Generics and Biosimilars are the Keys to Lower Drug Prices

In September 2021, the Department of Health and Human Service (HHS) released its plan to lower drug prices. Unfortunately, for consumers and patients, the report contained grim statistics that highlighted the cost of drugs in this country and the medical insecurity these prices impose. HHS estimates that each year, “Americans spend more than $1,500 per person on prescription drugs,” a figure that is “far higher than any comparable nation.”

These high prices have created substantial medication insecurity and left more than 18 million Americans “unable to pay for at least one doctor-prescribed medication for their household.”

While the report emphasized the high cost of medication in the United States, it also outlined several policies to lower drug prices and liberalize access to essential, often life-saving medications. One such policy that could substantially lower prices for Americans outlined by HHS is to “promote biosimilars and generics.”

A biosimilar drug is a prescription drug that is “very close in structure and function” to brand-name drugs and often “made from the same proteins or pieces of proteins.” However, unlike brand-name drugs that must undergo extensive clinical trials, biosimilars can undergo an abbreviated pathway to demonstrate safety and effectiveness. This expedited approval process ultimately means biosimilars are cheaper to produce, meaning lower costs to patients.

Similar to biosimilars, generic drugs “contain the same active/key ingredient” of brand name drugs and also “have the same strength, use the same dosage; and use the same route to administration.” Unlike brand-name drugs, however, generic drugs undergo an expedited approval process that allows them to be produced at a significantly lower cost which is then passed onto patients in the form of lower drug prices.

These lower costs translate to real savings for consumers and patients. For example, in September 2021, Amgen estimated that biosimilar products had saved Americans over $2 billion in the second quarter of 2021 and $9.8 billion over the previous five years. These substantial savings are possible because biosimilar products often sell between 15% and 37%  lower than brand-name drugs.

The Food and Drug Administration (FDA) has also found that generic drugs can lower the price of medications for patients by as much as 95% when generic alternatives enter the market.

Recognizing the significant price declines generics and biosimilars cause when they enter the market should signal policymakers that enhancing competition is the key to lowering drug prices for Americans.

For patients, these lower costs mean medications are affordable, diseases and illnesses are more treatable, and dramatically enhanced quality of life.

Perhaps it is because of the substantial savings biosimilars offer that there has been an increase in the number of practices that specifically seek to keep biosimilars off the market, including pay-for-delay schemes where generic manufacturers are offered financial incentives “not to bring lower-cost alternatives to market.” One such pay-for-delay agreement occurred in 2010 between Impax and Endo Pharmaceuticals, where Impax was paid $112 million not to release a generic competitor to Endo’s painkiller Opana ER until 2013. The Federal Trade Commission (FTC) has estimated these schemes cost “consumers and taxpayers $3.5 billion in higher drug costs every year.”

Patent abuses have also been used to delay generics and biosimilars from entering the market. Secondary patents protect pharmaceutical manufacturers’ intellectual property, such as delivery methods and active ingredients. For example, two Human Immunodeficiency Virus (HIV) medications, Ritonavir and Lopinavir, have a combined 108 patents preventing generic alternatives from being manufactured and sold until 2028. Because of patents, Ritonavir and Lopinavir retail at $1,033.79.

Thus, by placing a secondary patent on any aspect of a brand-name drug, pharmaceutical manufacturers have significant leverage to block generic manufacturers from bringing their products to market. When it comes to lowering drug prices for Americans, HHS correctly identifies the role generics and biosimilars will play. Nevertheless, generics and biosimilars are just part of the solution as any action to enhance their availability must be followed by crackdowns on pay-for-delay schemes and the abuse of patents. Only then will the cost of medications fall into line with other countries, and fewer Americans will be forced into medication insecurity.

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