In recent weeks, BIO has run ads in The Hill and Politico asking, “What’s at stake if Congress passes the wrong patent reform bill? The next great biomedical breakthrough.” Philip Johnson, Chief Patent Counsel for Johnson & Johnson, puts it this way: “The biggest concern is that by making it harder to get, maintain, and enforce patents, and lowering damages to be recovered in the event a patent is infringed, you reduce the incentives to invest in R&D.” The tech firms have, in turn, dismissed such statements as “sky-is-falling” rhetoric. It’s difficult to assess either claim as very little academic work in the area has been done, according to Arti Rai, a law professor at Duke who studies the pharmaceutical industry. But, in any case, the final bill may be less sweeping than the heated debate suggests. “The current version of the Reform Act has been watered down from previous versions in 2005 and 2006, and keeps getting watered down,” says Mandel. “It’s moving toward tweaking.”

Another major legislative fight that could resurface in 2008 is over a bill creating a regulatory pathway for follow-on biologics (FOBS), or biosimilars. Already, biologics are the fastest-growing and most promising drug sector in the United States, a $50-billion-per-year industry that’s expected to double in the next several years. Currently, there’s no expedited approval process for FOBS, and the stakes look high: Patents on biologics worth more than tens of billions of dollars a year have already expired, with another $15 billion worth of drugs set to go off-patent soon.

Contrary to popular belief, however, BIO is not opposed to legislation that would enable the FDA to approve biosimilars, and is lending support to several bills put forward by Senate Democrats. Within the biotech industry, the general sense is that such legislation is inevitable—the European Union has already set up a biosimilars approval process—and Greenwood observes that PhRMA “lost some reputational capital” after digging in its heels on generics legislation for pharmaceuticals in the 1980s.

Nevertheless, there are still sticking points—mainly concerning “data exclusivity,” or the amount of time after approval of a new drug before a competitor can use data from the original approval process for its own FDA filing. BIO wants 14 years, while the Senate bill provides 12. Representative Henry Waxman, a California Democrat who is crafting his own bill in the House, has not yet put forward a precise number, but is expected to put up a fight on this front. “I’m not 100 percent sure it’s going to get done this year,” says Dean Rosen, a healthcare lobbyist in Washington, D.C. “Waxman has his own approach and may want something less favorable to the industry.” (Several lobbyists speculated that Waxman, who tends to side with generics manufacturers, may prefer to run down the clock and wait for a Democratic president in 2009).

At stake is not just revenue, but also potentially the ability to innovate. “If [Congress] ends up saying that, for example, only two years of exclusivity is fine, well, that’s only two years of effective market return on a product that takes 12 years and hundreds of millions of dollars to develop,” says Paul T. Kim, a life sciences lobbyist with Foley Hoag LLP. “You can’t possibly achieve an adequate return in two years and still attract venture finance or fund such a high-risk enterprise.” Meanwhile, according to one lobbyist, there are rumors that PhRMA may enter the fray and ask for extended data exclusivity rights for traditional pharmaceutical drugs, which now last about five years. (PhRMA declined to comment on hypothetical legislation).

Opinions vary on the impact FOBS legislation would have in practice. One recent study suggested that total potential cost savings from generic biologics could be more than $70 billion over 10 years. In a recent report from the American Enterprise Institute, however, Calfee suggested that some of these projections are overly optimistic, as the FDA would almost certainly be extremely cautious in approving follow-on biologics—both House and Senate bills allow the agency to require more data if it’s not clear that the follow-on product would work in the same way as the original. Because a blanket “no-clinical trials standard” is infeasible for follow-on biologics, Calfee argues that “the FDA will bring to this task its innate aversion to risk in approving new drugs,” and doctors will be even more reluctant to prescribe generics.