Biotech Impact From Obama Plan Muted

Thu, 03/05/2009 - 9:28am
NEW YORK (AP) — Most of President Barack Obama's budget will have little impact on large biotechnology companies, according to a Citi analyst, though several will have to prepare for potential competition from copies of their treatments. A key development for the industry is the budget's lack of a plan to call for government directly negotiating drug prices with drug developers, Citi analyst Dr. Yaron Werber said in a note to investors. He said concerns over direct price negotiations have been weighing on the sector. "Our consultants note that this provision can always be added later," he said. "However, we believe that most products are protected since they are novel and have little competition or direct alternatives." Biotechnology treatments are made using living cells, unlike their chemical-based counterparts. As it stands, there is currently no regulatory process for approving copies, or biosimilars as the industry calls them, leaving the largest companies without the same type of generic competition the pharmaceutical industry faces. That lack of competition and alternatives could change, though, as Obama calls for Congress to draft and approve a system for approving and regulating biosimilars. Debate over the issue has dragged on for years, with both the biotechnology and generic drug industries vehemently protecting their financial interests. The biotech industry wants any regulatory system to include up to 14 years of market exclusivity for drugs, in order to allow them to recoup their investments on developing the treatments. The generic drug industry, meanwhile, has been calling for exclusivity closer to the system for generic chemical compounds, which is about 5 years. Both sides agree additional testing should be done to determine whether the copy, which would actually be a slightly different drug, works the same as the original. But, again, they differ on just how intensive and long those studies should be, a factor that will go a long way in determining the eventual cost of a biosimilar. Werber said the 14 years being requested by the industry will likely be shaved down significantly. But final legislation will likely require biosimilars to undergo extensive studies to gain approval, he added. Thousand Oaks, Calif.-based Amgen Inc. has the most exposed risk to any legislation, he said, with most of its products facing biosimilar challenges by 2015. Overall, South San Francisco, Calif.-based Genentech Inc.; Foster City, Calif.-based Gilead Sciences Inc.; and Summit, N.J.-based Celgene Corp. are least affected by Obama's budget proposals, Werber said. Still, Celgene and Amgen could be hurt, he added, if action is taken on limiting the ability of U.S.-based companies to shield overseas profits from taxes. Many of the largest companies have manufacturing plants overseas and are able to book profits in subsidiaries. "Our analysis shows that most large biotech companies, except for Genentech, have substantial ex-U.S. tax shields," Werber said.

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