Price and Rai on Biologic Secrecy

Nicholson Price and Arti Rai just posted Manufacturing Barriers to Biologics Competition and Innovation, which is forthcoming in the Iowa Law Review. Here is the abstract:

As finding breakthrough small-molecule drugs gets harder, drug companies are increasingly turning to “large molecule” biologics. Although biologics represent many of the most promising new therapies for previously intractable diseases, they are extremely expensive. Moreover, the pathway for generic-type competition set up by Congress in 2010 is unlikely to yield significant cost savings. 

In this Article, we provide a fresh diagnosis of, and prescription for, this major public policy problem. We argue that the key cause is pervasive trade secrecy in the complex area of biologics manufacturing. Under the current regime, this trade secrecy, combined with certain features of FDA regulation, not only creates high barriers to entry of indefinite duration but also undermines efforts to advance fundamental knowledge. 

In sharp contrast, offering incentives for information disclosure to originator manufacturers would leverage the existing interaction of trade secrecy and the regulatory state in a positive direction. Although trade secrecy, particularly in complex areas like biologics manufacturing, often involves tacit knowledge that is difficult to codify and thus transfer, in this case regulatory requirements that originator manufacturers submit manufacturing details have already codified the relevant tacit knowledge. Incentivizing disclosure of these regulatory submissions would not only spur competition but it would provide a rich source of information upon which additional research, including fundamental research into the science of manufacturing, could build. 

In addition to provide fresh diagnosis and prescription in the specific area of biologics, the Article contributes to more general scholarship on trade secrecy and tacit knowledge. Prior scholarship has neglected the extent to which regulation can turn tacit knowledge not only into codified knowledge but into precisely the type of codified knowledge that is most likely to be useful and accurate. The Article also draws a link to the literature on adaptive regulation, arguing that greater regulatory flexibility is necessary and that more fundamental knowledge should spur flexibility.

Small-molecule pharmaceutical drugs have long been the poster child for the patent system, but as Allison, Lemley & Schwartz have recently reminded us, pharma and biotech are not the same and may have very different patent ecosystems. For anyone interested in IP policy in the biologics space, this new piece by Price and Rai is highly recommended.