A growing body of evidence shows the biosimilar market is increasingly realizing its potential as a driver of competition and savings in the United States. But a new report from Cencora highlights how implementation of the Inflation Reduction Act (IRA) threatens to undermine biosimilar progress driving competition in the marketplace and the future savings that could be achieved. Since Congress enacted the Biologics Price Competition and Innovation Act (BPCIA) in 2010, biosimilars have become an important way to bolster competition and increase options for patients.
What you need to know
The competitive dynamics in the biosimilar market are unique. While generic competition among small molecule medicines often leads to decreased uptake of brand-name products, the biologics market yields a more dynamic effect where both brands and biosimilars compete to retain market share. This dynamic effect is particularly noticeable in payment rates in the Medicare Part B program. An analysis of Part B payments in the report highlights the substantial reductions in the average sales price (ASP) of brand biologics facing competition from biosimilars. In one example, a brand biologic lowered its ASP by 57% while still maintaining majority market share with significant biosimilar competition.
As a result of growing competition, the biosimilars market has led to $21 billion in cumulative savings in the United States over the past six years for Medicare, employers, patients and the broader health care system.
On the contrary
While these benefits and the future promise biosimilars present are substantial, the IRA threatens the role these medicines play in controlling costs. Under the IRA, the government can select certain biologics in both Medicare Part B and Part D for government price-setting.
Biologics that have been on the market for 11 years or longer may be eligible to be selected for government price setting as long as they do not have a biosimilar competitor that is licensed and marketed. But it will be very difficult for biosimilar medicines to enter the market before the corresponding reference product is eligible for selection and government price setting may occur given existing timelines governing biosimilar entry that were created under the BPCIA.
And there is more
Though Congress enacted a “Special Rule” as part of the law enabling biosimilar manufacturers to obtain a “pause” before a brand biologic product is selected for price-setting to allow time for a biosimilar to be approved and launched before the set price is imposed, the timelines and criteria under the “pause” may still be insufficient to provide predictability for biosimilar manufacturers, throwing the future of the market into question.
Due to the complexities of biologics, biosimilar development can take between seven and eight years and $100-$250 million in investment. But under the IRA, biosimilar developers are not able to predict, with any accuracy, which branded products will be subject to price setting. As a result, the law creates significant uncertainty and will reduce incentives to invest in biosimilar development moving forward as manufacturers may find it difficult to recoup the significant costs of investment.
Impact is already harming future development
The negative impact is already apparent with the recent announcement of CMS’ initial list of drugs selected for 2026. Two of the biologics selected for price setting face pending biosimilar competition in the years ahead. However, due to the provisions in the IRA and CMS’ flawed interpretation, if the pending biosimilar products are unable to reach the market by August 1, 2024, and meet CMS’s arbitrary “bona fide” marketing standard, they will be forced to compete against products with a government set price, reducing the chances of success in the marketplace.
Here’s the deal
The utilization of biosimilars has been forecasted to save more than $180 billion over the next five years, a more than 4-fold increase from the previous five years. Unfortunately, substituting government intervention for market competition comes at a cost. Chilling biosimilar development at a time when the marketplace is positioned to demonstrate the full value of competition in reducing health care costs is misguided and seriously threatens projected savings for patients, Medicare and the broader health care system.
To learn more about biologics and biosimilars, visit here.
Lindsey Seidlitz
is a Deputy Vice President, Policy and Research at the Pharmaceutical Research and Manufacturers of America. At PhRMA, Lindsey focuses on policy analysis and developing research on a range of issues aimed towards supporting an environment for innovation. Her work seeks to further policymakers and the public’s understanding of the value that new medicines provide to patients and society, the role that medicines play in making our health care system more sustainable, and the dynamics influencing the way medicines compete in certain markets and therapeutic areas. Lindsey holds a BA in Political Science from the University of Southern California and a Masters of Public Policy from Georgetown University.
Lindsey Seidlitz
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"Biosimilars drive savings, but the IRA undermines their development"
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Biosimilars drive savings, but the IRA undermines their development
"Biosimilars drive savings, but the IRA undermines their development"