Biosimilars could cut US health care spending by $150B over next decade, report finds

Introducing biosimilar drugs into the U.S. market over the next 10 years could reduce health care spending by 3 percent, according to a new RAND report.

Just the FAQs: Biosimilars

Background

Biologic drugs are developed from living cells, which makes the treatments costly to develop and impossible for generic drugmakers to manufacture exact replicas. However, drugmakers can develop comparable and often less-costly versions of the drugs, called biosimilars, which are close enough to biologics to function in the same manner.

FDA in 2015 approved Zarxio, a drug developed by Novartis' Sandoz, as the first biosimilar medication for sale in the United States. According to FDA, the agency so far has approved a total of seven biosimilar drugs for sale in the United States.

Findings

For the report, RAND researchers reviewed the sales of over 100 biologic drugs in the United States and examined how Zarxio has performed in the U.S. market. The researchers also reviewed previous studies on biosimilars to estimate potential cost-savings.

The researchers found that between 1 and 2 percent of U.S. residents are treated with biologic drugs each year. Despite their relatively low use, biologic drugs accounted for 38 percent of prescription drug spending in the United States in 2015 and 70 percent of the growth in prescription drug spending in the country between 2010 and 2015.

The researchers estimated that introducing biosimilars into the U.S. market could cut U.S. spending on biologic drugs by 3 percent over the next decade, with estimated cost-savings ranging from $24 billion to $150 billion from 2017 to 2026.

The researchers explained that introducing biosimilars into the U.S. market would drive down biologic drug prices by increasing competition. However, they said those lower prices ultimately could mean more patients would be able to access biologic drugs, which could lead to higher health care spending overall. The researchers said those spending increases could potentially be offset if the drugs' use lowered other spending, such as spending on hospitalizations.

Andrew Mulcahy, the report's lead author and a policy researcher at RAND, said, "Biologics account for the fastest-growing segment of prescription drug spending, but biosimilars have the potential to help slow some of the increase." However, he said savings will depend on "many important industry, regulatory, and policy decisions" going forward. Mulcahy added, "Future research will be needed as more biosimilars come to market to see whether savings are realized and who benefits from any reductions in spending" (Lagasse, Healthcare Finance News, 10/23; Paavola, Becker's Hospital Review, 10/23; "Rheumatology," Healio, 10/23; RAND report, 10/23; FDA website, accessed 10/24).

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