Hamster ovaries, mare’s urine, pig intestines, blood.

It’s not a recipe for a witch’s stew — they’re all components of high-tech biologic drugs. Used to treat everything from cancer to arthritis, biologics are the fastest-growing class of medicines, with more than $40 billion in annual sales in the United States.

But they’re also expensive — many cost tens of thousands of dollars a year — and the U.S. Food and Drug Administration (FDA) has no authority to approve lower-cost, generic versions.

That will change if the health care bill is signed into law. Tucked inside the 2,000-page bill are provisions that would create a regulatory pathway for generic biologic drugs, also called biosimilars.

The potential payoff is great. Biosimilars could save patients, insurers and the government anywhere from $42 billion to $108 billion during the first 10 years, according to the Generic Pharmaceutical Association. Patents on many blockbuster biologics, including Procrit, Neupogen, Enbrel and Herceptin, have already lapsed or will soon expire. This leaves the field wide open for generic competitors — if they could get into the market.

Under current law, the FDA’s hands are tied. The agency can only approve applications for new biologic drugs, complete with extensive clinical data. There’s no shortcut for biosimilars.

Until Congress creates an abbreviated pathway — and concludes a health care debate that continues now over abortion funding, the public option and legislative maneuvers to force an up-or-down vote — the fate of biosimilars hangs in the balance.

As industry lawyers watch and wait, they’re also looking ahead to gauge the potential impact on the drug market and the FDA regulatory landscape.

“It’s going to be huge,” said Timothy Shea Jr., a partner at Washington intellectual property boutique Sterne, Kessler, Goldstein & Fox who represents bio­pharma companies. “The writing is on the wall. Biosimilars are coming.”

But for generic drug companies, the victory may be bittersweet. The bill as passed by the House and Senate is “so favorable to the brand-name, innovator companies,” said William Schultz, a Washington partner at Zuckerman Spaeder who represents generic companies. “They basically got everything they wanted.”

EXCLUSIVE FIGHT

One of the most contentious issues has been how long the innovator company should enjoy a de facto monopoly before the FDA will approve the entry of generic competitors.

The health care bill provides for 12 years of data exclusivity once a product is licensed by the FDA. After that, generic companies can use the safety and efficacy data originally submitted by the innovator company to win their own FDA approval. This data piggybacking is one key to generic cost savings. (Would-be competitors are free to file earlier if they’re willing to provide their own clinical data.)

According to the Biotechnology Industry Organization, the average cost of developing a biologic product is $1.2 billion. Because biologics are protein-based, made from living organisms — a cloned human gene is inserted into a hamster ovary cell line, for example, to make the anemia drug Epogen — they are more complex to produce than “small molecule” drugs made from chemical formulas.

Innovator companies stress that at least 12 years of FDA protection is necessary to ensure a reasonable return on their investment.

“The point of exclusivity is to incentivize innovation by allowing companies to make a profit on their products,” said James Czaban, who chairs the food and drug practice of Washington-based Wiley Rein. “You get the highest profits later in the life cycle of a product because it becomes more widely used. Cutting off the exclusivity period too soon reduces the incentive.”

Generic-drug makers counter that 12 years is far too long. They point to the Hatch-Waxman Act of 1984, which established the framework for generic chemical drugs regulated under the Federal Food, Drug, and Cosmetic Act and gave innovator companies just five years of data exclusivity.

The Federal Trade Commission (FTC) in a June 2009 report recommended no exclusivity for biologics at all. “No economic arguments suggest that such provisions are necessary to foster pioneer drug innovation,” the agency concluded.

The White House tried to split the difference, pushing for seven years of exclusivity even after the House and Senate passed their bills. But the move prompted Billy Tauzin, president of the Pharmaceutical Research and Manufacturers of America, to threaten to withdraw his group’s support for the entire health care bill, according to published reports.

“Attempts to shorten the period went nowhere,” said Colin Sandercock, a Washington life sciences patent partner at Seattle-based Perkins Coie who is following the legislation closely. “There’s been such strong lobbying that support in Congress is firmly behind 12 years.”

Schultz of Zuckerman Spaeder called the lengthy exclusivity period “devastating” for generic companies and said he feared the bill will allow drug companies to win additional 12-year extensions by making minor tweaks to their products, a practice known as evergreening. As a result, Schultz said, the bill’s biosimilar pathway may wind up being of marginal use to generic companies. “I really wonder whether they’ll use it all,” he said.

FINDING MORE TIME

The exclusivity issue may be a bit of a red herring. That’s because innovator companies also patent their new drugs. Patents run for 20 years (although some drugs are not approved by the FDA until that period is far along).

“If the patent is good, it’s going to keep competitors off the market,” Sandercock said.

But the biosimilar version of a biologic drug isn’t identical in the way, say, generic fluoxetine is to the active ingredient in brand-name Prozac. McDermott Will & Emery partner Sheila Walcoff, a health policy expert based in Washington, explained, “It’s like making chicken soup. If you figure out the exact recipe, you can copy it, adding a teaspoon of salt and pepper and so on.” But even so, the end result will vary ever so slightly, just because “you’re working with a natural source, and every chicken is different,” she said.

This lack of sameness, as well as the complexities of the manufacturing process, makes it difficult to write a watertight biologic patent.

“It’s very difficult to get broad patent protection for biologics, especially early on,” said Michael Samardzija, a biotech patent specialist who is counsel to Bracewell & Giuliani in Houston. If competitors make “a substitution here or there, they can get away from the patent claims.”

The potential result is a drug that’s similar enough to use the innovator company’s data for FDA approval but distinct enough to fend off a patent infringement suit.

What biotech companies want, Samardzija said, is certainty about the length of the FDA exclusivity period, the time during which they know they don’t have to rely on their patents alone to protect their innovation. “My clients say, ‘Give me the number, and then I can make an evaluation and move forward. Will it be five years exclusivity or 12? That difference is akin to whether I lose money or make a billion dollars a year. How can I make a prediction based on that range?’ “

THE SUBSTITUTE

The lack of sameness between biologics and biosimilars has other regulatory implications.

When a generic version of a chemical drug exists, the substitution of one for the other can generally be made “at the pharmacy level. They start switching it with the brand drug right away, without the doctor having to write a different prescription,” said Shea of Sterne Kessler, who represents companies developing new biologic drugs as well as those making improved second-generation versions.

Such interchangeability is “the holy grail,” he said. “But the FDA recently noted that the science is not yet at the point where the agency can approve any biologic as interchangeable. At the threshold level, you won’t have free substitutability of a biosimilar for the reference product, at least for the near future.”

Although detailed guidelines won’t be developed until after legislation is passed, the expectation is that the FDA will require biosimilar applicants to submit at least some data of their own to prove their product is close enough to the original. It won’t be sufficient to rely on data submitted by the innovator company.

“The most important issue is determining what level of clinical evidence will be necessary to give confidence to consumers that a product is safe and effective,” said Walcoff of McDermott Will, who previously served as associate commissioner for external relations at the FDA. “Because [the biosimilar discussion] has been going on for so long, the FDA has already given it a lot of thought.” She added, “The career staff are going to want to make sure they are exactly right on the science given the level of congressional interest in drug safety.”

For biosimilar applicants, conducting studies will make the approval process significantly more expensive and time-consuming. The FTC in its biologic report estimated that it will take generic competitors eight to 10 years to develop a biosimilar at a cost of $100 million to $200 million. By comparison, generic chemical drugs typically take three to five years and cost between $1 million and $5 million to develop.

This also means the savings to consumers won’t be as great. The FTC estimates biosimilars will cost just 10% to 30% less than brand-name versions, compared to conventional generics, which can be as much as 80% cheaper.

Given the expense of developing and marketing biosimilars, even top-selling biologic drugs are likely to face just two or three generic competitors, as opposed to the 10 or more generics chasing some conventional drugs. And the competitors may be other brand-name drug companies, the Pfizers and the Eli Lillys, rather than the usual generic players.

“The big pharmaceutical companies are looking at biosimilars,” said Daniel Kracov, who heads the food and drug practice at Arnold & Porter in Washington. “Innovator companies see this as an opportunity because they have the expertise. And getting a quarter or a third of a multibillion-dollar market is pretty attractive if you have the expertise to do it.”

Jenna Greene can be contacted at jgreene@alm.com.