The report, published by free-market think tank, Pacific Research Institute, examines the opportunity provided by biosimilars to reduce health care spending across the US.
It quantifies the savings that could be gained by greater adoption of approved biosimilars and outlines the current barriers for market entry.
In regard to creating a competitive market, the report states that when such a system is ‘working efficiently’, “once an innovative medicine has been given ample opportunity to recoup its costs of capital, the market will empower competition.”
The report argues that such a situation is currently not occurring in the US, which has led to some of the larger investors in the technology to reel in further deployment of capital.
Learning from other markets
The report uses the US generic market as an example of how biosimilars could reshape the affordability of biologic medicine, highlighting that sales of generic prescription medicine have risen to account for 90% of the prescription market – up from 75% in 2009.
Clarifying that the two markets are not exact parallels, the report identifies that developing biologics is more complex than the process for small molecule drugs, which explains why greater discounts cannot be achieved by biosimilars.
However, it notes that “as the large biosimilar share in the European Union (EU) exemplifies, it does not explain the lack of a competitive biologic market in the US Instead, there are key policy and market inefficiencies in the US that are discouraging wider adoption of biosimilars.”
The success achieved by biosimilars in the EU has become particularly notable as various biosimilar manufacturers have introduced Humira (adalimumab) biosimilars onto the market. This has allowed public health services to reap immediate, and significant, savings.
Individual biosimilar manufacturers have also called attention to the reduction in costs made possible by their products, such as Biogen suggesting that its three biosimilars will save the EU €1.8bn ($2bn) alone in 2019.
The potential savings
At present, there are biosimilars approved for nine biologic drugs in the US, with the total value of sales, including both originator and biosimilars, totalling $32.1bn annually. As of February 2019, biosimilar sales account for only 2.3% of this figure but still create savings of $253.8m annually.
If the market share for approved biosimilars increased to 25% of the market, the report identifies that $2.5bn in savings could be achieved annually. In the situation whereby this rose to 75%, this would increase to $7.2bn.
Though 75% across the board of the approved biosimilars may be on the higher end of the scale, rivals to AbbVie’s Humira in Europe have forced discounts of 80% on the previous list price of the product.
The report suggests that those biosimilars which are priced at a discount of between 20-40% on the originator product will generally secure a large share of the total drug sales.
Barriers to biosimilars
Despite higher numbers of applications and approvals, the US is still a difficult market for biosimilars.
The most significant barrier that biosimilars face is, according to the report, the difference in repayment between the originator product and biosimilars, which ‘biases’ the system against the latter.
This occurs because reimbursements are based on the average sale price of the medicine used, plus a percentage mark-up over this price. As a result, “a lower priced biosimilar provides less revenues to the provider than if a higher priced biologic medicine had been prescribed.”
In addition, the biologic market operates on a ‘fail first’ policy, whereby biosimilars can only be used if the more expensive biologics fails, again positioning the system against providing the cheaper alternative.
As an example, the report notes that UnitedHealthcare, a health insurance provider, lists Amgen’s Neulasta (pegfilgrastim) as its ‘preferred product’, despite there being two commercially available biosimilars on the market.
A further barrier mentioned are the ‘anti-competitive’ practices that it suggests are ‘thwarting’ the competitive process. Such cases have already led to legal action being taken by biosimilar developers against originator companies.
The report concludes, “Given that there are 60 biosimilar applications that have been approved in Europe, compared to the 19 biosimilars that have been approved in the US, there is clearly room to spread the benefits from greater competition to more originator biologic products.”