Biosimilar Prices Bode Well For Innovation

  • by: |
  • 09/03/2015
There's been a lot of sub-textual cheering by The Wall Street Journal about the a court's ruling that Novartis can sell Zarxio, the biosimilar version of Amgen's Neupogen approved by the FDA a few months ago.  In particular, the PBMs have been saying that eventually as more biosimilars hit the market , the discounts to payors and PBMs will be 40-50 percent.  

Previously, the WSJ stated the approval was akin to " firing the starting gun on a new industry" that will reign in drug spending. 

More like shooting blanks.   

First, it is important to remember, as the FDA noted in it's approval, that " ZARXIO has not been determined to be interchangeable."  Which means: No switching. 

Second, a biosimilar requires a Phase III trial.   Prior to obtaining approval, Novartis-Sandoz had to conduct the PIONEER study (the official title is A Randomized, Double-blind, Parallel-group, Multi-center Phase III Study Comparing the Efficacy and Safety of EP2006 and Neupogen┬« in Breast Cancer Patients Treated With Myelosuppressive Chemotherapy)  The trial was initiated in 2011 and the results of the study were submitted in 2014.    Several studies estimate it takes 8-10 years and anywhere from $100 million to $250 million to produce one biosimilar. (That does not include the capital costs of failure, delay, etc. )  That timeline is no different than innovative drugs.  That fact should squash the conspiracy theorists like Public Citizen or Donald Light and Hagop Kantarjian who claim that's what a new biotech costs to develop since a biosimilar takes NO risk in investing in preclinical and early human studies. 

Third,  biosimilars will require the same post market surveillance expected of innovator products.  My colleague Peter Pitts has articulated the need for this -- and for monitoring marketing claims -- better than anyone.  

For these reasons, biosimilars have not been a profitable business.  That will change as more biotech products go off patent.  But don't expect deep discounts as long as the costs of development increase.  

Instead, it is possible that companies producing biosimilars will seek to increase profit margins by developing therapies that add value.  Turning an injectible into an oral treatment is one way.  Reformulations and drug combinations are others.  Companies will likely seek to create niches using diagnostics and finding additional uses for products. 

Which raises the possiblity of authorized generic versions.   Or not.   My guess is that Amgen will compete on price and seek additional indications for Neupogen.  
Biosimilars will not save the gazillions estimated by the media.    Rather, they will promote the kind of competition one sees in smartphones and tablets: similar functions, different consumer experiences as a result of incremental, but useful, changes in technology. 


That's innovation.  And that's good for patients. 

CMPI

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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