Biosimilar Drugs May Save Health Care Billions

Introduction

Introducing competing "bio-similar" versions of complex biologic drugs used to treat illnesses such as cancer and rheumatoid arthritis could cut spending on biologics in the United States by $44 billion over the next decade, according to new analysis from the RAND Corporation.

Main Item

Affordable Care Act

The Patient Protection and Affordable Care Act (Affordable Care Act), signed into law by President Obama on March 23, 2010, amends the Public Health Service Act (PHS Act) to create an abbreviated licensure pathway for biological products that are demonstrated to be "bio-similar" to or "interchangeable" with an FDA-licensed biological product. This pathway is provided in the part of the law known as the Biologics Price Competition and Innovation Act (BPCI Act). Under the BPCI Act, a biological product may be demonstrated to be "bio-similar" if data show that, among other things, the product is "highly similar" to an already-approved biological product.

Biologics

Biological products include a wide range of products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins. Biologics can be composed of sugars, proteins, or nucleic acids or complex combinations of these substances, or may be living entities such as cells and tissues. Biologics are isolated from a variety of natural sources - human, animal, or microorganism - and may be produced by biotechnology methods and other cutting-edge technologies. Gene-based and cellular biologics, for example, often are at the forefront of biomedical research, and may be used to treat a variety of medical conditions for which no other treatments are available. In contrast to most drugs that are chemically synthesized and their structure is known, most biologics are complex mixtures that are not easily identified or characterized. Biological products, including those manufactured by biotechnology, tend to be heat sensitive and susceptible to microbial contamination. Therefore, it is necessary to use aseptic principles from initial manufacturing steps, which is also in contrast to most conventional drugs. Biological products often represent the cutting-edge of biomedical research and, in time, may offer the most effective means to treat a variety of medical illnesses and conditions that presently have no other treatments available.

While biologics have advanced medical treatment for many conditions, they often are expensive and patient copays for some biologics can be several thousand dollars per year. In 2011, eight of the top 20 drugs in the United States in terms of sales were biologics and the annual spending on the drugs has grown three times faster than other prescription medications.

The U.S. Food and Drug Administration is developing regulations to govern the approval process for highly similar versions of the already-approved complex, protein-based biologics, which includes drugs such as insulin, monoclonal antibodies and a range of medications to treat other serious conditions.

While expected to produce less-dramatic savings than an earlier generation of less-complex generic drugs, the introduction of bio-similars into the U.S. marketplace is expected to increase competition and drive down prices, resulting in savings for patients, health care payers and taxpayers.

"The emergence of bio-similar drugs has the potential to create significant savings for the nation's health care system," said Andrew Mulcahy, the report's lead author and a policy researcher at RAND, a nonprofit research organization. "However, the magnitude of savings will depend on a number of factors, including forthcoming decisions from the FDA."

RAND Health is the nation's largest independent health policy research program, with a broad research portfolio that focuses on health care costs, quality and public health preparedness, among other topics.

The FDA's approach to regulating small-molecule generic drugs cannot be applied to biologicals, which are complex molecules manufactured in living systems. The federal Affordable Care Act authorized the FDA to develop a regulatory framework for approval of bio-similars.

Draft materials released by the FDA suggest that not all bio-similars will be deemed interchangeable with their original counterparts. In addition, nearly all bio-similars will require at least one head-to-head clinical trial to confirm similarity to the original biologic, a more-strenuous process than required for standard generics.

While there is agreement that bio-similars will lead to health care savings, the magnitude of the savings is not clear.

In order to create an estimate of the likely savings from bio-similars, RAND researchers created a framework to predict future use of the drugs, considering issues such as the effect of increased competition and acceptance of bio-similars by physicians, patients and payers.

The effort included examining the experience with bio-similar drugs in the European Union, where an approval process was created a decade ago and several bio-similars already have been approved.

RAND researchers examined 2013 sales information for more than 100 biologics, including all blockbuster biologics with sales of more than $1 billion annually. In total, the drugs had sales of $66.3 billion in 2013 across all distribution channels.

Assuming that bio-similars will penetrate 60 percent of the market, RAND researchers estimate that savings from bio-similars would be $44.2 billion over 10 years or about 4 percent of the total sales for biologics over the same period.

A number of additional, yet-to-be determined issues ultimately will determine the size of the cost savings from bio-similars and who will benefit, according to RAND researchers. Among those issues is how much future use of biologics grows as some patients decide to switch to the drugs once bio-similars make such treatment more affordable.

Some cost savings will accrue to patients, but physicians and hospitals also may benefit because biologicals often are purchased by health providers and administered in clinics and other treatment settings.

Support for the research was provided by Sandoz Inc., a Novartis company. The RAND perspective, "The Cost Savings Potential of Bio-similar Drugs in the U.S.," is available at www.rand.org Other authors of the paper are Zach Predmore and Sorren Mattke.

Attribution/Source(s):
This quality-reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its significant relevance to the disability community. Originally authored by RAND Corporation, and published on 2014/11/03 (Edit Update: 2020/12/01), the content may have been edited for style, clarity, or brevity. For further details or clarifications, RAND Corporation can be contacted at rand.org. NOTE: Disabled World does not provide any warranties or endorsements related to this article.