Improving Value

Drugs - Biosimilars

Biologics are complex pharmaceuticals derived from living organisms that are used to treat medical conditions ranging from autoimmune disorders to cancer. Biologics require special handling and may require infusion or injection in a doctor’s office. Increasingly, these drugs are specifically tailored to specific populations. Biosimilars, sometimes called “follow-on biologics,” are not identical to their reference biologics, but have the same mechanism of action.

Biosimilars could impact health care costs by providing an alternative to biologics, which are notoriously expensive. In 2017, biologics constituted 2 percent of all U.S. prescriptions but accounted for 37 percent of net drug spending. Humira, the world’s most profitable drug, is a biologic medication. AbbVie, Humira’s manufacturer, has been awarded over 75 patents for the drug, which brought in over $14 billion in 2015 alone.¹

Research by PhRMA, the leading advocacy organization for the pharmaceutical industry, suggests that approximately 1,000 biologics are under development. Moreover, it is likely that drug spending reports underestimate biologic spending because many of these drugs are infused or injected in physician offices. Nearly half of this spending is billed through the medical benefit, not the pharmacy benefit, and thus is not reflected in data on prescription drug spending.²

Biologics have a 12-year period of “exclusivity,” meaning that the U.S. Food & Drug Administration (FDA) does not approve a generic competitor during this period of time. Exclusivity periods effectively extended drug manufacturers’ patent on brand name drugs, allowing them to gain monopolies for their products.

Many consumer advocates believe that a seven-year period of exclusivity would be sufficient to create incentives for innovation without driving up costs by delaying generic entry for too long. Additionally, they argue that exclusivity periods must be granted sparingly.

Biosimilars introduce competition into the drug market similarly to generic drugs. As of July 2019, the FDA has approved 23 biosimilars. The U.S. has trailed other developed nations in terms of approving and marketing these products; although they have been available in the European Union since 2006, the U.S. approved its first biosimilar in 2015.³ The hope is that the availability of biosimilars will drive down prices, as is observed with the introduction of generic drugs. (Evidence suggests that two generic competitors for a drug can lower the average generic price to nearly half that of the brand name product. Even more generic competitors can lower the average generic price to 20 percent of the price of the brand name product.)

The Association for Accessible Medicines and other experts have estimated that increased availability of biosimilars could save $54 billion over the next decade. An increase in biosimilar market share to 25 percent would result in $2.5 billion in annual savings, according to the Pacific Research Institute. The cost-cutting potential has already been demonstrated in Europe. For example, in Romania and Slovakia, biosimilars for Amgen’s filgrastim dropped the list price for the drug by more than 60 percent. This drove up the medication’s use by 500 to 2500 percent.  

While the evidence is promising, clarity around interchangeability guidelines and state substitution laws are needed to increase biosimilar uptake in the U.S. Biosimilar interchangeability guidelines state that any therapy granted an interchangeable designation is essentially the same product, and therefore will produce the same clinical result, as the reference biologic. Establishing interchangeability, which requires manufacturers to meet standards beyond those required for biosimilar approval, is necessary for pharmacists to be able to substitute biosimilars for biologic products without provider intervention. States must establish requirements for substituting biosimilars for reference biologics. The FDA finalized rules for interchangeability in May 2019. 

Notes

1. Moore, J. Duncan and Kristen Schorsch, “How AbbVie has won the Humira fight-so far.” Crain’s Chicago Business (2016, November 05).  http://www.chicagobusiness.com/article/20161105/ISSUE01/311059994/abbvie-s-humira-legal-wall-will-protect-patented-blockbuster-for-years

2. The Express Scripts 2014 Drug Trend Report, April 2014, p. 11

3. Biosimilars are regulated by the Biologics Price Competition and Innovation Act, which was approved as part of the Affordable Care Act. Generic medications are regulated by the Hatch-Waxman Act. https://www.fr.com/wp-content/uploads/2019/03/Comparison-of-Hatch-Waxman-Act-and-BPCIA-Chart.pdf>