Biosimilars are the grand experiment. If the biosimilar experiment succeeds, competition will lead to lower prices and increase access for patients. However, if biosimilar competition does not advance the result may be price controls. This could decrease the incentive to innovate and lead to fewer new drugs being developed.
Biologics are among the highest priced drugs. Nearly all of the net increase in drug spending in the U.S. over the last few years has been driven by biologics. These biologics treat and can cure some of the most serious illnesses.
Most biologics are specialty drugs. Specialty drugs are expected to account for half of the total U.S. drug spend by 2020 even though only 1% to 2% of Americans use specialty drugs.1 The U.S. itself accounts for around 50% of the biologics market. Many biologics have sales of over a billion dollars with some over $10 billion.
Biosimilars in the U.S. are relatively new with the first U.S. approval in 2015. Uptake has not been as great as expected due to various barriers to entry such as high costs of R&D, FDA approval issues, litigation issues and originator’s response.
Biosimilars cost more to develop and the process takes much longer than generics. Its development is expected to cost between $100 million and $200 million and take between eight to ten years. In contrast, generic drugs cost around $1 to $2 million to develop.
Even though the first biosimilar was approved in U.S. in March 2015 entry was delayed until Sept. 2015 because of legal issues. The courts had to decide various issues concerning biosimilar entry. Furthermore, Pfizer has filed an antitrust suit concerning volume discounts, exclusivity, and other contract issues which it claims has inhibited biosimilars ability to compete. Under out of court settlements concerning patent issues, several companies have agreed not to have their Humira biosimilar enter until 2023.
Since costs are greater for biosimilars, their percentage decrease in prices are not expected to be as great as generic drugs. Even if the percentage decrease in price due to biosimilar competition decreases less than generics, the savings to consumers and society could be much greater because of their higher prices. A 20% decrease in $100,000 biologics is $20,000, whereas an 80% decrease in $100 drug is $80.
Generic drugs saved consumers $253 billion in 2016 and $1.67 trillion in healthcare costs between 2007 and 2016.2 According to IMS, biosimilars “are expected to deliver total savings of as much as $110 billion to health systems across Europe and the U.S. through 2020.”3 Another benefit from biosimilar competition is an increased interest in developing new drugs by originators as existing drugs lose market share and profits.
There is a tradeoff between competition with lower prices and innovation. Public policy needs to balance these goals. Biosimilar competition will lead to lower prices and increased access for patients, if the experiment succeeds.
- Frazee, S (2018) “Highlights from PBMI’s 2018 Trends in Specialty Drug Benefits Report”, Pharmacy Strategies Group.
- Association for Accessible Medicine, (2017) “2017 Generic Drug Access and Savings in the U.S. Report” https://accessiblemeds.org/resources/blog/2017-generic-drug-access-and-savings-us-report).
- IMS Institute for Healthcare Informatics, (2016) “Price declines after branded medicines lose exclusivity in the U.S.” [Internet]. Parsippany (NJ): IMS; Jan https://www.iqvia.com/-/media/iqvia/pdfs/institute-reports/price-declines-after-branded-medicines-lose-exclusivity-in-the-us.pdf?la=en&hash=642B9A40F-3F176CE93E8E9F791EE-2BE4975C8580&_=1513600175779.