Englishman Geoffrey Allan is betting the future of the company he founded, Richmond-based Insmed, Inc., on the proposition that the U.S. Congress will reform patent laws preventing competition in a class of drugs, biologics, created by the biotech industry. Insmed is best known for IPLEX, a drug used in the treatment of certain “orphan” diseases affecting fewer than 200,000 people, but it is investing heavily as well in creating “follow-on biologics” -- generic versions --- of blockbuster drugs accounting for $10 billion in sales at today’s prices.

In an interview in the March/April issue of The American magazine, Allan outlines his bold strategy. Due to a loophole in the 1984 law overhauling the regulation of drugs in the United States, a class of drugs invented by the then-emerging biotech industry, known as biologics, was exempted from the 20-year limits on patent protection. When patent protections expire, competitors move into the market with cheaper generics, saving U.S. consumers untold billions of dollars. But the patent shield for biologics never ends.

“Biologic drugs now account for about $40 billion in U.S. sales,” says Allan. “Basically, there is no way that a generic 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, says Allan, is the only small company in the country today that has the scientific and technical infrastructure to make these types of drugs. One is a generic version of Neupogen, created by Amgen to stimulate the immune system following chemotheraphy by increasing the number of white blood cells. If Congress closes the biologics loophole and the FDA approves Insmed's follow-on version of the drug, Insmed plans to release it into the marketplace when the patent on Neupogen would be due to expire in 2012.

“We’re hoping that Congress will deal with this issue and allow the FDA to create a pathway for these drugs to be copied,” Allan says. Insmed is taking a risk when it goes up against the multibillion-dollar biotech giants, he concedes, but he thinks the odds favor him. “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.”