The bill that could rock biotech

NEW YORK (CNNMoney.com) -- Lawmakers are pushing forward with legislation that could help create generic competition for Big Biotech, drastically lowering the costs of expensive biotech drugs and changing the landscape in the pharmaceutical industry forever.

The Senate is expected to vote Wednesday on a bill that would extend the 15-year-old process of requiring drug companies to pay fees to the Food and Drug Administration to help fund the drug review process. Advocates say the law has helped streamline the review process so that it takes months instead of years to get lifesaving drugs approved for the market.

On the same day the Senate is voting, members of the House Energy and Commerce Committee are holding a hearing on a bill that would create a way for the FDA to review generic biotech drugs. Right now, there's nothing on generic biotech drugs in the Senate bill, and there's no guarantee that the bill will be modified.

Rep. Henry Waxman of California introduced a "biogenerics" bill in February along with Reps. Jo Ann Emerson of Missouri and Frank Pallone of New Jersey, as well Senators Hillary Clinton and Charles Schumer from New York.

The biogenerics bill would create a system for the FDA to review generic versions of biotech drugs, a $40 billion business in the United States last year, according to IMS Health, a drug industry research firm.

The bill has not yet been voted on in the House. Some believe that the best way to get the bill passed is for it to be folded into the FDA "reauthorization" bill, which has a much better chance of passing.

There is no biogenerics industry in America right now, so biotechs such as Amgen (up $0.88 to $64.14, Charts, Fortune 500) and Genentech (down $1.33 to $79.99, Charts) don't have to compete with generic companies like Teva Pharmaceuticals (Charts), Mylan Laboratories (Charts) or Barr Laboratories (Charts), which make low-cost versions of name-brand drugs after their patents expire.

Some of these biotech drugs costs tens of thousands of dollars a year. Genzyme (up $0.21 to $65.31, Charts) has drugs for rare diseases that can cost up to $200,000 annually. If a biogenerics bill gets through Congress, it could put serious pressure on these prices once the patents run out.

Andrea Hofelich, spokeswoman for the Generic Pharmaceutical Association (GPA), said making the biogenerics bill part of the broader legislation is the "best but not the only chance" of getting the bill passed in current congressional session.

Kathleen Jaeger, chief executive of the group, said she is "very optimistic" that a biogeneric bill will pass this year. "We do not believe that Congress can ignore the demand for biogenerics in this session," she said.

But a system for biogenerics is not included in the reauthorization bill, and the deadline is fast approaching. Casey Alexander, analyst for Gilford Securities Inc., said it would be a "shame" if the bill doesn't pass because it "opens a tremendous world of opportunity" in providing low-cost drugs to patients.

Amgen, the world's leading biotech in terms of sales, is the company most likely to feel the impact of biogenerics if the bill goes through.

Amgen's blockbuster drugs Epogen and Neupogen, which are used to treat serious side effects from chemotherapy, could both get pressured by generic competition. These drugs are big earners for Amgen. Epogen, a treatment for chemo-induced anemia, totaled $2.5 billion in 2006 sales. Sales for the anti-infective Neupogen (combined with the drug Neulasta) totaled $1 billion in 2006.

Drugs are typically covered by numerous patents with different expiration dates, and the legal status of the drugs is often battled out in court by name-brand and generic drugmakers.

The patent on Epogen expired in Europe in 2004. According to the GPA, the earliest U.S. patent on the anemia drug expires in 2012. The earliest patents on Neupogen expired in the U.S. in 2006, said the GPA. But that's not how Amgen sees it. Amgen spokeswoman Kelly Davenport said that Neupogen's earliest U.S. patent doesn't expire until 2013.

Biotech drugs are created through living cell cultures, while pharmaceuticals are based on molecular compounds. Alexander of Gilford Securities said the leaders in the generic drug industry - Teva and Mylan - would be the most likely to benefit from the creation of a biogeneric business in the United States because they have the resources to make cheaper versions of the biotech medicines.

But the bill's chances are uncertain at best. Alexander is pessimistic it can pass in the Senate, while a vice president at generic drugmaker Barr Laboratories says the chances are "better than 50-50."

Barr is developing a biogeneric form of Epogen through its Pliva subsidiary in Croatia, said Jake Hansen, VP and U.S. government liaison for Barr. But the future of biogeneric Epogen is unclear, even though a regulatory system for approving it already exists in Europe.

"From a scientific point of view, we know it can be done, but we haven't made the decision on the economics," said Hansen. "We don't know if we're going ahead with Epogen even in Europe. The process in Europe, even though they allow biogenerics, is very cumbersome."