The Biosimilar Solution

We’re all familiar with generic medications: the less expensive versions of medications that most insurance companies want us to get instead of their brand-name counterparts. Nine out of 10 prescriptions are filled with a low-cost generic medication instead of the brand name. Most of us don’t even pay attention to the substitution. Generics are available for medications called small-molecule drugs, which are chemically synthesized. Once a small-molecule drug’s patent expires, it’s simple to make a generic, and both products share the same molecular structure.

Biosimilars are like the generics of biological medications, though the process is a little more complex.

Biologic basics

Biologic medications are incredibly effective for many diseases. However, they are sensitive to heat and light, usually offered only as injections or infusions, not pills, and are very expensive. Adalimumab (Humira) costs an average of $6,000 to $9,000 per month. Secukinumab (Cosentyx) is $6,000 to $7,300; and etanercept (Enbrel) costs $9,000 to $12,000 per month. (Prices differ by pharmacy.)

Biologics don’t come from chemicals as small-molecule drugs do. Because they’re made from large molecules with 3D structures, it hasn’t yet been possible to synthesize them like chemical drugs. Instead, they come from living sources, like cells, tissues, or bacteria, so their structure may vary slightly.

As a result, creating a biosimilar version of a biologic medication (called the reference product) is more complex and expensive than developing a generic version of a small-molecule drug. It can take five to nine years and cost more than $100 million, compared with about two years and $1 million to
$2 million for a generic, according to an estimate from Pfizer.

Effectiveness

The U.S. Food and Drug Administration approves a biosimilar only if it considers it to have no “clinically meaningful difference” from the original medication. That means a patient can expect it to work just as well as the original, even though it is not identical.

A biologic medication can have multiple biosimilars, and all can have the same indications as the reference product unless an intellectual property (IP) issue blocks listing an indication. However, if the reference products get another indication in the future and it is not protected by IP, then all biosimilars get to add that indication as well. Because the FDA requires only one indication to approve a drug, different biosimilars may have been tested in different indications.

Interchangeability

There are two classes of biosimilars in the United States: biosimilars and interchangeable biosimilars. The latter classification comes after an approved biosimilar is put through additional testing of switching and alternating. As of July 2023, there are only four biosimilars with the label.

The designation is meaningless and, worse, misleading, says Sarfaraz K. Niazi, PhD, an adjunct professor of biopharmaceutical sciences at the University of Illinois and the University of Houston. It’s confusing for patients and physicians when it comes to safety and efficacy, and it limits options, as this status is exploited by companies having this status, presenting their product as a better choice. There are very few interchangeable biosimilars on the market, which can be an issue when there is a problem with the supply chain, insurance coverage, or pharmacy availability. When waiting for a physician to approve dispensing, it can cause delays in care.

Dr. Niazi is working to eliminate this designation with a bill in the Senate called the Biosimilar Red Tape Elimination Act, sponsored by Sen. Michael Lee (R-Utah). The bill would amend the federal code to state that all approved biosimilars can be substituted for the brand-name drug.

To remove the perception that interchangeable biosimilars are better, the FDA has recently issued a new guidance wherein this difference in their status will not be listed in the prescribing information. According to the FDA, it is not a quality issue but rather a legal issue regarding dispensing at the pharmacy level. No other regulatory agency has two classes, and these are freely switched with reference products and even other biosimilars.

The promise of savings

Biologic drugs are extremely expensive to develop and get approved—about $1 billion—and to purchase—often thousands of dollars a month in copays alone. However, once the initial development costs are recouped, the price to make the actual product is minimal. Humira costs about $30 per dose of 40 mg to make, Dr. Niazi notes, but has a sticker price upwards of $6,000. Medicare pays $3,500 per dose. Reducing costs is good for Medicare, private insurance, and patients facing large co-pays.

With a traditional small-molecule drug, you can often save up to 90 percent by opting for a generic, but biosimilars offer smaller savings of about 10 to 37 percent. Dr. Niazi is hoping to change that. There are a few ways to bring those prices down:

Streamline the testing process. So far, biosimilars have been tested as if they are new biological drugs costing hundreds of millions of dollars to secure FDA or European Medicines Agency (EMA) approval.

Over time, the approval guidelines have been relaxed, but they remain irrational, according to Dr. Niazi. For example, clinical efficacy testing that adds more than 70 pecent of development cost can never fail, yet the FDA and EMA continue to expect such testing. However, the barriers are coming down, and developers are encouraged to request waivers. If Dr. Niazi’s efforts to eliminate unnecessary testing are successful, many smaller companies can enter the marketplace. Once that happens, he predicts an 80 to 90 percent price reduction within 24 to 36 months.

How Pharmacy Benefit Managers Keep Prices High

Improving access to biosimilars also requires reducing interference from pharmacy benefit managers (PBM). PBMs are the middlemen who negotiate drug prices between insurers and pharmaceutical manufacturers and develop prescription drug formularies. Because PBMs charge fees tied to the price of medicines, they make more money on costlier medications—affecting access to biosimilars. A report from Amerisource Bergen states that starting in 2018, the three largest PBMs began excluding biosimilars from their formularies for patients with commercial insurance. In 2022, 14 biosimilars were excluded from the formulary of at least one of the three largest PBMs.

Several bills in the Senate are trying to address this issue. For example, the PBM Oversight Act of 2023 would establish the Centers for Medicare and Medicaid Services’ authority to provide oversight into how PBMs determine which medications are included on drug formularies. This legislation would also require the Government Accountability Office to study the issue and report its findings to Congress, including the Pharmacy & Therapeutics Committees’ practices in developing drug formularies under Medicare Part D. At a September 2023 hearing, “The Role of Pharmacy Benefit Managers in Prescription Drug Markets Part II: Not What the Doctor Ordered,” James Comer (R-Ky.), chairman of the House Committee on Oversight and Accountability, noted that pharmacy benefit managers (PBM) and their tactics are causing Americans to suffer from rising health-care premiums and expensive prescription drug prices. He described how anticompetitive pricing tactics aim to prevent payers—including government payers like Medicare, Medicaid, Tricare, and the Federal Employee Health Benefits program—from understanding how PBMs are making billions of dollars at the expense of patients and taxpayers.

Three large PBMs monopolize the pharmaceutical market. “Each of the three major PBMs—CVS Caremark, Express Scripts, and Optum Rx—is owned by a major health insurer and owns, or is owned, by a pharmacy. This means that when PBMs negotiate with a pharmacy or a health insurer, they are either negotiating with themselves or one of their direct competitors,” Comer said. “This can create incentives to do things that have negative impacts on patients.”

He cited an example of how typical PBM practices could be considered price gouging. A 30-day supply of the cancer drug Imatinib costs $72 at Cost Plus Drugs (Mark Cuban’s discount drug company), but $17,000 at CVS.