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Improving Value

Generic Pathway for Biologics

Biologics are medicines made from molecules derived from living organisms and not just chemicals, providing treatments for complex conditions ranging from growth abnormalities to cancer. Biologic require special handling; and may require infusion or injection in a doctor’s office. Increasingly, these drugs are may be specifically tailored to subpopulations.1

Biologics are also expensive. On average, biologic drugs are 22 times more expensive than typical brand name drugs. Spending on biologics is projected to outpace traditional, non-biologic drug spending and are expected to represent approximately 20 percent of total global pharmaceutical market value by 2017.

Research by PhRMA, the leading advocacy organization for the pharmaceutical industry, suggest that some 900 biologics are under development.2 And traditional drug spending reports likely understate growth in biologic drug spending. Because many biologic drugs are infused or injected in physician offices, approximately half of this spending is billed through the medical benefit, not the pharmacy benefit and thus is not reflected in common sources that report prescription drug spending.3

Biosimilars are essentially a generic for a biologic drug. Generic biologics are called biosimilars because biologics can’t be made exactly the same the way traditional drugs can. But experience thus far from Europe--which has a head start on approving biosimilars--indicates that they can be made safely.

The hope is that the availability of biosimilars will drive down prices as generic drugs have.
Typically, having two generic competitors for drugs can lower the average generic price to nearly half the price of the brand product. If an even larger number of generic competitors enter the market the price can fall to 20 percent of the price of the brand product.4

However, biosimilars are not likely to drive down drug costs as much as typical drugs based on experience from the European Union, which has approved biosimilars since 2009, shows that price reduction on the order of 10-15 percent.5

A generic pathway for biologics was created under the Affordable Care Act and the FDA only recently approved its first biosimilar for a drug used to prevent infections for cancer patients, Neupogen.

But the biosimilar pathway differs from the pathway for regular generics and this will slow the entry of generic competition into the market. Biologics have a long period of so-called exclusivity. “Exclusivity” relates to the FDA approval processes and refers to a period of time when the FDA will not approve a generic competitor. Exclusivity periods are distinct from patent terms. Gaining exclusivity is another way, outside the patent system, for brand drugs to gain effective monopolies for their products.

Under current law, biologics get a 12-year period of exclusivity. Many consumer advocates believe that a seven-year period of exclusivity would be sufficient to create incentives for innovation without driving up costs by delaying generic entry for too long. FDA exclusivity periods need to be granted sparingly and limited to where needed to encourage actual innovation.

Notes

1. The Express Scripts 2014 Drug Trend Report, March 2015, p. 5.

2. Purvis, Leigh, A Sense of Déjà vu: The Debate Surrounding Sate Biosimilar Substitution Laws, AARP, September 2103.

3. The Express Scripts 2014 Drug Trend Report, April 2014, p. 11

4. Food and Drug Administration website, Generic Competition and drug prices, http://www.fda.gov/AboutFDA/CentersOffices/OfficeofMedicalProductsandTobacco/CDER/ucm129385.htm

5. Roland Guy, Modeling Federal Cost Savings of Follow-on Biologics, Avalere Health, March 2007