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Issue Brief: The Elements of a Competitive Biologics Market

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Most people are familiar with generic drugs as less costly alternatives to drugs whose patents have expired.

These products are composed of relatively simple molecules. It wasn’t until recently that a similar type of pathway became available for more complex therapeutics known as biologics. Biosimilars are products that have been shown to be “highly similar” to their reference biologic and, just like generics, have no clinically meaningful differences from their reference product. However, they have brand names and will likely need substantial detailing upon their introduction to get physicians and patients familiar with their use.

Biologics and biosimilars are made in living systems (e.g., cell lines) and are much more complex to develop and manufacture than traditional generics. The higher costs of development for biosimilars, estimated at around $250M per product versus $1–5M per generic, necessitates a new business model. Still, it is anticipated that biosimilars will compete with their reference product based primarily on price, leading to potential system-wide savings.

Biosimilars have been available in some markets, such as Europe, for over a decade. In these markets, the extent to which biosimilars are prescribed, and the savings generated (or not), is to some extent a function of the policies put in place to incentivize physicians to prescribe them. Europe and other highly-regulated markets, such as Japan, Australia, Canada, and South Korea, show how incentives and the consequent uptake of biosimilars vary widely. In our report, we explore the policy choices which have encouraged or discouraged sustainable competition among biologics. Overall, we identify two consistent themes: (1) Biosimilars may not be prescribed, and a market for them may not develop unless physicians are incentivized by policymakers, and (2) Policymakers in individual markets must consider a tailored policy approach — there is no one-size-fits-all policy model.

Funding for this research was provided by Merck & Co. Avalere Health retained full editorial control.

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