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Executive Summary

Drug export legislation limiting exports to a single group of countries whose approval systems are similar to FDA's is acceptable to biotechnology companies, Genentech CEO Robert Swanson indicated at an April 28 hearing before Rep. Waxman's (D-Calif.) House Health Subcmte. Although "we support the legislation sponsored by" the subcmte.'s Ranking Minority Member Madigan (R-Ill.) and Rep. Scheuer (D-N.Y.), Genentech is "not wed to every provision of it," Swanson said. "We are asking for the legal authority to ship to industrialized countries which have scientifically based drug approval systems, pharmaceutical products which have yet to be approved in the U.S. -- but for which testing has been initiated in this country," Swanson continued. Asked by Waxman whether "the only countries you want to ship unapproved drugs to are" those identified as "'tier one' countries in the Madigan/Scheuer bill," Swanson replied "yes." Industrial Biotechnology Assn. Exec Director Richard Godown and Assn. of Biotechnoogy Companies General Counsel Bruce Mackler agreed. The witnesses indicated that they need immediate relief, are willing to negotiate, and are anxious that the legislation not fail because of objections by larger drug firms to some parts of the proposal. Godown explained why biotech firms are so anxious to see the legislation pass. "The time period for construction of a facility to the point at which manufacturing can commence has been put at 18-24 months"; consequently, he said, "If FDA approval is anticipated in two years, actual facility construction must be initiated now." For his part, Waxman said he has "sympathy with the claims of the biotechnology industry." He added: "I hope that we'll be able to address those very real problems they're facing." In the biotech companies, Waxman may have found a constituency for his more restrictive concept of drug export legislation. In return for gaining early access to their primary foreign markets, developed countries of western Europe, Japan and Canada, the biotech firms might be willing to give up the more far reaching drug export proposals of Madigan and Scheuer in the House and Sen. Hatch (R-Utah) and Sen. Kennedy (D-Mass.) in the Senate. Those bills are supported by PMA. Waxman is opposed to the Madigan/Scheuer multitier system that would permit, based on approval in a tier one country, exports to another country with a relatively unsophisticiated health care system. He asked that the subcmte. be provided a list of countries to which Genentech and other biotechnology firms "are now selling your drug products." He also indicated that the bill should permit export only of products with indications being actively pursued in the U.S., as a means to correct for disadvantages posed by the FDA "drug lag." Waxman said he was "particularly concerned by the prospect of manufacturing and exporting a drug overseas for which U.S. approval is not being sought. Frankly, I can't think of a drug which would be useful in Western Europe but would not also be useful in the U.S." Responding to Waxman's question as to whether any of the witnesses "desire to market products overseas which you do not intend to market in the U.S.," Swanson said that most products eventually would be marketed both here and abroad. However, he added, Genentech would rather manufacture in the U.S. therapies for tropical diseases such as malaria, which would be sold overseas only. Noting that Genentech "supports the thrust of HR 3995," the Madigan/Scheuer bill, Swanson declared: "Despite our concerns with some aspects of the chairman's bill, we believe that the problems addressed by HR 3962 [Waxman's alternative proposal] are legitimate ones which deserve the attention of this cmte., the pharmaceutical industry, and govt. We are anxious to work with you in an effort to address these problems in a way that will not jeopardize our company or unduly tax our limited resources." On the other hand, Swanson said Waxman's bill is overly restrictive in three respects. First, HR 3962 would not permit labeled indications to differ from those being pursued in the U.S., even though they may be approved in the importing country. A second problem with the Waxman bill, the Genentech chief continued, is that its transshipment penalties "would apply immediately, even if products are shipped by third parties, and there isn't a provision for notice and opportunity to correct that transshipment." Third, exports are not permitted under the Waxman bill until a full NDA is filed, "which is way too late to help our competitive position," Swanson maintained. Waxman suggested that the problem facing firms who produce bioprocessing materials could be solved by revising the manner in which FDA regulates biological intermediates. "If Congress revised the law or if FDA elected to treat biological intermediates like drug intermediates, would this solve a major problem for your companies?" Waxman asked. Mackler replied: "This would solve a proportional problem because there's a segment of the industry called the 'bioprocessors,' who produce on contract the intermediates, which are so crude they cannot be used in any way pharmaceutically; they're intended as a bulk raw material for further processing." On the other hand, Mackler added, "we have another segment of the industry which is very concerned about finished processes." FDA's Drugs & Biologics Center Director Meyer explained that drugs and biologics, whether or not they are produced through genetic engineering, are generally not regulated as finished products in the intermediate stage and therefore not subject to the current export prohibition. Only a product "with pharmacologic activity that would be potentially used to treat a disease" is considered a drug. IBA's Godown maintained that considerable capital expenditures and employment is at stake in the legislation. "It is not likely that existing manufacturing facilities can be used for the scale-up of these new biotechnology products. The recombinant microorganisms and mammalian and other cells used to produce these new compounds will require special design not inherent in traditional fermentation facilities," Godown said. "Depending on scale, a production facility can require a capital expenditure of $40-60 mil." Noting that "two companies have applied to FDA for approval of alpha interferon," Godown asserted that "some" genetically engineered therapeutic proteins, vaccines, and monoclonal antibodies currently in R&D "will receive approval within the next three years"; others will be approved within "five-eight years." If "10 companies commercialize products over this time period" and assuming a "conservative figure of $50 mil. for a manufacturing facility, this will result in $500 mil. in capital expenditures," he said. Furthermore, IBA assumes "220 production workers will be required for day-to-day continuing operations for a net employment base of 2,200," Godown said. "This neglects employment in service industries that provide the reagents and supplies necessary for ongoing operations required for growth of the cells used to produce therapeutic proteins as well as the separation equipment required for production isolation." Waxman said the subcmte. plans to hold two more hearings on the export issue. The next one, which is being scheduled for early June, will include testimony "from FDA, the Commerce Dept., the State Dept., the Pharmaceutical Mfrs. Assn., consumer organizations, religious leaders, and others concerned about drug export policy," the California Democrat said. A "final hearing will address the serious problem of internatl. marketing practices by the U.S. pharmaceutical industry," he added. "We will be looking specifically at the sale and promotion of U.S. approved drugs that are mislabeled" and "at the promotion and sale of drugs banned from the U.S. that continue to be sold overseas -- particularly in the Third World."

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