Care Transformation Center Blog

Just the FAQs: Biosimilars

by Samm Freedman

The biosimilar market has just started to take shape in the United States, but according to Express Scripts, biosimilars could reduce drug spend by up to $250 billion over the next decade. However, there remain significant obstacles to FDA approval and widespread use in clinical practice.

What are biosimilars?

Biosimilars are large molecule drugs that are highly similar to a reference "biological" product. Both biologics and biosimilars are made from living cells and are used to treat various diseases, ranging from cancer to rheumatoid arthritis to diabetes. Unlike generic drugs, biosimilars are not identical to the original drug that they are designed to imitate. Biosimilars and their reference products share the same mechanism of action and meaningful safety and efficacy criteria, but they may have differences in their clinically inactive components. It remains unclear which, if any, clinically inactive differences affect biosimilars' efficacy or toxicity.

Though biosimilars have been available in Europe since 2006, the FDA only approved the first biosimilar in the United States, Sandoz's ZarxioTM (filgrastim-sndz), in January 2015. A second biosimilar, Celltrion's Inflectra (infliximab-dyyb), was approved in April 2016.

How will reimbursement influence biosimilar adoption?

Starting in 2016, Medicare adopted a reimbursement formula that enables providers to prescribe lower-cost biosimilars without conceding revenue. Specifically, Medicare pays the average sales price (ASP) of the biosimilar plus 6% of the ASP of the reference product. As a result, there is no financial incentive to prescribe the reference product over the biosimilar. With that said, providers may remain more comfortable prescribing the reference product simply because they are less familiar with biosimilars.

What other factors will influence adoption?

The FDA has not yet provided clear guidelines for when biosimilars can be substituted for their reference products. Physician and pharmacy leaders should partner to educate providers about biosimilars and develop guidelines regarding substitution. In addition, health systems should invest in training and awareness campaigns to ensure that providers are familiar with biosimilars and use them appropriately.

What factors influence the price of biosimilars?

Biosimilars require complex manufacturing conditions and rigorous clinical trials to ensure that structural differences do not interfere with the efficacy of the drug. Due to the intensity of the research and development process, biosimilars cost between $100 and $250 million to reach the approval stage, compared to the $1 to $4 million that it costs to bring generic small-molecule drugs to market. As a result, biosimilars are less discounted relative to their reference products than generics. For example, ZarxioTM is priced at a 15% discount compared to its reference product. The price of Inflectra has not yet been announced.

Biosimilars will face competition from reference products and biosimilars produced by other manufacturers. It's unclear how prices will be impacted, but increased competition should ultimately drive down the drugs' ASP. And over the long term, lower ASPs will also reduce reimbursement for providers.

Get more insights on where biosimilars are headed

As more biosimilars enter the market, they could present a unique opportunity for providers to increase health care value without sacrificing revenues. Stay tuned to the Pharmacy Executive Forum to learn more about biosimilars' potential to change the industry.