Biosimilars are hailed as the drugs that can bring down healthcare costs and save the sector a tremendous amount of money over the coming years. These ‘copycat’ versions of the original biologic drugs hold great potential to significantly shift the pricing mechanisms in favour of healthcare payers such as insurers or patients themselves.

Biologics are notoriously expensive. However, due to their superior efficacy, it was reported that in 2011, eight of the top 20 best selling drugs (in terms of sales) in the United States were biologics. This has paved way for a lucrative and rapidly expanding market for biosimilars.

The approval of biosimilars may not lead to lower drug prices

The first biosimilar product was approved for sale in the European Union in 2006 (Omnitrope by Sandoz), followed by the first approval of Zarxio in the United States in 2015. The prices of these biosimilars were expected to be 10% to 30% lower than their innovator biologics and were forecasted to help lower healthcare spendings. The amount of expected saving is optimistic: in the United States alone biosimilars may help to save billions of dollars.

Dr Gillian Woollett, senior vice president of Avalere Health said “The commercial implication [of biosimilar switching] is potentially quite large. The ability to compete and gain share across the entire market, all of which is then linked to a lower price, may change the economic paradigm entirely”.

However, after the introduction of biosimilar products into the market, criticism began to surface where economists and market analysts questioned how much of the predicted “paradigm shift in price” will actually happen. Unlike generic drugs, the mechanisms behind the development, production and distribution of biosimilars are intertwined and complicated. The existence of multiple barriers to market entry has also contributed to stubbornly high drug prices.

The challenge of producing biosimilars

The molecular structure of biologics, including the biosimilar counterparts, are inherently complex. Unlike small chemical molecule, these large protein molecules or nucleic acids have specific biological functions or are capable of highly targeted interaction with other molecules.

A wide variety of medicine products can be classified as biologics, and many of them are made from natural sources. These products include recombinant therapeutic proteins, blood and blood components, vaccines, somatic cells etcetera.

The production of biologics and their biosimilar counterparts are characteristically technical and challenging. Unlike the production of conventional drugs through chemical synthesis, biologics (and biosimilar) products tend to be heat sensitive and prone to microbial contamination and therefore, require production to be conducted under aseptic conditions. The expensive manufacturing process inevitably increases the costs of these products, that eventually trickle down to the end-users.

In addition, manufacturers of biosimilar must consider the issue of interchangeability. Although biosimilar products are designed to mimic the original biologics, they are not automatically interchangeable with the original product.

The lack of interchangeability, as well as the low acceptance rate by physicians, have posed great challenges to biosimilar manufacturers in recouping their investment. In addition, these companies are obliged to conduct additional postmarketing safety trials as required by the relevant regulatory authorities, thus adding further financial strains that will be reflected in the price.

All in all, multiple factors affecting the safety, manufacturing procedures, entry barriers, physician acceptance and marketing costs will unavoidably influence price movements. Ultimately, the actual price of biosimilars will be heavily dependent on the decisions made by health insurers and the manufacturers. Under these circumstances, patients may still remain powerless in price negotiation, and vulnerable to unfair exploitation. MIMS

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Mulcahy A, Predmore Z, Mattke S. The Cost Savings Potential of Biosimilar Drugs in the United States. 2014.
Blackstone EA, Fuhr JP. The economics of biosimilars. Am Heal Drug Benefits. 2013;6(8):469–77.