Biosimilars, Saving Costs on Specialty Drugs

By Tom Dorsett, CEO, RazorMetrics
Twitter: @razormetrics

As of April 2023, the FDA has approved the use of 40 “biosimilars”, which are a less expensive version of an advanced “biologic” medication. The rise of biosimilars is a major source of excitement as a way to control rising drug costs. But is the fervor warranted?

The Rise of Biologics and Biosimilars

Biologics are aptly named as they are actually biological medicines made from living organisms, a relatively new pathway to treat difficult diseases. They are more expensive than traditional drugs because the manufacturing process is highly technical, requires different material sources, are structurally more complex, and have more regulatory requirements.

Currently, the most effective and popular treatment for arthritis is a biologic called HUMIRA, which costs about $7,000+ out of pocket or $5000 out of pocket per month with insurance. The high cost puts the drug well out of reach for most Americans. But a biosimilar version has the potential to bridge the cost gap.

Biosimilars are the generic version of a biologic, but not exactly. They are man-made versions of the living organisms that make the biologic medicines. Using a synthetic version makes the source material less expensive. Also, the regulatory pathway for biologics is much easier than for the original drug so the manufacturer isn’t trying to recoup years and years of research time. As a result, biosimilars are cheaper than their biologic counterpart. Since generics saved U.S. consumers about $373 Billion in 2021, the hope is that biosimilars will offer equivalent reductions in cost and improve access to the medication.

Biosimilars are Struggling Despite Lower Cost

Pharmaceutical companies resisted releasing their formulas once their patent ran out and as a result, congress passed a law in 2010 that forced competition into the market. The first biologic biosimilar was approved in 2015 but since then, only 40 have been approved.

The delay is due to a few factors. First, the structure of the biosimilar is close but not exactly like the original. This means it has to prove that it is as safe and effective as the original. The FDA must certify that the biosimilar is therapeutically equivalent before approval and licensing. This is a good thing, even though it delays the process a bit. It would be a disaster if any company could come along and claim without evidence that their product was just as safe and effective. They must prove that the biosimilar can treat the same kind of condition, with no discernible side effects, etc.

Second is availability. Though the FDA approved 40 biosimilars, only 18 are on the market. Most of these are oncological drugs that are administered via infusion at clinics or doctor’s offices. These types of drugs are special ordered. They are not the kinds of medications that a patient picks up at the local CVS. Patients must go through a specialized pharmacy, but eventually they will be able to use a specialized mail order pharmacy.

The FDA has a special designation for biosimilars that have gone through more rigorous testing. It’s called “interchangeable”, meaning it has proven that it has the same clinical result as its reference product for any given patient. “Interchangeable” follows the generic model for switching so pharmacists can make the change without a new prescription from the physician, nurse practitioner, or PA. Three of the 40 approved biosimilars have attained this designation, which makes it easier on patients to switch to a lower cost alternative.

Of the special three, one is HUMIRA, the very expensive arthritis biologic. It’s biosimilar is called AMJEVITA and it has the potential to save pharmacy budgets millions and millions of dollars, which leads to the third potential barrier.

Pharmacy budgets are more than just the base cost of a given medication. A payer’s or self-funded employer’s pharmacy plan may contain rebates for drugs like HUMIRA; a rebate of $3000 per month could bring the total cost of the drug down significantly and may be cost less than the biosimilar. The price paid at the pharmacy is a complicated formula that is well hidden from physicians and patients.

Biosimilars can overcome these hurdles and make a huge dent in pharmacy budgets with the right technology. A drug savings platform that can run analysis on prescribed drugs plus their rebate indicators will clearly show an insurer or self-funded employer what the better choice is in any given year. In the case of HUMIRA, if the rebate is not there, then it’s a rather simple matter. The hard part is knowing how to access the information on availability, cost, formulary, and rebate indicators. The fervor over Biosimilars is definitely warranted. Since, the FDA has over one hundred biosimilars in the pipeline for approval, we may see pharmacy budgets decrease for the first time.