A False Start on Biosimilar Savings?

We’ve heard for several years about the long and tortured route to an approval process for biosimilar products (that is, biologic agents made by other than the manufacturers who originally secured FDA approval). In the health reform bill passed in 2010, Congress finally directed the Food and Drug Administration to devise this long-awaited and highly scrutinized process, and its work is not yet complete.

Another related provision of the legislation is the setting of market exclusivity for original biologic products at 12 years, after much haggling by industry, lawmakers, and other stakeholders. This hard-earned standard seems to be under new attack even before it is implemented.

The Obama Administration’s recently released deficit reduction proposal includes a provision that tries to squeeze additional savings from the biosimilar approval process by reducing the market exclusivity period to 7 years. The Administration estimates that this move can save up to $3.5 billion by bringing biosimilars to the market earlier, with assumed cost savings from lower prices of the biosimilar products.

However, this is problematic for a couple of reasons. One relates to the difficulty of replicating the process for manufacturing the original biologic product. Proteins used in medicine are often extremely large and complex molecules, sometimes with thousands of chemical bonds. This contributes to the relatively high costs in general associated with biologic drugs. Simply, they are difficult to make. For this reason, the price difference between biosimilars and their biologic parents may not be as great as that seen between conventional generics and the branded versions. Therefore, the savings anticipated by the Administration may contribute less to deficit reduction than expected.

Second, many experts are concerned that replicating the structure of proteins, as biosimilar manufacturers seek to do, may not result in bioequivalence, or in the same therapeutic outcomes, even though the chemical structure is similar. If the agent does not produce the intended effect, patient care may actually be more expensive, further eroding any estimated savings. It is also expected that biosimilar manufacturers will need to spend millions of dollars in testing to prove similar outcomes before the FDA will approve their products (further contributing to higher prices).Finally, the Administration is counting on these savings coming at the expense of the innovator products and their manufacturers. With 5 fewer years of market exclusivity (12 vs 7 years), will manufacturers reassess whether they should take the $1 billion risk of bringing the product to market, with significantly less time to make their money back?

The result may be a short-sighted grab at questionable savings, with long-term repercussions for the industry and medical innovation in general. And the biosimilar approval process is not even in place yet...