The proverbial social contract that drugmakers often cite to defend prescription drug prices hinges on the image of a patent cliff: After a period of exclusivity that allows developers to recoup R&D costs, any treatment — even those with exorbitant price tags — eventually succumb to generic competition that inevitably brings down its cost, if not render it obsolete.
That model has largely held true for small molecule drugs. But outspoken policy researchers Peter Bach and Mark Trusheim, along with two of Bach’s associates at the Memorial Sloan Kettering Cancer Center, are arguing that the new generation of biologics may need an extra push down that cliff, and the force of biosimilars won’t be enough.
Biologics, they write in a two-part blogpost in Health Affairs, are fundamentally different from small molecules, creating natural monopolies that are difficult to overcome with competition-based price reductions:
While the monopoly held by innovator small molecules is a product of government policies, innovative biologic therapies possess intrinsic scientific uncertainties that make creating replicas difficult, costly, slow, and risky. Competitors to branded biologics are called biosimilars rather than “bio-identicals” or generics to reflect this difference.
Giving up entirely on biosimilars, Bach, Trusheim (of MIT Sloan), Preston Atteberry and Jennifer Ohn propose a regulatory approach to reining in biologics costs that they say can generate $250-$300 billion of net savings, while incurring one-time costs of $10-$20 billion over five years. Their estimates for savings are based on “the current 12-year exclusivity period and an assumption that discounts approach the traditional generic discounts of 70-90 percent,” while the one-time costs go toward compensating biosimilar firms.
The policy would require innovator biologic manufacturers to lower their prices after the period of market exclusivity — a price set by an independent body that takes into account the reported cost, a markup, a defined profit margin, return on capital and so on.
The authors anticipated some pushback. You can be sure that freshly retired FDA commissioner Scott Gottlieb was among the first to defend continued policymaking around biosimilars.
It’s far too early to throw in the towel on biosimilars. Impediments to uptake remain commercial barriers that will erode. One way to accelerate that erosion is to put Part B drugs into a comparatively bid scheme to take advantage of the fact that most are multi source medicines https://t.co/VyuwqOVD89
— Scott Gottlieb, MD (@ScottGottliebMD) April 15, 2019
A vocal champion of biosimilars as a means of lowering drug prices, Gottlieb has previously lambasted a “rigged payment scheme” on the insurance and pharmacy benefit managers side that hinder market penetration for biosimilars.
The Biosimilar Council, a division of the generic drugmaker coalition known as the Association for Accessible Medicines, told BioCentury that “marketed biosimilars currently average 47% off the brand biologics’ price” and abandoning it altogether would be “tossing out the baby with the bath water.”
Some also took issue with the premises of the argument.
I should expand a bit more on why I think it can be quite harmful to just throw around terms.
If we label markets that are not natural monopolies as such and then call for regulation — it looks like misusing ecnomics to get a preferred policy of price regulation (1/4) https://t.co/GiIGpPQtws
— Craig Garthwaite (@C_Garthwaite) April 15, 2019
As a notable talking point of President Donald Trump’s plan for lowering drug prices — with big biopharma players like Pfizer and Biogen doubling down on their investments — biosimilars are unlikely to go away any time soon. But Bach’s will be one of many ideas to come as politicians and companies alike frantically search for ways to tamper the roaring debate around high prescription drug prices, in which expensive biologics play an ever enlarging role.
Image: Peter Bach at an Endpoints panel, January 2019.
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