Researchers call for post-exclusivity regulation in favour of biosimilars to lower prices of biologic drugs

Researchers writing in a two-part blog in Health Affairs argue that biosimilars should be abandoned as a means to lower the price of biologic drugs and instead post-exclusivity regulation should be used to bring down their cost. The authors suggest that such a system, if introduced in 2018, could have generated $250 billion to $300 billion in US net savings over a five-year period, while only incurring one-time costs of between $10 billion and $20 billion to compensate biosimilar developers.

In the blog posts, the researchers contest that biologics are protected by barriers to entry "stemming from the scientific uncertainty that arises from their structural complexity," noting that penetration in the US market has been "slow, rare and minimally effective at lowering prices," while Europe has "not fared much better." The authors' proposals for post-exclusivity regulation include cost-plus, specified margins, or return on investment rates.  

Specifically, the researchers explained that since the passage of the Biologic Price Competition and Innovation Act in the US in 2010, only 29 biosimilars have been submitted for approval, while among the 18 authorised biosimilars, only eight have been launched. The authors also stated that no regulatory filings are pending for most biologics that are near or beyond the end of the market exclusivity period.  

The researchers added that most launched biosimilars have failed to provide significant cost savings. In particular, the authors noted that the launch of biosimilars to Amgen's Neupogen (filgrastim) only flattened the price trajectory of the originator product in the US, which as of the first quarter of 2018, still retained the largest share of the filgrastim market. However, the researchers cautioned that the effect of Pfizer's biosimilar Nivestym (filgrastim-aafi), which was launched last October, cannot yet be ascertained. Additionally, the team noted that a biosimilar version of Johnson & Johnson's Remicade (infliximab) was launched at only a 15-percent discount.  

Based on these issues, the researchers estimated that biosimilars will only provide $54 billion in price savings in the US over a 10-year period ending in 2026. The group indicated that despite a longer period of biosimilar availability, many products continue to lack biosimilar competition in Europe, while price cuts have averaged around 30 percent, representing savings of only 3.5 percent a year.  

The researchers argued that because of the large barriers to market entry for biosimilars, including high R&D costs and a lack of interchangeability, biologics are best considered "natural monopolies." The authors suggested that price regulation after the period of market exclusivity would be far more effective in achieving the goal of lower drug prices in the biologics sector. The group indicated that the reduced price should equal the costs of production and distribution, plus an appropriate profit. The authors also stressed that the body tasked with setting the reduced price should be independent of both the payers and the manufacturer.  

The projected cost savings in the US, which include more than $87 billion in reduced spending for Medicare and Medicaid, are based on the current 12-year exclusivity period and the assumption of price cuts of 70 percent to 90 percent, in line with price cuts instituted for generic products and the 80-percent price reduction enacted by AbbVie to prevent biosimilar competition to Humira in Europe. The group said total price savings would exceed $200 billion even if the exclusivity period was extended to 15 years.  

Meanwhile, to ensure treatment availability, the team proposed that companies should be required to either guarantee supply or sell rights to the asset, including all knowledge and intellectual property rights, to another willing firm. The researchers commented that although the proposal would rely on a sole producer after market exclusivity, the guarantee of reasonable profits should be sufficiently attractive to sustain availability.  

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