Anti-Monopoly Bill Appears No Threat to Amgen : Biotechnology: The Thousand Oaks firm’s first product has patent protection enabling it to ride out changes in federal orphan drug laws.
There’s an effort in Congress to curtail the market monopolies awarded to some drugs under the Orphan Drug Act, a federal law whose beneficiaries so far include Amgen Inc. and its blockbuster drug Epogen.
But even if the proposed changes in the law are passed and survive President Bush’s threatened veto, don’t look for Thousand Oaks-based Amgen to get hurt. That’s because Amgen’s patents on Epogen give the drug a second coat of armor against competition.
“The loss of orphan drug status at this point would be meaningless” for Amgen “because of the company’s watertight patent situation,” said David K. Stone, a biotechnology analyst at the investment firm Cowen & Co. in Boston.
Amgen, with 1991 revenue of $682 million, won’t speculate on what effect the bill, if enacted, would have on Epogen. But the company “believes the Orphan Drug Act as written is working well, and we do not see a need for any changes,” said spokeswoman Kimberly Dorsey.
The orphan drug law, enacted in 1983, gives drug makers a seven-year monopoly to sell drugs they have been developed to fight rare diseases and related ailments. The idea is to encourage companies to develop the drugs even though the small universe of patients that would get the treatments--typically fewer than 200,000 people--would not ordinarily merit the companies’ financial investment.
About 60 drugs are now covered by the Orphan Drug Act. Amgen, for instance, has had a seven-year monopoly on the market for Epogen since the drug was approved for sale by the U.S. Food and Drug Administration in June, 1989.
Epogen is a biotechnology-made copy of erythropoietin (EPO), a human protein that triggers red blood cell production. The drug fights anemia in patients suffering from kidney disease; a typical patient’s dosage costs $4,000 to $6,000 a year.
Epogen sales in the United States last year totaled $409.4 million, and Stone says they should climb to $490 million this year. Epogen and Amgen’s second drug, Neupogen--which is not covered under the Orphan Drug Act--have made Amgen the nation’s largest biotechnology company.
Theoretically, Amgen’s Epogen sales could be threatened by a bill sponsored by Sens. Howard M. Metzenbaum (D-Ohio) and Nancy L. Kassebaum (R-Kan.) Its key feature would cancel a drug’s orphan status once it reaches $200 million in annual sales, unless the drug maker can show that development costs exceeded that amount.
Metzenbaum, at a hearing of the Senate Labor and Human Resources Committee early this month, contended that the Orphan Drug Act has “allowed a handful of profiteers” to use their monopolies to “charge absurdly high prices for blockbuster orphan drugs.”
“Terminating a company’s seven-year market monopoly when its sales reach $200 million will encourage price competition and make orphan drugs much more affordable,” he said.
In the case of Epogen, though, the question of affordability is somewhat muted. The U.S. government, through a special Medicare program, pays 80% of the cost of Epogen for kidney dialysis patients.
Similar legislation to change the Orphan Drug Act was passed by the Senate and House in 1990, but was vetoed by President Bush. He’s also threatening to veto the current proposal on grounds it could discourage drug companies from developing such products.
But James McCamant, editor of the Medical Technology Stock Letter, an industry newsletter published in Berkeley, said the change “would only marginally discourage development. I don’t think it’s going to be a huge blow for biotechnology if this is passed.”
Besides its orphan drug protection, Amgen’s patents for Epogen already mean no rival can produce and sell a competitive EPO drug in the United States. Its patent victories have so far kept its chief EPO rival, Genetics Institute Inc. of Cambridge, Mass., out of the American market.
Genetics Institute also has licensed its EPO version to a joint venture between Japan’s Chugai Pharmaceutical Co. Ltd. and Upjohn Co., which could have made EPO overseas and then imported it into the U.S. market to compete with Amgen. But last December, that scenario also was blocked when the U.S. Patent and Trademark Office agreed to issue Amgen two additional broader patents covering EPO.
However, Genetics Institute is appealing the Patent and Trademark Office’s decision in federal court in Delaware, which could result “in a whole new trial to take a fresh look at the situation,” said Albert P. Halluin, a biotechnology patent lawyer in San Francisco.
For that reason, Halluin said Epogen’s patent protection is not yet “watertight.” But he said “it’s on pretty firm ground at the moment,” regardless of what happens to the orphan drug law.
Changing the Orphan Drug Act
A bill moving through the U.S. Senate could curtail the monopoly status currently enjoyed by some drugs under the federal Orphan Drug Act. One product now protected is Amgen’s Epogen. Here is an outline of the current law and the proposed changes.
CURRENT LAW
- Year enacted: 1983
- Major feature: Allows companies that develop drugs for rare diseases--those affecting fewer than 200,000 patients--to be sole producers of their drugs for seven years.
- Purpose: Ensures such drugs are available even though the relatively small number of patients would otherwise make it financially unfeasible to develop the products.
PENDING BILL
- Sponsors: Sens. Howard Metzenbaum (D-Ohio) and Nancy Kassebaum (R-Kan.)
- Major change: Monopoly for an orphan drug would end after the drug’s annual sales reach $200 million. (Last year Amgen’s U.S. Epogen sales reached $409.4 million.)
- Purpose: Ends what the bill’s proponents see as excessive prices charged for some orphan drugs and excessive profits earned by their producers.
