A new AARP analysis finds that manufacturers of many top-selling biologic drugs often recoup research and development costs within a single year. The findings challenge the industry’s contention that allowing generic versions of these drugs would prevent them from recouping their investments—and thus discourage development of new medicines.

Biologic drugs, which are made from living organisms, are used to treat complex, chronic conditions that affect millions of Americans, such as cancer, multiple sclerosis and rheumatoid arthritis. The drugs are also some of the most expensive on the market, costing up to tens of thousands of dollars a year.

The analysis by AARP’s Public Policy Institute shows the manufacturers of biologic drugs often recouped research and development costs within the first year a drug hit the market.

The average development cost is $1.2 billion, according to the Tufts Center for the Study of Drug Development. The researchers looked at sales of the top 10 biologics over a six-year period and found that manufacturers recovered the average R&D cost and more in three years or less. “For more than 20 years, generic versions of chemical drugs have given Americans access to safe, inexpensive treatments for their health problems without hindering scientific innovation,” says AARP Executive Vice President John Rother. “With more Americans taking biologic drugs for relatively common diseases like cancer and multiple sclerosis, it’s time to bring affordable generic biologics to the market.”

The Food and Drug Administration currently has no process in place to approve generic versions of biologics, so manufacturers do not face generic competition.

Rep. Henry Waxman, D-Calif., and three other House members introduced a bill that would authorize the FDA to approve generic biologic drugs after five years of exclusivity.

In an op-ed in this week’s Atlanta Journal-Constitution, John Lechleiter, chairman and CEO of Eli Lilly in Indianapolis, argues that drug companies should have 14 years of patent protection before lower-cost generics are allowed.

“Some in Congress, unfortunately, support biosimilars [generic biologics] legislation with only short periods of data protection, which would leave America’s biotech companies with little hope of recouping investments on most of our most promising ideas for new medicines,” Lechleiter wrote.

The stakes are high for both consumers and pharmaceutical companies. Biologic drug prices are 10 to 100 times higher than those of other prescription medications because often there are few alternatives. The arthritis drug Humira, for example, costs patients an average of $22,000 a year, while multiple sclerosis drugs Avonex and Betaseron cost about $24,000.

These numbers translate into hefty profits for drug manufacturers. Sales of biologic drugs were more than $75 billion in 2007, according to IMS Health, a pharmaceutical research firm.

AARP officials say a process to approve generic biologic drugs should be a part of comprehensive health reform.

“This bill is a win-win both for biologic drugmakers and for those Americans with the most desperate medical conditions who are struggling to afford the medicines they need,” Rother says.

Elizabeth Agnvall is a contributing editor with the AARP Bulletin.