Economic Impact of Biosimilars

A discussion on the pricing of biosimilars and factors that limit the cost-savings potential.

Anthony Mato, MD, MSCE: Now we’re going to talk about the economic impact of biosimilars. None of us are health economists, so full disclosure. But I’ll start with Bhavesh. Why don’t we start by discussing the pricing of biosimilars and the factors that limit the cost-savings potential. You had mentioned earlier that they are 20% or 30% less expensive than the originator product. Why are they not 50% or 70% less?

Bhavesh Shah, RPh, BCOP: It’s a great question. I think we may actually get to a point where it is 50%, depending on the number of biosimilars you have in the market. It’s about a competition. Currently when you have 1 or 2 agents, you’re not going to have aggressive pricing. But as each biosimilar comes onto the market, they are going to come out with even a lower price because they have to in order to get more market share.

Anthony Mato, MD, MSCE: But is there a limit based on the cost that it takes to develop the drug, quality-control standards, and FDA approval process? There must be a point where the cost can’t be reduced in order to make it effective to develop the agent.

Bhavesh Shah, RPh, BCOP: I think only the manufacturer knows that. I don’t know what the threshold is, but I’ve seen cases where there have been significant discounts on biosimilars that other institutions have been able to get a lot of times. There’s no limit, but there has to be in order for them to continue the biologic manufacturing process, because definitely we know it’s more costly than a generic drug.

Anthony Mato, MD, MSCE: Since we’re talking about economics and cost, I guess 1 thing that always jumps into my head in this conversation is that we have this conversation with the patients, but really the cost savings are not directly transferred to patients in any way. It’s an unusual situation where the parts of the system that are benefiting from the cost savings aren’t the patient directly, yet that’s the person that we often have the conversation with. That is the rationale for why we’re switching the drug. Any comment on that?

Bhavesh Shah, RPh, BCOP: Yeah. That’s interesting, and I think this is what goes into the education for providers and patients. You may not see the immediate cost savings, but the way a payer works, the way an institution works, is that you’re treating patients and the cost is basically per member, per month.

If you’re costing more to treat all your patients with a reference product this year, that means that’s going to translate to an increase in premiums and deductibles next year, and this is exactly what happened with Medicare. Recently they released that in 2020, they’re going to increase deductibles.

Anthony Mato, MD, MSCE: And premiums?

Bhavesh Shah, RPh, BCOP: Premiums and deductibles will increase by 7% because of cost. If you’re able to decrease drug cost by 20% to 30%, you can imagine that’s going to actually help you in your premiums and deductibles next year. You may not see the immediate savings, but essentially this will be something that you will see in the future.

The other aspect is that as you see more biosimilars coming into the market, you will see that the cost of the reference product is going to be steady or going to come down. The current trend for biologics is that every year the cost goes up by 5% to 9%, depending on the biologic. Last year 3 biologics increased their price and resulted in a $2.5 billion increase in health care cost. That’s because there were no biosimilars.

Now that you have biosimilars, that is going to actually stop the price increase. Also the ASP [average sales price] will start to go down. We will not see this immediately, but if we don’t have an adoption of these drugs and don’t start using them, we are not going to see a savings from them.

Anthony Mato, MD, MSCE: That’s a good point. As health care providers, we should almost mandate that we see those cost benefits translated to patients. Otherwise, why are we doing this?