Biotechnology companies must have some certainty that they can protect their investment in the development of new breakthrough therapies for a substantial period of time. This protection helps companies secure much-needed venture capital funding, which is the lifeblood of the industry.
A failure to include substantial data exclusivity would undermine incentives to invest in biomedical innovation and thus would slow progress in the development of breakthrough therapies to improve the health and lives of patients suffering from currently untreatable conditions.
Thus, in order to preserve incentives for biomedical innovation, any statutory pathway for biosimilars must include a substantial period of data exclusivity. Such non-patent exclusivity is necessary to provide innovator biologics with effective protection from biosimilar manufacturers prematurely entering the market.
The 12-year period of data exclusivity authorized through the Affordable Care Act  serves as an insurance policy that provides innovators with some certainty of protection. Data exclusivity would run concurrently with the patent term for the product. It therefore would create actual protection only in those instances where the biosimilar manufacturer would be able to work around the patents held by the innovator but still gain abbreviated approval of its biosimilar.
Data exclusivity of 12 years is an essential incentive for biotechnology investment. The majority of biotechnology companies are small, private start-ups, heavily reliant on venture capital investment. Yet these companies hold two-thirds of the industry’s innovative clinical pipeline.
The similarity standard for biosimilars creates a “protection gap” that may allow for abbreviated regulatory approval while eluding an innovator’s patents. That likelihood exists because of the confluence of two critical factors not present in Hatch-Waxman, which was designed to promote generics while leaving intact a financial incentive for research and development.
First, a biosimilar may be only “similar’ to the corresponding innovator product, and thus the innovator’s patents may not be infringed unlike a generic drug, which must be the same as an innovator product.
Second, because of the nature of biologic products – large molecules produced by living cells and organisms – patent protection is often narrower and easier to “design around” than that of small molecule drugs, and the trend is towards increasingly narrow patents.
Biologics research and development is a high-risk endeavor, with higher capital costs, higher material costs, greater manufacturing costs and uncertainties, longer development times, and lower late-stage success rates than compared to small molecule drugs.
Developing a biotechnology product is a lengthy and expensive endeavor. On average, it takes $1.2 billion over a period of more than a decade to bring a new biopharmaceutical to market.
This commitment is made with absolutely no guarantees of success. Indeed, the vast majority of biotech R&D projects fail. No company can afford to take such risks if its investment in ultimately successful products cannot be protected as it struggles through the arduous product development process.
It is important to preserve incentives necessary to attract the investment that is essential to conduct expensive clinical trials on unique new products and those which are significant improvements over previous medicines. Next generation products can be of enormous value to patients because new discoveries can make existing medications safer or more effective through changes to the structure of a molecule.
When significant changes are made to the original medication, the Food and Drug Administration  (FDA) considers it an entirely new product and requires the manufacturer to conduct new clinical trials and submit a new drug application for approval. Patient advocacy organizations and medical specialty groups recognize the importance of providing incentives for manufacturers to conduct clinical trials and seek separate approval by the FDA for next generation products.
If we preserve our traditional foundations of innovation and maintain data exclusivity protection, the industry will continue to deliver on its promise to heal, fuel and feed the world.