Document Type

Article

Publication Date

2016

Abstract

As finding breakthrough small-molecule drugs becomes more difficult, 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. This Article provides a fresh diagnosis of and prescription for this major public policy problem. It argues 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 Food and Drug Administration ("FDA") regulation, not only creates high barriers to entry of indefinite duration but also undermines efforts to advance fundamental knowledge about how biologics function and are best produced. 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. Trade secrecy, particularly in complex areas like biologics manufacturing, often. involves tacit knowledge that is difficult to codify and thus transfer. In this case, however, regulatory requirements mandate that originator manufacturers submit manufacturing details. As a consequence, manufacturers have already codified the relevant tacit knowledge. Carefully structured mechanisms for incentivizing disclosure of these regulatory submissions would not only spur competition, but would also provide a rich source of information upon which additional research, including fundamental research into the science of manufacturing, could build. In addition to providing a fresh diagnosis and prescription in the specific area of biologics, this 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. This 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.


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