Report: The United States Could Save $54 Billion Through Biosimilars

In the 7 years since the enactment of the Biologics Price Competition and Innovation Act (BCPIA), which authorized the FDA to create a new regulatory approval pathway for biosimilars, the agency has approved 7 biosimilars, 3 of which have been marketed. The BCPIA’s biosimilar approval pathway was designed to promote competition among drug manufacturers in order to lower prices and potentially increase access to medications.

Although the US biosimilars market is still in its infancy, there are over 60 biosimilar molecules in development for more than 20 reference biologics. A new report by the RAND Corporation, “Biosimilar Cost Savings in the United States: Initial Experience and Future Potential,” estimates the potential future cost savings gained from the use of biosimilars in the United States at $54 billion over 10 years, and examines future policy issues surrounding this important market. The research described in the RAND report was sponsored by Sandoz.

The report concludes that:

• The estimated cost-saving potential of biosimilars is $54 billion over 10 years, or about 3% of total estimated biologic spending over the same period, with a lower- to upper-bound range of $25 billion to $150 billion
• Cost savings estimates as a share of total biologic spending ranged from 0.2% to 10.5% (mean 3.1%) $3.3 billion of total 2016 biologic spending
• The potential for cost savings will vary across biologic classes based on sales, the degree of competition, and the timing of biosimilar entry into the market
• In the short term, savings will accrue to a range of stakeholders, but patients and taxpayers will benefit in the long term

Forecasting the future of the US biosimilars market, the RAND report suggests that evolving payment arrangements, regulatory policies and guidance, patient and prescriber acceptance of biosimilars, and other factors will influence the magnitude of potential savings. Other drivers of spending on biosimilar drugs work with and through competition to determine biosimilars’ market share, prices, and impact on spending, the report explains: “We identified competition as the most important factor in determining impact on spending.”

The report outlines the most important features of the still-evolving biosimilars market:

• Uncertainty involving intellectual property. The BCPIA introduced procedures for resolving patent disputes between biosimilar and reference biologic manufacturers prior to product launch, but early biosimilar makers launched products without fully complying with the BCPIA information exchange process, and other manufacturers with approved biosimilars have delayed entering the market to avoid patent litigation risk. Court decisions will set the tone for how patents and litigation will influence future biosimilars’ marketing.
• Interchangeability. None of the approved biosimilars to date have gained the interchangeable designation from the FDA. Without interchangeability, prescribers must choose a specific biosimilar or reference biologic by name, which limits the potential for biosimilars to gain market share and compete on price.
• Payment rates. The BCPIA requires Medicare payment for biosimilars to include a fixed percentage based on the more-expensive reference biologic. But Medicare’s payment approach could shift over time, the report notes, and it is not yet known whether private insurers are more aggressively incentivizing biosimilars through payment.

The RAND report notes that the potential for cost savings will vary across biologic classes based on sales, degree of competition, and timing of biosimilar entry. Anti—tumor necrosis factor (TNF) products, monoclonal antibody antineoplastics, and immunostimulants excluding interferons alone account for 87% of estimated savings from biosimilars. (The anti–TNF agent category includes some of the largest biologic products by sales and biosimilars that are already marketed or close to market entry.)

The Future of the US Biosimilars Market

Several key challenges and sources of uncertainty concerning the US biosimilar market remain, including questions about whether the market is sustainable or will lead to the intended cost savings. In addition to the issue of interchangeability, price competition will be affected by non-price competition from reference biologic manufacturers because biologic manufacturers in some markets are developing next-generation biologics that offer improvements over older reference biologics facing potential biosimilar competition. These next-generation biologics will compete with biosimilars and older reference biologics for market share. In addition, biosimilar naming conventions using a distinguishing 4-letter suffix may affect perceptions and acceptance of biosimilars—prescribers and patients could perceive lower efficacy or different safety for biosimilars and avoid their use.

Finally, the RAND report presents US policymakers with 2 choices going forward: they can allow the market to continue to develop under current policies—for example, allowing increasing FDA and industry experience with approval requirements, building on an understanding of legal issues set through early Court decisions, and allowing evolving pricing and market-share trends to eventually provide clarity on the stability of the US biosimilar market. Alternatively, they can intervene and help steer the US biosimilars market more quickly to a sustainable, competitive state, for example, reworking Medicare’s drug payment policies to more actively incentivize biosimilar uptake by lowering or eliminating cost sharing for biosimilars.