The Food and Drug Administration (FDA) began approving generic prescription drugs over 30 years ago. Today, generic drugs sell at prices that are 75 percent less than name brand products, and they are estimated to have saved consumers more than $1 trillion over the last decade.
Like the savings that generic drugs have brought to consumers, there is another opportunity for increasing competition and dramatically reducing pharmaceutical drug costs. This time, it involves a growing, but expensive, innovative class of drugs, called biologics, and the potential introduction of their generic-like counterparts, called biosimilars. Biologics are large molecule drugs produced in living systems such as plant cells or microorganisms that are often used to treat some of the most serious, life-threatening diseases.
While this positive news should appeal to most readers, the unfortunate fact is that the FDA continues to delay writing the rules necessary to allow these biosimilar products from entering the market. Until the FDA writes these rules, the benefits of lower priced, lifesaving pharmaceutical drugs and better patient outcomes will not occur.
Controlling health care costs is a national priority. Because biologic manufacturers incur substantial expenditures in research and development, and because they are costly to manufacture, the drugs are expensive. As a result, when biologics are sold under patent protection, they are sold at monopoly prices. For example, the average cost of a biologic in the U.S. is $45 per day compared to only $2 per day for chemical drugs, and several biologic products cost hundreds of thousand dollars per patient per year.
However, we should expect that once patent protection on branded biologic products has expired, biosimilars could be introduced as a cheaper substitute product, assuming that competitive entry is permitted and FDA approval is granted. This is then the opportunity for reducing these costs -- allowing for market entry, heightening price competition, increasing patient access to alternative lifesaving medications and reducing the cost of care.
Yet, as we recently wrote, it is not happening. While the FDA just agreed to accept the first biosimilar application, there are no FDA regulations in place for allowing biosimilar competition, even though the 2010 health law gave the FDA authority to develop these rules. As such, the benefits of lower prices for consumers will not occur until the FDA establishes rules for biosimilar entry.
The idea of introducing biosimilar drugs to compete with name brand biologic drugs not new. The European Union, Canada, Australia and a number of Asia counties have already approved the manufacturing and dispensing of biosimilar drugs, some drugs as far back as 2006.
So what's the delay? Biologics are very profitable, which provides every incentive for some manufacturers to slowdown the regulatory process. For example, one U.S. biologic drug reportedly yields $100 million in profits per month. By delaying regulatory rules, expired patents remain unchallenged at their monopoly prices.
The most recent stall tactic involves how to name biosimilars drugs. Some manufacturers have pushed for the creation of a unique naming system that does not conform with the current system in Europe. Pharmacists and other groups have stated that a unique naming system could create too many names for similar products, along with added confusion and an increase in dangerous medication errors. The FDA is getting distracted by the naming issue, when its priority should be to get biosimilars into the approval pipeline.
The savings from biologics could be significant. In Europe, some biosimilars are selling for 30-50 percent less than the biologic counterpart and, in the U.S., competition could save $250 billion over the next 10 years from just 11 biosimilar products. This potential savings is consistent with a study by the Congressional Budget Office, which has estimated that biosimilars could reduce prices by 40% over brand name biologics by the fourth year. Another report estimated that biosimilar competition could save a quarter of a trillion dollars.
The FDA needs to remain focused on completing the pathway for biosimilar market entry, in order to bring more affordable treatment options to patients as quickly as possible. The FDA should also reject calls to stray from the globally recognized naming system. At a minimum, the FDA should table the naming issue and focus on writing the rules, which would get competitive products into the pipeline for regulatory review.
If the public interest is at the core of the FDA's mission, it needs to move quickly and promulgate rules that will facilitate market entry, heighten industry price competition, save consumers money, and produce better patient outcomes.
Consumers and patients deserve better. They deserve choice.
Steve Pociask is president of The American Consumer Institute Center for Citizen Research, a nonprofit educational and research organization. For more information about the institute, visit www.theamericanconsumer.org.