Insmed CEO Geoffrey Allan, a native of the United Kingdom, came to the United States in the 1980s to work in the biotech industry in California. He founded Insmed in Virginia in 2000.

Tell me about Insmed.
Insmed is an emerging biotechnology company, publicly listed on the Nasdaq Exchange. We’re headquartered in Richmond, Virginia, and we have our technical center in Boulder, Colorado. We have about a hundred people on staff. We’re a research and development–based company, and we could be very well positioned for the development of a group of drugs called follow-on biologics.

What are follow-on biologics?
There is a class of drugs we call biologics that come out of the biotechnology industry. They are essentially immune from genericization. There is a loophole in the law that was established in 1984 by Representative Henry Waxman and Senator Orrin Hatch—that allowed the development of the generic drug industry—simply because these biologic drugs were not in existence.

I’m not averse to competition, because it stimulates innovation. What I am averse to is a monopoly where a drug cannot be touched for decades.

Biologic drugs now account for about $40 billion in U.S. sales. Basically, there is no way that a generic drug manufacturer can come in when the patents have expired to copy these drugs and bring them to the market at a cheaper price. Consequently, these drugs cost the healthcare system a huge amount of money, and it has created a monopoly for the large biotechnology companies.

Insmed is probably the only small company in this country today that has the scientific and technical infrastructure to make these types of drugs. We’re hoping that Congress will deal with this issue and allow the FDA to create a pathway for these drugs to be copied.

So, the law makes a distinction between biologics and other kinds of drugs as far as patents are concerned?
Yes. When the Hatch-Waxman Act came out, it allowed drugs that were regulated by the FD&C [Food, Drug & Cosmetic Act] to be genericized. These are what we call the small molecules of the business, what you will simply recognize as a pill in a container. Once the patent expires, they are eligible to be genericized and released at a fraction of the price of the innovated product.

That industry has blossomed since 1984. Two-thirds of all American prescriptions are filled by generic drugs, and that saves the healthcare system billions of dollars. The biologics drugs in 1984 were a fledgling industry. These drugs were regulated by the PHS [Public Health Service] Act, and there was not a provision in the Hatch-Waxman Act to deal with them. Over the years, nobody has gone back to right the wrong. Waxman himself has been attempting to do that. He is steadfastly trying to bring this class of expensive drugs into the debate so that a generic pathway can be developed. 

We use the word “generic” for the old small-molecule drugs. To describe the generic version of a biologic, we simply call them “follow-on biologics.” 

Now, your lead product is called IPLEX.
Yes. We have two aspects to our business. We’re focused on the development drugs for orphan diseases—diseases that [affect] less than 200,000 in the population. The second part of our business is the follow-on biologics. 

IPLEX was approved by the FDA and it’s currently in development for a number of indications. One that’s a top priority is development for the treatment of muscular dystrophy. The drug has shown very positive signs of working in the population. We were awarded a grant by the Muscular Dystrophy Association of about $2.1 million to help us further develop the drug. 

If the law on follow-on biologics changed, then could you have competition for IPLEX down the road?
Oh yes, absolutely. When the patents expire on IPLEX, it would be subject to competition. I’m not averse to any form of competition, because it stimulates innovation. What I am averse to is a monopoly where a drug simply cannot be touched for decades. 

How long does a patent last on a small-molecule drug?
The patent lasts for approximately 20 years from the time the invention was first made to the time that the patent expires. And the whole idea of a 20-year lifetime is that it gives the company adequate time to pay for it. 

The FDA also has periods of exclusivity that they award to companies if a drug gets approved. So the first time a drug gets approved, the FDA gives it an additional five years because it was the first company to get that drug approved. 

Look at Medicare expenditures: the highest cost is for these biotechnology products, and they cost patients tens of thousands of dollars annually. The law has to change.

Are there different rules for orphan drugs?
Orphan drugs, if biologics, are all subject to the same patents. Because there is no pathway to allow these drugs to be genericized, they do have the same monopoly potential. They also have market exclusivity for seven years post-approval that is awarded by the FDA. 

Again, that’s an incentive to bring companies to the table to develop these types of products, recognizing that they are going into very small patient populations and may not have the ability to bring the financial returns to pay for that development. The Orphan Drug Act was specifically passed to incentivize companies to develop drugs for these types of diseases. 

Are there other drugs that you are focusing your research on—other new drugs?
No, IPLEX is our flagship product for orphan diseases. In this follow-on biologic space, we are focused on the development of five different drugs that represent about $10 billion in sales at today’s prices. And when these drugs come off patent, we will be positioned to get these drugs approved by the FDA and launch them into the marketplace. 

And what are those drugs?
One is a generic version of a leading innovated drug called Neupogen. It’s made by Amgen and it’s a drug that’s used following chemotherapy to stimulate the immune system by increasing the number of white cells. We are making two versions of that drug that currently account for about $4 billion in sales across the U.S. Our own Insmed versions of those drugs are identical to the innovated versions, and it’s our objective to take them into clinical trial this year. We are very hopeful that the FDA will allow these drugs to be reviewed and approved, and then we will release them into the marketplace when the patents expire around 2012. 

But you would not be able to do that unless the law was changed?
If the law does not pass, then that will delay the development of the products, potentially, and it would certainly delay their approval. We are proceeding as if the law will be passed. I have seen enough activity on Capitol Hill. I don’t believe the healthcare system can afford to allow this type of expense to continue. 

But you’re really, in a way, betting the company that the law will change.
I wouldn’t say it is an outside bet; there’s a certain amount of risk that the law will not get changed. But when you look at the expense, these drugs are currently accounting for about $40 billion in U.S. sales. The sales are growing annually by 20 percent. If you look at Medicare expenditures, the highest cost in these expenditures is for these biotechnology products, and they cost patients tens of thousands of dollars annually. The law has to change. 

You testified in May in front of the House Committee on Energy and Commerce about innovation in the biotech industry. What did you say?
The people that have been against this bill have said that if you destroy the monopoly that these companies have, then you will reduce innovation. That same argument was used in 1984 with the small molecules, and we have had one of the most innovative periods in drug development over the last 20 years. There is no basis for that argument. Every company has an opportunity to innovate, and competition is the best stimulus with innovation. 

Image credit: photographs by Chris Hartlove.