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    Top four approaches to reduce pharmaceutical costs


    Finding #3: Biosimilars could result in big changes

    Among survey participants, 66% believe that biosimilars will reduce specialty drug costs over the next few years, leaving 34% as naysayers. One quarter of survey respondents foresee cost reductions due to biosimilars happening in 2018, 14% expect a reduction in 2019, 12% in 2020, and 15% after 2020.

    Ginestro agrees with the majority, stating that when biosimilars hit the market, they will reduce specialty drug costs. “Generally, a competitive market will lead to lower specialty drug costs both in terms of switching to biosimilars and the originators reducing pricing to retain market share,” he explains. “But if the original product is still holding substantial market share, those changes may be slow. Health plans and pharmacy benefit managers may be big drivers in that adoption through plan design, but many physicians will opt to keep their patients on treatments that are showing benefit and will be reluctant to change them. Once interchangeability (a designation that a biosimilar is regarded as an equivalent to the original product) is established, payers will have many more options to negotiate prices and manage utilization.”

    The biggest question, Ginestro says, is how quickly biosimilars can get to market and when and how quickly interchangeability will be established. Biosimilars have taken a slow path to market in the United States due to patent litigation, and now biosimilar sponsors are seeking interchangeability as part of an initial approval. “Once on the market, there are many competitive dynamics between original products and biosimilars,” he says. The adoption of biosimilars in certain categories will dictate the speed and amount of savings; adoption and uptake will differ by therapeutic area. Without interchangeability, patients with chronic conditions may be reluctant to switch. Over time, new patients with the right incentives in place may be more willing to try them.”

    Rademacher also believes that biosimilars will reduce drug costs in the long term. “Adoption of biosimilars in both the European market and the U.S. market has been modest initially, but it can be rapid when discounts are strong and incentives are aligned—as was seen in some Scandinavian and Eastern European countries,” she says. “High drug prices are an incentive for the market to speed adoption, however the lack of interchangeability is slowing uptake. As additional regulatory clarity is provided around interchangeability and both patients and providers become more experienced with biosimilars, their utilization will likely rapidly increase.”  

    TaurmanTaurmanBut Lee Taurman, principal and national life sciences advisory leader for Grant Thornton LLP’s healthcare industry practice, says proceed cautiously. “Biosimilars will likely lower specialty drug costs, but not to the extent that some expect,” he says. “The generic market for traditional small molecule pharmaceutical products has led to more than a trillion dollars in savings for the American public over the last decade.”

    Two key elements of the generic market that enable these savings are missing, at least to date, in the emerging biosimilar market, he says:

    1. Most generics are considered equivalent or interchangeable with their branded counterparts; therefore, a pharmacist can “substitute” a generic when filling the prescription. Biosimilars, by their name, are considered similar, but are not the same and are not substitutable in many states.

    2. Generics do not carry proprietary names, but are referred to by their scientific names. All generic manufacturers use the same name for the same drug. Brands, on the other hand, are required to have proprietary names that are specific to the manufacturer. While the rules for biosimilars are still evolving, early entrants have launched with proprietary names. Without substitution and with brand names, the biosimilar market will function more like the existing branded market than the traditional generic market, limiting the potential savings.

    Next: Finding #4



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