Biosimilars drive competition, alleviate medication costs for plans

By Chris Hanson-Ehlinger
Mon, Feb, 02, 2015 @ 14:02 PM

describe the imageBiosimilars are different from generics in that they are not identical to the original product but are highly similar in how they treat a condition, thus referred to as “biosimilars”. Biosimilars are the primary means to drive competition and save plans and members money in today’s high cost specialty medication market.

In a huge step forward, the FDA's Oncology Drug Advisory Committee just recommended approval of the first biosimilar for use in the U.S. Zarzio, a cancer drug, is a biosimilar version of Neupogen and promises to cut treatment costs by 35 percent. Biosimilars, which have been available in Europe for 10 years, typically cost 20 to 30 percent less than the original drug. That’s significant when specialty drugs can cost more than $100,000 for a course of treatment.

Generic savings

For small molecule (traditional) drugs, there is a process to create generics. Once a patent has expired, alternative manufacturers can bring a generic product to market with minimal development costs (estimated between $1 and $5 million) relative to the original drug. Generic manufacturers have neither the development nor the promotional costs needed to establish the product in the market. As a result generics provide an alternative at pennies on the dollar of the brand version and still earn manufacturers a return on their investment.

Biosimilar savings

Because the process to formulate biologics is so complex, exact generic versions are not an option. Biologics are large molecule drugs derived from living organisms. They typically cost around $1.4 billion to develop and bring to market. Unlike manufacturers of generic drugs, manufacturers of biosimilars are likely to incur significant ($100 to $200 million) development costs which represents approximately 10 percent of the original products development costs.

Market challenges

In the early years of generics, manufacturers of branded drugs made generic substitution difficult at federal and state levels. Over time, however, pharmacists gained authorization to use generics without hurdles such as the requirement to contact the physician before substituting a generic for a brand medication.

We face a similar situation with today’s pending biosimilar legislation. Local and national legislation is needed to provide a reasonable process for biosimilars to be substituted for branded products. Until then, payers and patients will continue to shoulder the financial burden of soaring specialty medication costs.

Shawn Patterson is national sales and client management leader at Burchfield. For more information, please call 800-778-1359 or send us a note (

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