Regulatory Uncertainty and Industry Practices Force Consumers to Overpay on Biologics

Biopharmaceuticals are preparations synthesized from living organisms, especially a human or animal protein, such as a hormone or antitoxin that is used as a diagnostic, preventive, or therapeutic agent. If the preparation is the original drug, it can be patented. Most of us have seen TV adverts for patented new wonder drugs such as Humira, Enbrel or Remicade.

There is another class of drugs called biosimilars, and as the name implies, their therapeutic effect is very similar to their patented competitor. In order for the FDA to approve use of these biosimilars on patients, the biosimilar maker must prove that when compared with the original drug, the biosimilar has no clinically meaningful differences in terms of safety, purity and potency.

During their period of exclusivity, patented drugs are often priced at what seem to be nosebleed levels. For example, two 40mg syringes of Humira (adalimumab) are priced at $5,360 at three major chain pharmacies. To protect that high price, Humira’s maker, Abbvie, is using a patent defense strategy to delay launch of adalimumab biosimilars. Abbvie believes it can delay the launch of Humira biosimilars by five years.

Inflectra is a biosimilar for the original drug Remicade. Inflectra is priced at a $980 average for a 100mg vial in three major chain pharmacies. Remicade is priced at $10,900 in the same pharmacies for the same dosage. Consumers can save 90% by using the available Remicade biosimilar.

The U.S. biosimilar market is expected to grow to approximately $11 billion in 2022, at an annual rate of 57 percent. As a result of biosimilar uptake and brand net cost erosion, the U.S. healthcare system could save a cumulative $50 billion for consumers by 2022.

For consumers to benefit from the strong competition that biosimilars infuse in the marketplace, FDA must approve more biosimilars — they must not be entangled in patent litigation, they must be part of the drug distribution channels, and physicians must prescribe them. Unfortunately, in the US, those pro-consumer conditions are rarely met.

The Council of Economic Advisors noted that “guidelines for demonstrating biosimilarity were finalized only in 2015,” five years after passage of the BPCIA [Biologics Price Competition and Innovation Act]. FDA regulations have been a long time coming, and that led to some drug makers deferring biosimilar development.

Still not finalized are the regulations for declaring that a biosimilar is “an interchangeable biologic” compared with the original drug. This had led to confusion over the naming convention between biologics and biosimilars. Some pharmaceutical makers are holding back for more clarity in regulations, because it can seem unclear whether the market will reward them for the extra, unspecified effort after approval. Failure for expediting regulations that encourage competition means less competition and higher prices. Consumers lose.

Drug distribution channels are another impediment to the widespread availability of biosimilars. For biological medicines, providers (hospitals or physician groups) purchase medicines, and then bill the payers (insurance company or the government), adding a percentage markup. Because biosimilars are typically so much cheaper than the biologic originals, the markup is far less in dollars, and less attractive for the provider to include in its formulary.

Another industry practice called “fail first” or “step therapy” is applied to biosimilars, but in a logically reverse manner, namely the original biologic is tried on the patient, and if that fails, the biosimilar is tried. Clearly the cheaper drug should be tried first.

Biosimilars hold much value for consumers. The faster that FDA approves them, the less time they are tied up in court. The quicker the industry treats them fairly, then the faster consumers will benefit.

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