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12,000 jobs in the next three years, according to a Congressional Democratic report. Merck, Eli Lilly, Johnson & Johnson, and Bristol-Myers Squibb all shed jobs, too. Schering-Plough and Wyeth added jobs.
Don’t trust the Dems on this? Here’s a 2011 report from the staunchly conservative Heritage Foundation: The 2004 tax holiday “produced the expected immediate results—the return of a significant amount of foreign earnings to the United States. However, the evidence is clear that these repatriations did not produce the hoped-for subsequent surge in domestic investment.”
Later efforts to pass new repatriation “holidays” have stalled out, but drug companies have continued to skirt U.S. tax payments with so-called inversions that move their U.S. headquarters overseas to friendlier tax climates. The latest, of course, is the proposed Pfizer-Allergan merger, which isn’t likely to be derailed by regulation.
—The Patient Protection and Affordable Care Act. OK, this has been more of a mixed bag of success for biopharma. When the ACA, aka Obamacare, passed, it did so with the drug industry’s blessing and a grand bargain in place. Insurers would no longer be allowed to cap coverage of a patient’s annual or lifetime essential benefits. Tens of millions of previously uninsured people would become drug-industry customers—with much of their bills paid by the government—-in exchange for a series of rebates, discounts, and taxes the industry would pay to help fund the vast new program. In one example, a drug seller has to pay a tax on its branded drug sales that is proportional to its share of the overall market. That excise tax alone is designed to bring in $27 billion in new revenue over 10 years. (A side note on that: Sales of orphan drugs aren’t included. In other words, the more orphan drug sales are part of a company’s revenue stream, the lower its potential tax hit.)
The bargain was expected to be good for pharma. A 2013 report pegged the benefit at $10 billion to $35 billion in extra profits in the decade to come.
But last year, the industry’s go-to data provider IMS Health said the first year of Obamacare, 2014, was responsible for only a small slice of the overall big uptick in drug spending, and it didn’t expect 2015 to be different. Much is in flux and in dispute: actual enrollment numbers, the amount and size of industry rebates, fees, and taxes, and other possible requirements, like data collection, that could add costs. So it’s hard to say so far that the industry got what it wanted in the grand bargain.
But one area where the industry is satisfied is biosimilars. The ACA created for the first time a framework for bringing copycat biologic drugs to market in the U.S. (Europe has allowed biosimilars for nearly a decade.) Biologics, such as Roche’s bevacizumab (Avastin) and AbbVie’s adalimumab (Humira), are among the highest-selling drugs ever and account for more than a quarter of all new drugs approved the past two years. They are also harder—if not impossible—to reproduce than traditional drugs, big biotechs and others argued. So the new biosimilar approval framework sets a higher scientific bar than the one already in place for traditional generics, which means biotech drugs likely won’t face the same competition from plentiful, dramatically cheaper copies as traditional drugs have faced.
The ACA also included another big win for the branded drug industry: 12 years of market exclusivity for the company making an original biologic drug. Even if the company’s patent expires a few years after approval, it still receives 12 years of protection. (Traditional chemical drugs are supposed to get just five years of exclusivity, or seven if they are approved for orphan diseases—see next item below.) Whether you consider that protection wholly appropriate or far too generous, the folks with big biologic franchises to protect and products in development were quite happy with it.
—The 12 years of market protection for biologics is just one of many extra protections and incentives drug makers can take advantage of—for new antibiotics, treatments of rare diseases and other unmet medical needs, for example—and Congress always seems to be considering more.
Former pharma executive Bernard Munos, writing for Forbes last year, called the 2012 introduction of the FDA’s breakthrough designation which lets the agency speed up development and review of drugs it deems a big advance treating a serious or deadly disease, “a remarkable regulatory innovation that changes the economics of drug R&D.” In the 21st Century Cures Act, an FDA reform bill working its way through Congress now, there are even more incentives for antibiotic and rare-disease drug development, and more provisions for speeding up clinical trials.
—When I first began covering the life sciences in 2004, it seemed impossible to sit through a conference, panel discussion, or interview without the requisite FDA bashing by people in the drug industry. My, how times have changed. Under recently retired commissioner Margaret “Peggy” Hamburg, the FDA became an industry ally, so much so that the agency approved 45 drugs last year, just shy of the all-time record set in the 1990s. That’s on top of the 41 approved in 2014. The pendulum has swung back from the lows of the mid-2000s, when the agency, stung by the 2004 market withdrawal of painkiller rofecoxib (Vioxx) and other big safety problems, instituted new clinical guidelines that added big costs to drug development. It also struggled with resources and in 2007 the agency’s drug-review chief gave his reviewers the leeway to miss their review deadlines; the agency ultimately approved just 18 drugs that year.
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