Table of Contents
What is a Biosimilar?
Biosimilars are, in essence, medicines that have the same composition and provide the same or similar health outcomes as original biologics. It’s somewhat akin to what generic drugs are to brand-name drugs, but not exactly.
Biosimilars (and biologics) come from synthesizing natural components, not chemical ones like in most drugs. This makes them uniquely effective, but also means they can prove difficult to develop and manufacture.
After a biologic’s patent has expired, biosimilars can flood into the market and increase competition. But biologics manufacturers might be preventing competitors from participating. Evidence also suggests that current legislation and regulation leave much to be desired.
On the other hand, unlike generics, increased market competition does not necessarily reduce drug prices all that significantly. This is, in part, due to their natural compositions and lack of known structures, making research and development costs high.
We at the Zero Theft Movement are dedicated to eradicating the rigged economy so that all Americans can thrive. While biologics provide unique and effective treatments, are their manufacturers unethically obstructing the release of biosimilars? If so, how much does that actually affect a market already facing a high cost of entry?
Biosimilar vs Generic
So again, biosimilars are drugs that have a nearly identical copy of an original biologic. They’re kind of like what generics are to brand name drugs. Kind of.
Generics are carbon copies of brand name drugs. That’s the case because most drugs have a known structure, and can be chemically synthesized. Both of these factors make their developmental and manufacturing processes relatively inexpensive and easy to replicate.
Biologics, on the other hand, come from myriad natural sources that work together to provide therapeutic benefits. Finding the right combination can take a great deal of proprietary R&D work, as you have to deal with inconsistencies and variations in most, if not all, natural products. There’s variance even between different batches of biologics, not just their biosimilars.
source: Worcester Polytechnic Institute
That’s why you have “similar” in “biosimilar.” Unlike generics, biosimilars will not have the exact same structure as their original or brand name counterpart. Drug manufacturers follow the same steps every single time and always produce slightly different end products due to the natural components. Those minor differences typically do not affect the biologic or biosimilar whatsoever (a.k.a. ‘no clinically meaningful differences’).
In the U.S., drug prices, on average, are 2.56 times higher than those in 32 developed nations. Americans spend about $1,200 on prescription medication annually.
The Biosimilar Approval Process
All drugs must receive approval from the U.S. Food and Drug Administration (FDA), otherwise, the pharmaceutical company cannot distribute them. The approval process for generics requires minimal work and costs as the FDA has already tested the safety and efficacy of their exact structures in their already released brand-name counterparts.
Biosimilars, on the other hand, must go through a battery of tests and clinical studies to receive the FDA’s approval. This further adds on costs to the biosimilar R&D process. The administration specifically tests the biosimilar to see if it meets the following criteria:
- The biosimilar is as safe as the ‘reference product’ (in this case, the original biologic)
- It functions as effectively
- Delivered in the same way
- Equivalent dose and strength as the original
- Treats some of the same diseases
- Shares the same possible side effects as the original
Source: FDA
If you wish to learn about the regulatory process in more detail, you can read the FDA’s overview.
Costs and Competition in the Biologics & Biosimilars Market
Navigating the business of biologics and biosimilars is, perhaps, not such a simple matter. The innovation required in developing biologics comes with significant costs. The latest figures estimate that on average R&D comes out at around $1 billion. Furthermore, pharmaceutical companies have a strong case for having a government-granted monopoly through patents for a limited period of time. These factors significantly contribute to the price tag being so high.
Research estimated the global biological products market at $292.2 billion in 2020. Trends suggest that the market will grow to $505.6 billion by 2027. Markets and Markets estimated the biosimilar market at $11.8 billion in 2020. They expect it to grow to $35.7 billion by 2025.
Many have predicted the huge spike in the biosimilar market due to a ‘patent cliff,’ where blockbuster biologic drugs lose their patent protection due to expiration.
But while you might expect the expiration of patents and the influx of biosimilars to significantly reduce prices for patients through competition, that may not actually be the case. As we’ve already discussed, generics have the exact same structure as the brand name version, so they’re relatively quick, easy, and cheap to get out to market. Conversely, biosimilars still require hefty R&D costs. In 2012, researchers Bruno Calo-Fernández and Juan Leonardo Martínez-Hurtado estimated those costs to come somewhere between $75–$250 million per molecule.
The question is: how much can biosimilars actually reduce drug spending in the U.S.?
Due to the non-interference clause in Medicare Part D, the government cannot negotiate drug prices. Does this lead to much more taxpayer money being spent on drugs than necessary?
See what the ZT community has found through their investigations…
Biologics, a natural monopoly?
Due to the extreme cost-related barriers to entry, some have argued for a government ban of biosimilars. Physician Peter B. Bach et al., for example, penned an article for HealthAffairs making the above case.
“[Biologics] are protected by barriers to entry stemming from the scientific uncertainty that arises from their structural complexity; these barriers are expensive, time-consuming, and risky to breach. Therefore, we propose to abandon the use of biosimilars to lower prices in favor of post-exclusivity price regulations on innovator biologics; possible price-reducing methods include cost-plus, specified margins, or return on investment rates.”
The aforementioned Calo-Fernández and Martinez-Hurtado estimated that the price of biosimilar products will range between 65%-85% of the reference products. Bach estimated that, from 2018-2023, a biosimilar ban and other regulations would save $250-$300 billion.
The Case of Humira
Whether or not you agree with Bach et al.’s solution, the current system appears to have considerable issues. Particularly due to opportunities to create ‘patent thickets,’ tens to hundreds of patents on a single drug. This makes it even harder for biosimilar manufacturers to produce an effective treatment similar to the biologic even after the main patent has expired. There’s a fine line between honoring innovation and perpetuating long-standing prohibitive price tags for life-saving, unique medications.
I-MAK conducted a study into how the best-selling drug in the world, Abbvie’s Humira, is priced in the U.S. We have paraphrased some of the organization’s key takeaways below.
- 247 patent applications have been filed on Humira in the U.S. with the aim of delaying competition for 39 years.”
- “Total spending by Medicare and Medicaid increased 266% on Humira between 2012 and 2016, and the average spending on Humira per person more than doubled from $16,000 to $33,000.”
- “This extended monopoly is estimated to cost American payers and taxpayers an excess of $14.4 billion.”
According to the I-MAK, the Federal Trade Commission actually granted 130 patents to Abbvie for Humira alone. The biologic’s first patent will expire in 2023.
Different Takes on Biologics and Biosimilars
In 2019, Congressman Jerrold Nadler (D-NY) introduced H.R. 2375 (the Preserve Access to Affordable Generics and Biosimilars Act). The Congressional Budget Office estimated that the bill would reduce the deficit by $613 million by 2029, but the bill died in Congress
A year later however, the Foundation for Free Economic Opportunity (FFEO) published a 2020 study investigating the biologics and biosimilars market. The organization claims that while biologics represented only 0.4% of total U.S. prescriptions in 2018, it accounted for 46% of all spending. If no reform takes place, the FFEO estimates biological products will cost patients an extra $25 billion without reform by 2029.
The FFEO proposes the following reforms:
- Enable biosimilar drugs to release without the risk of treble damages
- Establishing fair biosimilar interchangeability standards
- Eradicating patent trolling
- Reforming Medicare Parts B And D
- Finding avenues to achieve price reductions for non-generalizable biologics
What to do About Biosimilars?
The main purpose of having biosimilars is to increase competition and bring down prices for patients. But the exact way forward does not appear so clear. The natural components that make both biologics and biosimilars uniquely effective are what makes them so difficult and expensive to develop.
So what do you think? Savings are, at the end of the day, savings. And especially for low-income patients, every cent counts. By the numbers, the current system appears to have inefficiencies and debatable foul play through patent abuse that leads to citizens paying more for biological products than they should. Is the public getting ripped off by biologics manufacturers? Yes or no, what’s the next step?
The Zero Theft Movement, along with our growing community, works to calculate the best estimate for the monetary costs of corruption in the U.S. Corporate, political, and everything in between.
We have built a safe and independent voting platform where you and your fellow citizens collaborate to thoroughly investigate potential problem areas across the economy, including the biologics and biosimilar markets. Everyone votes on whether (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. Through direct democracy, we can collectively decide where the problem areas are and start working on addressing them systematically.
Only through hard evidence can we prove where the rigged parts of the economy exist and force Congress to hold the bad actors accountable. We can achieve economic justice, a financial system that allows the many good businesses (big, medium, and small) and good individuals (regardless of their socioeconomic status) to thrive.
Standard Disclaimer
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.