Health Economist Warns That Biosimilar Savings Could Be "Left on the Table"

Richard G. Frank, PhD, a health economist at Harvard Medical School and the former deputy assistant secretary for planning and evaluation at HHS, has penned a new perspective paper in the New England Journal of Medicine in which he warns that, if biosimilars continue their trajectory, they could fail to deliver on their promise to provide cost savings to the US health system.

Frank points out that only an estimated $3.2 billion (3%) of US biologic drug spending is currently subject to competition from biosimilars. That is a disappointing figure given that spending on biologic drugs has been averaging a 10% annual increase recently.

So what’s holding biosimilars back? Frank says that physicians are “naturally hesitant” to prescribe biosimilars because they lack familiarity with these products, “especially given that regulations create the impression that a biosimilar may not be all that similar to its originator.” The FDA’s use of 4-letter suffixes appended to the names of biosimilars may give prescribers the undue impression that the clinical effects of a biosimilar could have a meaningful difference from those of the reference drug, and “Perceived differences between competing products weaken price competition.” Frank suggests that an alternative tracking method could include use of the biosimilar’s brand name for pharmacovigilance efforts.

Like many other stakeholders, Frank has concerns about interchangeability designations for biosimilars. Because pharmacy-level substitution hinges upon a designation of interchangeability—which has not yet been granted to any product by the FDA—the cost savings that could be produced by this practice are yet to become a reality.

Furthermore, the FDA has not yet finalized its guidance on demonstrating interchangeability. Says Frank, “…the FDA requires that equivalent clinical results occur within the same patient if the biosimilar replaces the reference product. The FDA has not been clear about whether this requirement involves meeting an additional standard or producing more data. Conducting extra clinical studies is a very expensive activity, so clarity on this point is important.”

Other factors hindering biosimilar uptake, says Frank, include the fact that Medicare’s reimbursement policies for these products are “at best neutral with respect to choice of product on the basis of price,” rather than actively promoting price competition. Furthermore, reference product sponsors’ secrecy about manufacturing processes adds an additional hurdle in bringing biosimilars to the marketplace.

“Although a number of these factors may separately have modest effects, together they are additive and most likely contribute to the slow development of competition in the biologics market,” says Frank. “If the impediments continue, important savings will probably be left on the table.”

Reference

Frank RG. Friction in the path to use of biosimilar drugs [published online February 28, 2018]. N Engl J Med. doi: 10.1056/NEJMp1714908.