- The estimated cost savings potential of biosimilars is $54 billion over the next decade, or about 3% of total estimated biologic spending during the same period, with a lower and upper range of $24 to $150 billion.
- 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.
- Evolving payment arrangements, regulatory policies and guidance, patient and prescriber acceptance of biosimilars, and other factors will influence the magnitude of potential savings.
- Stakeholders will accrue savings in the short term, but patients and taxpayers will benefit in the long term.
As stated in the report, only 1-2% of the U.S. population is treated with a specialty drug – a category that includes biologics and other complex drugs – each year.[ii] However, biologics accounted for 38% of the total U.S. prescription drug spending in 2015 and for 70% of drug spending growth from 2010 to 2015. The Biologics Price Competition and Innovation Act (BPCIA), which authorized the FDA to create a new regulatory approval pathway for biosimilars, was designed to introduce competition among biologic manufacturers, and in turn, lead to savings in healthcare spending on biologics.
The developing U.S. biosimilar market could reduce spending on biologics, and the RAND report pointed out important evolving features of the U.S. biosimilar market: uncertainty surrounding intellectual property, interchangeability, and payment rates.[iii] RAND calculated their estimate of savings by reviewing the sales history of more than 100 biologic drugs, examining other studies that have explored the issue, and examining the experience that Zarxio (filgrastim-sndz), Sandoz’s biosimilar of Amgen’s cancer treatment drug Neupogen (filgrastim), has had on the market.
The BPCIA requires Medicare payment for biosimilars to include a fixed percentage based on the more expensive reference biologic to prevent providers from facing disincentives to prescribe the cheaper biosimilars. As required, Medicare implemented a new payment policy for biosimilars that pays a blended average sales price for all biosimilars that share a common reference biologic, plus a fixed percentage of the more expensive biologic. The report notes that this payment approach could shift over time and that it is not yet known whether private insurers are more aggressively incentivizing biosimilars through payment.[iv]
The report also noted that the potential for cost savings will vary across biologic classes based on sales, the degree of competition, and the timing of biosimilar entry.[v] Anti-tumor necrosis factor (anti-TNF) products, monoclonal antibody antineoplastics, and immunostimulants excluding interferons alone account for 87% of the estimated savings from biosimilars. The actual amount of cost savings depends on several key challenges and sources of uncertainty that the researchers identified in the report: patent litigation’s effect on the timing of future biosimilar launches; payment arrangements for biologics and biosimilars; price competition; switching from one drug (e.g., reference biologic) to a similar drug (e.g., a biosimilar) for a nonclinical reason such that it may impact the safety of the patient, or have other consequences; next-generation biologics that compete with biosimilars and older reference biologics; and future designations of interchangeability.[vi]
The report finally notes that policymakers are presented with two choices regarding the uncertainty in the U.S. biosimilars market:[vii] they can let the market continue to develop under the current policies, or they can intervene and help steer the U.S. biosimilar market more quickly to a more sustainable, competitive state. Although the report did not address whether any policy action is currently needed, the researchers believe the answer will become clearer over the next few years as the biosimilar market continues to develop.[viii]
[i] Mulcahy, Andrew W., Jakub P. Hlavka and Spencer R. Case, Biosimilar Cost Savings in the United States: Initial Experience and Future Potential, RAND Corporation (2017), https://www.rand.org/pubs/perspectives/PE264.html.
[ii] Id. at 2.
[iii] Id. at 4.
[iv] Id. at 5.
[v] Id. at 10
[vi] Id. at 13-15.
[vii] Id. at 15
[viii] Id. at 16.