The U.S. Food and Drug Administration (FDA) is close to approving its first official biosimilar – a drug similar to white blood cell-booster Neupogen®. Biosimilars are welcome news. And they’ve been a long time coming. Europe approved its first biosimilar drug nearly a decade ago.
The first biosimilar approval in the United States will be an important milestone in the journey to help people with complicated and debilitating illnesses reduce the substantial costs of specialty drugs.
But a new report sponsored by Prime Therapeutics and authored by health economist Alex Brill suggests the market for biosimilars may not be as robust as many hope it will be. Unlike generic drugs, which significantly impacted the traditional pharmacy market with their cost savings, biosimilars face a number of hurdles.
The new report finds that unless important economic and regulatory challenges are resolved at the federal and state levels, it will be economically prohibitive for manufacturers to develop biosimilars for all but the “blockbuster” specialty drugs.
Examples of the regulatory and policy decisions that may negatively impact biosimilar uptake include: naming conventions, clinical testing requirements for biosimilars, and state substitution laws. Even how health care plans cover biosimilars and prescriber and patient perceptions will influence use.
Models developed by Brill indicate pharmaceutical companies will need between $627 million and as much as $1.3 billion in revenue to break even on development of a new biosimilar. The most likely scenario suggests it will require $898 million in revenue. A highly-challenging regulatory environment would add to the already high development time and costs required – 8-10 years and $100 million to $200 million – and thus raise the break-even threshold.
Importantly, we may see diminished returns over time from a biosimilar pathway that makes only the largest biologic drugs good candidates for competition. Prime’s separate analysis suggests that “blockbuster” drugs will represent a smaller and smaller percentage of total specialty drug spend over time. The analysis underscores the need to preserve incentives for manufacturers to invest in developing biosimilars with a smaller sales market.
Read more in Brill’s report, “The Economic Viability of a U.S. Biosimilars Industry.”