July 15, 2014 at 5:00 am ET
In 1984, generic drugs entered the U.S. market for the first time. Since then, these products have provided access to affordable, high-quality medicines for patients who needed them, saving the U.S. healthcare system more than $1 trillion in the last decade alone. Now, for the first time in 30 years, the United States has the opportunity to once again obtain hundreds of billions in healthcare savings in the coming decade and improve patient access to life-impacting treatments with the introduction of a new class of follow-on drugs: biosimilars.
A biosimilar is a biologic medication that is proven to be just as safe and effective as the originator biologic drug it is modeled after, but offers significant cost savings. For nearly 25 years, biologic drugs have improved the quality of life for patients suffering from some of the most widespread and difficult-to-treat illnesses, including cancer, chronic kidney disease and auto-immune disorders, such as rheumatoid arthritis and ulcerative colitis. But biologic drugs are extremely expensive, costing up to $100,000 per year or even more per patient. Biosimilars have the potential to reduce those costs and increase patient access, but it is integral for experts to help physicians and patients understand the facts about biosimilars to ensure these savings come to fruition.
Within the next year, Hospira, the first and only North American company to produce and market biosimilars in Europe and Australia, along with other leading pharmaceutical companies, will submit the first applications for biosimilar drugs to the U.S. Food and Drug Administration (FDA) for approval. This means that biosimilars could benefit the U.S. healthcare system and patients as soon as 2015.
And why is that so important? Greater access to biosimilars will ensure that these life-impacting, more affordable medicines are available to improve the lives of patients. Over the next decade, the widespread introduction and acceptance of biosimilar drugs is projected to save the U.S. healthcare system up to $250 billion.
It’s undisputed that as a country, we spend an enormous amount on healthcare. In fiscal 2014, the federal government allocated 27 percent of federal spending to healthcare – the largest segment of the budget. This is also the segment with the largest opportunity for cost savings.
As biologic drug use has increased, costs to the U.S. healthcare system have swollen in response. For example, in 2013 alone, spending on biologics grew by nearly 10 percent to reach 28 percent of the $329 billion spent on medicine in the United States, up from 21 percent in 2008. And while biologics have provided great benefits to patients, several of them have maintained a U.S. market-exclusive, monopoly position that will soon be expiring, thereby allowing for the introduction of more affordable biosimilar medications.
Hospira has been providing biosimilars since 2008 in Europe – where many biologic patents expire ahead of the United States – and in 2013 received approval for Inflectra™ (infliximab), Europe’s first biosimilar monoclonal antibody (mAb) therapy. Hospira launched its first biosimilar in Australia in 2011. Millions of doses of safe and effective biosimilar medicines have been prescribed to patients across Europe and Australia, delivering safe and effective treatment with significant cost savings.
Many compare these drugs to generics. Indeed, at one time they were commonly called “biogenerics,” despite the scientific inaccuracy of the term. However, it is crucial for healthcare providers and policy makers to understand the difference between generics and biosimilars. This will help them properly plan for the role that biosimilars will play in the U.S. healthcare system starting as soon as 2015.
How will the advent of biosimilars be different than the rise of generics in 1984? There are three primary reasons:
1. Biosimilars are far more complex. Unlike typical generic drugs made from synthetic chemicals, biologic drugs are produced from a living organism, and can be up to 800 times larger in composition than a simple generic drug like aspirin. Unlike synthetic products, an exact copy of a biologic cannot be made every time. However, biosimilars have the same clinical and safety results as the original biologic drugs.
2. Biosimilars take longer and cost more to develop. Biosimilars are much more complex products that require more investment to create and more testing to gain regulatory approval. It typically costs $100 million to $200 million and requires eight to 10 years to develop a biosimilar product. By comparison, it takes $1 million to $5 million and three to five years to develop a traditional generic drug. The FDA’s biosimilars pathway for regulatory approval will be abbreviated from the originator biologics pathway — which makes them less costly to bring to market and more affordable for patients and healthcare systems. However, the process is still much longer than the regulatory pathway for traditional generic drugs.
3. Generics create greater per-unit reductions in costs. Based on Hospira’s experience in Europe and Australia, we expect biosimilars to bring initial savings of approximately 20 percent to 30 percent, versus initial savings of 80 percent for generics, given the cost and time to get biosimilar drugs to market and the expensive manufacturing process. But savings for biosimilars will still be substantial, as the savings are applied to vastly larger gross costs of the original biologic drugs. From 2007 through 2020, savings generated by biosimilars are expected to reach as much as 33 billion Euros in eight EU countries alone.
But the introduction of biosimilars on its own won’t guarantee change. We need federal and state biosimilars policies in place to create conditions for maximum adoption while ensuring a high scientific and clinical bar. And we have learned from our more than six years of experience providing biosimilars that education is the key to their acceptance and adoption by healthcare professionals. Education is essential to increase the confidence of prescribers, insurers and patients about the proven safety and effectiveness of high-quality biosimilars. Confidence in these more affordable biologic drugs ensures that biosimilars will be accepted and adopted by healthcare providers. Adoption of more affordable therapies will improve access for patients who need these medicines and deliver savings to the healthcare system. The equation is simple and will benefit both patients and efforts to reduce the spiraling costs of healthcare.
Biosimilars will not radically alter the face of healthcare overnight. But if government officials, healthcare stakeholder groups and industry leaders in the United States work together and engage in robust educational campaigns to increase awareness and acceptance, we can ensure adoption and access while unlocking up to $250 billion in savings for U.S. patients and the healthcare systems that serve them. Those are the 250 billion reasons why we must ensure that the promise and reality of biosimilars are well understood.
Dr. Sumant Ramachandra, M.D., Ph.D., is a Senior Vice President and Chief Scientific Officer at Hospira, Inc.