Low-Cost Biosimilar Is Set to Disrupt the Drug Market

The approval of the first interchangeable biosimilar insulin product in the United States was hailed as a crucial step in lowering medical costs for people with diabetes.

In July, the Food and Drug Administration (FDA) approved Semglee, a biosimilar alternative to its reference product, Lantus, a brand-name insulin glargine. A biosimilar product has no clinically meaningful differences from an approved biological product, according to the FDA. The approval means that pharmacists can automatically swap the brand-name drug for Semglee.

As biosimilars slowly but surely enter the U.S. market, advocates say the increased competition will make such medication 15% to 35% cheaper and grant patients more treatment options.

But compared to Europe, where biosimilars are readily available as low-cost alternatives, the U.S. has been slow in adopting such products because of regulatory bureaucracy, stigmas around safety, and anti-competition deals struck by pharma giants.

Why Is Biosimilar Medicine Important?

Biologic drugs have seen revolutionary success in the U.S. and Europe. Unlike synthesized drugs, they are derived from living organisms such as a plant or animal cells, and they are often used for disease prevention or treating cancer and rare illnesses. These include therapeutic proteins, cell therapies, and vaccines.

Although effective, biologics can be costly as manufacturers often spend years developing and testing novel molecules.

To create a cheaper alternative, manufacturers can find cost-efficient ways to recreate the molecules used in the original or “reference” biologic drug. Biosimilars are highly similar to their reference product despite differing chemical composition.

In 2009, the U.S. passed the Biologics Price Competition and Innovation Act (BPCIA). The law, which was included in the Affordable Care Act, outlines a pathway for biosimilars to be approved by the FDA. Since then, 30 biosimilars have been approved for use in the U.S., the majority of which were accepted in the last four years.

Studies have shown that biosimilars are generally safe and effective as substitutes for biologics. A 2018 review of 90 studies indicated that most publications did not report differences in immunogenicity, safety or efficacy when switching from a reference medicine to a biosimilar.

Lowering Medical Costs in the United States

GoodRx research found that biosimilars are roughly 10% to 37% cheaper than biologics. For instance, Neulasta, a drug manufactured by Amgen to fight infections for people undergoing chemotherapy, costs more than $10,000 per ml. A biosimilar competitor called Ziextenzo costs just over $6,500 per ml—a 37% cost savings.

Americans spend $500 billion a year on prescription drugs. Biologics make up more than $250 billion of that market, despite comprising only a fraction of the marketed drugs. The U.S. alone makes up more than half of the world’s total biologic drug revenues.

Pharmaceutical companies can file patents for their biologic products, which last for 20 years. Under the BPCIA, biologics enjoy market exclusivity for 12 years and data exclusivity for four years after receiving FDA approval, which could encourage research and development for more biosimilars.

“Before the arrival of biosimilars, originator companies—those are the companies that invent the molecule for the new drug—pretty much have the market to themselves. They can charge pretty much whatever they like and they can increase their prices, year after year,” Tony Hagen, senior managing editor for The Center for Biosimilars, tells Verywell.

After biosimilars enter the market, however, Hagen says average prices start to decline for the drug. The adoption of biosimilars could help to reduce drug costs in the U.S. by $100 billion over the next 5 years, according to the IQVIA Institute for Human Data Science.

Last month, President Joe Biden announced an executive order to promote business competition. He called for measures to increase the use of biosimilars as part of an effort to drive down drug prices.

“I would say there’s a fair amount of bipartisanship in this arena,” Representative Kurt Schrader said at an Axios event.

Schrader introduced a bipartisan bill in April to incentivize an increase in the use of biosimilars. The bill, known as BIOSIM, seeks to reimburse medical providers for the money they may lose when prescribing biosimilars.

Under the current system, Medicare reimburses doctors based on the average sales price of a drug plus 6% of the reference price. Choosing the more expensive reference drug would be the more profitable choice.

The BIOSIM bill, however, will increase the incentive for choosing biosimilar products by reimbursing the cost plus 8% of the reference drug price, while keeping reimbursement for the reference drug at 6%. Lawmakers hope this change will encourage physicians to prescribe biosimilars over reference drugs, saving money for patients and healthcare systems.

Entry Barriers for Biosimilars

Even when biosimilar options are available and greenlit by the FDA, they may face difficulties entering the U.S. market.

For instance, sales of the anti-inflammatory drug Humira (adalimumab) by AbbVie have declined internationally, due to the availability of cheaper biosimilar versions of the drug in Europe since October 2018. But in the U.S., Humira sales continued to soar, making it the highest grossing drug in the world, Axios reported.

AbbVie has raised the price of Humira by 470% since it entered the market in 2003. It now costs about $77,000 for a year’s supply, according to a report from a House Oversight Committee. A caretaker who relies on the drug described AbbVie’s aggressive efforts to keep biosimilars off the market as “cold and heartless.”

When other pharmaceutical companies sued AbbVie for patent abuse, the company struck deals to ensure that biosimilars would stay out of the U.S. market until 2023, so long as the biosimilar manufacturers were allowed to sell their products earlier in Europe.

Six alternatives to Humira are slated to enter the U.S. in 2023. An analysis finds that earlier biosimilar entry would have saved the U.S. health care system $19 billion from 2016 to 2023.

Such “pay-for-delay” settlements—in which companies creating biosimilars are compensated by brand-name pharmaceutical companies to keep their lower-cost drugs off the market—have long hindered the biosimilars market.

In Biden's recent executive order, he called for the FDA and Federal Trade Commission to update patent laws to prevent major drug companies from “unjustifiably” delaying entry of generic and biosimilar products.

Prior to the order, California was the first state to outlaw this anticompetitive practice in 2019.

The European Union approved the first biosimilar product in 2006. Since then, it has approved 55 biosimilars. These products make up about 90% of the injectionable market in Europe. In comparison, the first biosimilar was approved in the U.S. in 2015, and the drugs currently make up about 20% of the market.

Authorization of biosimilars tends to have a slower trajectory in the U.S. than in Europe. Clinical trials for FDA approval of biosimilars tend to be larger, longer, and more costly than those for reference products, a recent study found. The FDA also requires animal studies while the approval agency in the EU does not.

Projections for the Future

The U.S. saw promising growth in biosimilars as six of the 22 available products were launched last year. Additionally, the FDA expanded the biosimilar category to include insulin, human growth hormone, and fertility products, which could accelerate biosimilar product development.

In 2021, the FDA has only approved one biosimilar product, though many companies have sent in applications, Hagen says. The strain imposed on the FDA by the COVID-19 pandemic has slowed the approval process, but Hagen says he hopes more biosimilars will enter the market in the coming year.

The consulting firm McKinsey projects the market for biosimilars will double to $30 billion by 2025, partly because 17 extremely popular biologics will lose exclusivity between 2020 and 2025, paving way for the entry of new biosimilar products.

“In the beginning, it was forecast that you'd see savings very quickly—tens of billions of dollars from biosimilars—but that sort of hasn't happened. We've had a slow growth curve with a slow introduction of biosimilars and slow market share gains,” Hagen says. “But the more recent biosimilars that have been introduced are rapidly gaining market share, and the numbers are impressive.”