Follow-On Biologic Drugs Are Unlikely to Reduce the Price of Biologic Drugs Absent FDA Innovation

The price of pharmaceutical products has long been a source of controversy. While the recent headline of the increase of the drug Daraprim from $13.50 per tablet to $750.00 may provide an extreme example of some of the problems affecting the pharmaceutical industry, the looming costs of biologic drugs represent a far more complex and nuanced problem with few easy answers. Though generic versions of biologic drugs may offer some relief, the advent of these biosimilars, or follo-on biologics, is unlikely to result in lower prices without significant Food and Drug Administration (“FDA”) innovation.

In 2005, the European Union’s European Medicines Agency established guidelines for the approval process for follow-on biologics. This pathway predates the pathway established by the Biologics Price Competition and Innovation Act of 2009 (“BPCIA”), and has thus far resulted in the approval of 19 follow-on biologics for six different pioneer biologic drugs. Importantly, the impact of this regulation in the European Union’s mature follow-on biologic markets can be measured and used to predict the effects of similar regulation in America.

When analyzing the market data for follow-on biologic markets in the European Union, it is clear that the four most mature markets, and thus the markets that have the most value with regard to predicting regulatory effects in America, are for the biologic drugs erythropoietin, human growth hormone, granulocyte colony-stimulating factor, and anti-tumor necrosis factor. A recent report published by the IMS Institute for Healthcare Informatics, an American company that is the largest vendor for U.S. physician prescribing data, analyzed these markets and concluded that the extent to which biosimilar competition has penetrated the health care market is the most crucial predictor of whether the existence of a follow-on biologic actually results in lower prices for the consumer. The report suggests several ways to achieve this market penetration, including mass purchasing plans, elimination of barriers to an unrestricted free market, and establishing substitution guidelines that allow generic substitution. As the United States does not engage in the mass national purchasing that some countries belonging to the European Union do engage in, the United States should focus on eliminating barriers of entry to an unrestricted free market and promote the substitution of cheaper follow-on biologic drugs when appropriate to reduce the price of biologic drugs.

While the BPCIA established a regulatory framework for the introduction of follow-on biologics, it is ultimately up to the FDA to promulgate specific regulations for how a follow-on biologic manufacturer can bring a product to market. Importantly, this includes establishing whether a follow-on biologic is merely “biosimilar,” or if it is “expected to produce no meaningful clinical difference” to the pioneer drug and can be classified as “interchangeable.”[i] Unfortunately for biologic drug consumers, it is unlikely that a follow-on biologic will be able to meet this high bar because there is enormous pressure on the FDA from pioneer biologic organizations, including the  Biotechnology Industry Organization, to withhold making this determination until the state of the art  testing of biologics has improved.

Learning from the past, the FDA would be wise to promulgate standards that can eventually be converted into rules as the state of the art develops.[ii] These rules might eventually be able to advise companies on how to produce follow-on biological drugs that interact with a specific enzyme or incorporate a specific three dimensional motif. Furthermore, as the FDA establishes rules, it is likely able to save on screening costs[iii] that contribute to the price of biologics and affect the market penetration of follow-on biologics. However, these vastly understated shifts depend on the ability of the FDA to efficiently and consistently measure biologic drug safety and efficacy- a task that currently consumes enormous amounts of time and money, and is the principal factor contributing to the high price of biologic drugs. Thus, significant technological advancement in the state of the art of biologic drugs is likely the most significant factor in reducing the cost of the price of biologic drugs. While this advancement is likely to take years and costs billions of dollars, European data suggests that absent market penetration and substation, follow-on biologics are likely to have an insignificant impact on the price of biologic drugs in the United States absent this shift in how the FDA regulates biologic drugs.

 

Stephen Dotts is a 3L and a Senior Editor for the Journal of Law and International Affairs at the Penn State University Dickinson School of Law.

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[i] 42 U.S.C. § 262(k)(2)(A)(i)(I-V) (2011).

[ii] See Louis Kaplow, Rules versus Standards: An Economic Analysis, 42 Duke L.J. 557, 557-629 (1992)(arguing that standards are cheap to establish but expensive to enforce and that rules are expensive establish but cheap to enforce; the FDA is wise to employ both of these methods where appropriate for maximum effectiveness; and establishing rules for a less-developed market is more prone to large companies dominating the process).

[iii] See Richard A. Merrill, Risk-Benefit Decisionmaking by the Food and Drug Administration, 45 Geo. Wash. L. Rev. 994 (1976)(arguing that FDA screening of “small-ticket” products, such as drug products, is extremely expensive when compared to utilizing industry standards to ensure product efficacy and safety).