Abbott Stands Up to Obamacare

The health-reform bill established a pathway to approve biosimilars -- generic versions of biologic drugs -- but Abbott Labs (NYSE: ABT  ) is trying to block biosimilars of its megablockbuster Humira.

Abbott's argument, which holds for all biologics approved before the law was established, basically boils down to the fact that the drugs are too hard to make and therefore require the FDA to reveal Abbott's trade secrets to help the generic-drug makers get their products close enough to the original to have confidence that they have the same activity.

This "it's too hard to make" strategy has been used before. Sanofi (NYSE: SNY  ) tried to block Momenta Pharmaceuticals (Nasdaq: MNTA  ) and others from getting approval of generic versions of Lovenox. Didn't work. ViroPharma (Nasdaq: VPHM  ) argued generic versions of its antibiotic Vancocin needed clinical trials to prove they work, which was successful for quite a while until the FDA caved in. Teva Pharmaceuticals (Nasdaq: TEVA  ) doesn't want the FDA to approve generic copies of its multiple sclerosis drug Copaxone, arguing that it's too complex to copy.

Biologics, which are approved under a Biologic Licensing Application, are a degree more complex than the most complex drugs approved under a New Drug Application, so there's certainly an argument to be made here. I'm just not sure Abbott will be able to win.

The Hatch-Waxman law, which set up the pathway for approval of generic versions of drugs approved through NDAs, lets generic-drug makers use the clinical trial data of the brand-name drug to establish the efficacy of their generics. For most small molecule drugs, manufacturing isn't an issue since there are simple analytical tests to ensure the drug has the same chemical structure.

I think Abbott is probably right that the generic-drug makers will need some trade secrets to approve biosimilars, but I don't see how manufacturing trade secrets are any different than efficacy and safety trade secrets that the FDA currently lets generic-drug makers use under the Hatch-Waxman. That efficacy and safety data will also be needed for approval of biosimilars, which is provided under the new law.

Of course, Abbott doesn't have to win to be effective. Anything to slow down the eventual approval of biosimilars will result in continued de facto exclusivity beyond patent expirations.

And all of these arguments could be moot points if the Supreme Court throws out the health-care-reform bill or the Republicans take control of the government and repeal the law. You can find out other ways to benefit from the outcome of the election in the Fool's new free report, "These Stocks Could Skyrocket After the 2012 Presidential Election." Claim your copy here.