Federal budgets always make interesting reading and, this year, the Obama White House does not disappoint. Tucked into the section reserved for the US Department of Health and Human Services is a section that focuses on generics and how these can save an estimated $11.1 billion over 10 years - or roughly $1 billion a year (look here). Not small change, yes?

But how? There are two proposals. One would shrink exclusivity for biologics to seven years from 12 years, a move that would roll back a provision in health care reform. You may recall that brand-name drugmakers won a 12-year exclusivity period last year as part of an effort to create a so-called FDA approval pathway for biosimilars. Generic drugmakers, of course, wanted a shorter term.

At issue is the balancing act between protecting R&D investment and intellectual property with an interest in speeding access to needed and expensive medications. Whether the Obama proposal will pass, however, is another matter. Any move to shrink exclusivity is going to generate a bitter fight. In recent weeks, for instance, different groups of US senators have sent competing missives to FDA commish Margaret Hamburg about varying interpretations of exclusivity.

The Obama proposal “strikes a balance between promoting affordable access to medication while at the same time encouraging innovation to develop needed therapies,” the White House argued in budget documents. The effort would generate savings of $80 million beginning in 2015 and eventually could yield savings of $2.3 billion from 2012 to 2021.

The other proposal would stop pay-to-delay deals in which brand-name and generic drugmakers settle patent disputes by exchanging a payment for a commitment to refrain from marketing a generic for a set period of time. However, the Federal Trade Commission says the deals are anti-competitive because they force consumers and government healthcare programs to pay high prices.

The pay-for-delay proposal would save $540 million starting in fiscal 2012 and nearly $8.8 billion through 2021 (see the summary tables here). A Congressional Budget Office report estimated the federal government could save nearly $2.7 billion over 10 years if the deals were restricted. The FTC has also tried to convince Congress to pass legislation (see this).

UPDATE: PhRMA and BIO sent us the following statements:

From BIO: “The Administration’s budget includes a proposal which flies in the face of President Obama’s own call for the US to ‘win the future’ and maintain our nation’s leadership in research and technology…what is proposed would jeopardize continued biotechnological research and development that will help create new jobs here in the US, lead to new breakthrough cures and therapies, and help us out-innovate the rest of the world.

” Under this proposal, most biotech firms would be unable to recoup their investments in new medicines which ordinarily top $1 billon and involve 15 years of research and development…The biosimilars provision was one of the only bipartisan provisions of the health care law…Now the Administration is proposing to change this bipartisan, strongly supported provision and provide our innovators with dramatically less protection, in the name of questionable short-term budgetary savings that will come at the price of long-term costs to our healthcare system and our economy.”

From PhRMA: “PhRMA is disappointed that the President’s budget proposal would diminish crucial incentives for future U.S. medical innovations…Fair data protection for innovative biologic medicines is critically important to the development of cutting-edge medicines that allow American patients to live longer, healthier and more productive lives. Without such protection, US innovation would be seriously threatened, along with tens of thousands of American jobs.

“The President’s proposal to reduce the 12 years of data protection – the law’s only bipartisan provision – would disrupt this balance, seriously threatening innovative companies’ ability to fund research on future treatments and cures. Such a public policy flies in the face of the Administration’s recent commitments supporting domestic innovation, biomedical research, jobs and US competitiveness. In fact, the proposed policy could jeopardize American competitiveness since the US would then provide less data protection for new, innovative biologics than is currently bestowed in Europe.”