Why biosimilars may not be the huge cost-saver people hope
Why all the excitement about biosimilars? Because conventional wisdom suggests that the advent of a biosmilars market will provide all of the benefits associated with biologics, but at a significantly lower price. That means that all of these increasingly hard-to-cover treatments for cancer, rheumatoid arthritis, multiple sclerosis, neutropenia, and other conditions will suddenly become not only easier to access for individual patients, but also less likely to strain the healthcare system.
An analysis developed by Express Scripts in July 2013 forecasted what would happen in the next 10 years if the best-selling biologics remained branded, without a biosimilar option. The 11 top-selling biologics in the analysis include Avastin (bevacizumab); Epogen (epoetin alfa); Herceptin (trastuzumab); Humira (adalimumab); Intron A (Interferon alfa-2a); Neulasta (pegfilgrastim); Neupogen (filgrastim); PegIntron (peginterferon alfa-2b); Procrit (Epoetin alfa); Remicade (infliximab); and Rituxan (rituximab). Under that scenario, spending for the top 11 drugs would increase from $33.6 billion in 2014 to $121 billion in 2024.
Express Scripts predicts big biosim-related cost-savings
Though the numbers seem daunting, Express Scripts also formulated a different hypothetical analysis in which each of the 11 drugs would become available as a biosimilar at some point during the 10-year forecast period. Projections factored in anticipated patent expiration dates, as well as current biosimilar development pipelines. Based on this ‘best case’ scenario, if each of the top-selling biologics became available as biosimilars, cumulative savings between 2014 and 2024 would be $250 billion.
This is just one target figure. There are various expert viewpoints forecasting vastly different cost differentials. For example, the Rand Corporation has predicted a $44.2 billion reduction in direct spending on biologic drugs, with a possible range of $13 billion to $66 billion, between 2014 and 2024.
It’s not entirely clear what the immediate and mid-term future looks like with respect to biosimilar-related cost-savings. But what is clear is that various market and regulatory forces will play a major role in whether biologics spending decreases significantly as a result of a robust, sufficiently competitive biosimilar market.
DRG’s pragmatic outlook
While biosimilars will be at least a modicum cheaper than branded biologics, some experts are less optimistic about cost-savings over the next five to 10 years. According to Kate Keeping, senior director of biosimilars research at Decision Resources Group (DRG), her firm is projecting that the total value of the biosimilars market will only be $4.6 billion by 2019. This projection takes into consideration the complexity of the biosimilar approval pathway—and the impact that may have on the size of the market in the short term—as well as actual biosimlar prices, which she says will be higher than originally anticipated.
"We expect to see relatively modest price differentials," says Keeping. "First, there will be less competition among biosimilar manufacturers, compared with generics companies. Over time, prices will come down, but erosion will be gradual."
Keeping also makes the point that some companies have the built-in advantages of experience and infrastructure from developing, manufacturing, and marketing branded biologics. For example, Amgen, which manufactures Avastin, Neulasta, and Neupogen, has stated its intentions to have five approved biosimilars by 2019. Currently, total revenues from Amgen’s biologics portfolio exceed $8 billion annually.
The reality is that less competition translates into lower price differentials between branded biologics and biosimilars. And because there is no interchangeability at the pharmacy level—with just a few exceptions—marketing will be crucial and will be a major influencing factor in the speed of product uptake. It will be important to prove to physicians that a particular biosimilar is equally effective and safe as compared with the originator drug, because physicians will have to write a prescription for the biosimilar drug if the patient is to receive it.
Taking the long view
If all of these factors point towards a lower-than-expected cost differential, it stands to reason that having a robust, competitive biosimilars market, strengthened by a supportive FDA and a user-friendly regulatory pathway, would lead to lower prices for biosimilars.
On the upside, the biosimilars pipeline is strong and includes contributions from not only the big players, such as Amgen, Pfizer, and Novartis, but also from recently formed companies, such as Samsung Bioepis, a South Korean company in which Samsung and Biogen are partnering in order to develop biosimilars. Currently, this company has five phase III biosimilars in its pipeline, including etanercept, infliximab, trastuzumab, adalimumab, and insulin glargine.
These are the early days of biosimlars in the U.S. and it’s still difficult to know what the biosimilar market will look like 20 years out. According to many experts, biosimilars cost an average of 40% less than biologics in the E.U. While that scenario is unlikely in the U.S. market, the advent of a competitive biosimilar market still bodes well, all things considered, for the long term—for patients, payers, physicians, and for the sustainability of the healthcare system. Just don't expect too many cost-saving miracles off the bat.
- Express Scripts The $250 Billion Potential of Biosimilars