How to Foster Competition While Cutting Drug Costs

The 21st century has ushered in a new generation of seemingly miracle drugs that are turning cancers, multiple sclerosis, rheumatoid arthritis, diabetes, macular degeneration, psoriasis and several rare diseases into manageable conditions.

These medicines, based on complex biological molecules, are known as biologics, and they are transforming the pharmaceutical industry. However, regulatory and policy changes are paramount in order to make biologics more available to patients in the U.S. who need them.

Biologic treatments can cost tens of thousands of dollars a year, even hundreds of thousands. Given that they are the fastest-growing class of therapeutic products in the U.S. market, that adds up to significant costs to the U.S. health care system.

Biosimilars – which, as the name implies, are similar versions of biologics that can be substituted for brands – can ease that cost burden. They aren’t as cheap as generic versions of older chemical drugs, as biosimilars are far more complex and costlier to develop and manufacture.

Nevertheless, they are expected to be priced 15 to 30 percent lower than their biologic counterparts, creating potential savings of billions of dollars. Their availability also gives physicians and consumers greater choice and flexibility in their treatment options, promoting increased market competition.

However, that’s only if biosimilars reach the market. Currently, only nine biosimilars are approved in the United States, compared with over 30 in Europe. Legal murkiness in the domestic market has allowed some biologic makers to pursue aggressive strategies to impede entry, such as “pay-for-delay,” and refusing to sell biosimilar developers the samples needed to evaluate safety and efficacy. These delays are still occurring nearly 10 years after a law was approved in the United States to permit the biosimilars pathway.

It currently costs about $150 million to $200 million to develop a biosimilar; such anti-competitive tactics threaten to push those costs much higher, eliminating the savings that biosimilars could bring. Food and Drug Administration Commissioner Scott Gottlieb recently said that “while we see a growing number of sponsors pursuing biosimilar development programs, the economics of [biosimilar] development are currently unstable, and the pipeline of biosimilar products that we hope for could be dramatically affected by the weakening of market incentives to bring these products to patients.”

It is critical that lawmakers and regulators act to ensure a robust and competitive market for biosimilars. Specifically, the FDA should act swiftly to finalize pending regulations and guidance in this area to allow for direct substitution of biosimilars that are safe and effective alternatives to more costly brand name biologics.

Clear guidance from the FDA on the interchangeability designation could trigger increased biosimilar production, bolstering competition and lowering research and development costs. Additionally, neither federal nor state laws or regulations should impede the ability of pharmacists to make substitutions when filling a biologic prescription for an interchangeable biologic without directly notifying the prescribing physician of the change.

Congress can spur biosimilar development by passing a pending bipartisan bill, the CREATES Act, which would allow biosimilar makers to sue in federal court to obtain the drug samples necessary for developing generic versions. The bill would also create incentives to encourage physicians to prescribe biosimilars (incentives that already exist for generic drugs) and give the FDA more leeway to approve alternative safety protocols if a branded pharma company tries to block a biosimilar. Finally, lawmakers should retain changes in the federal Bipartisan Budget Act that would allow biosimilars to be covered under the Medicare donut hole.

The advantages of such policy changes would extend beyond any individual drug. By introducing competition and lowering health spending, biosimilars would create space in the health care budget to pay for more game-changing medicines, such as CAR-T and gene therapies. Patients deserve nothing less.


Susan Cantrell is CEO of the Academy of Managed Care Pharmacy.

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