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Biosimiliars: how will they affect the pharmacoeconomics of health care?

By: Kenny Chan, PharmD

Competition is the greatest driver of innovation and cost savings. The U.S. health care system relies heavily on generic medications to reduce the cost of drug spending. Since the Hatch-Waxman Act of 1984, generic versions of chemically synthesized, “small molecule” drugs have dominated the market and contributed to over 80% of all prescribed drugs. In 2014 alone, generics saved consumers about $254 billion.1 When the Hatch-Waxman Act was conceived to stimulate generic drug growth, the class of drugs called “biologics”, which are derived from living cells and include vaccines, monoclonal antibodies and certain proteins, was inconsequential compared to small molecule drugs. Today, biologics account for more than 15% of U.S. drug expenditures and worldwide sales exceed $150 billion annually.2 In the coming years, the patents on many of these biologics including Herceptin®, Aranesp®, Humira® and Avastin®, will expire, creating a wave of manufacturing opportunity for generic drug manufacturers. The Biologics Price Competition and Innovation Act (BPCIA) was introduced in 2009 to decrease biologic drug cost by encouraging the production of generic biologics called, biosimilars.

Biosimilars are biologic drugs that are proven to be as safe and effective as the parent biologic drug. Traditionally, biologics are approved by the FDA under the Biologics License Application (BLA). The BLA is a lengthy approval process that grants biologics 12-year marketing exclusivity, patent protection, and nondisclosure of proprietary data. In an effort to speed the development of biosimilars, the Affordable Care Act (ACA) introduced an “abbreviated pathway that will depend on existing data” to approve biosimilars as follow up versions of marketed biological drugs with “no clinically meaningful differences” from the original product.3 The abbreviated pathway, known as the abbreviated Biologics License Application (aBLA) was implemented by the FDA in 2012 under the BPCIA. Biosimilar drugs under the aBLA are granted interchangeability with biologics and a shortened approval process. However, they relinquish exclusivity, patent licensing and must disclose proprietary data if challenged. Because biosimilars extrapolate and “piggy back” off the originator biologic data, they bypass costly drug development phases and are typically priced 15-30% less than the originator biologic.4

In September 2015, Novartis launched the United States’ first biosimilar drug Zarxio®, its generic form of Amgen’s white blood cell-boosting product Neupogen®, at a 15% discount under the aBLA. The 15% discount is the same price gap set when Zarxio® launched in Europe in 2009. The price gap has since widened to around 25%.5 As a point of comparison, when the first generic copy of a small-molecule drug reaches the market, there is characteristically about a 30% drop in brand price; that reduction often reaches 80% as additional generic versions appear.6 Biologics have a lower price gap upon introduction than generics because they are much more complex and require extensive clinical trials to gain regulatory approval. One year after approval, biologics typically retain at least 90% of the original price and after 4 years, 80%.7 It typically costs $100 million to $200 million and requires eight to ten years to develop a biosimilar drug. By comparison, it takes only $1 million to $5 million and three to five years to develop a generic drug.8 In addition to greater investments, biosimilars must forgo a more vigorous approval process than small molecule generics.

Unlike small molecule generics, biosimilars are required to go through extensive post-marketing surveillance and clinical trials to demonstrate their safety, effectiveness and interchangeability with the originator biologic. Because of the complexity of biologic drugs and risk for immunogenicity, there is no blanketed approval process for biosimilars. Each biosimilar will have its own unique set of guidelines under the aBLA based on drug class. Many of these abbreviated biosimilar guidelines, including those for monoclonal antibodies, have yet to be defined in the aBLA, prompting manufacturers to utilize the BLA instead.9

Under the BLA, similar biologics are priced as brand drugs and do not necessarily lower drug cost.  For example, the interferon (IFN) ß-1a products Avonex® and Rebif®, and IFN β-1b product Betaseron®, have all enjoyed price increases of greater than 10% for the last several years despite their clinical similarities.7 Furthermore, the BLA protects similar biologics from litigation by protecting proprietary data. The aBLA pathway on the other hand, exposes biosimilar manufacturers to infringement suits by requiring the full disclosure and publication of the biosimilar dossier. Recently, Novartis was locked in litigation with Amgen over its biosimilar Zarxio® and has agreed to delay its marketing despite FDA approval. The additional approval requirements, lack of well-defined guidelines, and legal framework dampen the already soft outlook on biosimilars.

As the biological share of the total pharmaceutical market increases, the high cost of brand biologics places additional burden on payers. The average annual brand biologic costs $34,550 and far surpasses the price of small molecule generics. Moreover, the rate of biologic price increase far exceeds the rate of inflation. In 2010, biopharmaceuticals experienced a 9.2% price increase compared to a 0.3% increase in the Consumer Price Index.9 Medicaid rebate data have increased from 15% to 23% to compensate for biologic inflation.9 The combination of rising prices of brand biologics paired with a finite payer budget put biosimilars in a place to decrease U.S. drug costs, albeit at a lesser rate than generics.

Generic competition leads to greater cost savings. However, in the case of biosimilars, the FDA does not provide adequate legal frame work, incentive, or well defined parameters for biosimilars under the aBLA. As a result, biosimilar manufacturers are utilizing the BLA to produce similar biologics instead of biosimilars under the aBLA. These similar biologics behave as brand biologics and do not decrease prices to the extent that small molecule generics do to brands. Until the FDA can provide a comprehensive aBLA pathway with more attractive incentives, biosimilar production will be delayed, thus mitigating their maximum cost saving potential. Healthcare has a lot to gain from biosimilars, but currently lacks the infrastructure to nurture a healthy market.



  1. Generic Drug Savings in the U.S Seventh Annual Addition 2015, Generic Pharmaceutical Association, Executive Summary, pg. 2, http:/www.gphaonline.org/media/wysiwyg/PDF/GPhA_Savings_Report_2015.pdf
  2. Global Market For Biologics To Reach Nearly $252 Billion In 2017. Bccresearch. http:/www.bccresearch.com/pressroom/bio/global-market-biologics-reach-nearly-$252-billion-2017. Published 12/27/2012. Last Updated January 2013. Accessed 2/14/2016.
  3. Woodcock J. Follow-on Protein Products. fda.gov http:/www.fda.gov/NewsEvents/Testimony/ucm154070 Published 03/26/2007. Last Updated 07/22/2009. Accessed 2/14/2016.
  4. Simoens S. Biosimilar medicines and cost-effectiveness. Clinicoecon Outcomes Res. 2;3:29-36. doi: 10.2147/CEOR.S12494
  5. HIRSCHLER B. Novartis launches first U.S. ‘biosimilar’ drug at 15 percent discount. Reuters .http:/www.reuters.com/article/us-novartis-drug-idUSKCN0R30C220150903. Published 09/03/2015. Accessed 2/14/2016.
  6. Miller H. Do You Think ‘Biosimilars’ Will Reduce Healthcare Expenditures? Think again. Forbes. http:/www.forbes.com/sites/henrymiller/2013/03/27/do-you-think-biosimilars-will-reduce-healthcare-expenditures-think-again/#4c6ea38d24cd. Published 03/27/2013. Accessed 2/14/2016.
  7. Wiatr C. US biosimilar pathway unlikely to be used: developers will opt for a traditional BLA filing. BioDrugs. 2011;25(1):63-7. doi: 10.2165/11588410-000000000-00000.
  8. Federal Trade Commission 2009. Emerging Health Care Issues: Follow-on Biologic Drug Competition. Federal Trade Commission Report June 2009. http:/www.ftc.gov/os/2009/06/P083901biologicsreport.pdf
  9. Blackstone EA, Fuhr JP Jr. Innovation and Competition: Will Biosimilars Succeed?: The creation of an FDA approval pathway for biosimilars is complex and fraught with hazard. Yes, innovation and market competition are at stake. But so are efficacy and patient safety. Biotechnol Healthc.2012;9(1):24-7.
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