ACP Calls for Biologics Marketplace Reforms

A dysfunctional regulatory and market system is responsible for the high prices of drugs and the slim foothold that biosimilars have achieved so far in the marketplace, according to a position paper from the American College of Physicians (ACP).

The group describes numerous structural impediments that hinder market entry for lower-cost drugs and allow pharmaceutical companies to leverage larger and larger revenues from their original brand products without a commensurate increase in health care consumer value.

ACP suggests multiple policy changes that would remove or loosen the blocks and wedges and allow competitors to step in with biosimilars and generic products that would lower health care costs without stifling innovation.

“New policies should be implemented to prevent market manipulation, help lower-cost alternatives make it to the market faster, and ensure a robust and competitive market for generic and biosimilar drugs,” ACP said.

The United States produces 57% more new drugs than the United Kingdom, Japan, Germany, and France combined, but many new drugs are simply repurposed old drugs with new indications, and meanwhile, there are thousands of rare diseases for which treatments exist for only a tiny fraction, ACP said.

Many Americans have benefited from the development of “orphan drugs” for niche health conditions (≤ 200,000 patients), but these are generally very costly, and ACP states that an orphan drug might be only a rare disease indication for a commonly used drug. Because of its orphan status, that same drug would be granted an additional 7 years of product exclusivity, preventing lower-cost competition from exerting downward pressure on pricing.

“This puts a strain on patients and families affected by rare diseases, who are often already exposed to high direct and indirect costs of medical care,” ACP noted.

ACP described the American marketplace as “unregulated” when it comes to pricing freedom enjoyed by pharmaceutical producers. “The list prices for the originator rheumatoid arthritis drugs Enbrel (etanercept, Amgen), Humira (adalimumab, AbbVie), and Xeljanz (tofacitinib, Pfizer) have increased by more than 100% since 2014,” the group said.

Biosimilars have been approved for etanercept and adalimumab but because of patent protections will effectively be kept off the market until 2029 and 2023, respectively. “Preventing lower-cost biosimilar or generic drugs from entering the market adds billions of dollars in costs to federal health care programs and affects the affordability and accessibility of drugs for patients who rely on them on a day-to-day basis,” ACP said.

Patent Protections

Patent protections for biologics extend to 12 years in the United States, which the group said is excessive. Product exclusivity is often considered essential to reward companies for innovating and compensate them for the costs of developing a new drug; however, ACP argues that even after loss of exclusivity and biosimilar products enter the marketplace, a pharmaceutical company is able to continue making sizeable profits from a drug.

According to the Pacific Research Institute, the first biosimilar for filgrastim—and, in fact, the first-ever biosimilar in the United States—was launched in 2015, and since that time, filgrastim biosimilars have achieved only a 50.4% share of the marketplace for filgrastim, which supports the ACP’s contention that originator brands can continue making money after their patents have expired.

Manufacturers and industry insiders have contended that the 12-year window for product exclusivity is largely an illusion because many factors may shorten that time, such as a delayed approvals process.

Insulin product approvals have recently come under regulation via the Biologics Price Competition and Innovation Act, which affords them biosimilar status if they are not originator drugs. It is hoped that this will lead to greater price competition, and ACP noted that the absence of competition for insulin products has allowed manufacturers to control the marketplace and steadily increase prices. “The annual cost per patient for treatment of type 1 diabetes doubled between 2012 and 2016, from $2864 to $5705,” the group said.

“Shadow pricing” is a type of marketplace abuse that ACP described as particularly damaging to health care consumers. With shadow pricing, a small number of dominant producers raise their prices almost in tandem. “Between 2009 and 2015, the prices of the insulin products Lantus (Sanofi-Aventis) and Levemir (Novo Nordisk) increased at or around the same time 13 times. Similarly, the prices of Humalog (Eli Lilly and Company) and NovoLog (Novo Nordisk) increased in conjunction 17 times over 10 years,” ACP said.

The ACP called for legislative reform to the Orphan Drug Act to change incentives for development of these drugs. It supported reducing data and market exclusivity for biologic drugs from 12 years to 7 years and bringing a halt to “excessive patenting” on brand name and biologic drugs.

The group also called for elimination of direct-to-consumer (DTC) drug advertisements. “There is a lack of consensus in the economics literature about whether DTC advertising improves market performance or undercuts competition,” the ACP said.

Reference

Daniel H, Serchen J, Cooney TG. Policy recommendations to promote prescription drug competition: a position paper from the American College of Physicians. Ann Intern Med. September 15, 2020. doi:10.7326/M19-3773​