Curbing spending on prescription drugs

Millions of patients suffering from painful and chronic medical conditions could find it easier to access effective and more affordable treatment options, as federal health officials take steps to grow a nascent prescription drug sector known as biosimilars. For Rhode Island, which spends a greater percentage of its gross state product on health care than most other states, a robust biosimilars marketplace could have enormous benefits for residents in need of care while reining in ever-increasing health care spending.

While most Rhode Islanders may be unfamiliar with the term “biosimilars,” they are commonly used throughout Europe, Australia, South Korea and elsewhere to treat a range of conditions, from cancer to autoimmune disorders. Many Rhode Islanders, however, are likely familiar with drugs such as Humira or Enbrel, which are examples of “biologics” – branded, highly specialized drugs that are made in living cells rather than through chemical synthesis like most drugs.

While biologics were a revolutionary medical breakthrough and remain enormously valuable, the time and investment associated with developing biologics – up to 15 years and more than $1.2 billion in some cases – coupled with the lack of competition in the marketplace has led to high prices for patients who use them. This can create a barrier to care while driving up costs throughout the nation’s entire health care system. In fact, while only 2 percent of the population uses biologic drugs, they account for 40 percent of prescription drug spending in the U.S.

A biosimilar, on the other hand, is essentially what its name implies – a highly similar version of a biologic that is designed to match its safety, quality and efficacy. In fact, the Food and Drug Administration will only approve a biosimilar if there are no meaningful clinical differences from its biologic reference drug. As a result, patients and physicians can expect the same clinical results when using a biosimilar or the biologic reference drug.

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Biosimilars can be far less expensive, because biosimilar producers can rely on safety and efficacy information from the reference product rather than repeating large-scale clinical trials. In fact, biosimilars are expected to cost up to 35 percent less than their reference drugs, and the Rand Corp. has predicted that by 2024, biosimilars will reduce direct spending on biologics in the U.S. by more than $54 billion.

Biosimilars are expected to cost up to 35 percent less than their reference drugs.

For Rhode Island in particular, the emergence of biosimilars could help drive down the state’s ever-increasing health care spending rates. Rhode Island has one of the highest rates of health care spending per capita, spending more than $9,500 for every resident. In recent years, annual health care spending in Rhode Island has been as much as $8.7 billion.

But despite the potential of biosimilars to help drive down health care spending, the U.S. has yet to realize growth in the market that has been experienced overseas. In Europe for example, where biosimilars have been used for more than a decade, there are more than 20 biosimilars on the market. Fortunately, there is good news coming from Washington that could eventually have a real impact in Rhode Island and across the country.

In recent months, the U.S. Food and Drug Administration has approved four new biosimilars, bringing the total number of approvals to nine – with three currently available to patients. The FDA in October also launched a biosimilars-awareness campaign aimed at better educating the medical community about the safety and efficacy of biosimilars.

And a recent decision by the Centers for Medicare & Medicaid Services to change a billing policy that jeopardized the long-term stability of the biosimilars market could also help pave the way for increased development of biosimilars. The CMS rule change to assign each biosimilar a unique billing code will lead to greater opportunity for increased competition, greater cost savings and more choices for patients. In fact, the Biosimilars Forum estimates the new rule will reduce Medicare costs by $65 billion over 10 years, a critical development for Rhode Island, which spends $2.1 billion annually on Medicare.

These are critical steps toward building wider acceptance of biosimilars in the U.S., but there is more work to be done, and it is critical that policies continue to support a vibrant biosimilars marketplace. For states such as Rhode Island that are struggling to keep up with health care costs, increased access to safe, effective and more-affordable pharmaceutical options is essential for the future health of both patients and the state’s economy.

Stacie Phan is president of Washington, D.C.-based Biosimilars Forum.