Biosimilar Medications Could Save Billions

Over the next decade, the United States could save $44 billion by introducing competing biosimilar versions of complex biologic drugs, according to a report by the RAND Corporation. Biologics, which treat conditions, such as cancer and rheumatoid arthritis, are often effective, but expensive. Patient copays can be several thousand dollars a year. In 2011, eight of the 20 best selling drugs were biologics. Also, annual spending on the drugs has grown three times faster than spending for other prescription medications. Introducing biosimilar drugs into the U.S. marketplace is expected to increase competition and drive down prices, saving money for patients, health care payers, and taxpayers. However, savings are not expected to be as dramatic the as savings we have seen for an earlier generation of less-complex generic drugs.

The Affordable Care Act authorizes the FDA to develop a regulatory framework for approving biosimilar drugs. Draft materials released by the FDA suggest that not all biosimilars will be interchangeable with their original counterparts. In addition, nearly all biosimilars will require at least one head-to-head clinical trial to confirm similarity to the original biologic, which is a more-strenuous process than what is required for standard generics. A number of issues will determine the savings and who will benefit. One issue is how much the use of biologics grows as some patients switch to biosimilar drugs as they become more affordable. Patients will see some cost savings. But physicians and hospitals may also benefit because biologicals are often purchased by health providers and administered in clinics and other treatment settings. For more information, visit www.rand.org.

Last Updated 10/20/2021

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