Everyone is familiar with generic drugs that were once proprietary. As soon as the patent runs out, companies rush in with their version of a popular drug.

But so far, biotech medicines haven’t suffered this fate, largely because they’ve been too new. In fact, when the generic drug laws, known as the Hatch-Waxman Act, were passed in the 1980s, biotech drugs were so obscure that they weren’t included in the regulations, and the FDA still hasn’t figured out what to do about it.

Now, patents on many biotech drugs are finally about to expire, and the race is on to determine who will benefit from the potential market in biogenerics, as they’re being called. Biotech drugs are fundamentally different from the pharmaceuticals of the past. They include such exotic ingredients as interferon, human growth hormone, and targeted antibodies. Under their brand-name banners, they also generate some $32 billion in annual sales and represent the fastest growing business in medicine. In fact, biotech drugs are outperforming the broader pharmaceutical industry by two to one.

They’re expensive, they’re in high demand, and until now, their success has gone unchallenged. But that’s about to end, and the companies that can overcome the regulatory, legal, and technical hurdles stand to reap huge rewards. Unfortunately, the U.S. stands to lose if it doesn’t unravel the regulatory nightmare of the Food and Drug Administration.

As a result of that confusion, some observers don’t see biogenerics taking hold in this country until 2010, by which time European companies could be well established in the market. The European regulatory body issued regulations and guidelines in 2003, and although no product has yet been approved for generic manufacture, it could happen within a year or two, according to a recent Research and Markets report.

With a dozen biotech patents due to expire next year, the heat is definitely on. But not everyone wants the FDA to act. Those companies holding the aging patents, for example, don’t want upstart companies manufacturing cheap versions of their drugs. Pfizer has already submitted a petition to the FDA to use an obscure rule to prevent biogenerics from going forward in the U.S.

The stakes are enormous. Amgen alone has two red blood cell enhancers that earned...