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Biosimilars Seen Saving U.S. $54 Billion

Pills and dollar bill


24 October 2017. An analysis of health care costs shows increasing the use of substitute biologic treatments known as biosimilars could save the United States some $54 billion over 10 years. The study, conducted by the Rand Corporation, a public policy think tank in Santa Monica, California, and funded by a maker of generic and biosimilar drugs, was released yesterday.

The Rand Corp. analysis, led by policy researcher Andrew Mulcahy, sought to estimate dollar savings from greater use of biosimilars, as well as explore key policy issues on these treatments. Biosimilars are engineered replacements for original branded biologic drugs, and not one-to-one chemical substitutes like generic drugs. As a result, biosimilars are more complex and must show they are interchangeable with the branded drugs they seek to replace.

Mulcahy and colleagues reviewed studies conducted in recent years on pharmaceutical spending, as well as sales histories of more than 100 biologic therapies. Yet, the industry so far has little hard experience with biosimilars. Despite a 2010 law creating a special pathway for FDA to review new biosimilars, the agency as of July 2017 approved only 5 of these drugs, with 2 of the treatments yet to reach the market.

The researchers estimate that substituting biosimilars for branded drugs would reduce spending on biologics by 3 percent, which translates to $54 billion from 2017 to 2026. Given the complex nature of pharmaceutical markets, the savings over this 10-year period could range from $25 billion to as much as $150 billion. Decisions to use biosimilars are rarely made by the patient alone, but more often are the result of health care provider recommendations and insurers’ coverage of the drugs. The team identified competition between branded and biosimilar products as the most important factor in determining the amounts spent.

The Biologics Price Competition and Innovation Act, passed in 2010 as part of the Affordable Care Act, provides for an accelerated pathway for review of biosimilars in FDA. The researchers found that despite the law, the market for biosimilars is still shaking out as regulatory policies evolve, and acceptance grows by patients and health care providers. Savings from biosimilars, say the researchers are more likely to affect the bottom lines of drug makers, insurers, and health care providers in the short term, with savings extended to consumers and taxpayers later on.

“Biologics account for the fastest-growing segment of prescription drug spending,”says Mulcahy in a Rand Corp. statement, “but biosimilars have the potential to help slow some of the increase. However, there remain many important industry, regulatory and policy decisions to be made that will influence whether such savings are realized.”

Among those decisions is the extent of government intervention to realize those savings. The researchers identify alternative strategies for policy makers: allow the market to evolve and reduce uncertainties as FDA gains more experience reviewing biosimilar drugs, or intervene directly into biologics markets to steer biosimilars into a sustainable competitive state.

The study was funded by the Sandoz division of drug maker Novartis, hardly a disinterested observer on the subject. Sandoz produces generic and biosimilar drugs, including the first biosimilar treatment approved by FDA in March 2015, and was a party in a key legal case involving these therapies. As reported by Science & Enterprise, a U.S. Supreme Court decision in June 2017 handed Sandoz and other biosimilar developers a victory in removing a 6-month waiting period to begin marketing their products after FDA approval.

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