The FDA Should Enable Biosimilars and Foster a More Competitive Biologics Market
Negative health care news continue to dominate the headlines. And, deservedly so. Thanks to the Affordable Care Act, health care is now less affordable, not more so. It has also increased the healthcare system’s complexity and worsened the adverse incentives plaguing the U.S. healthcare industry.
There are, however, some bright spots in the American health care industry. For instance, historically the U.S. health care market has not imposed the distortionary price controls on pharmaceutical products put into place by most other major industrialized countries. As a result, the U.S. pharmaceutical industry’s growth has been stellar. U.S. pharmaceutical exports are expected to grow by 8 percentage points annually through 2030 – a rate that would make the U.S. the largest pharmaceutical exporter in the world displacing Germany from its traditional top spot.
Given this projected bright future, the FDA should expeditiously approve a market entry process for biosimilars: one of the more innovative segments of the pharmaceutical market. Biosimilars are similar, but not identical, copies of drugs based on biological processes (biologics), rather than the traditional chemically-based pharmaceutical products.
Biologics are responsible for many innovative therapies that are already benefiting patients who are suffering from illnesses including rheumatoid arthritis, psoriasis, breast cancer, and Crohn’s disease.
Approximately one-third of all current pharmaceutical industry research and development is spent on biologics. Furthermore, the industry expects that by 2016, 10 of the top 20 bestselling drugs globally will be biologics.
Biologics are also playing a valuable role in the exciting area of personalized medicine. Personalized medicine leverages scientists growing understanding of the human genome and enables health care providers to prescribe treatments that are tailored to one’s individual medical profile. Thanks to personalized medicine, the ability for doctors to accurate diagnose medical conditions is improving. And, just as importantly, personalized medicine improves medical treatment, making it safer, more precise, and more effective.
Biologics are an important tool that helps make personalized medicine a reality. However, the trend of personalized medicine creates obstacles as well as opportunities. Medicines that are widely prescribed – such as prescriptions for high cholesterol or hyper-tension – can expense their costs over a large population. The larger the population that can benefit from a pharmaceutical drug, the lower the costs per drug can be. It is basic economics.
Personalized medicine, by definition, reduces the population using any specific drug. Therefore, the biologic costs per personalized-medicine patient will be higher. And, these higher costs are on top of biologics already larger research expenditures when compared to traditional chemically-based therapies. This is where greater competition from biosimilars can be so valuable.
Just like generic drugs, which compete with chemical-based medicines that previously enjoyed market exclusivity, biosimilars compete with biologics once their patents have expired. Like most markets, a competitive biologics market can benefit consumers by lowering prices and increasing quality.
The Rand Corporation, for instance, estimates that in the U.S. biosimilars can provide $44.2 billion in savings on biologic drugs between 2014 and 2024. In the European Union, where biosimilars already compete with biologics, biosimilars typically sell at a 30 percent discount compared to branded biologic medicines.
A robust biosimilars market can also improve the efficacy of biologics. Biosimilars have an impeccable track record for safety in the EU, Japan, and Canada where biosimilars regularly compete against biologics.
Sometimes, biosimilars will improve upon the original biologic discovery. These drugs, referred to as “biobetters” or “biosuperiors,” leverage the learnings gained from the original biologics drug and can provide a therapeutically superior product. Thus, a robust market for biosimilars would increase the quality of pharmaceutical drugs in addition to exerting downward pressure on pharmaceutical prices.
It’s time to enable a robust biosimilars market to develop here in the United States. This requires the FDA to act because the U.S. is one of the few industrialized countries without a clear approval pathway for biosimilars. This needs to change.
There are reasons for optimism; for instance, the FDA has accepted applications to consider approval of biosimilar drugs this year. The FDA should build upon this progress and establish a clear approval pathway for these innovative new products. Doing so will improve the health outcomes for millions of Americans.
Wayne Winegarden, PhD is a Senior Fellow at the Pacific Research Institute and a Contributing Editor to EconoSTATS at George Mason University.
OHE briefing. What is the Role of HTA for Biosimilars. April 2014.