Biosimilars and Health Care Reform

Mr. McAllister is a health systems consultant based in Chapel Hill, North Carolina.

Biosimilars or follow-on biologics are defined as officially approved new versions of innovator biopharmaceutical products after patent expiration. The use of biotechnology holds great promise for new drug development using new approaches in drug discovery, design, and production, especially for many cancers, Alzheimer’s disease, and a myriad of conditions and diseases that are difficult to treat with drugs currently available. To date, the FDA does not have a pathway for establishing innovator products or establishing therapeutic equivalence of biosimilar products.

As one might imagine, both the Senate (Health, Education, Labor and Pensions Committee amendment) and the House (Energy and Commerce Committee amendment) have received approval from their respective members for creation of a pathway for approval of biosimilars as well as a 12-year period of exclusivity during which the FDA cannot use the innovator’s safety and efficacy data to approve biosimilar products. The challenge to legislators is to approve necessary regulations that protect innovator companies, while maintaining the safety and efficacy of biosimilar products that will increase competition and lower drug costs. Lobbyists on both sides of the issue debate safety and efficacy concerns over biosimilars and the fear that they will hinder innovation if the innovator’s drug is replaced before a positive return on investment is achieved.

Hospital pharmacists should be quite interested in the proposed regulations, because the vast majority of these drugs are used in organized health care settings. Past experience with biotechnology-derived drugs that have received approval reflect extremely high prices (and sometimes for large patient cohorts) that can have a dramatic impact on a hospital’s drug spend. In addition, hospitals have a tendency to be the primary provider of these expensive products following discharge, because initiating therapy during an inpatient stay almost obliges them for providing continuation of therapy regardless of the patient’s prescription drug benefit plan coverage or his or her ability to pay out of pocket. Sales of biopharmaceuticals exceeded $20 billion in 2003, and some experts predict that sales may exceed $100 billion by 2010.

President Obama and his administration intend to focus health care reform on improving access while reducing costs. Biologic products will surely dramatically increase overall spending on drugs, and hospitals may need to somehow limit access of these products to patients whose insurance (or lack thereof) will not reimburse the hospital.

One of the most hotly debated points related to the proposed reform legislation is the period of exclusivity, which is a 12-year period in both the House and Senate versions of health care reform. It is interesting to note that the Generic Pharmaceutical Association and AARP advocated for a 5- to 7-year exclusivity period, and a Federal Trade Commission report supports their position because biologics usually require a more complicated manufacturing process, thus offering additional protection for the innovator. Despite these recommendations, the Obama administration objected to the shorter protection period.

Pharmacy colleagues with considerably more expertise on this issue have suggested that we need to look at the European Union for guidance on this issue. The European Medicines Agency (similar to the FDA) has a science-based pathway for biosimilar review that has resulted in 20% to 30% lower prices for biosimilars that have achieved a 30% market share.

It is evident that politics is again about to let us down and miss the target espoused by the Obama administration of reducing health care costs. I agree that biopharmaceuticals have the potential for improving health, and we should encourage their development. The pharmaceutical industry needs more self-reflection on this issue, however, to contribute to a more controlled growth of drug costs. What do you think?