability of say a company that

 23 has a druggable target to soothe a drug innovator

 24 looking at the target.

 25 The same thing I think with the whole

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 174

 1 implication of biomarkers. We've talked about it.

 2 That's going to be thrown into a tremendous disarray I

 3 think in the next few months. Certainly the Federal

 4 Circuit's issued a recent decision in Bilski that's

 5 going to have a tremendous amount of implication on

 6 biomarkers, so all those patents that are out there on

 7 biomarkers may be subject to invalidity challenges.

 8 So I think again, the whole issue is we are in

 9 an area of great uncertainty as to what the value of

 10 your patent protection on anything is in the biotech

 11 sphere. It's really disconcerting for most of us who

 12 practice in this area.

 13 MS. MICHEL: And, Doug?

 14 MR. NORMAN: Sure, thanks. I would like to get

 15 back and touch on one thing that actually Bruce and Ken

 16 both mentioned a little earlier, and that's the question

 17 about patent term restoration as it relates to

 18 bioproducts or even small molecule products.

 19 There's a limitations under the Patent Term

 20 Restoration Act that came to us in 1984 as part of the

 21 Hatch-Waxman Act that puts a five-year cap on the amount

 22 of restoration that you can get once you obtain product

 23 approval.

 24 So while it can be all the way up to 14 years,

 25 it is capped at five years. Therefore, if you only have

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 175

 1 one or two or three years left on your key patent,

 2 whichever key patent that is covering your product, then

 3 you're only allowed to add a maximum of three or five

 4 years beyond that, giving you a total of maybe a

 5 whopping eight years of patent protection if you can get

 6 that far.

 7 Now, a few things have happened since 1984, once

 8 of the most important of which was the United States

 9 signed on to trips, giving us a 20 year patent term from

 10 the date we file it rather than the 17 year term from

 11 the date it issued, and Naomi quite properly pointed

 12 out, there are patents issuing probably tomorrow that

 13 are probably pre GATT that will have 17 years of life.

 14 Probably 95 percent of everything that people in

 15 this room are going to be dealing with from now on are

 16 going to be post GATT filings, and they're going to be

 17 20 years.

 18 Now, if it's 20 years from the date you file it

 19 and you try to launch a biotech product, I can tell you

 20 now it's going to take you 10 to 12 years based upon

 21 experiences that we have seen and things that we've

 22 heard in the industry, and therefore putting a five year

 23 cap of patent restoration on top of that doesn't get you

 24 up to the 14 years you otherwise were hoping that you

 25 were going to be entitled to under the Patent Term

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 176

 1 Restoration Act.

 2 Add on to that the difficulty it is to get

 3 things through the FDA nowadays. We can see that the

 4 number of new products being launched is declining

 5 rapidly from year to year, and add upon that then the

 6 inability to even try to carry out any clinical trials

 7 on something as important as preventative medicines

 8 because the length of time of the clinical trials need

 9 to be sometimes eight, nine, ten, twelve years, if

 10 you're working in the preventative medicine area.

 11 We are literally leaving innovation behind us

 12 because no one can get the proper rewards for it, and

 13 therefore, an important thing, important aspect of

 14 anything moving forward in new legislation would be to

 15 remove that five-year cap so that we can still attempt

 16 to get a 14 year reasonable patent life based upon

 17 patent term restoration.

 18 MS. MICHEL: Well, one question about that, and

 19 I may be wrong, so please correct me. I thought it was

 20 possible to choose the patent to be extended, and that

 21 if you had a later expiring patent, you would choose to

 22 extend that one rather than the one with only three

 23 years life.

 24 MR. NORMAN: Well, you're right. You're

 25 absolutely right. You can choose to extend one patent,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 177

 1 although you really want to extend the one that's most

 2 important that's going to protect your market. Often

 3 you have some of these follow-on patents, which others

 4 here refer to as evergreening patents, that might be

 5 something, a formulation, a new delivery aspect, a slow

 6 delivery, a fast delivery formulation, and someone that

 7 can practice another aspect of your product placement

 8 and not perhaps infringe that patent, and therefore

 9 extending that one would protect that product line

 10 itself but may not protect your entire franchise.

 11 MS. PEARCE: But it is correct, Doug, to say

 12 that in practice, people file a number of applications

 13 for patent term extension, and then choose the patent

 14 they would prefer for that extension to apply to and

 15 withdraw the others.

 16 MR. NORMAN: At some point you have to make the

 17 final decision, yes.

 18 MS. MICHEL: Let's see. Let's go to Bruce

 19 because I think he had his tent up earlier and then to

 20 Ester and Jeff.

 21 MR. LEICHER: I actually just have a very brief

 22 comment which is that maybe to David's surprise, we may

 23 actually agree with him more than he realizes, in that

 24 on the point you raised earlier about similarity, one of

 25 the reasons that we support the legislative possibility

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 178

 1 of biogenerics is because there isn't going to be the

 2 patent uncertainty associated with patent protection if

 3 you're actually able to demonstrate essentially that you

 4 have a copy.

 5 MS. MICHEL: Okay, thank you. Ester?

 6 MS. KEPPLINGER: Just a couple things. With

 7 respect to pre GATT cases, when I left the PTO in 2005,

 8 there were maybe a couple hundred, I'm not certain of

 9 the number, buy that's been almost four years, so it's

 10 diminishing, so there aren't that many pre GATT cases

 11 that could raise that question.

 12 The second thing, just very briefly, about 103.

 13 You asked the question if you get a narrow claim, isn't

 14 that going to be a stronger cases against the validity

 15 challenge for obviousness? And certainly the less scope

 16 that you have, the fewer references that might be out

 17 there, they would not -- maybe not be able to find some

 18 little point within that scope that is vulnerable.

 19 However, if the reference is there, it's there

 20 to make it obvious, and the Supreme Court with KSR,

 21 while it really didn't change the law so much, it

 22 re-emphasized some old case law. It certainly changed

 23 the way the Patent Office has been applying 103 and

 24 potentially the way the Fifth Circuit will. So it is

 25 becoming more difficult to get patents for obviousness

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 179

 1 as well.

 2 MS. MICHEL: Let me ask: The extent to which

 3 112 is such a big issue in biotech is, I understand it,

 4 fairly grounded in the Federal Circuit calling

 5 biotechnology an unpredictable art, and to some extent

 6 doesn't that unpredictability then also help defend them

 7 against an obviousness case?

 8 MS. KEPPLINGER: Yes, it can, but they'll take a

 9 piece of prior art and say A shows this and B shows

 10 this, and it would have been obvious, and the standards

 11 for the two are not necessarily exactly the same.

 12 MS. MICHEL: Thank you. Jeff?

 13 MR. KUSHAN: Listening to the discussions, I

 14 think one thing that would be good to do is pull back a

 15 little bit and really try to understand why people think

 16 differently about biologics relative to small molecules,

 17 and I've been thinking a lot about this over the last

 18 couple of years.

 19 I think if you look at -- kind of when you're

 20 making the decisions to put money into your development

 21 as an animator, if you're in the small molecule space

 22 you know there's a lot of uncertainty about your patent

 23 estate, but one thing you pretty much know is that if

 24 you've got a patent on the molecule that's going through

 25 clinical development and you get that patent issued and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 180

 1 then you're drug gets approved, you know where your

 2 competition is going to come at is going to be at

 3 another molecule that's identical to that.

 4 So your chaos of prediction of where you're

 5 going to be in the future is somewhat narrower in scope

 6 than it might be in the biologics area, primarily

 7 because in the complimentary decision making point, in

 8 the biologics development, you don't know whether the

 9 patent estate you're going to have necessarily would hit

 10 the exact molecule that a biogeneric or a follow-on

 11 producer is going to select.

 12 I think the other part of this equation that's

 13 hard to grasp on to is that the scheme is actually

 14 enabling the follow-on producers to have a lot more

 15 latitude to navigate around the patent estate than the

 16 complimentary innovator or generics would have relative

 17 to the NDA holder.

 18 So it's not just a one way perspective. It's

 19 the other perspective of looking at that patent that was

 20 cut through the jungle that Doug described earlier that

 21 they know how they get around a lot more readily the

 22 patent estate than the NDA holder and the end filer

 23 might be in that kind of a debate.

 24 I think the other thing that we always talk

 25 about is hard, and we get paid as patent lawyers way too

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 181

 1 much money to do our crystal ball function of figuring

 2 out where your patent estate is and how strong it is

 3 relative to your products. One thing we can't do, we

 4 tend to come in and say, all right, 30 percent chance

 5 you're going to win or lose your patent case. It really

 6 has nothing to do with facts, so let's take that

 7 variable and put it away upfront.

 8 Second, we talk about the claim scope variables.

 9 Certainly the trend has been for the PTO to crimp down

 10 around the sequence that is the reference point of the

 11 early examination, and that does give you some instincts

 12 about at least mathematically whether you're going to

 13 have infringement by a certain number of substitution of

 14 amino acids in a protein sequence.

 15 The thing that is kind of a killer variable that

 16 we're not talking about is the other thing it makes it

 17 impossible to predict where you're going to come out,

 18 and that's this wonderful doctrine called Inequitable

 19 Conduct because every single patent case that we're

 20 involved in, where were on the offensive side of

 21 fighting, we have to fight this unknowable risk of

 22 Inequitable Conduct.

 23 So when you're sitting there 12 years out from

 24 launch of a product, and you're advising a company,

 25 Well, so how is this patent going to look to protect us

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 182

 1 from a follow-on producer, I feel bad taking their money

 2 because it's just like there's this variable, there's

 3 that variable and there's so many variables that affect

 4 fundamentally your ability to say this patent estate is

 5 going to be worth anything that it's almost comical to

 6 have the discussion.

 7 So let me say, that's a bit of an overstatement,

 8 but I want to make sure people appreciate that the

 9 patent calculus is one that is so difficult to predict

 10 that you need another thing out there to tell the

 11 innovators, yeah, you should do this, but you should do

 12 this in a long-term multiple indication focus

 13 development effort, and that's where if I had to still

 14 down the difference between the NDA and the biologics

 15 area, I know at least where I stand with copies of a

 16 molecule in the NDA's base, and that does reduce some

 17 degree of the uncertainty of coverage I might have.

 18 MS. MICHEL: Do you have any comments on how the

 19 jury system plays into that degree of unpredictability?

 20 MR. KUSHAN: Well, in the Hatch-Waxman cases,

 21 the juries tend not to be there.

 22 MS. MICHEL: Well, they're not.

 23 MR. KUSHAN: So we get enough uncertainty just I

 24 think -- a very big variable is in the Inequitable

 25 Conduct area.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 183

 1 MS. MICHEL: But on the biotech side.

 2 MR. KUSHAN: Well, again if you're going to come

 3 up with an environment where you're going to be fighting

 4 about the patents before there's an actual infringement,

 5 you're probably not going to see a jury in that case as

 6 well, the reason we don't have damages in the patent

 7 cases and Hatch-Waxman. We'll see the same model I

 8 assume in the pre launch scenario in the biologics area.

 9 MS. MICHEL: Yeah. Okay. Ken Goldman?

 10 MR. GOLDMAN: I will try and make this quick. I

 11 think I want to make four quick points and hopefully

 12 answer your last question about whether biotech patents

 13 can preclude competition from biosimilars and

 14 biogenerics, and then also, ultimately we can get to

 15 your last objective, and I'll see if I can get that all

 16 in four points.

 17 Starting with David, I think you're correct. In

 18 terms of the question about biosimilars and biogenerics,

 19 the FDA -- we need the FDA up here to tell us what the

 20 correct standards are going to be, but the FDA is

 21 clearly the right entity to be deciding which products

 22 will fall under the laws and to promote the consistent

 23 regulatory standards that would be required to implement

 24 such a scheme.

 25 We believe that Novartis -- the Novartis group

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 184

 1 of companies, if you haven't heard already includes also

 2 Sandoz, believes that comparability is the best standard

 3 as set forth by the FDA in 1996 and which is the

 4 standard used for manufacturing pre and post

 5 manufacturing changes for innovative products.

 6 Now, given that that would be the standard,

 7 whether a patent that you get will ultimately prevent

 8 design-arounds is obviously not a sure thing. It might

 9 depend on the day of the week, the patent examiner that

 10 you have, what the most recent Federal Circuit case

 11 says, any number of possible outcomes, although we do

 12 believe that aggressive and intelligent patent

 13 prosecution should give you a broad enough patent, but

 14 again it's not entire clear.

 15 Therefore, it's clear that the patent system

 16 alone is not going to satisfy the risk that innovators

 17 face of not getting a return on their investment.

 18 Therefore Novartis believes that the biotech patent

 19 should not be coupled with this scheme because it's

 20 never going to give you -- as we concede, it's never

 21 going to give you the assurance that you need to recoup

 22 your investment, but rather the data, some type of data

 23 exclusivity at least as good as the one that's currently

 24 in force in Europe today would go a long way towards

 25 providing that type of assurance, and reduce that risk.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 185

 1 MS. MICHEL: Thank you. And we'll give Ken Dow

 2 the last word, but I'll also just say, as Michael said

 3 at the earlier panel, the record remains open and we

 4 certainly welcome more comments, if there's anything

 5 that we weren't able to get to that you would like to

 6 comment on. Thank you.

 7 MR. DOW: Well, obviously I would agree that the

 8 period of data exclusivity is absolutely critical here

 9 because of the unpredictability that we're going to run

 10 into.

 11 Just a couple small points that when we were

 12 talking about the patent term extensions, there is one

 13 other limitation in there that in that the extension

 14 only applies to the approved use, so that's -- first

 15 approved use, so you would have to factor that in, if

 16 you were going to make that system over into biologics.

 17 The other thing is when we were talking about

 18 the difference between biotech patents and small

 19 molecule patents, in my experience for biologics, the

 20 implications of third-party patents is much greater in

 21 the biotech area, and the so-called royalty stacking

 22 that we have in this area is something that the

 23 biosimilar may or may not have to deal with. Maybe

 24 those patents will be expired by the time they get to

 25 the market or they may have to deal with them

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 186

 1 themselves, so good luck.

 2 MS. MICHEL: With that, we'll conclude this

 3 panel and take a shortened break, a five-minute break.

 4 Thanks very much.

 5 (Applause.)

 6 (A brief recess was taken.)

 7

 8

 9

 10

 11

 12

 13

 14

 15

 16

 17

 18

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 187

 1 PANEL FOUR:

 2 LIKELY COMPETITIVE EFFECTS OF

 3 FOLLOW-ON BIOLOGIC REGULATORY INCENTIVES

 4 MR. WROBLEWSKI: Good afternoon. Thanks for

 5 coming back. My name is Michael Wroblewski. For those

 6 who are just joining us this afternoon, I'm an attorney

 7 in the Bureau of Competition here at the FTC, and my

 8 comoderator is my colleague in the Bureau of

 9 Competition, Elizabeth Jex.

 10 Joining us in this panel discussion this

 11 afternoon are going to be Geoff Allan, president and CEO

 12 of Insmed; Aaron Barkoff, partner at McDonnell, Boehnen,

 13 Hulbert & Berghoff; Marc Goshko, executive director of

 14 legal affairs for TEVA Pharmaceuticals North America;

 15 Dr. Steve Miller, senior vice president and chief

 16 medical officer of Express Scripts; Doug Norman, general

 17 patent counsel for Eli Lilly & Company; Bill Schultz,

 18 partner at Zuckerman Spaeder here in Washington; and

 19 Bryan Zielinski, assistant general counsel for

 20 intellectual property at Pfizer.

 21 More detailed information about each participant

 22 is in the folders and on the FTC's website.

 23 The objectives of this panel, there are really

 24 two of them. One is to identify the likely competitive

 25 effects of follow-on biologic regulatory incentives and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 188

 1 to examine how Hatch-Waxman experience informs this

 2 inquiry.

 3 As we mentioned this morning, we're trying to

 4 use some definitions and some terms that we have defined

 5 with a biosimilar drug being a drug product that refers

 6 to one that is therapeutically equivalent,

 7 interchangeable and substitutable at the pharmacy point

 8 of use level, whereas a biogeneric drug is one that --

 9 excuse me, that was a biogeneric drug. A biosimilar

 10 drug, I'll go to the top of the slide, is one that

 11 refers to one that is comparable to the reference

 12 product.

 13 We're going to run the panel the same we did it

 14 this morning. I'll pose a question, ask a specific

 15 panelist to start off, but if another participant would

 16 like to join in, please just turn your name tag on its

 17 side, and we'll be able to turn to you, if time permits,

 18 and once of again, these microphones are always on, so

 19 once you've finished talking, if you can just flip the

 20 microphone up, there won't be any excess chatter in the

 21 background.

 22 Why don't we just get right to kind of the main

 23 thrust of this particular panel: Is a marketing

 24 exclusivity period necessary to encourage competition or

 25 encourage companies to develop biosimilar and/or

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 189

 1 biogeneric applications and to seek their approval at

 2 the FDA?

 3 I'm going to turn either to Bill Schultz or to

 4 Geoff Allan maybe to start this conversation off.

 5 MR. SCHULTZ: Sure, thank you, and thank all of

 6 you at FTC for doing this day's session. I think it's

 7 going to be very helpful. It's certainly been very

 8 interesting.

 9 We haven't talked much about legislation, but we

 10 all know that's in the background, and the legislation

 11 that's been introduced on the hill, a number of the

 12 bills have an exclusivity period that's really very

 13 different from what's in Hatch-Waxman. The purpose of

 14 it is not to create an incentive to challenge patents

 15 that are weak.

 16 The purpose of it is to create an incentive to

 17 develop interchangeable biologics, and I think from just

 18 this morning's session, you couldn't listen to that --

 19 listen to the FDA speaker without thinking that there's

 20 going to be a lot of work for any company to do in order

 21 to persuade the FDA that a biologic is interchangeable.

 22 Maybe we ought to just go back and talk about -- just

 23 say what we're talking about here.

 24 The legislation, as I see it anyway, it really

 25 talks about two different kinds of approvals for

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 190

 1 biologics, almost two different steps. The first step

 2 would be you would get an approval for what you all have

 3 defined as a biosimilar; in other words, you showed that

 4 you're close enough to the innovative product that the

 5 agency is willing to let you show safety and

 6 effectiveness with less data than the innovator had to

 7 use.

 8 The bills don't say what kind of data or how

 9 much, and that will be up to FDA, and I think everybody

 10 thinks that's going to vary from product to product, but

 11 that lets you get on the market and market your product.

 12 It doesn't allow you to do what generic drugs

 13 can do today or generic chemical drugs or ANDAs can do,

 14 which is to sell their products as interchangeable where

 15 a pharmacist can actually make the substitution without

 16 a doctor's permission. You would have to have a

 17 separate doctor's prescription for that biosimilar

 18 product.

 19 The second type of approval that you can get is

 20 in addition to showing that you're similar, you can show

 21 you're interchangeable, and the bills have definitions

 22 for that, but the basic idea is that you have to produce

 23 enough data, not only showing that the product is safe

 24 and effective, but to show that it will have the same

 25 clinical effect in an individual patient.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 191

 1 I think it's envisioned that FDA is going to be

 2 the one to figure out what that data package will be,

 3 but I think everybody's involved, and as FDA said today,

 4 would say that there's a lot of work to be done here.

 5 It's going to be a tremendous effort. It's probably

 6 going to be very expensive, and yet I think the payors

 7 would say it is very, very valuable in terms of the

 8 healthcare system because the interchangeable products

 9 are the greatest opportunity for healthcare savings.

 10 So the idea of these bills, and some of them are

 11 six months and some of them are a year, they would say

 12 to the generic company that if you show that you are a

 13 biogeneric, you get for a period of time, six months or

 14 a year, to be the only one that can promote your product

 15 as interchangeable. You're the only one that's

 16 interchangeable.

 17 Unlike Hatch-Waxman, it does not block other

 18 products from the market. During that period of time

 19 other products can be approved as biosimilar, they just

 20 will not be approved as biogeneric during the

 21 exclusivity period.

 22 MR. WROBLEWSKI: So to make sure we understand,

 23 are you thinking that if it's a biogeneric, it is a

 24 subset of bio similarity, of the biosimilar drugs?

 25 MR. SCHULTZ: Yes, yes, absolutely. Every

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 192

 1 biogeneric would be biosimilar.

 2 MR. WROBLEWSKI: Geoff or Marc, if you wanted to

 3 add to this discussion.

 4 MR. ALLAN: Go ahead, Marc.

 5 MR. GOSHKO: I've been working on the generic

 6 exclusivity on small molecule drugs for probably about

 7 ten years, and for the last five, probably the three

 8 words in the Medicare Modernization Act, the later of.

 9 We still haven't come to an agreement on what those

 10 mean, but to emphasize things that Bill said and things

 11 that were said this morning, we're sort of building for

 12 the future here with establishing some reward for the

 13 investment that will be necessary to develop

 14 methodology.

 15 To move one thing over to the table is if

 16 legislation is going to be done, it doesn't need to be

 17 redone every time that science makes an advance, so we

 18 really want to have the legislation in a position that

 19 when the technology meets FDA's acceptance, that

 20 everything is in place to accommodate the idea of a

 21 biogeneric and to incentivise it.

 22 MR. WROBLEWSKI: Geoff?

 23 MR. ALLAN: I guess my comments are somewhat

 24 similar. As a company that's in the business of trying

 25 to develop these molecules, I think one thing is

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 193

 1 becoming very clear. These are going to be expensive

 2 drugs for the FOB, and we obviously want our return on

 3 investment and incentives for developing them in the

 4 first place.

 5 So if there's an exclusivity laid out there for

 6 interchangeability, and as William said, I don't think

 7 there's any clue whatsoever as to how we're going to get

 8 to interchangeability, but if there's an incentive

 9 provided for the first company that does get to

 10 interchangeability, is that an unfair incentive for

 11 other companies who are chasing that same designation.

 12 So my concern would be if you are investing a

 13 huge amount of money into this program relatively

 14 speaking, do you want any further barriers out there to

 15 allow you to get your own return on investment?

 16 MR. WROBLEWSKI: Let me ask you a quick question

 17 in terms of how an applicant who is trying to show that

 18 they're a biogeneric, if there is one biogeneric that

 19 has been shown to be interchangeable and a second one

 20 comes in, does that under this scheme -- does that

 21 second one who is claiming to be interchangeable have to

 22 show that it is interchangeable not only to the

 23 reference product but also to that first interchangeable

 24 that has been designated interchangeable so that the

 25 investment to show both of those, to show

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 194

 1 interchangeability with two products rather than just

 2 one would be more? Is that what you're anticipating

 3 would happen?

 4 MR. SCHULTZ: Well, I mean, I think that the

 5 bills anticipate that you would be showing you're

 6 interchangeable to the reference product, to the brand

 7 grant product. How that second piece plays out I think

 8 is at the moment really left to FDA.

 9 In the small molecule world I think it's assumed

 10 if you're interchangeable to the reference product, all

 11 the generics are interchangeable.

 12 MR. WROBLEWSKI: What would be a guidance?

 13 MR. SCHULTZ: I think it's a scientific issue as

 14 to whether that's true or not. That hasn't really been

 15 addressed.

 16 MR. WROBLEWSKI: Anyone else?

 17 MR. ALLAN: Well, I think we heard this morning

 18 from FDA representation that interchangeability is going

 19 to be designated on the basis of some form of clinical

 20 trial activity, switching products back and forth.

 21 If the interchangeability goes beyond the

 22 reference product, that's going to make the conduct of

 23 those clinical trials extremely complicated.

 24 MR. SCHULTZ: One motivating factor, I think

 25 it's envisioned there will be a much smaller number of

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 195

 1 actual products in many, many cases than there are in

 2 the small molecule world. I mean, I think most people

 3 would assume that you're not going to on the first day

 4 see eight products coming on the market like you

 5 sometimes do for small molecules, just because they're

 6 so expensive.

 7 MR. WROBLEWSKI: But if you're looking at, what

 8 we heard this morning was that the number of competitors

 9 actually is where the savings comes to the consumer and

 10 where the price competition comes, so what incentive

 11 should we put in for the second or the third or the

 12 fourth interchangeable, or is one necessary at all for

 13 them to show that interchangeability so that you can go

 14 from the reference product to the first interchangeable

 15 to the second, back to the first, to the reference?

 16 I mean, are we building in a disincentive for

 17 that to occur then by giving the 180 days or some period

 18 to the first interchangeable?

 19 MR. SCHULTZ: Well, there's a lot to that

 20 question, but one thing is I think once you show -- once

 21 the first company shows it's interchangeable, then at

 22 least FDA knows how to do this, and the effort is much

 23 less after you have one, and thus I think the incentive

 24 is somewhat less necessary.

 25 MR. WROBLEWSKI: Bryan, you would like to add a

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 196

 1 point?

 2 MR. ZIELINSKI: I guess I just don't understand

 3 why you need any incentive at all. I mean, we heard

 4 previously today that the market is going to be

 5 fundamentally different with fobs, and some people

 6 estimate -- well, many people estimate that you're going

 7 to have fewer entrants and as little as 10 to 30 percent

 8 price discount off brand, so it's not clear to me that

 9 simply developing FOB requires an incentive.

 10 You don't need an incentive to challenge the

 11 patent. The patents will be challenged, given the time

 12 and expense that's going to go into developing that FOB,

 13 so certainly tied to any exclusivity to a patent

 14 challenge would be inappropriate.

 15 But having any exclusivity would have to be

 16 justified. The market is going to be smaller. There's

 17 going to be less of a price discount. The market

 18 dynamic itself will be sufficient incentive, so they

 19 would have to do something more than merely try to go

 20 down the same path that the innovator took.

 21 The innovator spent all the money, took all the

 22 risk, and so simply following that in and of itself

 23 should not be sufficient to entitle an FOB applicant to

 24 exclusivity.

 25 MR. WROBLEWSKI: Doug, you wanted to add a point

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 197

 1 to that?

 2 MR. NORMAN: I would agree, and if we look at

 3 history, we would recognize that just from some of the

 4 slides we saw this morning, that there's plenty of

 5 competition available in the biologic market regardless

 6 of whether there's any incentive to anyone who is

 7 creating another compound going into that market.

 8 Looking at human growth hormone alone, there's

 9 eight molecules currently on the marked. Genentech had

 10 I believe 19 patents in one lawsuit against some folks,

 11 and yet people ended up getting to the market. They

 12 ended up settling they ended up litigating. They ended

 13 up knocking some out, and that was branded competition

 14 at its finest, exactly what we ought to want to see.

 15 I fail to recognize why someone following on

 16 after that trail has already been blazed should need any

 17 incentive other than the market in and of itself. The

 18 market provides plenty incentive for people to do what

 19 reasonable persons do every day.

 20 MR. WROBLEWSKI: Thank you. Marc, you wanted to

 21 add something, and then I'll turn to Steve.

 22 MR. GOSHKO: Yes. I wanted to first address the

 23 idea of the incentive to the first interchangeable

 24 product. I think if the actual exclusivity period is

 25 based on some reasonable parameters that it will be

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 198

 1 sufficiently enticing to develop the technology, but not

 2 sufficiently inhibiting to subsequent applicants.

 3 As Bill noted, that the subsequent applicants

 4 can be moved into their non interchangeable status and

 5 still offered for sale during the actual exclusivity

 6 period. If the concern is that the exclusivity period

 7 is for some of the small molecules, it has the potential

 8 to go on for large periods of time due to that infamous

 9 word parking, I think that legislatively those

 10 circumstances can address that.

 11 MR. WROBLEWSKI: Thank you. Steve?

 12 MR. MILLER: Just as a reminder, the environment

 13 in 2008 is much different than the environment was in

 14 1984, so in 1984 with the original Hatch-Waxman, we had

 15 to create a generics industry. That industry is now

 16 established, both for small molecules and for biologics,

 17 and it's very vigorous, and it's actually looking

 18 forward to it this newer era.

 19 So I think when you look at incentives, you have

 20 to look differently today than you did when you were

 21 originally constructing Hatch-Waxman. The 180 days

 22 should be something that is earned, not just given for

 23 being first in line at the FDA.

 24 So there has to be a reason you're giving the

 25 180 days, be it what Bill discussed, all the way to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 199

 1 fully substitutable molecules or some other reason. One

 2 of those other reasons actually may be just addressing

 3 products of market size.

 4 So if you were to look at EPO for instance, EPO

 5 is such a large market, you probably won't need

 6 incentives to get companies to line up to challenge EPO.

 7 If you look at some of the other orphan drugs, however,

 8 you're probably going to need incentives there because

 9 there's just not going to be enough companies willing to

 10 take those on.

 11 MR. WROBLEWSKI: That's a good point. Thank

 12 you. You know, you brought up Hatch-Waxman, and I would

 13 like to know what experiences have we gained from the

 14 use of the 180 day marketing exclusivity period that's

 15 relevant to the biologic market. I will turn to you

 16 first since you're laughing.

 17 MR. NORMAN: Okay. What experience have we had?

 18 I think the official name is the drug price competition

 19 and Patent Term Restoration Act of 1984, which is really

 20 the patent litigators full employment act of 1984,

 21 because if we've learned anything in the past 24 years

 22 it's that the United States Patent and Trademark office

 23 is wholly incompetent to issue any valid patent to a

 24 pharmaceutical product in the United States because

 25 there is not a single drug product out there worth its

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 200

 1 salt that doesn't have 10 or 11 or 12 or 15, or in some

 2 instances even more, folks making challenges to those

 3 simply because there is a bounty on intellectual

 4 property coming out of the Hatch-Waxman Act.

 5 If we're going to design anything for biologics,

 6 we can design some sort of regulatory scheme to allow

 7 biologics on. We can design some sort of patent term

 8 restoration. We can design some sort of meaningful

 9 incentives back and forth, but we should not design a

 10 bounty on the intellectual property rights of

 11 innovators.

 12 In particular, I would say we should also not

 13 set up a system whereby that bounty arises simply

 14 because someone has shown that they can actually design

 15 around a validly issue but narrow U.S. patent. We've

 16 seen that time in and time out in the Hatch-Waxman

 17 context where the first person to show up perhaps could

 18 not competently design around a patent owned by an

 19 innovator, and therefore were unable to get their drug

 20 approved and on the market arising from the litigation

 21 after the Hatch-Waxman case was filed.

 22 A second generic then shows up who is quite

 23 properly designed around, and yet because of the

 24 questions over who is going to be entitled to that 180

 25 day exclusivity, we saw litigation all through the last

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 201

 1 century, all through -- well, sorry, all through the

 2 last decade, and we are now seeing it over the last

 3 couple years arising from whether or not the Supreme

 4 Court's decision in the MedImmune case gives some sort

 5 of declaratory judgment action arising from the filing

 6 of later ANDAs that in some way can take care of all the

 7 180 day issues that my colleagues down at the other end

 8 of the table have had to deal with.

 9 It's terribly difficult. It doesn't reward the

 10 kind of innovation that we would expect the marketplace

 11 would be willing to pay for, and therefore, we shouldn't

 12 have a system set up that does nothing more than place a

 13 bounty upon the innovation of others.

 14 MR. WROBLEWSKI: Thank you. Bill?

 15 MR. SCHULTZ: You know, we could have a very

 16 interesting debate on whether the Hatch-Waxman 180-day

 17 exclusivity is a good thing, and we could have a very

 18 interesting debate on whether that system ought to be

 19 applied to biologics, which you're tempting us, but I

 20 think it's quite interesting that none of the bills or

 21 proposals that are sort of on the table adopt anything

 22 like the Hatch-Waxman provision.

 23 And to the extent we want to focus on really the

 24 exclusivity that is in that legislation, the only thing

 25 I want to point out is it's very, very different. It

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 202

 1 doesn't depend on first to file. It doesn't depend on

 2 patents. It's much more like the Orphan Drug Act. It's

 3 the first one to get approval of interchangeability gets

 4 six months or a year, whatever is decided, of being the

 5 only one who gets approved as interchangeable.

 6 Unlike the Orphan Drug Act, other products can

 7 still come on the product. There's been very little

 8 litigation over Orphan Drug Act approvals, and I think

 9 there's good reasons to think -- there may be other

 10 reasons to argue against this, but I don't think there's

 11 really good evidence that it's going to lead to a lot of

 12 litigation, which may be unfortunate for lawyers.

 13 MR. WROBLEWSKI: Marc, did you want to add a

 14 point?

 15 MR. GOSHKO: Yes, I think a good distinction

 16 between this market and the small molecule is that one

 17 mechanism that small molecule applicants have for

 18 escaping the 180 day exclusivity of others is either to

 19 file an ANDA suitability petition and move a dosage form

 20 or to file a 505(b)(2) application for an injectable

 21 product and try to set up an alternate an brand market.

 22 Now, where there is a lot of true generics, that

 23 isn't a very viable course of action, but in this

 24 dynamic, the idea that people will always try to go

 25 after the similarity pathway first already creates the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 203

 1 potential patent challenges even before the true

 2 biogeneric gets there.

 3 MR. WROBLEWSKI: Thank you. Following up on one

 4 of the things that the Commission has spent a lot of

 5 time on in the Hatch-Waxman context, has been looking at

 6 settlement agreements, so I ask everyone around the

 7 table: Would you oppose a restriction in the grant of

 8 or in the way this provision is written for getting some

 9 type of marketing exclusivity for the first biogeneric

 10 from selling that right to an innovator company or to

 11 negotiate a delay of the entry?

 12 MR. MILLER: Representing the payor community,

 13 this is actually been quite problematic because it's

 14 become part of the management of the life cycle of the

 15 product, and so you're actually not adding innovation to

 16 the marketplace, but you're extending higher prices for

 17 a longer period of time.

 18 I believe that when it was originally developed,

 19 that was not the intention, but that's become one of the

 20 uses, and I think that whatever we do going forward, we

 21 have to be cognizant of the fact that there will be

 22 people that will try to exploit the intentions of it,

 23 and so we have to look for these unintended consequences

 24 as we're developing the regulations.

 25 Otherwise we'll get right back to the situation

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 204

 1 where we are today, just extending the profitability

 2 during the terminal phase of a product without really

 3 benefiting the consumer.

 4 MR. WROBLEWSKI: Any other follow-up or comments

 5 on that before I change? Marc?

 6 MR. GOSHKO: Referring to legislation introduced

 7 earlier by Mr. Waxman, I think that he tries to account

 8 for various scenarios, which may mitigate, if not solve

 9 the problem of that type of a settlement issue.

 10 MR. WROBLEWSKI: Thank you. One of the things

 11 that we tried to do this morning, and Linda Horton was

 12 very gracious in terms of giving us an overview of the

 13 European experience, and I wonder how the Europeans have

 14 examined this particular question in terms of whether

 15 there is or should be an incentive for the filing of

 16 follow-on applications.

 17 And I'll turn to Aaron, if you would like to

 18 start off on that?

 19 MR. BARKOFF: Sure. First, thanks for inviting

 20 me, and I should say my views are mine alone, not those

 21 of my law firm or my firm's clients.

 22 So in Europe, not only have they not passed any

 23 kind of provision for market exclusivity for

 24 biosimilars, but there is no 180 day period or market

 25 exclusivity for any generic of any kind, including small

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 205

 1 molecule.

 2 My understanding is, it's not just Europe, it's

 3 Asia and the rest of the world that don't have any kind

 4 of generic market exclusivity period for any

 5 pharmaceutical. The U.S. is the only country in the

 6 world.

 7 So getting back to your original question, is

 8 this kind of 180 day exclusivity period necessary? That

 9 tells me it's not necessary for biosimilar drugs to be

 10 developed and marketed.

 11 It's a separate question to ask whether it's

 12 advisable to have a 180 day exclusivity period or some

 13 other kind of generic market exclusivity period. In

 14 other words, would we have more cost savings to

 15 consumers, more introductions of biosimilar products

 16 than we would without that kind of period, and that's a

 17 real difficult question to answer, but along the same

 18 line, it's not restricted to Europe.

 19 Another argument in support of the notion that

 20 this kind of period isn't necessary is the fact that

 21 many, many generic companies don't make the 180 day

 22 period kind of a cornerstone of their business model.

 23 There are many generic companies who aren't necessarily

 24 interested in being the first to file a Paragraph IV

 25 certification, and in fact, they file ANDAs knowing that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 206

 1 they're the second or third or fourth filer, and in fact

 2 litigate that.

 3 So they're not always riding the coattails of

 4 the first filer's patent litigation strategy. Maybe

 5 they think they have a better litigation strategy, and

 6 so that also tells me that the 180 day exclusivity

 7 period is not necessary.

 8 MR. WROBLEWSKI: Thanks. Bryan?

 9 MR. ZIELINSKI: I would agree with Aaron. I

 10 don't think it's needed, and I think that if you took

 11 anything from Europe, while the experience is somewhat

 12 limited, it certainly highlights that having some type

 13 of FOB exclusivity hasn't been needed to encourage

 14 companies like Sandoz to pursue biosimilars in that

 15 market. They are doing so, and I expect that they will

 16 probably continue to do so.

 17 MR. WROBLEWSKI: Bill, go ahead.

 18 MR. SCHULTZ: The only thing I would like to

 19 point out is Europe is obviously very different because

 20 it has price controls, and generic drugs are just much

 21 less of a factor is my understanding there in terms of

 22 drug delivery and so on, and I think that really plays

 23 into this question.

 24 MR. WROBLEWSKI: That's a good point. Geoff?

 25 MR. ALLAN: Yeah, I would just go back to what I

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 207

 1 said at the outset. Some day there's going to be

 2 legislation to allow these drugs to be developed. Once

 3 that legislation is laid in place, companies are going

 4 to possibly line up. It's going to take them four to

 5 five years to develop these products and get them

 6 approved.

 7 They've got to wait for patents to expire, which

 8 will be five or six years out. They've got to invest 50

 9 to 100 million dollars, and depending on how well

 10 capitalized you are, that could be a major investment,

 11 and if there are any other barriers before you can bring

 12 your drug to the marketplace to get your return on

 13 investment, it's only going to be in my mind

 14 anti-competitive, so I would rather not see any

 15 exclusivity provision.

 16 MR. WROBLEWSKI: Doug, go ahead.

 17 MR. NORMAN: Sure, thanks. That was a nice

 18 point actually, and it brings up a view that Lilly has

 19 concerning incentives, certainty, the level of risk in

 20 what to us as innovators is a high risk, high reward

 21 marketplace and to folks who would be follow-on, what

 22 would be a lower risk and probably lower reward

 23 marketplace, but one which is meaningful nevertheless.

 24 That is from the aspect of the innovator, we've

 25 had some roundtable discussions this morning about the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 208

 1 lack of certainty with patent estates in biotechnology.

 2 We've had some discussion about the appropriate length

 3 of time over which the data package should be protected,

 4 and I would say at Eli Lilly & Company, the one thing

 5 that we haven't projected to the world, and I doubt if a

 6 lot of people have projected to the world, is the

 7 difficulty that we end up having to -- the difficult

 8 decisions we end up having to make regarding where we're

 9 going to place our investments for an innovative product

 10 arising from the uncertainty that we face from the

 11 patent estate on the molecules or from the lack of data

 12 protection going forward.

 13 And thus, unfortunately there are many

 14 opportunities that we turn down because we can't

 15 possibly hope to recoup the investment that we would

 16 need to make in a molecule, and therefore, one thing

 17 that we've discussed and we've talked about publicly is

 18 in exchange for the appropriate level of certainty of --

 19 what do you call it, data exclusivity, marketing

 20 exclusivity, if we could get a date certain that was

 21 sufficient, and here let's just throw out 14 years

 22 because that's what people talked about this morning, we

 23 would be willing to enter into a decision that we would

 24 call a fork in the road, that a year or two post launch

 25 or three or four years post launch of a drug, we would

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 209

 1 be willing at that point to choose either to live with

 2 the data package period or our patent estate, one or the

 3 other, and give up the rights to one or the other.

 4 So that the follow-on industry could then know

 5 for sure what Lilly drug is going to be available for a

 6 follow-on, and they can make their appropriate decisions

 7 at the appropriate time and lower the risk in their part

 8 of the business, and in the meantime the public gets

 9 access to a Lilly product through a certain period of

 10 time that's a date set certain. Then follow-ons can

 11 come along quickly after that, and the market can adjust

 12 to the level of lower risk, even if it's a lower return.

 13 MR. WROBLEWSKI: Is one of the effects of a

 14 choice or a fork in the road, as you describe it, is

 15 that the innovator will always take the longest period?

 16 MR. NORMAN: Probably.

 17 MR. SCHULTZ: Why not?

 18 MR. NORMAN: Isn't that what we're supposed to

 19 do with our patents?

 20 MR. SCHULTZ: Either that or answer to your

 21 stockholders.

 22 MR. WROBLEWSKI: The one last question I want to

 23 raise, and this was something that, Steve, you brought

 24 up: If the marketing exclusivity provision were tied to

 25 the size of the market, so to the extent that, as you

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 210

 1 indicated for orphan drugs, if there's no economic

 2 incentive to develop the interchangeability, what would

 3 be the likely effect of that, of tying it to the size of

 4 the market?

 5 MR. MILLER: Well, I want to go back to one

 6 point that Doug made and then address that. Amazingly

 7 in Europe they have a shorter time of data exclusivity

 8 and price controls. To ask for both the longer time and

 9 a free market in the U.S. seems to be counter to what's

 10 been successful in Europe where they have brought these

 11 molecules to the market.

 12 I do think, and my biggest concern is for our

 13 membership where it is an orphan drug, where it is the

 14 small markets -- interestingly the innovator companies

 15 are still bringing to the marketplace products for

 16 extremely small markets. If you saw The Wall Street

 17 Journal this week, we're talking about diseases where

 18 the markets worldwide are often a couple thousand

 19 patients.

 20 So there must be some incentive out there

 21 obviously for that, but our biggest concern is when you

 22 have these small markets, is there a way to use tax

 23 credits or time of exclusivity or something that

 24 actually incents the companies to go after making those

 25 products for those smaller markets, and we believe that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 211

 1 that's where a lot of the energy should be.

 2 MR. WROBLEWSKI: Marc, did you want to add

 3 something to that?

 4 MR. GOSHKO: I just had a question, a

 5 clarification. Is it your suggestion that the larger

 6 the molecule, the more the potential need for the --

 7 MR. WROBLEWSKI: No, opposite.

 8 MR. GOSHKO: Okay.

 9 MR. WROBLEWSKI: Bryan, did you want to add?

 10 MR. ZIELINSKI: I wanted to say, you're positing

 11 that the smaller the market, you might want some sort of

 12 variable exclusivity.

 13 MR. WROBLEWSKI: A variability or there would be

 14 an opportunity to have exclusivity.

 15 MR. ZIELINSKI: I would only say that if you're

 16 going to have some sort of variable exclusivity, I think

 17 it runs counter to the more positive approach having

 18 something clear and predictable. I think it's better to

 19 have something clear and predictable. It's less subject

 20 to gaming. It's easier to make reasonable investment

 21 choices on that basis.

 22 And I'm still not sure that it's needed because

 23 even with a small market, the products will probably be

 24 priced obviously much higher than a small molecule. You

 25 will probably have fewer biologic entrants and you will

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 212

 1 probably have less price depreciation when the generic

 2 or biosimilar does enter the market.

 3 So I think you need some empirical evidence to

 4 suggest that you would need some exclusivity, let alone

 5 a variable exclusivity.

 6 MR. WROBLEWSKI: Thank you. Bill, and then I'll

 7 turn to you, Doug.

 8 MR. SCHULTZ: If the purpose of exclusivity is

 9 to make sure there's a sufficient incentive for

 10 innovation to discover molecules, then there's some

 11 attraction to the idea of having the exclusivity vary on

 12 the -- depending on the profit of the product, and I

 13 guess the sales of the product is sort of a rough proxy

 14 for the profit, so I personally think it's a very

 15 attractive idea.

 16 I would say that when it's been tried on the

 17 Hill, it's always run into problems. On the other hand

 18 it's sort of a new day, and it doesn't mean it would --

 19 these ideas would have the same debate that they've had.

 20 The other thing I want to say is I think it's

 21 very important to pay attention to the question of

 22 whether any exclusivity, at least beyond that that's in

 23 Hatch-Waxman, is justifiable, and I feel like we've

 24 jumped into --

 25 MR. WROBLEWSKI: And this way, you've moved away

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 213

 1 from the marketing exclusivity for a follow-on biologic

 2 to exclusivity for a --

 3 MR. SCHULTZ: That's what I thought you were

 4 asking about. No, to what? I'm talking about marketing

 5 exclusivity for a follow-on biologic.

 6 MR. WROBLEWSKI: Okay.

 7 MR. SCHULTZ: I'm just saying it's important to

 8 ask the question of whether the patent system provides a

 9 sufficient incentive, or whether there's really a case

 10 that you need, this is somehow so different from the

 11 chemical market, that you need additional exclusivity.

 12 I feel that often we just jump passed that and we start

 13 saying, what does exclusivity mean without really taking

 14 a hard look at that question.

 15 MR. WROBLEWSKI: Doug, did you have something

 16 you wanted to add?

 17 MR. NORMAN: Bill covered it, okay.

 18 MR. WROBLEWSKI: Amazingly we're back on

 19 schedule. Unless there are other final comments, Steve,

 20 if you have one.

 21 MR. MILLER: Yeah. I have just one other, and

 22 that is if you do not coordinate the development of

 23 these products with Medicare payments, you're going to

 24 miss a great opportunity. If you allow these to share J

 25 Codes, you will actually get much greater uptake of the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 214

 1 follow-on biologics than if you don't.

 2 So I think it's going to be crucial to

 3 coordinate this not just through what this bill does,

 4 but how it's applied to Medicare because if you force

 5 them to get separate J Codes, you are going to delay the

 6 adoption of these drugs, and you're going to delay the

 7 benefits to society, and I think it would be a

 8 tremendous opportunity that would be wasted.

 9 MR. WROBLEWSKI: Okay. Thank you. We're going

 10 to take ten minutes, until about five after 3:00, and

 11 then we'll start the last panel of the day. Thank you.

 12 (A brief recess was taken.)

 13

 14

 15

 16

 17

 18

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 215

 1 PANEL FIVE:

 2 PATENT DISPUTE RESOLUTION PROCESSES

 3 MR. WROBLEWSKI: Why don't we go ahead and get

 4 started. My name again is Michael Wroblewski. I'm

 5 co-moderating this panel with my colleague Suzanne

 6 Drennon also in the Bureau of Competition.

 7 The objective of this last panel is to discuss

 8 the need for and the likely competitive effects of

 9 different ways to structure a process to resolve patent

 10 disputes between innovator firms and FOB applicants,

 11 prior to FDA approval of the FOB product.

 12 Participating in this discussion, and everyone's

 13 actually been introduced earlier today except for Hans

 14 Sauer from BIO, so welcome, Hans, and Christine Siwik of

 15 RMMS in Chicago. Thank you, Christine, for coming this

 16 way.

 17 This panel is going to be a little bit different

 18 from the earlier panels. We are going to try to discuss

 19 many of the issues in the context of a hypothetical

 20 patent portfolio claiming the XYZ drug product developed

 21 and marketed by the sponsor company.

 22 The use of this hypo will hopefully help us put

 23 some meat on the bones to illustrate the points that we

 24 want to make.

 25 Rochelle Seide has been gracious enough to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 216

 1 actually volunteer to present the patent portfolio case

 2 study. Rochelle?

 3 MS. SEIDE: Thank you, Michael. The patent

 4 portfolio was set up to show you in reality for those

 5 who aren't patent attorneys also that biotechnology

 6 products tend to suffer from a fairly complex patent

 7 portfolio, maybe a little bit more complex than you see,

 8 and maybe this is another way of showing the distinction

 9 between small molecule portfolios and biologics because

 10 there seem to be a lot more players here, so let's go

 11 forward.

 12 What we've done is we've put together the XYZ,

 13 and I'll go into what the XYZ product is down the line,

 14 but there are a number of different tiers of patents

 15 that we'll talk about. There's the university drug

 16 target patents, the third-party technology patents, and

 17 I think Ken Dow talked about all of the royalty

 18 stacking, and in a lot of cases and this is where it

 19 comes from because the company is in-licensing a number

 20 of patents that are not their own, and they have to pay

 21 royalties on those patents if there is a drug that is

 22 developed.

 23 Certainly there's the sponsor company's own

 24 patent, and then there's a little wrinkle perhaps in

 25 some cases in the biologics area. Some molecules, and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 217

 1 this may be going forward in the whole area of

 2 pharmacogenomics, that you might want to -- the patient

 3 population may be better defined by use of biomarkers,

 4 which population of patients may be better suited for

 5 treating with a particular drug.

 6 The prime example is certainly Herceptin where

 7 the patient population of those women with breast cancer

 8 who have been shown to have the HER-2 marker by a

 9 bioassay, and the bioassay may be that of the company or

 10 may be of that a third-party.

 11 All right. Let's talk about the tier 1, the

 12 drug target patents. We have to say the first group of

 13 patents, these are owned by a university, so the

 14 inventors are researchers who are perhaps doing basic

 15 research and find out certain things that of interest.

 16 They find a particular target receptor on a cell

 17 line that may be of interest for developing something or

 18 they've identified something about this target that may

 19 be a receptor for a hormone or the like.

 20 So you've got the early patents from the

 21 university. You have claims that are drawn to the

 22 target itself, the target receptor. Certainly again

 23 like everything else, you do the DNA in coding the

 24 receptor. You perhaps, if you're lucky, also get the

 25 cloned receptor protein.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 218

 1 Now, again any good patent attorney will also

 2 claim a monoclonal antibody that specifically reacts

 3 with the receptor and perhaps inhibits or enhances the

 4 activity, depending on what it's doing, and then you

 5 will also see generic, sort of generic therapeutic

 6 treatment of say cancer, in this case cancer, using

 7 agents which inhibit the receptor binding.

 8 We've been fairly broad about this, and again

 9 some of the comments are you can get broad patent

 10 protection. Some of these may or may not be claims that

 11 you will be able to get in the future, but we will see,

 12 but for purposes of the hypothetical, these patents

 13 which are owned by the university are licensed

 14 exclusively to the sponsor company for field of use, say

 15 a treatment of cancer or a certain kind of cancer.

 16 But the university itself will retain

 17 enforcement rights of the patent, and this is not an

 18 unusual situation. Universities also take grant back

 19 licenses so they can keep the rights themselves, even if

 20 they license to a sponsor company, so again here we have

 21 patent rights that are fairly complex. They are not all

 22 in the sponsor company. They are all over the place.

 23 University has some of them. They may be field

 24 of use and they may license -- and the university may

 25 license to another sponsor company in a different field

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 219

 1 of use, and that's not uncommon either.

 2 So the second tier of patents that we'll talk

 3 about or that will be involved are what we call tier 2.

 4 These are technology platform patents. I think certain

 5 things like in the biotech area, certain patents like

 6 phage display for identifying certain molecules may be

 7 an example of technology platform patents, but these are

 8 owned by a third party. These are not owned by the

 9 sponsor.

 10 We are going to use antibodies as our example,

 11 and the technology platform claims technology for making

 12 recombinant antibodies with reduced immunogenicity.

 13 These are kinds of antibodies which originally the whole

 14 monoclonal antibody technique was developed in mice.

 15 You give a mouse antibody to a human, they're going to

 16 make an immune response to it, so there are technologies

 17 for humanizing or making chimeric or humanized

 18 antibodies that reduces the immunogenicity of these

 19 molecules so they may be more therapeutically valuable.

 20 These patents, the technologies are licensed non

 21 exclusively to a sponsor company, but if they are used

 22 and a product comes out of it, the sponsor company owes

 23 royalties to the technology platform company, and again

 24 the patents have also been licensed to a variety of

 25 other companies and are being used in several other

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 220

 1 biologics.

 2 So again the situation is fairly complex.

 3 You've got -- the sponsor has to in license certain

 4 technologies so they can may their own biologic.

 5 Now, with the sponsor companies patents, which

 6 are on the next slide, sponsor company has additional

 7 development and receives patents that the claims are

 8 drawn to what we call a masked recombinant antibody with

 9 lower immunogenicity and better binding to and an

 10 inhibition of the receptor or Ligand interaction, and

 11 again these may be, as I said, humanized or chimerized

 12 or the like or may be fully human antibiotics.

 13 There is at least in the beginning treatment

 14 showing that these antibodies can be used in treatment

 15 of testicular cancer and prostate cancer, and you get

 16 claims to that, and then you get some process patents on

 17 the way these antibodies are purified using -- from

 18 affinity purification in making the monoclonal antibody

 19 so this is the process patent for making the antibody.

 20 Now, we have a separate tier that can be

 21 important, and we put in here what we call biomarker

 22 patent, and I put this in with the caveat that we don't

 23 know -- again there's a great uncertain as to whether

 24 biomarker patents will survive Federal Circuit and

 25 probably Supreme Court scrutiny because there was a case

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 221

 1 up at the Supreme Court dealing with biomarkers which

 2 was dismissed for improvidently granted cert, but there

 3 were three justices that dissented from that denial

 4 saying we should look at these and saying these are all

 5 product in nature patents, and they shouldn't be granted

 6 in the first place.

 7 So they have some questionable aspects to them

 8 right now too, but let's assume that there are some

 9 biomarker patents out there, and that claim biomarker

 10 assays for identifying lung cancer patients who would be

 11 best candidates for treatment with the mass antibodies,

 12 remember again this antibody may have multiple uses as

 13 we've told before.

 14 These particular bioassay patents are owned by

 15 the sponsor company. There are others biomarker patents

 16 that may be that -- for identifying prostate cancer

 17 patients who would be the best candidates for treatment

 18 with the antibody, and these are owned by the

 19 third-party and licensed exclusively to the sponsor

 20 company.

 21 Then there's another -- then there's another

 22 possibility, that the sponsor company out licenses its

 23 diagnostic reagent to various third parties, each of

 24 which holds enforcement rights, and these licenses

 25 generate a royalty stream to the sponsor company, so

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 222

 1 maybe they license out their lung cancer biomarker case

 2 to other parties who may have other ways of looking --

 3 using those patents maybe with other drugs.

 4 Okay. Let's for the assumption of our

 5 hypothetical say, just to make it simple, these are all

 6 post GATT patents, so they will have a 20-year term,

 7 inclusive of any extension granted. We're trying to

 8 make it simple. They will have a 20 year term from the

 9 date of filing. The innovator receives FDA approval for

 10 the treatment of lung cancer using the recombinant mass

 11 antibody at some point in time.

 12 At the time of the FDA approval, the university

 13 drug patents have seven years of patent life remaining.

 14 The technology platform patents have five years of

 15 patent life remaining. The company patents have 9 to 13

 16 years of patent life remaining, and the biomarker

 17 patents have 12 years of patent life remaining. These

 18 are some arbitrary numbers that we can discuss.

 19 Now, there's some other facts that we put in

 20 here to discuss and how they may effect what may occur

 21 in a realistic situation where you have follow-on

 22 biologics using these because, as I said, you have a

 23 very complex patent portfolio.

 24 Say the sponsor company does additional clinical

 25 trials and development on other indications and then

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 223

 1 receives FDA approval of therapeutic treatment of

 2 prostate cancer three years after the first approval,

 3 which was for lung cancer.

 4 The approval implicates a method of use and

 5 formulation patents not included in the first

 6 indication, again receives FDA approval for testicular

 7 cancer six years after the first approval, and

 8 testicular cancer in this case was also given an orphan

 9 drug designation.

 10 At eight years after approval, a black box

 11 warning was given related to long-term side effects, and

 12 around eight years, also the FDA -- there was FDA

 13 approval to require biomarker assay to identify patients

 14 for whom use of the mass antibody would provide greatest

 15 benefit eight years after approval. All of these latter

 16 things require a labeling change for the biologic.

 17 So here's sort of a summary of what we have of

 18 all of these. So we have, as you can see, a whole

 19 spectrum of patents covering a sponsor company's XYZ

 20 product. You have certain patent claims to the drug

 21 target, owned by the university, licensed to the

 22 sponsor, terms exclusive and field of use.

 23 I mean, this is just sort of a summary of what

 24 we have. We have a technology platform. We have

 25 monoclonal antibody treatment processes. We have

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 224

 1 biomarkers, and then at the bottom we have sort of a

 2 timeline over say 13 years from the initial approval of

 3 the product for the first indication of sort of

 4 expiration dates of various things or occurrences of

 5 various things.

 6 So this fact pattern sort of sets up I think the

 7 discussion that we'll have for the next hour and a half

 8 or the like in regard to how patent scenario may be

 9 factored into the proposed legislation.

 10 MR. WROBLEWSKI: Thanks, Rochelle. Before we

 11 jump into the series of questions that we have regarding

 12 the hypothetical, I would just like to ask: Why is a

 13 regulatory pathway or why is a patent resolution pathway

 14 prior to the expiration of any data exclusivity period

 15 necessary?

 16 Before we get into the intricacies of it, why is

 17 it necessary or not necessary? I'm going to start with

 18 Christine, since she's our newest panelist. Pull the

 19 microphone down.

 20 MS. SIWIK: I think the answer is yes, it's

 21 necessary, but...

 22 I think if we learn from Hatch-Waxman, it's

 23 critical that key patent disputes get resolved

 24 concurrently with FDA review so that the generic is in

 25 the best possible position to launch as soon as you get

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 225

 1 the FDA approval done, but I think we've learned a lot

 2 of other things from Hatch-Waxman too.

 3 So my answer is, yes, it's important to have a

 4 mechanism in the bill for resolving certain patent

 5 disputes concurrent with FDA review, but the big but is,

 6 if the system doesn't work, if whatever this patent

 7 mechanism is doesn't work, I guess work in the sense

 8 that it can delay the market launch.

 9 The reason to do it is because it can expedite,

 10 but if a process isn't right, if it isn't narrowly

 11 tailored to address those key patent disputes what you

 12 will end up seeing is significant delays to launch, and

 13 if the process is too cumbersome and it takes too long,

 14 because in litigation, length connotes a lot of money,

 15 and as a person who litigates patents for a living,

 16 that's fine for me. That's great.

 17 MR. SCHULTZ: Doesn't it depend which side

 18 you're on?

 19 MS. SIWIK: Either side. It works out fine.

 20 It's what's great about the whole thing, right, Jeff,

 21 it's whatever side you're on? But the longer it takes,

 22 the longer it's going to delay generic market entry, and

 23 the longer it takes, the more expensive it is, and the

 24 expensive it is, the fewer companies are going to be

 25 willing to shoulder the costs.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 226

 1 We've heard people from the generic side today

 2 saying, 10 million, 25, 35, 40, 50 a hundred million to

 3 do the drug. You throw on 5, 10, 15, 20, million for

 4 the litigation costs or whatever it's going to turn out

 5 to be, and that's just from the generic side, and I

 6 think most of us familiar with the industry know that

 7 the brands tend to outspend the generics significantly

 8 in litigation.

 9 So if it's too long and cumbersome and it

 10 doesn't really hit the key patents, it's going to delay,

 11 which doesn't do anybody any good and if it takes too

 12 long and it's not well tailored, it's going to be

 13 expensive, and it could be prohibitive for some

 14 companies.

 15 MR. WROBLEWSKI: Thanks, Hans, please.

 16 MR. SAUER: Well, one can only agree with the

 17 need of a pre-approval patent resolution mechanism. I

 18 guess the difference is one of degree. I guess the way

 19 you would look at it from the perspective of an

 20 innovator is from the perspective of business risk.

 21 So what does it mean to have a regulatory scheme

 22 that routinely contemplates the approval and launch of

 23 products at a time before you even know what kind of

 24 remedy you're going to get for infringement of your

 25 patents if your patents are held to be infringed.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 227

 1 So, in other words, as we look at it, there are

 2 two kinds -- from a patent perspective, two kinds of

 3 uncertainty built into the systems that we're

 4 contemplating today. One is the patent circumvention

 5 question that has been described in previous panels.

 6 That's uncertainty relative to what we see in the small

 7 molecule drug structure today where patents and

 8 follow-on products, in that case generic products, are

 9 much better paired than they will be in the follow-on

 10 biologic space.

 11 The other element of uncertainty is that even

 12 for patents that are infringed, if products are launched

 13 before patent resolution is complete, you would have no

 14 way of knowing what kind of remedy you're going to get.

 15 I think it's going to be misguided to believe that

 16 follow-on products will be pulled off the market if you

 17 win your patent resolution suit once they've been

 18 established in the market.

 19 I think it's just as misguided to believe that

 20 they will always be permitted onto the market and left

 21 on the market under kind of a compulsory license, but

 22 the point is you don't know what a court is going to do

 23 in that kind of situation and what kind of equitable

 24 remedy they're going to craft.

 25 If you contrast that to the Hatch-Waxman Act

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 228

 1 when it was crafted in 1984, that had built into it a

 2 lot of provisions to mitigate business risk, so you had

 3 an infringement safe harbor. You have an artificial act

 4 of infringement, so you can litigate without having to

 5 incur damages. Products and patents are much better

 6 paired. You have a 30 month stay so you can get the

 7 litigation done hopefully before you have to launch or

 8 before you get that launch pressure.

 9 And these provisions to mitigate business risk

 10 we believe are one of the reasons why the generic

 11 industry has grown quite well and why the act has

 12 fostered an industry that has grown to what it is today.

 13 Compare that to the biologic schemes we are

 14 discussing. Small drug development I think is going to

 15 look like a much more safer and interesting business

 16 proposition than biologics development where you don't

 17 have the same approval standards for follow-on products

 18 or you have a patent circumvention question.

 19 And then if you layer on top of that a system

 20 that routinely contemplates launches before patent

 21 resolution, you get a double uncertainty that will make

 22 small molecule drug development look like a safer

 23 business proposition, and I think from our industry

 24 perspective, biotech's perspective, that would be quite

 25 intolerable because if anything, we think biotech

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 229

 1 tolerates less business risk than small molecule.

 2 So that's I think something that should probably

 3 be avoided. The patent resolution process is going to

 4 be necessary to offset the other risks that are already

 5 built into the process.

 6 MR. WROBLEWSKI: David, you wanted to add a

 7 point?

 8 MR. MANSPEIZER: Thank you. Three key elements

 9 to an early resolution patent mechanism have to be

 10 certainty, fairness and full disclosure, but we can't

 11 look at the patent resolution mechanism in isolation.

 12 You have to look at it in the context of the overall

 13 package.

 14 So as you heard me speak earlier, we believe

 15 it's very important to have a system that adequately

 16 accounts for the uncertainty that provides, that patent

 17 litigation provides, with adequate data exclusivity.

 18 Married to adequate data exclusivity, a patent

 19 litigation system can certainly be crafted, given all

 20 that we've learned from Hatch-Waxman, on both sides that

 21 provides fairness to everyone, certainty to everyone,

 22 and is based on full disclosure.

 23 MR. WROBLEWSKI: Thanks. Ken, you had raised

 24 your tent?

 25 MR. GOLDMAN: Yes, sir. I guess the Novartis

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 230

 1 group of companies, which includes Sandoz, has a

 2 somewhat different opinion. Launching as risk, the fear

 3 that has been raised by Christine, is the norm as we

 4 have been discussing all day in the biotech industry,

 5 not just in the follow-on industry but in the innovator

 6 industry, as well.

 7 There's not a single product that hasn't come on

 8 market in which launching at risk hasn't been a key

 9 issue. And companies are -- all of us here have the

 10 ability to take that business risk into consideration

 11 and decide whether or not to launch at risk. So the

 12 need for an early resolution, early litigation because

 13 of the fear of launching at risk is not a serious one we

 14 contend.

 15 Furthermore, linkage, that is creating an

 16 artifical act of infringement by the filing of a

 17 follow-on biologic as like an ANDA is really quite an

 18 exception and not the rule in the patent world. In the

 19 U.S., the generic small molecule industry is the only

 20 industry that has such a scheme, and that was a result

 21 of the state of the industry in 1984, and we don't

 22 believe is required with the state of the industry in

 23 2008.

 24 Even in Europe, the biologic industry, there's

 25 no linkage. There's no linkage. There's no artifical

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 231

 1 act of infringement in the European scheme as well, so

 2 it's a real aberration.

 3 Another fallacy I would like to address is that

 4 early litigation means early resolution. I don't think

 5 that that's necessarily the case. We heard Doug Norman

 6 talk just on the last panel about the litigation on the

 7 180 day exclusivities, combined with the new declaratory

 8 judgment standard, in Genentech versus MedImmune, which

 9 has really caused all sorts of complex difficult

 10 questions that can extend litigation for many extra

 11 years.

 12 And besides that, we also see in those cases

 13 that there's serial litigation. You litigate one patent

 14 followed by another patent, and that can really extend

 15 the litigation pre-approval. Post approval, there's no

 16 incentive for serial litigation. You would want to

 17 bring your best patents quickly to get the product off

 18 the market.

 19 Novartis does believe in the notification period

 20 following the approval of an FOB of a 45 to 90-day

 21 statutory stay so that would allow a patentee a chance

 22 to bring certain remedies to the judicial system,

 23 potentially get a preliminary injunction if that were

 24 warranted under the circumstances.

 25 I have a few other points, but I think that's

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 232

 1 enough for the moment.

 2 MR. WROBLEWSKI: Thank you. Thank you. Bruce,

 3 did you want to add to that?

 4 MR. LEICHER: Sure, I'll take a minute. We

 5 share some of those points and maybe disagree on some of

 6 those points.

 7 The notion of waiting until the end of a data

 8 exclusivity period to litigate works for very large

 9 capitalized companies, doesn't work for the smaller

 10 innovators that may be developing in the biotech

 11 business, maybe going into developing biogenerics or

 12 biosimilars because they can't take the risk or raise

 13 the capital to fight those battles at that stage, and so

 14 it creates a different set of players in the industry

 15 along those lines.

 16 From our perspective, we think it's really

 17 important, as Christine was saying, that there be

 18 certainty, that there be a reasonable period before the

 19 end of the data exclusivity period to have an

 20 opportunity to clear out of the way the patents that

 21 don't belong being in the way.

 22 There's a natural, and as I'm sure others are

 23 going to disagree on the panel with me, but there is

 24 sort of a Darwinian process. There are going to be

 25 people making judgment on whether to develop a product

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 233

 1 based on whether the patents are strong, valid, real or

 2 whether they're not, and if you don't have a process for

 3 clearing the path of the patents that shouldn't have the

 4 claims they have, we're going to be holding up

 5 competition inappropriately.

 6 And by waiting until the end of the data

 7 exclusivity period, we're creating a de facto extension

 8 of exclusivity, and that's really the way we see it.

 9 People refer to Europe as sort of a

 10 justification for having a longer data exclusivity than

 11 Hatch-Waxman, but in Europe you have the freedom to

 12 challenge patents at any time, essentially throughout

 13 opposition proceedings, through nullity proceedings, and

 14 we don't have that without some kind of artifical act of

 15 infringement or other kind of statutory mechanism in the

 16 U.S.

 17 So we think that there ought to be a process.

 18 We think there ought to be an appropriate period perhaps

 19 and trade-off the balances that Hans was describing in

 20 Hatch-Waxman.

 21 MR. WROBLEWSKI: Thank you. What would the

 22 effect be of, if there wasn't a process, and that once

 23 the FDA approved a follow-on application, that the

 24 innovator and the new applicant then decided to kind of

 25 fight it out? And does it depend on how long the data

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 234

 1 exclusivity period is then? Ken, did you want to start

 2 with that?

 3 MR. DOW: I would agree that it takes a certain

 4 amount of business risk to -- acceptance of the business

 5 risk to launch any one of these drugs, normally both for

 6 the biosimilar and for the innovator, but I think that

 7 without some kind of linkage or some kind of method to

 8 resolve the patent situation before the data exclusivity

 9 expires, you are going to be left with a situation where

 10 the generic is going to have to make the decision

 11 whether they are going to launch at risk in the face of

 12 a patent lawsuit, and if they do decide to do that, the

 13 market at that point is distorted.

 14 There is -- the price will drop, and it's

 15 impossible I think at that point to put the Genie back

 16 in the bottle and restore the market, if ultimately the

 17 patentee wins, and the ability for the patentee to go

 18 and get a preliminary injunction to stop that from

 19 happening I think is going to be much more difficult in

 20 the future given a lot of the court rulings around

 21 preliminary injunctions.

 22 MR. WROBLEWSKI: But how does that square with

 23 the idea that what we heard in the one of the first

 24 panels this morning was that at least in the near term,

 25 I would say near term is 10 to 15 years, that there's to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 235

 1 be little price competition. Won't a court judgment of

 2 infringement for damages compensate any harm that would

 3 be done to the innovator?

 4 MR. DOW: That hasn't been our experience in the

 5 generic industry so far. I don't -- it remains to be

 6 seen whether you could adequately compensate. I don't

 7 believe you could.

 8 MR. WROBLEWSKI: Okay. Jeff, you wanted to add

 9 something?

 10 MR. KUSHAN: Yeah, I think first I will

 11 subscribe to the kind of more popular view I guess of

 12 saying it's probably better to have the resolution

 13 system in place. I think there are a couple nuances

 14 that need to be appreciated.

 15 When you're looking at a window for drug

 16 development and you're within the data exclusivity

 17 window or some window that might be triggered off of a

 18 patent that's going to extend out passed that, you're

 19 looking at making your investments on the clinical

 20 development and expanding your base, getting more

 21 indications approved, and I think the impact of getting

 22 money at the back end of some calculus that you don't

 23 really know how it's going to work is hard to really

 24 filter into your decision ten years, eight years earlier

 25 when you're doing commencement of those trials.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 236

 1 So again we're looking at kind of where we know

 2 the outcome is going to end based on the patent

 3 portfolios and the data exclusivity, the more certain we

 4 know that there will not be a better molecule on the

 5 market during those windows of time is the stuff that

 6 leads into the decision to do the early stage and make

 7 those investments.

 8 So we need to keep remembering it's not just

 9 kind of the immediate price erosion. It's just kind of

 10 a narrower perspective than what we actually would look

 11 at on an investment decision on clinical work.

 12 On the system I think the critical thing to

 13 appreciate is there's really two bundles of patents that

 14 have to be resolved. The patents that are essentially

 15 blocking anybody who might want to make a molecule and

 16 get it on the market, and then the second basket of

 17 patents are the ones that the follow-on producers have

 18 elected to use, which aren't necessary to use to get

 19 their product made.

 20 And I think in either of those bundles we should

 21 have the right to resolve our patent conflicts over

 22 either types of those patents, whether it's the one

 23 that's kind of dominating the product market or the one

 24 that the follow-on producer has elected to use a

 25 particular technology we've developed and patented.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 237

 1 There's no reason why we shouldn't be able to resolve

 2 that fight in advance of them getting onto the market.

 3 I think the critical and difficult part of the

 4 equation is how do you know which patents matter and

 5 which patents have to be litigated? And ultimately I

 6 look at it very simply. We have to litigate the patents

 7 that are going to be infringed by the follow-on

 8 producer. It doesn't have to be any more complicated

 9 than that.

 10 There are some choices that are not yours to

 11 make as a follow-on producer. You're going to make a

 12 product that's going to key off the end product covered

 13 by a dominating molecule patent, and then there's an

 14 array of patented technologies you might employ to make

 15 your product, which you don't have to necessarily employ

 16 but end up infringing in various rights. Those patents

 17 should be resolved as to their status before we see them

 18 getting onto the market.

 19 Finally, we do have a somewhat artificial need

 20 for this because of the 271(e) exemption. We can't

 21 litigate until they're on the market, and so unlike

 22 Europe, we don't really have a parallel where we can

 23 start -- we need our artificial act of infringement

 24 because we kind of artificially exempted conduct from

 25 infringing in that context.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 238

 1 MR. WROBLEWSKI: Let me two more comments over

 2 here, and then we'll start into the hypo. Rochelle, I

 3 think --

 4 MS. SEIDE: No, I think Jeff made a lot of the

 5 points I made because it's not only the sponsor's

 6 patents that may be litigated here, again the technology

 7 platform patents are very important, that no one can get

 8 on the market to do, and so there has to be some way of

 9 resolving third-party patents as well if they're known.

 10 And it would be better to do them early on

 11 rather than with an at launch risk because the follow-on

 12 applicant will still be susceptible, even if there's a

 13 resolution with the sponsor. There's sill a

 14 susceptibility of an at risk launch after that, so there

 15 has to be a way of resolving all of this whole bundle of

 16 patents.

 17 MR. WROBLEWSKI: Christine, yes, go ahead.

 18 MS. SIWIK: A few quick response points. To

 19 Ken's point about at risk launch or the launches, it's a

 20 brand versus brand launch. That risk -- that isn't

 21 really in my opinion an appropriate model. The brand is

 22 going to charge its brand price. The other brand is

 23 going to charge its brand price.

 24 If there's a damages calculus to be done, the

 25 infringing brand has sold their product at a -- I don't

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 239

 1 say this in a bad way, but at a brand monopoly price.

 2 They don't have competition.

 3 A generic, by definition, we launch at a lower

 4 price, so by definition we don't make enough money on

 5 each sale to cover the brand's lost profits, so to say

 6 that every other industry does it and the brands do it

 7 to each other, to me that's not a relevant comparison

 8 because it just doesn't happen.

 9 And again I say this kind of tongue in cheek,

 10 but not every generic has Novartis's checkbook to write

 11 a check at the run, and if we launch at risk and we owe

 12 $2 for every dollar we made, that's going to put some

 13 people out of business and not everybody has that money,

 14 and that means we delay.

 15 I guess a little bit going back to Jeff's point,

 16 the idea that they want to litigate the patents that are

 17 going to block everyone, that everyone has to infringe,

 18 you just had a panel two hours ago where we just talked

 19 about the fact that we can design around basically

 20 everything, and as generics, that the patents are

 21 narrow, that it's going to be easier for us to design

 22 around.

 23 So I don't know what this universe of patents

 24 that we are all going to have to infringe necessarily is

 25 anymore. Maybe there are, but I didn't hear them

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 240

 1 discussed on the panel about meeting data exclusivity

 2 because patents aren't good enough, so I think that, and

 3 the other thing is it all comes down to who decides.

 4 I mean, we get sued on Hatch-Waxman everyday

 5 because someone thinks we infringe, but we don't always

 6 lose so it's a question of who decides what patents we

 7 infringe as the generics, and there's just some tension

 8 here in some of the arguments.

 9 MR. WROBLEWSKI: Thank you. I'm going to turn

 10 to Ken and then to Bill, and then we'll start on going

 11 through the hypothetical.

 12 MR. GOLDMAN: Thanks. First of all, Christine,

 13 about the branders, I wasn't necessarily talking about

 14 brand versus brand. It could be patent, just any

 15 patentee. Like for example in the EPO case I believe

 16 the Amgen versus Chugai, that was not brand versus

 17 brand. That was just two patent holders and just one

 18 product that was getting ready to go on the market at

 19 the time.

 20 And on the point of the size of the bank account

 21 or the checkbook, I mean, it surprises me that if you're

 22 worried about -- that the companies that are worried

 23 about not having enough money are the ones that are

 24 advocating jumping into expensive litigation 30 months

 25 early.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 241

 1 I would think you would want to avoid that, the

 2 litigation. If you file any -- with the system in which

 3 you create an artifical act of infringement, you may in

 4 fact be bringing on expensive litigation costs earlier

 5 when you might not want to do that.

 6 So a couple of points when Ken was talking and I

 7 guess Christine about launching it at risk, and whether

 8 waiting for post approval, going on the market and then

 9 being sued would artificially extend patent terms, and

 10 of course that is not really the right model because if

 11 we were talking about launching when there are existing

 12 patents so we're not talking about extending any patent,

 13 any patent term longer than the patentee's entitled to.

 14 And under the Novartis scheme in which you would

 15 be required to give the innovator 45 or 90 days notice

 16 and be on stand until they had a chance to litigate, if

 17 an injunction is granted, then of course there will be

 18 no market and price erosion, and there will be -- and

 19 there won't be any extension. It will be -- the patent

 20 term will just continue.

 21 If there is not an injunction, then there may be

 22 some mark in price erosion, but I think that we have the

 23 Plavix case which demonstrates that no price erosion is

 24 not irrevocable, so it's not clear that that is the

 25 situation.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 242

 1 And in terms of creating an artificial act of

 2 infringement, I think Bruce made a good point, which is

 3 that that's not the only option here. We have the

 4 option of following the European system of post-grant

 5 opposition, and I believe that that has been on the

 6 table in Congress with bills for quite some time, and

 7 that may be the very appropriate way of solving that

 8 problem without couplings.

 9 In fact, you could solve -- you could get

 10 certainty far earlier if you can challenge the validity

 11 of a patent as soon as it issues and not when you're

 12 having to wait until you file your abbreviated new drug.

 13 Just one last thing, I think I wanted to

 14 emphasize I think what Doug was saying on the last panel

 15 which is why do we want to create bounties on valid

 16 patents by creating this incentive system, especially in

 17 a situation that we're talking about, we're going to

 18 talk about now, in which you have very broad patents

 19 that cover -- and large patent estates that cover many

 20 different things, many different applications and

 21 potentially putting them at risk on the basis of someone

 22 filing a drug application that hasn't even yet been

 23 proven to be able to market an approvable drug at the

 24 time of filing of the application.

 25 That's the wrong time to put at risk an entire

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 243

 1 portfolio with broad and far-reaching implications

 2 outside of the FOB.

 3 MR. WROBLEWSKI: Thank you. Bill, did you have

 4 something you want to say, and we'll turn to Suzanne and

 5 start going through the questions for the hypothetical.

 6 MR. SCHULTZ: Yes, and this is on the record,

 7 and in the last panel after the panel, Michael and I

 8 talked and I think there's a misunderstanding between

 9 him and me about what market -- what the question was,

 10 and what the answer was. I'm not going to go through it

 11 all, but I thought the record ought to reflect that.

 12 MR. WROBLEWSKI: Sure.

 13 MR. SCHULTZ: I want to make a very broad point.

 14 The basic trade in Hatch-Waxman was that the brand

 15 companies got patent extensions of up to five years,

 16 maximum of 14 years, and the generic companies got a

 17 streamlined system under which they could get generic

 18 drugs on the market, and the whole theory of it was that

 19 on the day the patents -- or it could be exclusivity but

 20 it's usually patent -- expire, the generics should be

 21 ready to go on the market.

 22 And as part of that they set up a system so that

 23 you could challenge -- if there are patents that the

 24 generic wanted to challenge, the idea was to challenge

 25 them early, so those could be resolved, so again the day

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 244

 1 the valid patent expires, the generic goes on the

 2 market.

 3 Now, there can be a lot of discussion about

 4 whether that works or not, but that was the theory, and

 5 I think it's absolutely what we should be striving for

 6 here, but what it means is that, first of all, there

 7 shouldn't be an issue about the remedy because the

 8 patents -- the idea is to resolve the patents before the

 9 generic even goes on the market, so there shouldn't be

 10 an issue about the brevity. If you don't do it, you're

 11 giving the brand an extra monopoly, an extra period of

 12 time while litigation ends up extending the monopoly.

 13 MR. WROBLEWSKI: Doesn't that all depend on the

 14 length of the data exclusivity period then?

 15 MR. SCHULTZ: Well, that's the third thing I

 16 want to say, and I don't think what I say matters, the

 17 data exclusivity or not, matters. Even if you had no

 18 data exclusivity, you still need a system to resolve any

 19 patents in dispute early so that again on the day the

 20 valid patents expire, the generic can go to market.

 21 MR. WROBLEWSKI: Okay. Thank you. I'm going to

 22 turn to Suzanne, and we'll start going through kind of

 23 the nuts and bolts of if you had a patent resolution

 24 system, what are some of the tension points and things

 25 that would make it workable or not workable, so Suzanne?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 245

 1 MS. DRENNON: Thanks, Michael. Now, we're going

 2 to assume there is a patent resolution process, so the

 3 earlier questions were focused on whether or not there

 4 should be one, and at the beginning of the panel,

 5 Rochelle outlined our patents covering sponsor companies

 6 XYZ product, so now we're going to begin to use the

 7 chart that's behind us.

 8 In using this case study, I would like to walk

 9 through the potential market consequences of patent

 10 resolution procedures relatively chronologically, so

 11 beginning first with the notice issues and then

 12 continuing to timing, moving to patent inclusion, then

 13 additional patents and approvals, discussing a sue or

 14 lose provision, so what sort of penalties should be in

 15 place, because there are penalties in some of the bills,

 16 and ending really because, this is the end of the day

 17 with a summary, by all panelists of what you think

 18 should be included in a patent resolution scheme and how

 19 you think that should work so we'll reserve 20 minutes

 20 at the end for that.

 21 But to begin, with the beginning, when should a

 22 follow-on biologic applicant provide notice of its

 23 application to the sponsor company in relation to when

 24 any data exclusivity period ends? You're the first one.

 25 MR. KUSHAN: I won one. I think there's been a

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 246

 1 lot of discussion, which I think has been very

 2 constructive over the past couple years about how to

 3 figure out what patents matter, and I think when you

 4 look at the nature of the biologic approval, you're

 5 going to have to time the notice and the information

 6 exchange close enough in time to the potential approval

 7 to make sense because at the end of the day, you need to

 8 walk down the process technology.

 9 And you're not going to want to do that eight

 10 years before you're on the market. You will want to do

 11 it two or three or four years before you're out, so

 12 something which is kind of aiming at the back end of the

 13 data exclusivity window is necessary so that you can get

 14 the relevant technology identified and resolved.

 15 I think as a practical matter from the

 16 discussion this morning, the take away I have of the

 17 discussion this morning is that it may be that we will

 18 get a patent that covers through the claim language of

 19 the patent the exact molecule that's in the follow-on

 20 producer's product.

 21 It may be that we don't, but then we may have

 22 process technology, and we may have other types of

 23 technology that's been patented, so there needs to be

 24 some kind of an exchange where the relevant patent

 25 owners can identify patents that they have that relate

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 247

 1 to what is actually going to be marketed and how the

 2 product is going to be made.

 3 And that's I think a big differentiation from

 4 the orange book Hatch-Waxman model where you might have

 5 a bit more certainty knowing the characteristics of the

 6 product, and second, the process variable in the

 7 approval system is the other differentiation.

 8 The goal is to really not have disruptions once

 9 the follow-on product is on the market. Since the

 10 process technology used to make your product becomes

 11 integrated into the approval basis, you're going to want

 12 to resolve the process technology issues as well.

 13 Otherwise you're face the same kind of market

 14 disruption.

 15 So I think as a practical matter, the only way

 16 to kind of navigate these two variables, the two

 17 unknowns is what patents matters and what technologies

 18 implicated by the follow-on producer. You're going to

 19 have to set up some kind of information exchange where

 20 the technology that's being used by the follow-on

 21 producer is communicated to some body of patent owners

 22 that are going to be having or holding relevant patents.

 23 It's difficult because I don't know that it's so

 24 simple, and Rochelle's introduction makes it clear.

 25 You're dealing with a larger population of interested

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 248

 1 patent owners, and you're dealing with a more granular

 2 type of relationship between the patents and the

 3 technology that's implicated, so it seems to me there

 4 needs to be some sort of flexible window during which

 5 you can figure out what patents matter, which ones are

 6 implicated, and once that's over, then you can go

 7 through the conventional dispute mechanisms that you

 8 might create.

 9 MS. DRENNON: Christine?

 10 MS. SIWIK: I think Hatch-Waxman included

 11 obviously the amendments because basically in part

 12 because what had you without it is we couldn't start

 13 doing the R&D without infringing the patent until the

 14 patent expired, and so you ended up with what they

 15 called the de facto patent exclusivity or, I'm sorry, a

 16 de facto patent extension because you couldn't infringe.

 17 So the monopoly continued, again I'm not using

 18 that in a negative way, but the monopoly continued while

 19 we did the R&D, and they stopped it. They said that's

 20 not a good idea, let's get the research done now.

 21 If we have the notice patent process start too

 22 close to the end of whatever data exclusivity period is,

 23 we're just going to create something new. We've going

 24 to create a de facto data exclusivity period because

 25 data exclusivity means people should be able to go when

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 249

 1 that's over, whatever that date is, and the goal should

 2 be to set it so that we can definitely be done, and it

 3 can't start near the end.

 4 Anyone that does Hatch-Waxman litigation knows

 5 it's -- there are courts that aren't giving us summary

 6 judgment any more. Trials are taking 48 months to get

 7 through court on a simple case, so it needs to happen

 8 early. It needs to happen right away. We need to start

 9 the process.

 10 And with respect to the notice, I know your

 11 question asked us, are there any anti-competitive

 12 consequences to the notice. I think there could be

 13 significant anti-competitive consequences to this notice

 14 if it's not done carefully, which is under some of the

 15 pending bills -- we have to give over our entire, we'll

 16 refer to it as an ABLA for purposes, plus manufacturing

 17 information to anyone who wants it.

 18 If you say you've got a patent, we've got to

 19 turn it over, and we have to turn it over with no real

 20 confidentiality provisions, and the brands say our data

 21 is really important, we deserve X amount of exclusivity

 22 to protect it. Our data is going to be important.

 23 We're going to be able to protect that too.

 24 I guess the anti-competitive consequences from

 25 my perspective are: If you are going to do all this

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 250

 1 work and spend the tens of millions of dollars it's

 2 going to take, you can't be forced to turn that stuff

 3 over to anyone who asks for it on insufficient

 4 confidentiality terms.

 5 MS. DRENNON: Thank you. David, I think you had

 6 something.

 7 MR. MANSPEIZER: Well, I don't think the three

 8 or the two people who have spoken so far and me are

 9 necessarily all that far off from each other. I think

 10 that we've got to have a resolution mechanism that

 11 starts early enough that we can completely resolve the

 12 issues before the end of the data exclusivity but late

 13 enough so that the process is set.

 14 Now, if the data exclusivity is long enough,

 15 there's plenty of time to do that, and I'll just use the

 16 example that's up on the screen behind us. If you had

 17 14 years of data exclusivity, and I'm using the term

 18 data exclusivity loosely, because true data exclusivity

 19 for 14 years would mean that you couldn't file an ABLA

 20 for 14 years, so let's use data exclusivity correctly.

 21 Ten years of true data exclusivity followed by 4

 22 year period of market exclusivity, in which there would

 23 be 48 months to resolve a litigation, would certainly

 24 seem to be enough time to allow the ABLA filer to have

 25 fully defined its process and what its product is and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 251

 1 yet give sufficient time -- and I recognize that we have

 2 some courts today who are not perhaps handling our cases

 3 as expeditiously as both sides would like. I think

 4 there are some ways to deal with that.

 5 So I don't think that we're as far as off on the

 6 timing as people might think. I think the true dispute

 7 here is whether it should only be a limited number of

 8 patents or everything that both sides want to bring to

 9 the equation.

 10 And I come back to the point I made before about

 11 fairness and complete resolution, and I think in order

 12 to get that, there needs to be some mechanism by which

 13 both sides can lay their cards on the table completely,

 14 and when I say both sides, I mean the innovator and the

 15 ABLA filer, recognizing that there may be some

 16 circumstances in which there are third party licenses.

 17 There can be mechanisms worked out to deal with

 18 those, but once we get a basic structure in place, those

 19 are fine points, if we can agree on the basic structure.

 20 MS. SIWIK: Just to be clear, I agree maybe

 21 conceptually we have some framework to talk about, but I

 22 just want to be clear that I'm not saying that we

 23 shouldn't -- eight years of data exclusivity is

 24 acceptable and that we should sit idly for eight years

 25 doing nothing.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 252

 1 I think we would want to be able to file our

 2 applications much sooner. And data exclusivity are

 3 filing moratoriums for the generics. That's what they

 4 are. We can call it whatever we want. It's a filing

 5 moratorium. You can't submit an application and get the

 6 review process started.

 7 So the idea of basically double what we have in

 8 Hatch-Waxman as a filing moratorium, I don't think a lot

 9 of generics are going to find that particularly

 10 competitive, so I agree that we can probably talk about

 11 a structure, but I certainly wouldn't want to leave

 12 anyone here with the impression that we need eight years

 13 to file.

 14 MR. WROBLEWSKI: Let me ask you a quick

 15 question: Say you had said -- say you had a data

 16 exclusivity period of X numbers of years and you would

 17 back out some period of time, you had said 48 months.

 18 Is it that you are waiting for an appeals court review

 19 to provide the certainty? Is that what you're looking

 20 for? If there were numbers say from a 2002 Generic Drug

 21 Study that showed that District Court resolution for all

 22 Hatch-Waxman cases up to that point took 24 months and

 23 that when you added in an appeals court, it added

 24 another 14 months, so you add the District Court plus

 25 the 14 months for an appeals court decision on average,

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 253

 1 then you subtract it from whatever the data exclusivity

 2 period would be. Is that what you're thinking?

 3 MR. MANSPEIZER: Yes, I was thinking Federal

 4 Circuit because the Federal Circuit, although obviously

 5 there's always the possibility of someone higher taking

 6 a look at one of the cases, but the Federal Circuit

 7 tends to be in these cases the less word, and that would

 8 give both sides the certainty.

 9 I would back it out from the end, but

 10 recognizing again this is in the context of a fully

 11 defined system that has adequate data exclusivity.

 12 MR. WROBLEWSKI: Sure, sure. I just wanted to

 13 make sure I understood what the time would represent,

 14 and it would represent an appeals court decision, and if

 15 you had average numbers, you could kind of make that

 16 calculus on average.

 17 MR. MANSPEIZER: And I built in extra time

 18 because I think that everybody here who practices in

 19 this area recognizes that 30 months doesn't cut it.

 20 MS. SIWIK: You can't get it out of District

 21 Court.

 22 MR. MANSPEIZER: So we need to have an adequate

 23 period of time. You have to figure out what adequate

 24 means and ways in which we can expect courts to enforce

 25 that or live up to that end of the bargain.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 254

 1 MS. DRENNON: And we're actually going to come

 2 back to the litigation issue, but I think I'll ask one

 3 more question on the notice and, Ken, I know you had

 4 your card up, so both with respect to the question we

 5 just asked of when you should have notice, I also want

 6 to turn to: What should be included in that notice

 7 because we talked about it a little bit, but in a little

 8 bit more detail, what would you include in your notice.

 9 And then also with respect to your notice should

 10 that just be to the sponsor company or as we have here,

 11 we have universities and third parties that are also

 12 involved with their own series of rights, how would you

 13 corporate those issues?

 14 MR. GOLDMAN: All right. I wanted to -- the

 15 last conversation was quite a bit about data exclusivity

 16 and the interplay of the expiration of data exclusivity

 17 with patent exclusivity.

 18 First of all, I don't believe data exclusivity

 19 is a filing moratorium. Obviously you can file a full

 20 drug application for a follow-on molecule. It's not a

 21 filing moratorium. It's only a moratorium on the use of

 22 data, and I don't think there's -- I mean, eight plus

 23 two is -- you can also think of that as ten minus two.

 24 It's ten years of market -- of data exclusivity and two

 25 years -- but you can start two years early in filing

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 255

 1 your application.

 2 You just can't get approved for two more years,

 3 so I think that whole calculus, there's no artificial

 4 data exclusivity extension I think in that system.

 5 You're going to come -- we're all going to come to some

 6 agreement about what the appropriate term is, and you're

 7 going to be able to have time to file your application

 8 and get it approved after the expiration of that term,

 9 but to tie it back to -- I'm going to first try and get

 10 back to the hypo and then violate my own promise in that

 11 regard.

 12 The question is: When does patent exclusivity

 13 and with relation to data exclusivity, and I think this

 14 time language shows the impossibility of coming to any

 15 sort of reasonable conclusions about how those two are

 16 going to interplay. Let's assume that we have ten-year

 17 exclusivity. If you just look on the timeline, you have

 18 some patents expiring at five years, some patents at 7,

 19 some 9, 10, 11, 12, 13, 14 years.

 20 Some of them obviously are going to expire

 21 within the data exclusivity. Some of them are going to

 22 expire outside of the data exclusivity. There's no way

 23 you can make any sort of reasonable legislative

 24 decisions on whether -- on what's going to control,

 25 whether you're going to need to -- whether people are

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 256

 1 going to be able to file -- whether generics are going

 2 to be able to file before or after the data exclusivity.

 3 The patent system should be separate. This is

 4 where I know we're assuming there's a patent resolution

 5 system, but it doesn't seem that you can make any

 6 reasonable conclusions on whether you need to have this

 7 system in place based on whether the patents are going

 8 to expire before or after the data exclusivity because

 9 even in this one situation, you're all over the map.

 10 So Novartis believes that you don't need to have

 11 a notice provision when you file the FOB application.

 12 It would require disclosure of confidential data at a

 13 point which is inappropriate, and that the only notice

 14 that's necessary is after the approval and only to the

 15 extent that notifies the innovator that an FOB has been

 16 filed based on the innovator's delay.

 17 MS. DRENNON: The other Ken?

 18 MR. DOW: The one point I was going to make is

 19 obviously the longer the data exclusivity period, the

 20 less this becomes a problem because most of its

 21 patents -- a lot of the patents will expire, and so

 22 you're going to have less of an issue, but if the data

 23 exclusivity period is short, there are a lot more patent

 24 issues to be resolved in a very short period of time,

 25 and that it's unlikely that that is likely to occur.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 257

 1 MS. DRENNON: Turning to Jeff, both what should

 2 be included, and I would like to hear people's thoughts

 3 on whether notice should be given to anyone besides the

 4 sponsor company?

 5 MR. KUSHAN: First of all, let's kind of step

 6 into the real world and realize that all the patents are

 7 published, and so the universe of what patents you're

 8 probably going to have to run into is not going to be an

 9 unknowable fact. You're the follow-on producer, you can

 10 do a patent search like anyone else can.

 11 The universe of implicated potentially

 12 implicated patents is not infinite. It's going to be

 13 finite, and it will be a list of people that you can

 14 find.

 15 I think the universe is also going to be a

 16 manageable one, once you understand what technology is

 17 being used by the follow-on producer to produce their

 18 product. Obviously the longer the data exclusivity

 19 window is, the fewer people you have to deal with, so I

 20 think there's not an intractable problem to figure out

 21 what patents have to be resolved based on which patents

 22 are going to be infringed.

 23 I completely subscribe to the idea that you need

 24 to have the confidentiality bubble around the exchange

 25 of information. I don't think anybody would suggest

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 258

 1 that you have to open up your manufacturing technology

 2 and let everybody see it, so you can implement a

 3 relatively straightforward type of mechanism to make

 4 sure that any information that is exchanged under this

 5 process will be done so without any risk of it going

 6 outside -- going to the public sector.

 7 At the end of the day, the information has to

 8 identify what technology is going to be implicated so if

 9 you look at a typical manufacturing process, you will

 10 have to figure out the wholesale type, the sequence you

 11 might be producing, the nucleic acid sequence, maybe

 12 some of the expression technologies you're employing, so

 13 there's some process technologies, some of the

 14 manufacturing processing information will have to be

 15 conveyed.

 16 The molecule structure, the formulation, the

 17 stuff that you typically might find corresponding to

 18 some of your Orange Book stuff, the molecule's identity

 19 and it's intended use. I think a lot of it will be

 20 captured in the biologically abbreviated application.

 21 There will be more that's needed beyond the typical

 22 application such as some of the process technology for

 23 manufacturing.

 24 I think there's a way of figuring out how to

 25 provide a mechanism to let interested patent owners know

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 259

 1 that there's a process that has to be started and give

 2 control to the applicant to determine when to convey

 3 information, and that may be the mechanism that you use

 4 to ensure who gets the information and barring them by

 5 any appropriate confidential restriction.

 6 But we do have to figure out who make that

 7 official. We don't want to have to make that a game

 8 plank element of the system, but you do need to get into

 9 some of the technology used to make the product in order

 10 to figure out what patents you have to resolved.

 11 MS. DRENNON: All right. Turn to Bruce and then

 12 Hans and Rochelle.

 13 MR. LEICHER: Actually Jeff just made a number

 14 of points I was going to make, which I think one of the

 15 problems with the hypothetical, which is great for doing

 16 the analysis we are doing from a theoretical point of

 17 view, but from a policy making point of view, I think it

 18 overly complicates the circumstances of many products in

 19 the sense that it asks us before asking these questions.

 20 So, for example, I would propose that the notice

 21 should only go to the sponsor, that with many products

 22 that any company launches, whether it's generic or

 23 brand, there are patents out there that you're going to

 24 do a clearance process, you're going to identify, and

 25 there are patents that are not controlled by your future

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 260

 1 competitor, and you negotiate an agreement or a license

 2 with the university or with whoever holds that patent,

 3 and there's an example here on that.

 4 And it's really the patents that are controlled

 5 by or are under common control with and some mechanism

 6 by the sponsor that I think you should give the notice

 7 to. We think that a notice mechanism needs to be kept

 8 as simple as possible.

 9 I think that's sort of the view we have,

 10 something maybe along the lines of the PIV kind of

 11 notices now with some kind of reasonable confidential

 12 access provision so you can just get things dealt with,

 13 and I would also like to say, I agree with David, you

 14 need to do this early enough so that you don't end up --

 15 and this is maybe where Ken and I disagree.

 16 We think it's important you don't end up with a

 17 process that extends the data exclusivity period as a

 18 result of litigation. It's not so much the patent term,

 19 but the data exclusivity, but essentially I think if you

 20 limit it to the key patents that are built around the

 21 product that the brand company controls, I think you've

 22 got it simplified, and I also agree, you have the

 23 ability as a generic company to go and see what's out

 24 there because you know your process. You know your

 25 product.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 261

 1 MS. DRENNON: Thanks. Hans?

 2 MR. SAUER: Everybody of course is striving for

 3 simplicity. I think you know what, Bruce, as you said,

 4 giving the notice only perhaps to the sponsor of the

 5 reference product, the ABLA would also be in synchrony

 6 with what was done under the Hatch-Waxman Act where

 7 third parties are largely excluded from the Hatch-Waxman

 8 specific patent resolution process.

 9 I think certain -- to some degree I think we

 10 have to account to the fact that there is some more

 11 technology stacking going on in biotech than in the

 12 small molecule space. So I think maybe some

 13 accommodations can be found for the kinds of patents

 14 that would be exclusively licensed into the innovator's

 15 portfolio, and to even account for situations where the

 16 innovator himself may not have the first enforcement

 17 rights for such in-license patents.

 18 I think as a basic proposition, I think

 19 innovators typically license them with enforcement

 20 rights. It sometimes does happen, that when they're

 21 in-license from certain academic institutes, that those

 22 retain first enforcement rights. And a way would have

 23 to be found to accommodate that. I don't think it's

 24 going to be an insurmountable obstacle.

 25 At the end of the day I think the purpose of all

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 262

 1 of this of course is to identify the patents that are

 2 going to be part of this pre resolution process, and in

 3 the Hatch-Waxman context, we do it with an Orange Book,

 4 and here the only reason why we talk about a notice is

 5 that we're obviously not contemplating an Orange Book

 6 like process.

 7 I think probably for good reason in that the

 8 approval standard is not going to be one based on

 9 sameness, so you're going to be less clear about what

 10 kinds of patents you're supposed to be listing. The

 11 assumption can be to the same extent that is under

 12 Hatch-Waxman, that you list the patents you are going to

 13 be covering, the follow-on product, and the second

 14 difference I guess is product process patents, which

 15 aren't part of the Orange Book process.

 16 And it would have to be included. Again it's

 17 going to be easier to do this through a notice process,

 18 and the third I think is a structural problem with the

 19 Orange Book process, and that once you start requiring

 20 people to list patents, you're presumably going to build

 21 in disincentives for not listing patents, penalties for

 22 listing wrong patents, and as we've seen in the

 23 Hatch-Waxman context, it tends to drive people to

 24 over-list or to start putting things in there for fear

 25 of being penalized and not having put them in there.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 263

 1 So for all these reasons that we see that in

 2 other contexts cropping up through the legislative

 3 proposals do, but forfeiture provisions and all that

 4 kind of stuff. I think keeping it simple and as close

 5 as possible to normal patent litigation I think is going

 6 to be beneficial, and therefore I think a notice process

 7 under appropriate confidentiality and not everybody who

 8 thinks they have a patent that covers the follow-on

 9 product can show up from outside is going to be helpful

 10 and more appropriate.

 11 MS. DRENNON: Thank you. Christine and Rochelle

 12 and Esther, and as you're answering this, I would be

 13 interested in other thoughts that you have with respect

 14 to the Orange Book because technically I have that

 15 coming later but I think it's a good time to talk about

 16 it now.

 17 MS. SIWIK: It fits in. There are obviously --

 18 in Hatch-Waxman there are third parties that own

 19 patents. We do give notice to people who are other than

 20 the brands. We give notice to the patent holders. It's

 21 easier to figure out with the Orange Book, but we

 22 routinely do give out the notice letter to companies

 23 that are not the brand.

 24 It happens I just did it this week. It

 25 happens -- it does happen a lot, so I think that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 264

 1 starting with the brand I think makes sense. They know

 2 what patents they've licensed. I don't as the person

 3 who is submitting it, so I do think it's only realistic

 4 to think there's going to be people other than the brand

 5 who are going to need notice.

 6 I mean, especially -- I know we'll get to this

 7 at the end so I'll throw it out. If there are sue or

 8 lose type penalties, the people that the brand is

 9 licensing from are going to need to be part of that

 10 process in some respects.

 11 Again I agree simplicity is important, but if

 12 there's going to be a sue or lose, there has to be

 13 someone that knows that might be happening, I hate to

 14 use the word fair because it so rarely counts in these

 15 things, but you need to be fair.

 16 And I think that the idea of the Orange Book, I

 17 think Hatch-Waxman works. I think it could be better.

 18 I think it could be a lot worse, but I think we can look

 19 at that -- I don't know if Liz Dickinson is still here.

 20 I love talking to her all the time about the Orange

 21 Book, multiple times a week, but there's going to be a

 22 better way to do it.

 23 I don't know if listing -- I think the concerns

 24 are right. There's over listing. There's under

 25 listing, how are you going to figure it out. I think

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 265

 1 the idea behind the Orange Book, the idea of identifying

 2 key patents and litigating those early is not a bad idea

 3 at all. It's a good idea, but an FDA should be doing

 4 what FDA does which is reviewing and approving

 5 applications.

 6 Like I said, I love talking to the office of

 7 chief counsel, it's fun, but their time is going to be

 8 better spent not figuring out what patents should have

 9 been listed, and to take it even a step further, none of

 10 the bills that I've seen tie any type of exclusivity to

 11 the generics actually submitting a patent. It's a

 12 challenge. It's been tied to approval.

 13 And that takes even more of a burden off the

 14 FDA, the idea of collateral litigation I think Bruce

 15 touched on earlier, I haven't seen a proposal where that

 16 would happen because FDA is being pulled out of the

 17 picture, and I think to the extent we can let them focus

 18 on what they're good at and what they should be doing, I

 19 think it helps everybody.

 20 MS. DRENNON: Thanks. Rochelle?

 21 MS. SEIDE: I think some of the points that I

 22 was going to address have already been addressed.

 23 Particularly in this area, process patents are of

 24 importance, and they are specifically excluded, and the

 25 drugs situation from the Orange Book. You do not --

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 266

 1 there's a separate method under 271(g), pursuant to

 2 271(g) that you go and ask the sponsor or the brand

 3 company for any process patents that might cover their

 4 product because they are not listed in the Orange Book.

 5 The same kind of situation occurs in regard to

 6 producing generic antibiotics which are not also listed

 7 in the Orange Book, and I would venture to say that

 8 generic companies that are looking to make a generic

 9 antibiotic have a very difficult time of identifying

 10 what patents are important in regard to that because if

 11 they are not listed on the label, there's a very

 12 difficult way of going to find who owns those patents.

 13 And it may again -- the same kind of thing, it

 14 may be that the patentee is not the drug sponsor, and

 15 when you're looking -- when you give notice to say the

 16 patentee, it may not be the brand company that's the

 17 drug sponsor, and I've seen this in a lot of situations.

 18 I again think the notice, the whole issue of

 19 notice should be as simple as possible, but some of the

 20 issues are more complex than we see even in the more

 21 complex drug situations.

 22 MS. DRENNON: Thanks. Esther?

 23 MS. KEPPLINGER: Just a couple of points, but

 24 the example that we created was not just an arbitrary

 25 hypothetical but actually Hans pulled together an amount

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 267

 1 of data from actual situations and drugs, and so we

 2 compiled the example trying to base it on the kinds of

 3 situations that are actually out there. We threw a

 4 couple of additional curve balls in, but this is the

 5 kind of situation that might be typical in biologics.

 6 Secondly, it seems like one of the lessons from

 7 Hatch-Waxman, and many people have talked about it, is

 8 that there's quite a lot of litigation, and it seems

 9 like in designing the situation, we should be looking to

 10 try to reduce the litigation because it is just a lot of

 11 money that could probably be better spent on other

 12 things, like designing more pharmaceuticals.

 13 Lastly, with respect to the Orange Book, it

 14 seems that it should also be a simple process, one in

 15 which you reduce the number of errors that could

 16 possibly be made by someone so a different kind of

 17 mechanism for identifying what patents would be

 18 appropriate should be looked at.

 19 MS. DRENNON: Ken Goldman?

 20 MR. GOLDMAN: I'm sure everyone is going to be

 21 shocked to hear that Novartis does not believe that

 22 there needs to be Orange Book listings. I wanted to

 23 address -- in that regard, I wanted to address something

 24 that Bill said with regard to Hatch-Waxman, which is

 25 that the purpose of Hatch-Waxman is so that when valid

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 268

 1 patents expire, competition can begin. That's fair,

 2 right?

 3 And I just wanted to say that Novartis

 4 completely agrees with that, that when patents expire,

 5 competition should begin. That's absolutely our

 6 fundamental principle for us. The problem of course is:

 7 What does pre approval patent resolution due to achieve

 8 that?

 9 I mean, again I wish Doug was back on this

 10 panel. He said if you look at the history of drug

 11 litigation in the last 20 years, you would believe that

 12 the PTO has failed to issue one single valid patent that

 13 covers a drug. Every single patent gets challenged. So

 14 the point being that the pre-approval patent resolution

 15 process is an opportunity to bounty hunt. Of course

 16 everyone is going to -- all the generic companies are

 17 going to challenge every patent under the rubric that

 18 otherwise there will be a patent extension because of

 19 patents -- because they won't be able to launch because

 20 of the existence of illegitimate patent. But I say that

 21 that's not true.

 22 The way to achieve that for generics is exactly

 23 the same way that innovators that launch drugs deal with

 24 that, which is you make an assessment, and you launch at

 25 the time that you believe that you don't infringe any

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 269

 1 valid patents.

 2 It's the same for innovators as it is for

 3 generics, and you don't need any sort of pre approval

 4 resolution procedure to do that. The generics would be

 5 in exactly the same place as every other drug company is

 6 when they go to launch a product biologic product.

 7 MS. DRENNON: Ken Dow.

 8 MR. DOW: We were talking a little bit about

 9 this possible exchange of information earlier on, so

 10 well I was going to mention that there are some

 11 precedence for that, and Rochelle mentioned one, under

 12 271(g), that the process patent requests.

 13 The other is early in the Hatch-Waxman context

 14 when there is a patent certified filed, oftentimes the

 15 issue might be around infringement or whether the

 16 generic actually will infringe the product, and often

 17 early in that process there is an exchange of

 18 information under an appropriate protective order so

 19 that the brand can make an evaluation as to whether or

 20 not the product will actually infringe these --

 21 sometimes the later formulation patents and that sort of

 22 thing.

 23 And so we know how to do this. We've done it,

 24 we do it in other contexts, and I don't see any reason

 25 why we couldn't it, we design the same kind of system

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 270

 1 here.

 2 MS. DRENNON: Thank you. And I would like to

 3 switch gears a little bit and still follow up with what

 4 we've been talking about, but ask if the timing of FDA

 5 approval should be tied to the outcome of the patent

 6 resolution process, and what are the marketing and

 7 competitive consequences of this decision. I guess

 8 Christine would like to go?

 9 MS. SIWIK: I'll start and then Jeff should go

 10 next.

 11 MS. DRENNON: Let's go to Hans. It looked like

 12 you were raising your hand. Either way, I'm happy Hans,

 13 why don't you start.

 14 MR. SAUER: Your question sounds again a bit

 15 like linkage so what about lineage, should there be

 16 linkage or not? Under Hatch-Waxman I think people

 17 understand linkage to mean different things. We've

 18 heard one definition, and others under -- others think

 19 the 30-month stay when they hear that. Something is

 20 delayed in the FDA approval process if litigation

 21 starts.

 22 Others see other elements there, so I think if

 23 we dissect that so there's this one element, a 30 month

 24 stay that kicks in that delays the approval of the ANDA,

 25 and that happens solely by virtue of the reference drug

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 271

 1 holder having filed a lawsuit and pressing a lawsuit, so

 2 it's not about winning, it's about litigating, which

 3 results in an exclusivity benefit.

 4 I think that has been necessary because -- for

 5 various reasons I guess. It's been built into the

 6 Hatch-Waxman Act from its inception, but it's been

 7 subject to a lot of criticism too. I think it's been

 8 remarkable that nobody has been -- on this panel so far

 9 has been arguing for a 30 month like stay provision to

 10 be built into this follow-on pathway, where approval is

 11 stayed solely by being virtue of being in litigation or

 12 where litigation itself is something that's valuable.

 13 The other linkage concept I guess that's built

 14 into the Hatch-Waxman is that once patent litigation is

 15 resolved, if everything works as planned within

 16 Hatch-Waxman and within 30 months you get to a final

 17 judgment and the patent is upheld and found to be

 18 infringed, then the secretary won't make the ANDA

 19 approval effective until the expiration of that patent.

 20 That kind of linkage seems to be quite rational,

 21 and it seems to be the logical consequence of having any

 22 pre approval patent resolution mechanism, so that I

 23 guess is something that we would all agree to at BIO as

 24 an appropriate element. Nobody is really asking for

 25 delaying approval pending litigation, which many BIO

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 272

 1 members don't.

 2 MR. WROBLEWSKI: To make sure I understand, that

 3 if the FOB, the follow-on application, the ABLA were to

 4 lose at the District Court level, should the FDA stop

 5 its review?

 6 MR. SAUER: No, no, I don't think it should stop

 7 its, just like it doesn't stop its review under the

 8 Hatch-Waxman.

 9 MR. WROBLEWSKI: How far do you go? Federal

 10 Circuit, Supreme Court? If there's linkage, what is the

 11 stopping point?

 12 MR. SAUER: The stopping point of final

 13 resolution of litigation? I think that's open to

 14 discussion. Under the MMA it's District Court judgment

 15 and it is falsely -- and that would be kind of a logical

 16 symmetry to what we might want to adopt here.

 17 MS. DRENNON: Christine?

 18 MS. SIWIK: I think I'll agree with half, not

 19 the second half. I think, like I said, we've learned a

 20 lot from Hatch-Waxman, and I think one of the things

 21 that the generic side has learned is that linkage

 22 doesn't expedite market entry. The 30 monthly

 23 litigation stay linkage encourages litigation.

 24 That's a significant financial incentive to file

 25 a suit, regardless of whether or not -- what you value

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 273

 1 your chance of success. Someone has made the point,

 2 well, if we launch and you get damages four or five

 3 years later, that's not sufficient. That might not be

 4 sufficient. The same is true for us.

 5 If we get sued from a frivolous lawsuit, our

 6 approval is delayed for 30 months and a day, and I try

 7 to get antitrust damages and good luck, but if I do

 8 that's another five years away, and that doesn't make up

 9 for the competitive harm.

 10 So I think linkage in that sense of the

 11 initiation of a lawsuit somehow is going to delay

 12 approval or somehow impact approval, I think that we

 13 should avoid that. I think it does have

 14 anti-competitive -- I'm not saying antitrust but

 15 anti-competitive consequences because it creates an

 16 incentive to file lawsuits that you might not otherwise

 17 have filed.

 18 And I think linkage between the outcome of the

 19 patent litigation and the approval, in this context in

 20 particular, is not necessarily going to be appropriate.

 21 We've heard a lot that there's all these different types

 22 of patents. I mean, for example, let's pick one from

 23 the hypothetical tech platform patents. We saw in the

 24 assumptions that that's not exclusively licensed to the

 25 brand. It's not exclusively licensed to many other

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 274

 1 companies for many other products.

 2 If I am found to infringe that patent, they're

 3 not going to get a permanent injunction, to block my

 4 approval because they're more likely than not not going

 5 to be able to establish that standard given their

 6 licensing history. Why should I get stayed for my

 7 approval until patent expires simply because -- in other

 8 words if the brand can prove a permanent injunction, get

 9 a permanent injunction. Don't give it to them

 10 automatically with linkage because there isn't --

 11 there's going to be patents that exist that they're not

 12 going to be able to make that standard.

 13 Yet if there's automatic linkage we're going to

 14 get blocked even in they can't meet the standard.

 15 MR. WROBLEWSKI: Can I ask you a follow-up

 16 question? What you said intrigued me. You said a

 17 30-month stay encourages litigation.

 18 MS. SIWIK: Yes.

 19 MR. WROBLEWSKI: What's the difference between

 20 that and a data exclusivity period minus X numbers of

 21 years? In my example, David had earlier in the

 22 discussion said 48. When you are coming the other way,

 23 isn't that the same thing? Couldn't a data exclusivity

 24 minus X numbers of years have the same economic affect

 25 as the 30 months stay in terms of encouraging litigation

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 275

 1 that may otherwise not occur?

 2 MS. SIWIK: Yes, and that's why there should be

 3 no data exclusivity either. It's all bad.

 4 MS. DRENNON: Christine, if you could move a

 5 little closer so we can get it recorded.

 6 MS. SIWIK: Yes, but yes and no. Yes and no. I

 7 mean, they're going to get their data exclusivity period

 8 whatever that number is, regardless of the patent

 9 litigation. If there's no linkage, I don't see what

 10 extra incentive they have necessarily to bring that

 11 suit. Do you see what I'm saying?

 12 So they're going to get eight or nine, four,

 13 three, five, whatever those years are, and if in theory

 14 we set it up such that the litigation would necessarily

 15 be complete, whatever that means, by the end of that

 16 period, what extra incentive do they have because it's

 17 not going to get them anything else? Under Hatch-Waxman

 18 it gets you 30 months no matter what.

 19 MS. DRENNON: Jeff or Ken?

 20 MR. GOLDMAN: Can I just make one quick comment

 21 about linkage because I'm not confused about what

 22 linkage means, and usually that of course means that I'm

 23 not thinking about it hard enough, but linkage in my

 24 mind is the creation of an artifical act of infringement

 25 by the filing of that FOB application. Now you'll prove

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 276

 1 me right.

 2 MS. DRENNON: Jeff?

 3 MR. KUSHAN: I think the question that you are

 4 asking is whether a valid patent is infringed by a

 5 follow-on producer, the FDA should defer the approval of

 6 their application until the expiration of that valid

 7 infringed patent, and I think for many people in the

 8 biotech community, the answer has got to be yes, and

 9 it's not a complicated question, and it resolves itself

 10 in two ways.

 11 If it's an elective technology, which you have

 12 elected to use and therefore have infringed, the

 13 consequence of not using the technology is logicalness

 14 that is what a lot of businesses are based on in terms

 15 of the biotech community.

 16 I think the practice of licensing does go into

 17 the question of whether you'll get an injunction. I

 18 think it's not a black and white question. I think

 19 there are many instances where you can enforce and get

 20 an injunction against a party notwithstanding the fact

 21 that you have a non exclusive license to somebody else.

 22 There's a variable that goes into the equation

 23 of a conventional litigation that dictates whether

 24 you're going to get this injunction or not. In this

 25 environment, if we're going to be designing it to signal

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 277

 1 which patents should be avoided and which ones should

 2 not be, the logical connection is that you come in and

 3 say, if you elect to use the technology, then you're

 4 going to have to have a deferral on when you can get

 5 onto the market using that technology.

 6 It may be that if do you things right and you

 7 have an initial fight about technology you don't have to

 8 use to make good product, you do what everybody else

 9 does and you change your method before it has a big

 10 consequence on you getting on the market.

 11 That's the way it should be, and that resolves

 12 the patent dispute by not admitting the issue of

 13 infringement, and this is all going to happen before

 14 there's any liability because you're talking about pre

 15 approval.

 16 So there seems to me a logical symmetry of

 17 saying let's drill down to the patents that do present

 18 the conflict, resolve the status of those patents, if

 19 the resolution is that patent is invalid and infringed,

 20 the linkage should flow from that, that you should have

 21 a deferral of the product that has deployed the

 22 technology that you've infringed.

 23 I think if you go to a more subjective standard

 24 that basically says you can litigate and then there's

 25 just whatever outcome you get is going to come, that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 278

 1 does erode the confidence that you're trying to create

 2 in the market equation that the innovators is looking

 3 at.

 4 So there should be -- this doesn't have to be

 5 black and white. I think maybe you need to look at the

 6 types of patents that are at issue, but conceptually it

 7 makes sense that if you're making the investment to do

 8 the litigation upfront, you should tie the outcome as it

 9 makes sense into the linkage structure.

 10 MS. DRENNON: All right. And Ken Dow?

 11 MR. DOW: One issue that concerns me is that if

 12 you don't have some kind of linkage, then you get a

 13 sticky situation at the end of the -- if the patent is

 14 determined to be valid and infringed, what do you then

 15 do if the generic has already launched and you wind up

 16 with the same kind of compulsory license situation which

 17 we've never really been in favor of in this country, or

 18 you have to pull the drug from the market, which is not

 19 going to be something that you want to subject consumers

 20 to pulling drugs off the market that have been put out

 21 there.

 22 I think that's a really bad idea so that I see

 23 early resolution of these disputes the only answer.

 24 MS. DRENNON: Bill Schultz?

 25 MR. SCHULTZ: Personally I'm not persuaded that

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 279

 1 there should be any filing moratorium. In other words,

 2 I'm not persuaded that the generics shouldn't be able to

 3 litigate these patents as early as they want after

 4 they've filed their application.

 5 MS. DRENNON: What do you mean by filing

 6 moratorium?

 7 MR. SCHULTZ: I mean a period of time during

 8 which the generic cannot file an abbreviated

 9 application, I'm not persuaded of that, but if there is

 10 to be one, then you need to figure out how long the

 11 litigation is going to take. This is the point I want

 12 to make.

 13 I don't think we should be looking at the

 14 average time because if you pick the -- if the average

 15 is 48 months and you pick that, then they're going to be

 16 roughly half, half of the time the litigation is

 17 actually going to delay the generic from getting on the

 18 market, so if you were going to pick this period of time

 19 you really need to look at the upper end and say, What's

 20 the upper end amount of time litigation is likely to

 21 take because the whole goal ought to be so that

 22 litigation is not delaying approval of the generic.

 23 MS. DRENNON: Thank you, and, Hans, I see that

 24 your tent is up. We're also planning on talking

 25 about -- okay, excellent. Because we have about 15

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 280

 1 minutes to cover a couple of other issues before we get

 2 to our final summary point, and the next issue I want to

 3 talk about is: We have this spreadsheet here with all

 4 these other patents and then when you look at the

 5 timeline, you have the second approval and third

 6 approval and all of that.

 7 Once the resolution process has begun, assume

 8 it's begun, how should the process handle additional

 9 patents that are applied for and/or granted that claim

 10 the reference product? And then also I'm tying these

 11 together. Let's do that quickly and then I have a

 12 follow-up question, so does anyone have any thoughts on

 13 that. Bruce?

 14 MR. LEICHER: From our perspective it seems

 15 there should just be a DJ right or an artifical act of

 16 infringement so you could actually integrate it into the

 17 litigation that's occurring at that point in time so you

 18 can actually have the clarity in the same timeframe.

 19 MS. DRENNON: Christine?

 20 MS. SIWIK: I think that works fine in theory a

 21 little bit, and I think maybe my experience with

 22 Hatch-Waxman has taught me a little bit different, which

 23 is you can't keep going. You can't be 30 month s into

 24 your litigation, have a new patent issue and start from

 25 scratch, get 15 more months into your litigation, have

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 281

 1 another patent issue and then stop everything.

 2 You will never get done, and there is a

 3 remarkable opportunity to stager patent issuance. It's

 4 not an exact science any more than you can predict the

 5 day your approval is going to pop out of FDA, but there

 6 are a lot of things that can be done to stager patent

 7 issuance. We've seen it happen a lot.

 8 So the idea -- like I said in theory you would

 9 want to resolve the key disputes, but as time goes on,

 10 the chances of those patents also covering the product

 11 seems slim because that, in theory, is what we heard is

 12 the first patent you get, not the 15th patent you get 15

 13 years after approval.

 14 So as time goes on, the patents get more narrow.

 15 The patents get further away from the brand product or

 16 something we infringe, so the idea of folding in every

 17 new patent that comes out right away is going to drag

 18 the litigation out way, way too long.

 19 MS. DRENNON: David and then Jeff?

 20 MR. MANSPEIZER: Confining myself to your

 21 hypothetical --

 22 MS. DRENNON: If you have major changes that

 23 would affect your answer, the hypothetical is just a

 24 hypothetical.

 25 MR. MANSPEIZER: Because you directly were

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 282

 1 questioning about the second and third edification, and

 2 the answer there seems to me is defined by: Is the

 3 biosimilar applicant seeking approval for that

 4 indication. If they are, then there should be a

 5 mechanism to include that. If they aren't, and they're

 6 not allowed to promote for that and they're not allowed

 7 to sell for that and there's no substitution, then it

 8 shouldn't be included.

 9 MS. DRENNON: Thank you.

 10 MR. LEICHER: Let me say that we would also

 11 agree with that point as well.

 12 MS. DRENNON: Jeff?

 13 MR. KUSHAN: I don't have a lot to add. I think

 14 the one thing that I have found in my experience is that

 15 the patents that come out later you can't really make

 16 any conclusions about, whether they're going to be

 17 narrower, broader. It may be that the first patent that

 18 came out of the gate is the picture claim because that's

 19 the one that was easiest to demonstrate patentability.

 20 The one that took an appeal, an inference to

 21 come out of the system may be broader. The converse may

 22 be true, and it may be that maybe you get a late issuing

 23 extremely narrow claim which lands directly on the

 24 follow-on's product, so I think you need a little bit of

 25 flexibility in your thinking about the patents might be

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 283

 1 that come out and why they might come out late.

 2 And I also wish, maybe you are more powerful

 3 than I am in controlling exactly when the patent office

 4 will give us a patent, but usually it's never, but it's

 5 another question, but it's not a process that you can

 6 carefully predict. I think the basic mechanism is when

 7 the patent comes out, determining if it's going to be

 8 infringed, and if it needs to be resolved, it goes into

 9 the existing litigation.

 10 MS. DRENNON: What if the existing litigation

 11 has ended?

 12 MR. KUSHAN: You may need to bring a new suit.

 13 Again, at some level, the mechanism, if it's embedded

 14 within the data exclusivity period, is self resolving,

 15 if it's a patent that issues the day after the follow-on

 16 launches, that's an undesirable scenario, but it's one

 17 where you're just going to have to fight it out, and it

 18 may have that less desirable outcome of disrupting what

 19 happens on the market.

 20 But the idea is that if everybody is trying to

 21 get everything resolved with this early notification

 22 process, you get as many of it done as possible, that's

 23 the optimal model. I just want to make sure people

 24 appreciate that you can't make these kind of general

 25 assumptions about what the patents are that might come

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 284

 1 out late and why they might have come out late.

 2 MS. DRENNON: Hans, I think you have your

 3 something?

 4 MR. SAUER: Jeff largely said it. As a

 5 practical matter, with appropriate periods of data

 6 exclusivity, I think as a practical matter, the issuance

 7 of patents that run into the back end of data

 8 exclusivity, that innovators might get so late in the

 9 game is -- it can't really be predicted what kind of

 10 patents those might be, but if they issue that late, and

 11 that's again a business risk that the innovator will

 12 have to live with as well, at some point this data

 13 exclusivity period is over, and if there's an ongoing

 14 lawsuit, the FDA is still going to make the approval

 15 effective of what we're seeing.

 16 And then things will work themselves out the way

 17 they do in normal patent litigation in that context.

 18 Also I think there's some element of being able to stir

 19 issuance of patents. The PTO has a much tolerated

 20 accelerated review program, accelerated review program

 21 that you can take advantage of.

 22 So everybody has some business risk, and if your

 23 patent issues, whatever, 12 years into the market, I

 24 think that's probably a business risk that innovators

 25 live with today and they can live with under this system

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 285

 1 as well.

 2 MS. DRENNON: Ken Goldman and then Ken Dow.

 3 MR. GOLDMAN: Just real quickly on the issue of

 4 the later filed, the later issuing patents, I agree with

 5 Hans that these are normal litigation issues, and title

 6 35 and judge made law surrounding that are perfectly

 7 adequate to deal with issues of whether you can add

 8 patents to ongoing litigation or not.

 9 And I see no reason why this particular issue

 10 has any particular valiance in this context so it's just

 11 another reason to keep there whole issue out separate

 12 from the FOB approval process.

 13 MS. DRENNON: Ken?

 14 MR. DOW: I wanted to make a point about

 15 subsequent indications.

 16 MS. DRENNON: That was my follow-on.

 17 MR. DOW: And why we need to deal with that in

 18 the data exclusivity, because you need to provide that

 19 incentive to investigate newer indications.

 20 If you rely solely on patents and your patent is

 21 only on the secondary indication and the generic comes

 22 on the market for the primary indication, the first

 23 approval, there's nothing that that second patent will

 24 do. You can't use that patent to prevent doctors from

 25 using the generic drug for the secondary indication, and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 286

 1 so you lose that incentive if you don't deal with it

 2 in -- by tacking it on to the original data exclusivity

 3 period.

 4 MS. DRENNON: Christine, and then I would like

 5 to move to the issue of penalties.

 6 MS. SIWIK: Well, quickly I think the problem I

 7 would throw out maybe, and I wasn't trying to suggest it

 8 was possible to pinpoint when new patents are coming

 9 out, but I think the idea of the problem of these late

 10 arriving patents is going to be exacerbated depending on

 11 the number of third-parties that allowed to come into

 12 the process.

 13 So while the brand might say, I'm only going to

 14 get ten patents on this, if any third-party that wants

 15 to is allowed to jump in, it just raises a whole new

 16 host of issues for these late patents if they're

 17 automatically allowed to be brought in.

 18 MS. DRENNON: Thank you. Now turning to the

 19 idea of kind of an enforcement issue: If any party

 20 fails to participate in the patent resolution process,

 21 should there be regulatory penalties? To whom should

 22 the penalties apply? Again we've got the sponsor

 23 company, the university and the third party follow-on

 24 applicant, and what is the competitive effect of a sue

 25 or lose provision? Ken, you're up.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 287

 1 MR. GOLDMAN: Oh, no, but since you asked, I

 2 think obviously sue or lose is a -- sounds very penalty

 3 oriented and in fact seems to detract from

 4 Constitutionally appointed patent rights, and we would

 5 oppose the insertion of any type of sue or lose

 6 provision.

 7 MS. DRENNON: Would you have any enforcement

 8 provisions other than what's in title 35?

 9 MR. GOLDMAN: I'm sorry?

 10 MS. DRENNON: Would you have any enforcement

 11 provisions?

 12 MR. GOLDMAN: Enforcement provisions of?

 13 MS. DRENNON: Such that if a party doesn't

 14 participate in the regulatory process, and later then

 15 asserts rights under just title 35?

 16 MR. GOLDMAN: There's case made law about how

 17 long you can delay in filing your lawsuit, and we

 18 believe those are the adequate protections.

 19 MS. DRENNON: Thank you.

 20 MS. SEIDE: I was going to say the same thing in

 21 the sense that those situations exist, even though in a

 22 sense Hatch-Waxman has that kind of penalty. If you

 23 don't sue in 45 days after the Paragraph IV situation,

 24 and the ANDA is approved, there is really not a penalty

 25 because the innovator or the branded can sue under

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 288

 1 271(a). There's no preclusion against bringing a

 2 regular patent lawsuit at this point in time.

 3 MS. DRENNON: What if you didn't have that 45

 4 day -- what if that wasn't part of the regulation? How

 5 would that affect things?

 6 MS. SEIDE: It's a matter of whether the penalty

 7 applies to pre or post approval. I think that would be

 8 an issue. Are you making the penalty -- if you don't

 9 sue pre approval, do you lose the right to sue post

 10 approval, and I don't think you can -- that's a property

 11 right. The issues maybe different. You have a property

 12 right in your patent and don't have to sue on it at a

 13 particular time, and then you're sort of taking away a

 14 property right from the innovator from the patent

 15 holder.

 16 MS. DRENNON: If you're doing that and it's not

 17 a matter of the regulatory process, how do achieve

 18 certainty through the regulatory process?

 19 MS. SEIDE: In that situation you can't. And I

 20 don't think you can.

 21 MS. DRENNON: Okay. So you wouldn't be able to

 22 have certainty?

 23 MS. SEIDE: No. The certainty is when the

 24 patents all expire.

 25 MS. DRENNON: Christine and then Bill?

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 289

 1 MS. SIWIK: I think that's part of the issue is

 2 that the whole purpose of this system, let's just say

 3 it's pre approval, the whole point is to get certainty

 4 and if you can hold back patents, if the brand, a

 5 third-party, whoever, if you can hold back patents until

 6 just near the end of litigation or just to launch, if

 7 the point is to litigate early to get certainty,

 8 everyone has to play by that.

 9 And if it doesn't happen, then the whole point

 10 of the process is lost so whether or not the generics

 11 will hold up their end of the bargain, whether or not

 12 the brands will hold up their end of the bargain, what

 13 those penalties need to be are going to be in large

 14 part a function of what the overall scheme looks like.

 15 If the overall scheme is fair and balanced,

 16 maybe we don't need to worry about huge sticks to make

 17 people participate, but in Hatch-Waxman we learned that

 18 there are rules, but if there are no sticks, the rules

 19 are going to go out the window. There were statutory

 20 definitions of what patents could go in the Orange Book,

 21 and there were a few companies that abused that, and a

 22 list of other patents triggered a lot of 30 month stays

 23 and a lot of litigation delays, but there were no

 24 penalties for doing it.

 25 The courts refused to enforce it. FDA wouldn't

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 290

 1 enforce it, so just we ended up with an untenable

 2 situation until that was corrected, what, 20 years later

 3 so people need to participate and do the system or else

 4 what's the point.

 5 MS. DRENNON: Bill and then David, and then I

 6 see we have a bunch of people over here, and then we'll

 7 do our sort of summary what should the goals be.

 8 MR. SCHULTZ: Christine said what I wanted to

 9 say because it's really important.

 10 MS. DRENNON: Do you have to because we've got

 11 12 minutes?

 12 MR. SCHULTZ: Yes. This is really fundamental.

 13 I mean, if the basic idea is that at the end of valid

 14 patents, the day after valid patents expire you get to

 15 go on the market, then you have to have a system that

 16 allows that to happen, and if you don't have some

 17 mechanism for forcing these lawsuits to be resolved

 18 early, then effectively the brand gets a patent

 19 extension or an extension of its monopoly for however

 20 long it takes to litigate.

 21 So we've now pushed all the incentive to the end

 22 of the process, and the incentive is to bring the cases

 23 late and litigate them late, and this isn't anything

 24 against the brands because everyone in this business is

 25 going to operate in a financial interest, and that's the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 291

 1 last thing you want to do.

 2 MS. DRENNON: David?

 3 MR. MANSPEIZER: If we design the system the

 4 right way, such that it's based on principles of

 5 certainty and principles of full disclosure, then I

 6 don't have a problem in the right system with a sue or

 7 lose provision because I think under traditional

 8 principles of laches and estoppel, you're probably going

 9 to be excluded anyway.

 10 Now, there have to be -- kind of the unfair play

 11 role on both sides, so if -- I'll give you an example.

 12 If the biosimilar applicant were to change its process,

 13 such that in the middle of the processing of its

 14 application at FDA, were to change its process such as

 15 to bring a patent that was otherwise not infringed by

 16 the old process, but now has become relevant by virtue

 17 of their change, you shouldn't be precluded from

 18 asserting that patent.

 19 I would also put some incentives on the table

 20 for the biosimilar applicant to want to fully disclose,

 21 and one example would be perhaps a requirement that they

 22 have to certify to FDA that they have in fact fully

 23 disclosed.

 24 I don't think anybody in this business would

 25 like to -- on any side wants to be on FDA's bad side by

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 292

 1 putting in a statement that's not truthful and accurate,

 2 but I think again it all comes down to, in many ways,

 3 what does your system look like, and is it adequately

 4 and fairly balanced.

 5 MS. DRENNON: And then I think Bruce and Jeff.

 6 Bruce is down?

 7 MR. LEICHER: I think the points have been made.

 8 MS. DRENNON: Okay. Jeff?

 9 MR. KUSHAN: Yeah. I think in large part the

 10 going in and abrogating a property right is a very

 11 serious event, and I think by looking at that as a

 12 sanction is kind of like the only sanction to think

 13 about is a little bit unsettling to many people because

 14 given the flavors of the process we've seen so far,

 15 there's a lot of administrative risk. There's a lot of

 16 procedural risk that you then see translating into lost

 17 profit rights.

 18 So that's why there's just a general reluctance

 19 to say, If you don't comply with the process, your

 20 property rights disappear, and so maybe the right way of

 21 thinking is not necessarily focusing on kind of the loss

 22 of right patent sanctions, but I tend to believe that if

 23 you set up the process and everybody participates

 24 thoroughly in it, and despite that you get notice of the

 25 infringement and you take no action, the first thing

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 293

 1 that you will have as a biosimilar is the right to have

 2 the right to file yourself.

 3 And in the case of Novartis it makes it pretty

 4 clear that you're going to have DJ jurisdiction, and if

 5 it's a patent that the other side really wants to fight

 6 about, it will start the fight, and maybe you need to

 7 bless that, the right way given that standing.

 8 The second variable is if neither side starts

 9 the fight and you're out eight years later, the idea

 10 that I'm going to walk into a court and get an

 11 injunction on this patent that I've been sitting on for

 12 eight years is a pretty tough sell. I know there's no

 13 hundred percent certainty but that's a tough case.

 14 So there's a self policing variable in the

 15 equation as to the amount of disruption you can cause to

 16 the follow-on's conduct once they're on the market if

 17 you don't participate in the system.

 18 So I think at the end of the day, my two points

 19 are really, when people focus on the patent sanction as

 20 the mechanism, it's a very big sanction, especially when

 21 there's a lot of different products that might be

 22 implicated by that one patent.

 23 The second variable is that there's ways short

 24 of that patent sanction to give relief to the party that

 25 needs to fight and resolve patent suits, and those

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 294

 1 certainly should be included in the equation of any kind

 2 of system.

 3 MS. DRENNON: And, Ken, can you include your

 4 points in a wrap up? Would that be okay if I turned it

 5 on you?

 6 MR. DOW: Okay.

 7 MS. DRENNON: Thank you. Because I want to

 8 thank everyone for spending -- Christine as well, I'm

 9 sorry I missed you. Thank everyone for spending two

 10 hours on a Friday afternoon talking about patents. I

 11 was really looking forward to this, but I know that.

 12 MR. KUSHAN: Most exciting thing ever.

 13 MS. DRENNON: I do honestly think that. I know

 14 that other people might not share in my joy.

 15 MR. WROBLEWSKI: Also I wanted to thank Suzanne

 16 for -- this is something new for the FTC to try to do a

 17 hypothetical like this and to craft an open discussion,

 18 so this was kind of testing the waters, and I think

 19 Suzanne and all of the folks here on this panel did a

 20 fantastic job. So I appreciate your taking the

 21 leadership role and getting this initiative off the

 22 ground and have it so well received.

 23 MS. DRENNON: I guess to wrap up, based on our

 24 discussions today, what should be the main goal of a

 25 regulatory patent resolution system? And, Ken, since I

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 295

 1 cut you off last, I'm going to go to you first, and I

 2 think I'll just go around and see what people have to

 3 say.

 4 MR. WROBLEWSKI: I'm going to add to Suzanne's

 5 point about what the main goal should be and achievable?

 6 MS. DRENNON: That's a good point.

 7 MR. DOW: First of all, I want to thank you for

 8 allowing us to come here and be heard and have this

 9 discussion. I think it was great.

 10 The one point I wanted to make was that I think

 11 in terms of the sue or lose provision, I think that was

 12 one thing that Hatch-Waxman might have gotten a little

 13 bit right, but there was a linkage there, and if the

 14 patent was put into play, then you had a chance to

 15 resolve the patent litigation, and as long as that was

 16 done, you had linkage that the generic wouldn't be

 17 approved.

 18 If you didn't sue, you lost the linkage. And

 19 you could still sue later on, but the generic could be

 20 already launched. So that was one thing I thought was

 21 conceptually right. Whether we do that, whether we have

 22 30 months stays or not, I don't know if that's the right

 23 answer, but at least something like that.

 24 I do think that the goal of the patent

 25 resolution process should be to resolve the patent

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 296

 1 issues during the exclusivity period so that everyone

 2 has certainty as to when the generic can launch, and I

 3 do think that it's achievable. I think it's something

 4 that we can -- there are some good proposals out there.

 5 I think we can work with them. I think in the end I

 6 think we can design something that will work for all the

 7 parties involved.

 8 MR. GOLDMAN: I also would like to thank you for

 9 inviting the Novartis group of companies, which includes

 10 Sandoz, to speak here, and I just -- it's obviously a

 11 very complicated issue.

 12 The question of early resolution I believe is

 13 tied to the art. You can't have early resolution unless

 14 you create the artificial act of infringement, which is

 15 the filing of an ABLA, which is I think what linkage --

 16 despite the fact that I think people seem to agree with

 17 me, I think the court would disagree with me.

 18 The core of early resolution is the creation of

 19 the artificial act of infringement, and everything

 20 follows from there, and Novartis believes that there's

 21 no need to do that, to achieve the -- first of all,

 22 there's no -- we've seen it. The only way to achieve

 23 certainty is to make sue or lose so that -- every part

 24 of the deal so that every single patent that could

 25 possibly be a problem gets put in.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 297

 1 You would have to have enough time to start so

 2 that you could finish litigation, and that litigation is

 3 as long as the longest possible litigation you could

 4 imagine, which is 10 or 12 years. There's no way you're

 5 ever going to achieve that certainty. We believe that

 6 the launch at risk is the appropriate remedy,

 7 appropriate way to deal with the situation.

 8 MS. DRENNON: Thank you. Bruce?

 9 MR. LEICHER: I think in the end I think we

 10 actually disagree with the last point just because from

 11 a financial perspective, for the smaller companies, it's

 12 just not financially feasible to raise capital by

 13 waiting until the end to get clarity and resolution.

 14 We actually think the proposal that we've been

 15 talking about for the last hour was to set up a

 16 timeframe where this can be done before the patents

 17 expire, to have a mechanism that protects for the brand

 18 companies valid patents, but also makes available for

 19 the generic and follow-on companies the opportunity to

 20 clear out of the way in an appropriate sometime the

 21 invalid patents.

 22 I also share Jeff's comment which I was going to

 23 make earlier, which is if need be, the remedy should be

 24 DJ jurisdiction if you have a valid notice mechanism so

 25 you can just get in there and make it happen because

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 298

 1 that gives everyone due process.

 2 And the one lurking issue that is sort of behind

 3 all this, and I'm not sure that that gets resolved

 4 today, is: Is everyone's caveating what they're saying

 5 on, what's the date of protection period, and for me --

 6 and it's probably where I disagree with a number of the

 7 members on the panel, if that turns on your belief

 8 system about the strength of the ultimate patents

 9 themselves, if you believe that the biotech patents

 10 provide a significant level of protection, then you have

 11 one view of the data protection period.

 12 If you believe they don't, you have another

 13 view. We tend to look at what the current -- if we're

 14 going to look at the current proper products that are

 15 out there for the next ten years, they have very broad

 16 claims. They seem to have -- and it's not clear to us

 17 at least why the lengthy data protection period is

 18 necessary.

 19 MS. DRENNON: Esther?

 20 MS. KEPPLINGER: Well, I think the objective is

 21 to get the follow-on onto the market at the point that

 22 the patents end, but following on to what Bruce was

 23 saying, I think that while those early patents may be

 24 broad, I think that they will be getting more narrow as

 25 we move forward.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 299

 1 And the problem is that you need the system that

 2 will create the incentives for the innovators to

 3 innovate. Without that you will have no competition,

 4 and so you have to create the system that really rewards

 5 them and provides a long enough period of data

 6 exclusivity to cover it, because I'm not sure as we move

 7 forward that patents will.

 8 MS. DRENNON: Jeff?

 9 MR. KUSHAN: So first I would like to request

 10 that I can sit right next to the left of Christine. I

 11 really appreciate the discussion today. It's been very

 12 constructive, and I think it just helps you see that

 13 there are a lot of legitimate needs that need to be

 14 addressed in designing any kind of a system.

 15 I do believe that the pre-approval mechanism for

 16 resolving patent issues is viable and should be

 17 implemented. I think what we're going to see is that

 18 there may be an initial noisier interchange at the

 19 outset of figuring out what patents do matter to the

 20 follow-on product and which ones have to be resolved.

 21 But once that kind of initial noise ends, and

 22 you figure out which patents are relevant, you're going

 23 to see a relatively conventional picture of resolving

 24 those patents that are in dispute.

 25 I think one thing you also have to keep in mind

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 300

 1 is within the biotech community culture, there has been

 2 a far greater tendency of licensing practices, so when

 3 you can identify the patents that are relevant,

 4 particularly for the universities, they're more inclined

 5 to come in and want to get money without litigation.

 6 So it's probably better for everybody to make

 7 sure that you keep this initial identification process

 8 inclusive and flexible with the hope that at the end of

 9 the day you're not going to see some significantly

 10 different picture of how to resolve the patent fights.

 11 The last thing I would mention, I didn't touch

 12 on this earlier, but I think one of the critical

 13 questions is: At what point does the linkage kick in,

 14 and I think when we were talking before, there's a

 15 desire to get late enough in the -- toward the end of

 16 the data exclusivity period so you can see what the real

 17 processes are that are going to be used by the follow-on

 18 producer, not too early, not too late.

 19 But at the end of the day, when you're looking

 20 at kind of a two or three, four years out from launch

 21 time point, you are going to want to make sure that once

 22 you've identified the relevant patents and fought to a

 23 conclusion, the conclusion really should be at the

 24 District Court level, at that point that should dictate

 25 whether you're going to cause the FDA to stop or go

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 301

 1 forward on approval.

 2 I think it's fair to do it at that point because

 3 that's an outcome. That's a judgment. You have already

 4 made a resolution. It may get flipped on the appeal,

 5 but if you're looking at a T minus two commencement of

 6 litigation, you're never even going to get a District

 7 Court judgment by the second year, and I think there's

 8 some good faith believes in the equation that we need a

 9 balance.

 10 So I think that the system is definitely viable

 11 to create, and I think it ultimately will prove to be

 12 beneficial to both sides.

 13 MS. DRENNON: Thank you. David?

 14 MR. MANSPEIZER: Well, first, we've heard a lot

 15 of talk today about the products that are out there

 16 waiting today ready to be picked, and let's not get too

 17 distracted by them because if we were going to design a

 18 system that would deal only with the patents that were

 19 going to go off patent, whatever that means by 2014, it

 20 probably would look nothing like what we've all been

 21 discussing here for the last two hours.

 22 We've got to remember that whatever gets

 23 legislated here is going to be a system we have to live

 24 with for the next 20, 25, 30, 50 years, however long it

 25 is, and it's got to be adequate to deal with all of the

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 302

 1 issues that we're going to face over that time period,

 2 and it's got to be fair and balanced to both sides of

 3 the equation.

 4 I think we all recognize that there's a lot more

 5 common ground between us than we thought there was I

 6 think when we all walked in here today, and there's a

 7 lot more agreement if fact than there is disagreement.

 8 The devil is always in the details, but I do think that

 9 it is certainly achievable.

 10 The biggest -- and I don't know if Bruce said

 11 it, the biggest difference seems to be how do we factor

 12 data exclusivity into this all and what role does data

 13 exclusivity play, and for us again it's not about the

 14 strength or the weakness of a patent or whether you

 15 believe it's a strong patent or a patent that's going to

 16 permit you to retain your position.

 17 It's about certainty, and it all comes back to

 18 you have to have enough certainty to balance innovation

 19 and competition, so you have to design your system with

 20 that in mind, and the other stuff I think we've

 21 discovered will fall into place.

 22 MS. DRENNON: Thank you. Hans?

 23 MR. SAUER: We didn't much talk about patients

 24 and providers and payors, all of whom want certainty

 25 too. It's not just us and you guys, but also the guys

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 303

 1 out there in the market, so in that sense when you think

 2 of it, Plavix maybe isn't even a great idea or a example

 3 to analyze this situation under.

 4 We're talking about biologics for really serious

 5 diseases, which for the most part as we've talked about

 6 earlier in these panels are not going to be

 7 interchangeable so we're talking about products that

 8 would be in the market where the FDA already said, you

 9 can't switch them back to the innovator product.

 10 There's no immediate obvious substitute.

 11 So what are you going to do if there's

 12 litigation that's unresolved? Do you want to take away

 13 the drug from these people, tell them to switch when the

 14 FDA has said they're not really interchangeable and so

 15 on?

 16 Nobody really wants to do that, and at the same

 17 time nobody really wants to live under a compulsory

 18 license too. I don't think that's the way the case law

 19 is going, and compulsory licenses just from a business

 20 perspective anywhere, like compulsory marriage. It's

 21 not what you would want, being in a licensing

 22 relationship with somebody.

 23 So I think there are just a lot of good reasons

 24 that we should all try very, very hard to put together a

 25 reasonable pre approval litigation and patent resolution

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 304

 1 half way. Conceptually it doesn't sound that difficult.

 2 During the innovator's exclusivity a window would open

 3 that's long enough to get it all done before the

 4 follow-on approval can be made effective.

 5 I think we also shouldn't forget that for the

 6 most part, it's going to take many follow-on applicants

 7 probably four or five years to begin with to put an

 8 application together, and the first -- maybe it's

 9 quicker. I don't know, some products are going to be

 10 more difficult.

 11 So all that, if you piece that together, that's

 12 going to -- as you said, the elephant in the room. How

 13 long is this data exclusivity going to be in the end? I

 14 think we have some building blocks that we've been

 15 working with that already give us a dimension of where

 16 it's going to rationally end up, and I think we

 17 optimistically can look forward to a process that we can

 18 craft that's going to be rational and work for all.

 19 MS. SEIDE: Well, without belaboring the

 20 analysis because I agree with a lot of what's said, and

 21 I think what we have to realize is that there is a very

 22 much symbiotic relation between the innovator company

 23 and the follow-on or the generic companies because

 24 without any innovation, there wouldn't be any follow-on.

 25 For that point, then the follow-on would have to

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 305

 1 become an innovator, and there's an interesting dynamic

 2 there, so whatever situation, I think there's some

 3 rudimentary -- our discussion today leads to certain

 4 ways of developing that, and I think it's a workable --

 5 there's a workable pathway ahead.

 6 I think the issue is again, there has to be some

 7 kind of certainty, that whatever happens, the innovators

 8 will still be allowed to innovate and develop new

 9 biologics that could be very useful for treating all

 10 these horrendous diseases, and that lower cost follow-on

 11 biologics come on the market because that also benefits

 12 to the population that will be benefitting from them.

 13 And again like everybody else said, the other

 14 issue is how does data exclusivity factor into this

 15 particular resolution. My perspective is that the

 16 resolution should come at some point in time before

 17 launch, but again what is the window and when does it

 18 appear and when does it -- what are the consequences for

 19 not going in that window. Are there details that still

 20 have to be worked out?

 21 But again I also want to thank the FTC for at

 22 least addressing these issues. I think it's very timely

 23 and hopefully some useful proposals will come out of it.

 24 MS. DRENNON: Especially at this time with a new

 25 Congress, who's going to be grabbling with this, and

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 306

 1 this is going to be a big issue in healthcare so it's

 2 very timely.

 3 MR. SCHULTZ: I think the goal is that the first

 4 day that the generic or biosimilar or biogeneric is

 5 ready to be approved, all issues regarding patents that

 6 it has identified this would preclude it from marketing

 7 have been resolved. I think it's doable. I think

 8 there's probably a range of ways to do it, but I

 9 absolutely think it's doable.

 10 And I agree with what other people said. I

 11 think if it were this group resolving it, I think

 12 there's a way to resolve it. I hope it wouldn't be

 13 unduly complicated, and I think this has been a terrific

 14 session. Thank you. Everybody.

 15 MS. DRENNON: Christine, you get the last word.

 16 The downside of being last is everybody wants you to be

 17 quick.

 18 MR. SCHULTZ: And they don't listen.

 19 MS. SIWIK: I guess I want to make the point --

 20 two points. One, I would certainly hate for anybody to

 21 leave here thinking that the generics are out to stick

 22 it to the brand industry in any sense. Without a strong

 23 brand industry, there is no generic industry, by

 24 definition.

 25 We need a strong, robust, innovative brand

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 307

 1 industry or there is nothing to file a generic version

 2 of, so I think it's all about balance. It's about

 3 balance on the approval pathway. It's about balance on

 4 whatever brand exclusivity there is going to be, and on

 5 the patent piece, the balances, we need to resolve the

 6 key patent disputes early, and we have to avoid a system

 7 that is going to make the rate limiting step, if you

 8 will, of marketing a patent dispute.

 9 And to a large extent I think we should try to

 10 avoid some of the things we've seen before and help

 11 expedite that process by not linking the patent process

 12 to the approval process.

 13 Finally, I would like to again echo the thanks

 14 of everyone else that's been on the panel. This has

 15 been very helpful, and we really appreciate your time.

 16 MR. WROBLEWSKI: This concludes our marathon day

 17 of the issues and we appreciate everyone sticking

 18 around.

 19 The one thing I do want to make clear is that

 20 the record is still open for another 30 days. So if

 21 there are topics that we addressed today or questions

 22 that were raised and you didn't feel like you got an

 23 ability to make a point, you're welcome and we encourage

 24 you to file comments, and it's until -- the closing date

 25 is I think Monday December 22. So thanks again.

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 308

 1 (Whereupon, at 5:13 p.m. the workshop was

 2 concluded.)

 3

 4

 5

 6

 7

 8

 9

 10

 11

 12

 13

 14

 15

 16

 17

 18

 19

 20

 21

 22

 23

 24

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555
 309

 1 CERTIFICATE OF REPORTERS

 2 CASE TITLE: FTC ROUNDTABLE ON FOLLOW-ON BIOLOGIC DRUGS

 3 DATE: NOVEMBER 21, 2008

 4

 5 WE HEREBY CERTIFY that the transcript

 6 contained herein is a full and accurate transcript of

 7 the steno notes transcribed by us on the above cause

 8 before the FEDERAL TRADE COMMISSION to the best of our

 9 knowledge and belief.

 10

 11 DATED: DECEMBER 1, 2008

 12

 13 _________________________

 14 SUSANNE BERGLING

 15

 16 _________________________

 17 DEBRA L. MAHEUX

 18

 19 CERTIFICATION OF PROOFREADER

 20 I HEREBY CERTIFY that I proofread the

 21 transcript for accuracy in spelling, hyphenation,

 22 punctuation and format.

 23 _________________________

 24 SARA J. VANCE

 25

 For The Record, Inc.

 (301) 870-8025 - www.ftrinc.net - (800) 921-5555