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The impact of drugs known as biologics is immense. Millions of patients are now treated with medications in this fast-growing class of therapeutic products and the market continues to grow. Biosimilars — medications designed to be similar or interchangeable with biologics — should further increase access to treatment and lower costs for patients facing serious diseases. But whether or not biosimilars will be able to make significant inroads into this market is still an open question.

Unlike traditional drugs, which are generally small, easily characterized molecules made via chemistry — think aspirin or antidepressants — biologics are generally large, complex molecules that are often produced by living organisms. Best-selling examples include Enbrel, Herceptin, and Humira. These highly complex treatments often come with a steep price tag: Biologic drugs accounted for almost 40 percent of U.S. prescription drug spending and 70 percent of drug spending growth from 2010 to 2015.


Just as lower-priced generic drugs can be substituted for brand-name drugs, biosimilars may soon be substituted for biologics, providing more treatment options and presumably better pricing through competition. But depending on where you sit, biosimilars are either the cure for sky-high drug prices or a stake in the heart of innovation.

Due to the potential for lower prices, biosimilar medicines could promise treatment access to a wider swath of patients. Insurers, the government, and other purchasers of medications hope this avenue leads to better access and significant reductions in cost. One analysis projects biosimilars to reduce direct spending on biologic drugs by $54 billion between 2017 and 2026.

Like generic pharmaceuticals with the potential for broader access and savings, biosimilars come with a downside — challenge to scientific innovation. As biopharma innovators develop new and exciting biologics to combat cancer, autoimmune diseases, and other diseases with high unmet need, they must consider a steeper loss of market share to biosimilars than historically portioned to other competitors. It is possible that innovators may begin to project reduced revenues and subsequently less reinvestment into new therapies as a result.


Despite payer hope and innovator alarm, neither scenario has yet played out in the United States. In fact, the rate at which biosimilars are coming to market and their subsequent growth in market share has been slower than anticipated. This could be due to the current lack of “interchangeability,” meaning that the pharmacy cannot automatically switch prescriptions from an innovator drug to a biosimilar without physician approval the way they do for small-molecule generics. It could also be that despite the label, biosimilars do not have the real-world evidence across indications that innovator drugs may have. Lack of physician and patient awareness of biosimilars may also be to blame.

As part of a life science consultancy that helps clients develop strategies for advancing health care technologies and forecasting business growth, my colleagues and I periodically check in with payers and providers to understand what’s happening on the ground. We recently spoke with a handful of payers at large, U.S. health plans about biosimilars.

One thing we heard was that biosimilar drugs are simply not yet cheap enough. The current wave of biosimilars lack the desired price point: a 40 percent to 60 percent reduction relative to the original drugs’ net price (the wholesale price less rebates). Until they reach this point, payers say it’s more economical for them to stick with innovator drugs and their substantial volume-based rebates.

One payer said his company is waiting for biosimilar manufacturers to hit the market with “shock-and-awe” pricing — offering insurance companies steep discounts on the drug compared to discounts they receive on the innovator drug. Without these discounts, which can reach as high as 60 percent, biosimilar manufacturers may never gain needed market share.

Without rapid gains in market share and subsequent profitability, the U.S. biosimilar industry could wither on the vine before it fulfilled its promise to bring down costs. To gain market share, biosimilars companies need to offer payers a good deal. But a good deal is often a moving target. Payers will engage in parallel negotiations with innovator companies who can counter with more substantial volume-based rebates than the biosimilar company could offer.

To compete with more entrenched innovator companies who are already present in the health care system, biosimilar manufacturers could aim to negotiate with a limited number of payers to gain nonexclusive access to a large group of providers who subsequently become enthusiastic about the biosimilar. This is typically based on a site of care such as a specialized clinic, infusion center, or hospital.

In the German multipayer system, for example, the fast uptake of a biosimilar of erythropoietin alfa between 2007 and 2009 was due to early adoption by the largest network of dialysis centers, the Kuratorium für Dialyse und Nierentransplantation, also known as KfH. It manages 30 percent of Germany’s dialysis patients. KfH used a limited, centralized set of group-purchasing organizations to negotiate prices with manufacturers. In exchange for a discount on biosimilar erythropoietin, KfH delivered a large set of patients to the manufacturers of the drug. Even without mandatory substitution of the biosimilar, access to the network and peer-to-peer education spurred its uptake.

This kind of strategy needn’t be limited just to biosimilar manufacturers. U.S. innovator companies would be wise to pay special attention to the large, integrated delivery systems and chains of specialized care delivery clinics, such as dialysis clinics or infusion centers, to ensure they maintain a competitive edge. This will become even more important as hospitals organize themselves to better procure the drugs they need.

In contrast, U.S. physicians want certainty more than discounts. They know that biosimilars are close copies that are fine for applications like supportive oncology care or even rheumatology. But they balk at the use of biosimilars in critical “no-fail areas” like inflammatory bowel disease, where reduced potency can lead to relapses and hospitalization, or to metastatic cancer, where reduced activity can decrease survival. For biosimilar companies, this means building data sets of real-world evidence across multiple indications and making sure physicians have access to the data. For innovator companies, it means continuing to invest in studies that demonstrate their drug’s efficacy and safety, including patient-centered outcomes and real-world evidence.

It is still early days for biosimilars and it isn’t clear who the winners and losers will be. The impact of newly-minted government policy may soon come into play, including biosimilar-related provisions that Congress passed this week along with the short-term spending bill, which appear to be a mixed bag for the industry. Nevertheless, the key to success for both biosimilar manufacturers and innovator companies is in finding strategies that fundamentally ensure the best patient outcomes, enable broad market access, and deliver a fair price.

Michelle Hoffmann, Ph.D., is senior vice president at Back Bay Life Science Advisors, where she specializes in helping both startups and large-cap companies find growth through scientific and clinical innovation.

  • I have a feeling that the drug pricing of biosimilars in the US market is not competitive and the promise to reign in costs will not be realized any time soon. Unlike other countries like in the EU where centralized decisions affect many clinics across several EU countries and deliver more savings. Has anybody analyzed the costs of lawsuits and rebates in stifling the wholesale switch to biosimilars in Hematology/Oncology?

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