It is no secret that medicine is expensive, but for many high-cost drugs, no one is developing cheaper alternatives. Competition lowers prices and drives investment. In the biosimilar market, poor regulations from the Food and Drug Administration and anticompetitive behavior from pharmacy benefit managers limit investment in less expensive versions of the most complex medicines.
One of the significant achievements of modern medicine is the creation of “biologics” — medicines with far longer chemical structures than regular “small molecule” drugs. From insulin to treat diabetes to many new cancer drugs, biologics save lives. Just as those small-molecule drugs have generic versions, biologics can have biosimilar versions that are just as effective but far less expensive.
Of the 118 biologics expected to lose patent protection by 2034, only 12 have biosimilars in development. Given the potential profit, companies should be racing to develop biosimilars. Instead, the FDA makes it unnecessarily expensive, and PBMs often won’t offer them.
On the FDA side, the United States was the only country for years that required biosimilars to pass separate interchangeability tests — often called switching studies. Thankfully, the FDA has released draft guidance recognizing that switching studies are unnecessary. Unfortunately, that change has not been finalized.
These studies focus on whether there are any effects when switching from the original biologic to a biosimilar and add large costs to an already expensive process. Developing biosimilars typically costs $100 million to $300 million and takes six to nine years before an additional $100 million to $300 million for switching studies. These studies effectively double the cost of producing biosimilars without providing additional patient safety.
The European Union has authorized 120 biosimilars, all automatically considered interchangeable with the reference product. The United States has 75, with only 21 deemed interchangeable. The United States can compete internationally if given the chance. Four of the top 10 biosimilar firms are American — including the top two — yet our market remains constrained. Of the 19 biologics with approved biosimilars, 11 have none granted interchangeable status. Interchangeability tests are costly and create a stigma for biosimilars without them, and make those without impossible for pharmacists to dispense instead of an expensive name-brand biologic.
PBMs are the other major obstacle to patient access. Humira has had 10 approved biosimilars, yet PBMs often won’t offer them. Humira is covered by 99 percent of health plans, yet only 53 percent cover at least one of its biosimilars — even though four already hold FDA interchangeable status.
When biologics can’t get into the market, there is little reason for manufacturers to bother making them. The result is fewer lower-cost biosimilars and less competition bringing prices down for patients.
Some name-brand manufacturers share the blame. AbbVie — the manufacturer of Humira — has reportedly offered discounts on other drugs they make, so long as PBMs don’t recommend biosimilars over Humira, giving up some profits on other drugs to ensure their Humira remains dominant in the market. That trade-off might be defensible if PBMs reliably passed savings on to patients, but PBMs are known to retain a sizable portion of discounts.
When PBMs refuse to cover biosimilars or prioritize name brands, biosimilar manufacturers face the risk that even after paying for development and interchangeability tests, their product won’t be allowed to compete.
Overregulation and a lack of coverage have left the United States with too few biosimilars and too few being developed. Smart reforms can change this. First, the FDA should finalize the decision to drop unnecessary interchangeability tests.
They may have seemed prudent more than a decade ago, but evidence shows no safety of efficacy issues when switching between biologics and biosimilars. Removing interchangeability tests would reduce the cost of developing biosimilars, while allowing patients easier access to less expensive medicines.
Second, Congress should require transparency from PBMs in the form of upfront reporting on the biosimilars they offer and those they don’t. Without comparable data, insurers cannot pressure PBMs to compete on access and price.
Until biosimilars are given a fair chance to compete, patients will continue to pay more than they should for essential medicines.
