Six new copycat versions of Humira – one of the top-selling prescription drugs in the United States – just hit the market. Cyltezo is the first interchangeable Biosimilar for Humira, and another named Yusimry, is about 85% cheaper than the brand-name product. In total there will be eight available Biosimilar competitors to Humira available in the coming weeks.
That's fantastic news for insurers, taxpayers, and – most of all – patients battling everything from rheumatoid arthritis to Crohn's disease to ulcerative colitis. Collectively, they stand to save billions of dollars thanks to the cheaper versions coming to market.
Unfortunately, last year's Inflation Reduction Act could make the launch of these lower-cost treatments the exception, rather than the norm. The law – which Congress passed to reduce drug spending – could ironically keep drug spending high by deterring the creation of biosimilars.
The Humira biosimilars show that America's drug development system is working just as it should. The drug launched in 2003. Like any other new medicine, Humira enjoyed finite periods of patent and market exclusivity to allow its developer to recoup R&D costs and earn a return. That return is what drives life-science innovation in the first place. Investors fund drug development in the hopes that they may one day profit from the development of a new medicine.
Humira enjoyed a virtually unprecedented 20 years of exclusivity, but those periods are now over, and biosimilars are launching left and right. As yet more manufacturers join the dance, it will create a robust competitive market driving down price. Ultimately, patients will win.
Most people are familiar with generics, which contain the same active ingredients as brand-name, chemically synthesized, small-molecule drugs that typically come in pill form. The market for generics is enormous – nine in 10 U.S. prescriptions are filled with generics.
Biosimilars, on the other hand, are nearly identical copies of "biologics," which are large-molecule drugs grown from living cell cultures that are typically administered intravenously. The biosimilar market is still nascent; the FDA has approved just 41 biosimilars, compared to roughly 32,000 generics.
Unlike generics, which often take just a few million dollars and a year or two to launch, biosimilars are expensive and complicated to manufacture and shepherd through the regulatory approval process. A single biosimilar can cost hundreds of millions of dollars and nine years to develop.
The increased cost is due, in part, to the complexity of growing and formulating a medicine from living cells, rather than simply copying a brand-name drug formula that relies on synthesized chemical ingredients.
Policymakers want more biosimilars to enter the market, and rightly so. Biologics comprise nearly half of U.S. drug spending, while making up just under 3% of prescriptions. Biosimilar competition could save the U.S. healthcare system a whopping $180 billion over the next five years alone, according to a recent analysis.
But the Inflation Reduction Act risks spoiling biosimilar development just at the critical time when the industry is starting to take off.
The law permits the government to impose "negotiated" price controls on certain brand-name medicines covered through Medicare. Brand-name biologics become eligible for negotiation after they've been on the market for 11 years, with the negotiated prices taking effect two years later – in other words, 13 years after a biologic's initial FDA approval.
"Eligible" is the key word – nobody knows which particular biologics will be selected for the negotiation process, and which won't, until the government publishes its list of selected drugs two years before price controls take effect.
That presents a major problem for biosimilar developers, whose entire business model is premised on winning market share by undercutting the name-brand biologic on price.
If the government swoops in and resets the price of the name-brand biologic below what a biosimilar competitor's anticipated price, it would vaporize the biosimilar developer's projected profit margin.
And without advance notice of which drugs will be selected, it becomes incredibly risky for biosimilar developers to spend nearly a decade and up to a quarter billion dollars to launch their products. The inevitable consequence of this government-created uncertainty will be a "market flight" of biosimilar manufacturers who will be unable to justify entering certain markets.
Lawmakers tried to address this harmful uncertainty when, at the eleventh hour, they added a provision to the IRA that allows the government to delay selecting a given biologic for price-setting for one year, and potentially an additional year, if there is a "high likelihood" a biosimilar will launch during that time.
The policy was well-intentioned, but the text left too much ambiguity. For a delay request to even be considered, a biosimilar has to be on the verge of launching – but the specifics of what that means are undefined. Plus, since it can take nearly a decade to develop a biosimilar, manufacturers would have to make monumental investment decisions long before they know whether they'll win a delay.
The Centers for Medicare & Medicaid Services had an opportunity to clear up the uncertainty surrounding the biosimilar delay when it released its initial drug pricing implementation guidance back in March. Instead, the guidance made matters worse by doubling down on the uncertainties present in the IRA.
Kneecapping the biosimilar market could undo any savings that stem from drug price negotiations. Projected savings from the IRA's negotiation provision – $98.5 billion – are far below the $180 billion estimated five-year savings that would accrue if lawmakers and CMS let the biosimilar market work.
This particular statistic exemplifies the short-sightedness of the IRA. While the law's price controls will achieve short-term savings, in the long-run they will produce only half the savings that would result from unimpeded market forces.
The emerging biosimilar market has the potential to dramatically lower drug spending – but only if lawmakers and CMS revisit the policies that are currently deterring the development of these lower-cost medicines.
Dan Leonard is the former president and CEO of the Association for Accessible Medicines, former president and CEO of the National Pharmaceutical Council, and former executive vice president of public affairs for America's Health Insurance Plans.
