Opinion: Protect drug innovation in trade deal

Marc L. Busch
President Donald Trump, Canada's Prime Minister Justin Trudeau, right,  and Mexico's President Enrique Pena Nieto, left, participate in the USMCA signing ceremony, Friday, Nov. 30, 2018 in Buenos Aires, Argentina.

Congress may soon vote on the United States-Mexico-Canada Agreement. Mexico already ratified the pact in June. Canada is expected to do so imminently.

In the United States, however, some lawmakers want to rewrite the deal at the eleventh hour.

USMCA's robust intellectual property protections for advanced medicines, called "biologics," are at the center of the debate. Critics fear the intellectual property protections afforded to these medicines will raise drug prices — so they want the provision stripped out.

This would be a mistake. The provisions won't have an impact on drug prices. And removing them would slow medical innovation, unnecessarily threatening millions of lives.

Advocates for HIV/AIDS patients say health insurers are putting patients at risk of discontinuing vital treatments by no longer crediting drug companies' discounts toward deductibles and out-of-pocket maximums, prolonging the time each year that insurers fully fund the drugs.

Biologics differ from traditional, small-molecule drugs, whose chemical formulas scientists can easily replicate. Inventors can patent these chemical formulas to prevent competitors from copying their designs for a limited time.

But the era of small molecule drugs is over, and biologics are not so simple. Created from living organisms, biologics' molecules are many times larger than traditional drugs. Their molecular structure is virtually impossible to copy exactly.

As a result, patents alone aren't enough to protect the inventors of biologics. Innovators also require something called "data exclusivity." 

In the U.S., drug companies enjoy 12 years of data exclusivity during which companies can keep their research data private from would-be competitors. This prevents rivals from creating knockoff biosimilars, which are clinically similar, though slightly molecularly different, from the original biologics. 

It’s tempting to think of biosimilars as being “generic” equivalents of biologics, but this is wrong. Small molecule drugs can be reverse-engineered in a laboratory; biologics, as living systems, can’t. This puts a tremendous burden on testing in a way that patents alone don’t get at. Thus, without data exclusivity, innovation would come to a standstill.

USMCA would require our North American neighbors to offer at least 10 years of data exclusivity to new biologics.

Some House members have voiced concerns about USMCA's lower 10-year requirement, which they fear could prevent drug firms from creating cheaper biosimilars. Consequently, patients would be stuck paying higher brand-name prices for a longer period.

Not only is this bad trade policy, but the fears inspiring it are unfounded. For starters, nothing in the deal would change America's data exclusivity period: it would remain at 12 years. To backslide on this under USMCA wouldn’t reduce the price of drugs, but rather create uncertainty for the industry, putting at risk much-needed investment in cutting-edge R&D.

Recent history proves that extending data exclusivity periods doesn't drive up drug spending. When Canada increased its data-exclusivity period to eight years in 2006, drug spending as a percentage of overall healthcare spending actually fell. The same thing happened in Japan after that country extended its data protections in 2007.

In fact, shortening data exclusivity periods would result in fewer cheap biosimilars, not more.

Here's why. It takes roughly $2.6 billion to create just one new medicine. Without a reasonable data exclusivity period, competing firms could simply copy a new biologic and sell it for a bottom-dollar price. It would be extremely difficult for inventors to recoup their development costs. So innovators would have little incentive to invest in new biologic research in the first place.

If investment in biologics dries up, biosimilars will disappear too. That’s because scientists can't reverse engineer nothing, and without data exclusivity to seed research on new biologics, that’s exactly what there will be to copy: nothing.

USMCA represents an important opportunity to advance biologics and medical innovation for American patients. Removing the deal's data exclusivity provision would be bad trade policy -- and bad health policy.

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at Georgetown University's School of Foreign Service.