Time to give up on biosims, experts say. Price regulations would deliver more savings

Peter Bach, director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, routinely weighs in on drug pricing issues. (MSKCC)

The U.S. biosims market has been notoriously slow to generate meaningful savings or price reductions, and now some experts say it’s time to scrap the idea altogether. Instead of using biosims and competition to lower prices for high-cost biologics, the experts suggest creating an independent body to set prices after the meds lose exclusivity. 

In fact, the U.S. could save $50 billion a year by using cost-plus or other formulas to set prices for biologics after their exclusivity wraps up, the authors figure—up to 10 times the amount biosims are estimated to shave off annual spending.

In their two-part Health Affairs article, authors Preston Atteberry, Peter Bach, Jennifer Ohn and Mark Trusheim argue that biologic drugs enjoy a “natural monopoly,” while small molecule drugs are only protected by regulations that give them exclusive access to a market.

FierceBiotech Executive Breakfast

Getting Real: The Changing Tide on Real-World Evidence in Drug Development

Join FierceBiotech and a panel of industry experts for an executive breakfast at BIO. We will discuss the impacts of real-world evidence on drug development and address the important questions that companies are facing including where to find the right talent & technology and how to deploy it internally or with partners. Join us in Philadelphia on June 5th for this important discussion.

In other words, biosims are costly to develop and tough to manufacture, and even when they hit the market, there's no guarantee of a payoff. Biosim makers have to shell out for marketing, too, and negotiate with payers as well. On the other hand, traditional generics typically don't require clinical trials, production is less complicated and they're automatically substituted for branded drugs at the pharmacy counter.

Getting into the biosims business requires clearing some high hurdles and ponying up large sums of money. Not so much with small-molecule copycats; their biggest obstacles are patent rights.

As a result—and as has been well-documented—biosims haven’t had much effect on drug prices or savings in the U.S. Generic drugs, on the other hand, quickly lower prices, thanks to plenty of competition as soon as a brand loses its lock on the market.

To fix that disconnect, the authors wrote that “price regulation rather than competition may be far more effective” to drive savings in biologic drug classes. Bach serves as director of Memorial Sloan Kettering’s Center for Health Policy and Outcomes, where Ohn is a research data analyst and Atteberry is a research fellow. Trusheim is the strategic director at MIT's NEWDIGS program.

In an email to FiercePharma, Bach said he and his fellow authors suggest an "independent body, not the government" set prices for biologics after they lose exclusivity. Prices should be "built up from cost-reporting from the biologic manufacturers and set at a level where the built-in costs ... are included as is an attractive profit," Bach added.

In the Health Affairs piece, the authors wrote that prices after the loss of exclusivity "could be determined through any of multiple formulas, from a reported cost plus a markup, a defined profit margin on revenues, return on capital, or a blend of these."

That way, U.S. health systems would save much more money than they would by relying on biosims, the authors argue. Their approach would generate an estimated $250 billion to $300 billion in savings over five years, after one-time costs of $10 billion to $20 billion, the article argues.

Biosims, on the other hand, are projected to save $54 billion between 2017 and 2026, the authors wrote. Prices in drug classes that face biosim competition are only expected to fall 20% to 30%, while small molecule prices often tumble 70% to 90% after generics hit.

RELATED: Gottlieb calls out 'rigged' system that's hurting biosimilars, pledges FDA fight to boost uptake 

Of course, the article is just a starting point for the proposal and such a change would face fierce backlash from the pharma industry, if Congress were to take up the issue at all. But the discussion alone outlines how far short biosims have fallen compared with early expectations. Amid the conversation this week, one influential industry voice was quick to support biosims.

"It’s far too early to throw in the towel on biosimilars,” former FDA commissioner Scott Gottlieb tweeted. While “impediments to uptake remain,” he said those barriers will eventually “erode.” 

For his part, Bach told FiercePharma he doesn't "want to gauge the likelihood of this happening, but to be clear the opportunity costs of not taking this approach and instead waiting for biosimilars to work out is extremely large." Aside from a projected $50 billion per year in savings are the "human costs of running needless trials to compare biosimilars to biologics."

Suggested Articles

Celltrion Chairman Seo Jung-jin says the South Korean company will spend about $33 billion over a decade on its biologics and pharma businesses.

Purdue took a big hit when it settled with Oklahoma over claims it misleadingly advertised its powerful opioid, OxyContin. Now more states want in.

The new endorsement of Celgene's Revlimid from England's cost watchdog NICE may not help calm fears about BMS' $74 billion buyout.