In a prior post, “Will the ‘New Normal’ Affect the Life Sciences Industry," we queried whether the life sciences industry would become a target during the on-going government budgetary crisis. President Obama’s recently released Budget of the United States Government for Fiscal Year 2012 includes provisions targeting the Department of Health and Human Services, some of which will likely impact the life sciences industry.
Two of the budgetary proposals intend to bring generic versions of brand-name drugs to market sooner than originally permitted, reducing federal healthcare costs. Specifically, the 2012 Budget includes proposals to modify the period of data exclusivity for brand name biologics from 12 years to 7 years, expediting the availability of data formulas for brand-name biologics by 5 years, and essentially shaving off 5 years of expected profits for the originating company. Additionally, the Federal Trade Commission would be authorized to prohibit drug companies from entering into anti-competitive agreements extending the period of exclusivity for brand name drugs. By reducing the exclusivity time of biologics and potentially prohibiting the ability to extend the exclusivity of other generics through private agreements, these two budgetary proposals estimate a reduction of the federal deficit by approximately $11M. From the perspective of the life sciences industry, this projected reduction to the federal deficit may prove to be an insubstantial figure compared to the potentially significant profits that pharmaceutical companies may forfeit, not to mention the potential freezing effect these proposals may have on innovations from pharmaceutical companies in the coming years.
Not all of the budget proposals will advance, but we do expect that life science companies will feel some pain.