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Volume, Not Competition, Drives Down Drug Prices

Developing breakthrough biologics isn’t an inexpensive investment. Biosimilars, however, have become a well-respected but less costly alternative to their reference products. 

In an effort to introduce more biosimilars to the market, the FDA created an approval pathway specifically for them. The idea was that more biosimilar competition would add additional downward price pressure on reference biologics. Now, new research has cast some doubt on that argument. 

The study, which focused on biosimilars used in treating rheumatoid arthritis, found that volume of use, rather than variety of choice, makes a bigger difference in price. The authors reported that high uptake of existing biosimilars led to a 20-60% reduction in the price of reference biologics. In short, they more biosimilars are used, the cheaper they will become.  

Physician Uncertainty Slowing Biosimilar Use 

Pricing aside, clinician uncertainty about biologics, especially in new subspecialties, has hampered acceptance and use. Even though biosimilars have a designated approval pathway, they must meet the same federal safety and efficacy requirements as their reference biologics. 

Currently, there are 39 FDA approved biosimilars for treatment of diseases such as cancer, rheumatoid arthritis and irritable bowel syndrome. And more biosimilars are in development for use across subspecialities including neurology, endocrinology, gastroenterology and respiratory.  

Increased education and awareness about biosimilars’ approval standards can help assuage providers’ hesitation. Experience using the medications should also bring additional comfort, though accessing many of the new biosimilars could prove challenging. 

Health Plan Rules Could Limit Coverage 

Health plans and pharmacy benefit managers have a record of limiting coverage to new medications through new-to-market exclusions. Beyond that, not every reference product and biosimilar will be included on their formulary list of covered drugs.  

It can be difficult to balance treatment options with cost. Nevertheless, when it comes to choosing a medication, be it a reference biologic or a biosimilar, the decision should be determined by patients and their doctors – not payers. 

Reimbursement Rules Could Affect Access 

Potential changes to reimbursement rules around “buy and bill” might also have a downstream effect of lessening patients’ access to and choice of biologics and biosimilars.  

The common arrangement involves physician practices buying injected or infused drugs on behalf of their patients. After administering the medication, the provider bills the patient’s insurance for the drug’s cost plus a fee for storage and administration. Potential changes would diminish the financial viability of providers to stock the medications on the front end, reducing patients’ ability to get the medication when they need it. 

In a landscape that’s changing as fast as that of biologics and biosimilars, there are many competing priorities. But keeping patients at the center of decisions – around approval and access – will give them the best chance at benefitting from the ongoing innovation.

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