Increased Access to Biologics the Next Step in Reducing Healthcare Costs?

| Megan Elmes | March 13th, 2018 |

By now it’s clear that healthcare costs in the United States are soaring with no expected reduction coming anytime soon. In 2015, we spent $9,990 per capita on healthcare, more than double the OECD median. To start controlling this spending, there has been a dramatic transition from fee-for-service payments to managed care plans. These newer plans work to control costs by encouraging consumers to pursue preventative care and healthy lifestyles. Additionally, managed care plans encourage providers to control costs through more efficient treatments, timely diagnoses, and lower cost pharmaceuticals. Efforts to contain pharmaceutical expenses are rooted in switching from high cost brand name drugs to their cheaper generic counterparts.

In late January, the Wisconsin State Senate passed a bill that allows pharmacists to change physician orders from a biologic drug to its FDA approved, biosimilar counterpart. This is similar to the substitution between a brand name drug and its generic equivalent. This bill once again brings up the discussion about how to bring drug prices down. In the case of biosimilars, aspects of the law and approval process are inhibiting market entry. Improvements in this process could make more biosimilars available for use through this bill, thereby drastically decreasing healthcare costs.

Biologics are drugs that are synthesized using living cells and are one of the most expensive classes of drugs. Infliximab, a biologic commonly used to treat rheumatoid arthritis, costs a patient $26,468 per year. Biologics would have had the ability to continue charging these high prices if it were not for the Biologics Price Competition and Innovation Act (BPCIA). To avoid pharmaceutical company monopolies over biologics, President Obama signed this act into law in 2009. As the name suggests, its purpose was to encourage the creation of ‘generic’ versions of these drugs in order to drive down costs.

Making biologics is complex and the ‘generic’ versions, called biosimilars, are not identical to the original biologic, but are deemed close enough by the FDA to have the same efficacy as their biologic reference compound. The BPCIA’s intent was to create a clear path through the FDA approval process to encourage development of these drugs. However almost 8 years after its signing, there have only been 9 approved biosimilars introduced to the market.

Biologics make up a massive portion of pharmaceutical revenue, due to their high costs and continued use. AbbVie’s biologic Humira alone accounts for 63% of their revenue, making $16 billion annually. But, we have yet to see a biosimilar come to market for Humira. Why would pharmaceutical companies not be nipping at the heels of brand name companies to introduce their biosimilars as soon as the patent runs out?

Well, they are, but in the world of biologics there is a forest of patents to cut through in order to sell the biosimilar without any lawsuits. A single drug can have multiple patents protecting it from biosimilars infringing on its profits. These patents can range from protecting the chemical compound to dosing patterns to the equipment needed for its administration. Piling on the patents is a way that producers of biologics have been able to maintain their monopoly power longer than originally granted.

Discovery and production of life-saving biologics is an expensive process, and for that the founders are granted 12 years of exclusivity. This is much longer than 5-year period granted to new chemicals and antibiotics. A lengthy exclusivity period is not inherently bad. Pharmaceutical companies do need the time to earn back the costs of the development process. However the amount of additional patents seems superfluous. AbbVie’s biologic Humira has over 100 patents, with the last one ending in 2034. Patents disrupt competition by granting monopoly power to the patent holder. Only upon expiration of most or all of a biologic’s patents can generic versions enter the market and begin driving down the drug’s price. More patents lengthen the brand name company’s monopoly status and further delay price competition. In the case of Humira, it seems like competition, and healthcare savings, is not in the near future.

The patent possibilities seem endless. In fact, biologics even have an inborn ‘patent’ due to their properties. While the Wisconsin bill allows a pharmacist to change physician orders to biosimilars, he must remain judicious. Since biosimilars are not identical to their biologic counterparts there are concerns about the possible adverse side effects. Since the biosimilar field is still new, there is limited data on how switching patients between the two counterparts will manifest. Therefore, pharmacists may not be able to change all orders to biosimilar equivalents. Some patients will need to remain on the original biologic, securing continued business for the founding company. Given this, it seems that a robust forest of patents is unnecessary for protecting a single biologic.

In a time when we are trying to control healthcare costs, biosimilars present a great opportunity to save money. An underdeveloped biosimilar market restricts the potential success of the Wisconsin bill passed in January. If more biosimilars were approved and on the market, we could use this bill more effectively. Giving pharmacists the ability to switch orders from biologics to their biosimilar counterparts can save hospitals and patients thousands of dollars, $3000 per dose in the case of infliximab. Just the few biosimilars on the market now have been predicted to result in $44 billion savings on biologics by 2024.

Imagine how much we could cut healthcare costs if we were able to clear out the thicket of patents protecting drugs like Humira so that biosimilars can claim a share of the market. The BPCIA was a good start to clearing the way for biosimilars’ emergence, but it is clear that still more needs to be done to make it possible for these money-saving drugs to make it to market without facing a flock of lawsuits.