European researchers are on the cusp of overtaking their American counterparts in biotechnology innovation, especially when it comes to the development of cutting-edge medicines known as ‘biologicals’, which are grown in living cells and consist of molecules thousands of times bigger than those in conventional drugs. In 2004, European biotech firms had access to only 20% of the private equity financing that US firms had. And yet today, the EU has just about as many dedicated biotechnology firms as the US, according to OECD figures.

It is therefore surprising that just as the European biotech industry's substantial investments of about a third of revenues into R & D in recent years is beginning to pay off, US policy makers are considering legislation that would hamstring biotech research in their own country. This would provide a welcome boost to Europe's biopharmaceutical sector but hurt the US industry and overall scientific progress.

A bill currently before US Congress would allow drug companies to make knock-off versions of biologicals much sooner than in Europe. To shepherd these most advanced drugs from the research laboratory to a patient's bedside over the course of a decade can cost more than Euros 800 million. To encourage this sort of expensive R & D, companies are typically allowed to keep their research data private for a set amount of time. Only after this ‘data exclusivity period’ has passed can copycat drugmakers use an innovator's research data to make biosimilars. Firms manufacturing such knock-offs have of course much lower costs than the innovators because they do not have to spend billions on drug discovery and development.

Without a significant exclusivity period, however, biotech companies will not have enough time to recoup the hundreds of millions of euros they have invested. Instead, they would immediately have to compete with biosimilars, which are less expensive than the brand-name biologicals but have much the same medicinal effect.

A study released in September 2009 by Mr Henry Grabowski, an Economist at Duke University, Durham, USA, pegs the ideal period for preserving innovation at 12 years. “If the data exclusivity period is too short”, Mr. Grabowski argued, “biotech firms may elect to invest in lower-risk biosimilars rather than to pioneer innovative products.”

US lawmakers are considering a data exclusivity period half that long – between five and seven years. This will make it nearly impossible for American biological makers to be globally competitive. Firms in the EU, on the other hand, enjoy 10 years of exclusivity with the option of an additional year if a biological shows particular promise. The EU adopted this standard in 2003 to increase the competitiveness of the continent's pharmaceutical and biotech firms. It has paid off, as the recent success of European firms illustrates.

If the US decides to handicap its drugmakers, the task of creating the next generation of biological drugs would fall primarily to Europe. This would mean more investment dollars, more jobs, and more research facilities on this side of the Atlantic.

This would be a historic shift. For much of the past few decades, American biotech researchers have left the Europeans in the dust. If American lawmakers proceed with their plan to undermine the US biotech industry, Europe may again take the lead.

Reference:
Benedetto della Vedova. Washington's Gift to European Biotech - With a little help from Congress, Europe may take the lead in biologic drugs. The Wall Street Journal. 2009 Nov 12.