UPDATE 4-FTC:12-14 yr too long to shield biotech drugs

* FTC: Generic biologics could save patients money

* Savings would be up to 30 percent for popular drugs

* FTC: 12 to 14 years exclusivity is too long (Adds industry group comment)

By Diane Bartz

WASHINGTON, June 10 (Reuters) - Cheaper versions of expensive biotechnology drugs would save patients money but are unlikely to drive down prices as much as generic competition has cut the cost of antibiotics and other, simpler medicines, a Federal Trade Commission report said on Wednesday.

Makers of brand-name biotechnology medicines, which are derived from living matter and can cost tens of thousands of dollars a year, are pushing for 12 to 14 years of protection from competition as lawmakers craft plans to give the Food and Drug Administration authority to clear cheaper copies.

But an FTC report found "the 12- to 14-year regulatory exclusivity period is too long to promote innovation."

Even with competition from generics, the first companies to develop biologic drugs are not as vulnerable to generic competition as the makers of chemically synthesized drugs, the report found.

In fact, the FTC report concluded that competitors would likely enter the market only for drugs that had more than $250 million of annual sales, and only two to three generic entrants would be expected for each drug.

"These FOB (follow-on biologic) entrants are unlikely to introduce their FOB products at price discounts any larger than between 10 and 30 percent of the pioneer products' price," the FTC said in its report.

"Pioneer manufacturers are likely to retain 70 to 90 percent of their market share and, therefore, will likely continue to reap substantial profits years after entry by (generic biologics)," the report said.

In contrast, generic competition for chemically synthesized drugs can push prices down by up to 90 percent.

Still, the FTC said, giving the FDA clear authority to approve generic biologics "would be an efficient way to bring these lower-priced drugs to market."

Biologic drugs -- which are usually injectable -- tend to be more expensive and complicated than traditional chemical medicines because they are made from living cells. They are used to treat everything from cancer to autoimmune diseases such as rheumatoid arthritis.

The generic drug industry is eager to begin producing cheaper copies of the medicines.

Brand-name biotech companies such as Roche Holding's (ROG.VX) Genentech Inc and Amgen Inc (AMGN.O) say they need an adequate period without competition to encourage development of new medicines.

The Biotechnology Industry Organization, which represents makers of brand-name biotech drugs, said the report's conclusions were based on "fundamentally flawed or highly selective assumptions, an exceedingly narrow policy perspective, and a lack of true understanding of the necessary conditions to drive future biomedical breakthroughs."

"An unbalanced pathway to biosimilars jeopardizes the ability of biotechnology to continue U.S. leadership in innovation, provide hope for patients and help drive economic growth," said Jeff Joseph, a spokesman for BIO.

The Pharmaceutical Research and Manufacturers of America (PhRMA), an industry group representing brand-name makers of chemical-based and biotech drugs, also criticized the report.

"The FTC's recommendations, if enacted, could severely hamper future research in biologics aimed at treating such complex diseases as Parkinson's, Alzheimer's and cancer," said PhRMA spokesman Ken Johnson.

Generic companies greeted the report with enthusiasm.

Chris Begley, chief executive of injectable drug and medical products maker Hospira (HSP.N), said cost savings could be in the billions.

"The FTC's report underscores the need for Congress to quickly pass legislation that would give the U.S. Food and Drug Administration the ability to approve these drugs and save billions of dollars for American consumers and the American government," Begley said in a statement.

Cowen & Co analyst Eric Schmidt said investors were more concerned about patent protections for biotech drugs rather than the exclusivity period that has become a major focus in the debate over generic legislation.

"Biologics are still protected by strong patents that typically last 20 years. I don't believe the FTC is contemplating changing the duration of patents," he said.

The FTC report was posted on the agency's website here. (Reporting by Diane Bartz, Lisa Richwine and Bill Berkrot; Editing by Dave Zimmerman, John Wallace and Steve Orlofsky)