The high cost of health care in the United States is a
significant issue. Some research points to two causes of the high cost in the United States: 1) high pharmaceutical cost; and 2) high wages for health care workers.
pharmaceutical companies, Novartis and Pfizer, recently announced that they
would not implement pharmaceutical price increases on certain drugs. This is apparently from pressure from the
The Commissioner of Trump's Food and Drug Administration, Scott Gottlieb, MD, recently released comments concerning pricing reform for a Brookings Institution discussion on
pharmaceuticals. His comments define the
problem with rising drug costs by placing a focus on biologics and the very
slow movement in the United States for biosimilars to reach the marketplace. His comments further explain how improving
competition can lead to decreased prices and savings for the United States. He details some solutions to the problems,
including increased cooperation with regulators outside the United States to
speed up biosimilar approval. He further
points to how intellectual property tactics taken by biologic owners are
slowing down the process for biosimilars to reach consumers and how the FDA
plans to work with the Federal Trade Commission to address these tactics. Here is an excerpt of his comments:
While less than 2 percent of Americans use biologics, they
represent 40 percent of total spending on prescription drugs.
So, enabling a path to competition for biologics from
biosimilars is a key to reducing costs and to facilitating more innovation.
By enabling a path for competition from biosimilars, we also
give innovators an added incentive to invest in further research that’ll lead
to the discovery of even better drugs that deliver additional benefits for
At the FDA, we’re focused on advancing policies that make the
process for developing biosimilars more efficient.
To achieve these goals, I’m pleased to announce today that
we’re releasing our Biosimilars
Action Plan. This plan is an important piece of the Administration’s bold Blueprint to Lower Drug Prices and demonstrates the
progress being made against the deliverables the President laid out.
Our plan is aimed at promoting competition and affordability
across the market for biologics and biosimilar products. Before I focus on some
of the details, I’d like to talk about some of the broader goals we’re focused
. . .
Biologics represent 70 percent of the growth in drug spending
from 2010 to 2015. And they’re forecasted to be the fastest growing segment of
drug spending in the coming years.
To make sure that the next generation of breakthroughs
remains affordable, it requires vibrant competition from biosimilars. But it
also means that we must consider new payment approaches. Models that allow us
to take advantage of the competition that biosimilars offer.
Our current payment system, which reimburses drugs based on
their average sales price, was designed in a single-source world. It was a
market of biologics where there was typically only one drug in a category. And
there wasn’t a lot of therapeutic variety or competition.
At the time, there was only one EGFR inhibitor on the market,
and just one VEG-F inhibitor. I was there when this system was designed and
implemented. And I can tell you many of us didn’t envision a world where
there’d be so much competition in these therapeutic categories.
So a system was designed that accepted the fact that
government programs, like Medicare, would be price takers.
We didn’t have the advantage of drug competition to enable
the development of formularies, bidding and market-based negotiations like we
have under Part D prescription drug plans.
So the system we designed—using the average sales price as a
benchmark for reimbursement—was designed to help make sure that drug makers
wouldn’t be able to take big price increases once the drugs reached the market.
But it wasn’t a system designed to take advantage of price competition. Because
we didn’t foresee that there would be multiple drugs in these different
While the FDA has approved 11 biosimilars through 2018, only
three are now marketed in the U.S.
Competition is, for the most part, anemic.
It’s anemic because consolidation across the supply chain has
made it more attractive for manufacturers, Pharmacy Benefit Managers, Group
Purchasing Organizations and distributors to split monopoly profits through
lucrative volume-based rebates on reference biologics—or on bundles of
biologics and other products—rather than embrace biosimilar competition and
It’s anemic because litigation has delayed market access for
biosimilar products that are, or shortly will be, available in markets outside
the U.S. several years before they’ll be available to patients here. These
delays can come with enormous costs for patients and payors.
Let me give you one measure of those costs.
At the FDA, we did an analysis of biosimilar competition
across all Organisation for Economic Co-operation and Development (OECD)
markets. We looked at what would have happened if all the biosimilars that the
FDA approved in the U.S. were successfully marketed here in a timely fashion.
We’ll release the full details on this analysis soon. But I
want to give you a sense today of what we found.
To measure the potential impact of this biosimilar
competition, we assumed that the savings achieved in the U.S., in terms of
price discounts, would have been on par with the experience enjoyed in the
other OECD nations.
Based on these assumptions, our analysis showed that if
Americans had the opportunity to purchase successfully marketed, FDA-approved
biosimilar prescription drugs, they could have saved more than $4.5 billion in
These are large savings. They’re about half of the nearly $9
billion in total savings in 2017 from all of the 2017 generic drug approvals,
according to earlier FDA work.
This analysis assumes that all of the biosimilars that the
FDA approved were successfully marketed.
But we know that’s not the case. We know that litigation
blocked a lot of these launches. Yet our study found that entry of a single
biosimilar product in non-U.S. OECD markets lowers prices relative to the reference
product by 30 percent; markets with three to four biosimilar entrants have
prices 35 to 43 percent lower than their reference biologics.
Our savings estimate doesn’t include additional potential
savings from biosimilars approved in 2018. Estimated savings would therefore be
significantly greater than $4.5 billion if these additional FDA-approved
biosimilars were also marketed at or near the time of their approval.
Biologic manufacturers have a right to defend their
legitimate intellectual property interests. And we want them to continue to
offer the benefits of improved versions of originator biologics. These benefits
might include biologics that target disease in new ways, such as delivering a
toxic payload directly to cancer cells, or biologics that target multiple
targets of disease at the same time.
. . .
But rebating schemes or patent thickets that are purely
designed to deter the entry of approved biosimilars are spoiling this sort of
competition. Long-dated contracts are another toxin. The branded drug makers
thwart competition by dangling big rebates to lock up payors in multi-year
contracts right on the eve of biosimilar entry.
We’re also concerned that volume-based rebates may encourage
dysfunctional clinical treatment pathways. We’ve heard from multiple sources
that some payors are requiring step-therapy or prior authorization on the
reference biologic before patients can access a biosimilar. We see no clinical
rationale for these practices, since a biosimilar must demonstrate, among other
things, that it has no clinically meaningful differences from the reference
product as a part of demonstrating biosimilarity.
The branded drug industry didn’t build its success by being
business naïve. They are smart competitors.
But that doesn’t mean we need to embrace all of these
business tactics, or agree that they’re appropriate.
Some of these tactics should be unacceptable to every member
of the drug supply chain.
Biosimilars may be relatively new, but manufacturers’ tactics
to delay and frustrate Congress’ legislative intent to promote competition in
drug pricing date back decades.
These tactics were first honed in battles between branded
companies and manufacturers of small molecule generics after the passage of the
Hatch Waxman Act in 1984.
And these battles played out for a time. But ultimately
competition prevailed, and so did the benefits of generics.
In 1983, generic drugs accounted for only 13 percent of U.S.
prescriptions. Today, in 2018, it’s 90 percent. And generics can cost 75 to 90
percent less than their branded competitors.
Robust competition has led to generic drug prices that are
often less expensive here in the U.S. than in other developed markets in Europe
and Asia. The Association for Accessible Medicines, a trade group that
represents generic drug makers, estimates that generic medicines have saved the
U.S. well over $1 trillion over the last decade.
The generics market that we see today, while not perfect, is
robust in most respects. But it took about two decades to develop. It took a
long time for providers to grow comfortable prescribing generics and patients
to be confident in taking them. It took a long time to work through legal
tactics that were put in the way of competition. It took a long time for the
coverage systems to be changed to take brisk advantage of generic entry.
Sometimes it feels as if we’re seeing the biosimilars version
of “Groundhog Day,” with brand drug makers replaying many of the same tactics,
and all of us being too susceptible to many of the same misconceptions about
biosimilars’ safety and efficacy relative to originator biologics.
We’re falling into some of the same doubts and policy
constraints that were used to deter competition from generics in the years
after the Hatch Waxman Act.
But we’re not going to play regulatory whack-a-mole with
companies trying to unfairly delay or derail the entry of biosimilar
competitors. We’re not going to wait a decade or more for robust biosimilar
competition to emerge.
Expanding access to affordable biosimilars, and slowing the
rise of health care inflation, is an even more critical issue today than it was
in 1984. The higher costs, and longer timelines, required to develop
biosimilars relative to generics means that these delaying tactics can make it
uneconomical for biosimilar sponsors to postpone entry for extended periods of
time. I’m worried that the biosimilar manufacturers may pull out of these
endeavors altogether if the brand drug makers are able to lock up markets even
in cases where there’s a fully interchangeable competitor.
Ultimately, this behavior is also putting innovative drug
development at risk by eroding public confidence in market-based pricing
mechanisms. Too many people now are shooting at the branded drug makers. And
the shrapnel isn’t just going to tear apart the gaming tactics that we might
agree are gratuitous and ill conceived.
I’m worried that the shrapnel could also fray the fragile market-based
rewards that support new innovation.
Our Biosimilars Action Plan applies many of the lessons
learned from our experience with generic drugs to accelerate biosimilar
competition with four key strategies.
First, improving the efficiency of the biosimilar and
interchangeable product development and approval process.
Second, maximizing scientific and regulatory clarity for the
biosimilar product development community.
Third, developing effective communications to improve
understanding of biosimilars among patients, providers and payors.
And fourth, supporting market competition by reducing gaming
of FDA requirements or other attempts to unfairly delay market competition to
I don’t want to get into the details of the entire plan in my
remarks today. We’ve issued a plan that lays out all of the discrete elements
of our approach.
But I want to highlight a few key actions that we’re taking.
I believe some of these actions can be transformative for
sponsors’ ability to bring high quality biosimilars to market.
As part of this effort, the FDA is seeking to strengthen its
partnerships with regulatory authorities in Europe, Japan and Canada. Such
partnerships can enable greater efficiency in developing safe and effective
For example, we’re actively exploring whether data sharing
agreements could give us better insights into biosimilars’ real-world safety
and efficacy and, in some circumstances, facilitate the increased use of
non-U.S.-licensed comparator products in certain studies to support an
application under Section 351(k).
We know that when those developing biosimilars use biologics
sourced ex-U.S. as their comparator product, it can lower the cost of clinical
studies since many of these products can be procured more easily, and cheaply,
in European and Asian markets.
We’ll also be updating the Purple
Book and evaluate how we can incorporate additional information into that
resource to give product developers more transparency.
And we’re also taking new steps to make the biosimilar
development process more efficient.
. . .
Today, the FDA issued its final
guidance on biosimilar labeling. The FDA wants to make sure that biosimilar
products have labeling that allows health care practitioners to make informed
prescribing decisions for their patients. Our guidance gives recommendations to
applicants on how to prepare this labeling for review by the FDA.
We’re also going to be updating guidance to provide
additional clarity on how biosimilar manufacturers can carve out indications
from their labels where a branded drug maker might still maintain some IP. And
we’re going to describe how these indications can be efficiently added into a
biosimilar label once that IP on the branded alternative has lapsed.
We are also currently developing and implementing new FDA
review tools, such as standardized review templates, that are tailored to
applications for biosimilar and interchangeable products. We’ve already adopted
similar approaches when it comes to generic drugs. These templates will improve
the efficiency of the FDA’s review.
We’re also developing an index of biosimilars’ critical
quality attributes relative to their reference products.
Such an index can allow sponsors to better understand how the
FDA evaluates data from comparative analytical studies performed to support a
demonstration of biosimilarity, and how to use suitable analytical methods.
And we’re going to be taking new steps to challenge some of
the gaming tactics I talked about earlier. This includes new efforts to
coordinate with the Federal Trade Commission (FTC) to address anti-competitive
A video of the Brookings
Institution talk along with panelist responses can be found, here.