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Research Questions

  1. How might the developing U.S. biosimilar market reduce spending on biologics?
  2. How have market share and price changed over time for the first biosimilar marketed in the United States?
  3. What policy issues in the U.S. biosimilars market might affect the cost savings?

The Biologics Price Competition and Innovation Act (BPCIA), enacted as part of the 2010 Patient Protection and Affordable Care Act (ACA), authorized the U.S. Food and Drug Administration (FDA) to create a new regulatory approval pathway for biosimilars, which are biologic drugs that are very similar to already approved "reference" biologics in terms of potency, safety, and efficacy, but are manufactured by different companies. In the seven years since the ACA, many drug manufacturers worked to push new biosimilars through development and FDA review. As of July 2017, there were three marketed biosimilars and two more that were approved by the FDA but not yet marketed. BPCIA's shorter, lower-cost biosimilar approval pathway was designed to introduce competition among biologic manufacturers.

This Perspective estimates potential future savings from biosimilars in the United States, summarizes the experience to date with the first marketed biosimilar in the United States, and discusses key policy issues surrounding biosimilars. We estimate that biosimilars will reduce direct spending on biologic drugs by $54 billion from 2017 to 2026, or about 3 percent of total estimated biologic spending over the same period, with a range of $24 to $150 billion. While our estimate uses recent data and transparent assumptions, we caution that actual savings will hinge on industry and regulatory decisions as well as potential policy changes to strengthen the biosimilar market.

Key Findings

The Cost Savings Potential of Biosimilars

  • We estimated the cost savings potential of biosimilars to be $54 billion over ten years using recent baseline data and transparent assumptions, with a lower- to upper-bound range of $25 billion to $150 billion.
  • The potential for cost savings will vary across biologic classes based on sales, the degree of competition, and the timing of biosimilar entry into the market.

The Future of the Biosimilars Market

  • Evolving payment arrangements, regulatory policies and guidance, patient and prescriber acceptance of biosimilars, and other factors will influence the magnitude of potential savings.

The Beneficiaries of Cost Savings

  • Savings will accrue to a range of stakeholders in the short term, although patients and taxpayers will benefit in the long term.

Recommendations

  • Future research as additional biosimilars are marketed in the United States will help us to assess whether the BPCIA achieved competition and cost savings through the creation of a biosimilar regulatory approval pathway.
  • The pervasive uncertainty in the U.S. biosimilar market — including questions as to whether the market will be sustainable and lead to cost savings, as intended — presents two choices for policymakers. One strategy is to let the market continue to develop under current policies. Increasing FDA and industry experience with approval requirements, precedent through early legal decisions, and evolving pricing and market-share trends will eventually provide clarity on the stability of the U.S. biosimilar market and the significance of biosimilars to the health care system. As an alternative, policymakers could choose to intervene to help steer the U.S. biosimilar market more quickly to a sustainable, competitive state.

Research conducted by

The research described in this report was sponsored by Sandoz, a Novartis Company, and conducted within RAND Health.

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