This is Part II in a series exploring the history, challenges, and opportunities in the regulation of biosimilars, or biologic medical products that are very similar to already approved biological medicines. Part II covers some key considerations and factors that impact the biologics market and regulation. For Part I, click here.
Reference Products Available for Copying in 1984
Because most post-1962 drugs enjoyed a 17-year patent term (changed to 20 years in 1995), there was little need for an abbreviated pathway in the years immediately following the Kefauver-Harris Amendments. But as patents expired, increasing numbers of post-1962 drugs became available for copying yet were ineligible as reference products under the 1970 ANDA regulations. On the eve of the Hatch-Waxman Act, Congress estimated that approximately 150 post-1962 drugs were off-patent but had no generic equivalent. This backlog of available reference products produced a surge in ANDA approvals following enactment of the new law (Exhibit 1).
Although it is difficult to know how many off-patent biologics were available for copying when the BPCIA became effective, the FDA’s Center for Drug Evaluation and Research approved only 73 biologics in the 25 years preceding the BPCIA (including those transferred to CDER in 2003, see 68 Fed. Reg. 38067). If it is assumed that biologics approved during the 14 years prior to the enactment of the BPCIA continued to be protected by unexpired patents (see Grabowski et al. 2016), then no more than 15 of the 73 drugs would have been off-patent by 2010. Because biologics tend to be covered by more patents than small-molecule drugs, and because patents for a given drug product may have different expiration dates, the actual number of off-patent biologics may have been smaller (see also Grabowski et al. 2014).
Of biologics approved between 1984 and 2009, 41 percent (30 of 73) were initially approved for a rare (“orphan”) disease indication, i.e., a disease or condition affecting fewer than 200,000 people in the US, leaving 43 biologics indicated for larger markets that would be more likely to attract competitors. By contrast, only 19 percent (123 of 660) of small-molecule drugs were initially approved during this period for rare disease indications. Although the Orphan Drug Act was not enacted until 1983, if a similar percentage of small-molecule drugs approved between 1963 and 1983 received orphan indications, 277 would have been indicated for larger markets.
Unlike small-molecule drugs, which can often be self-administered, biologics must usually be injected or infused in a health care setting, making administration less convenient, more time-consuming, and more expensive. These factors, which are unrelated to the BPCIA framework, further contract already small patient population sizes. In turn, fewer patients mean that the fixed costs of development, testing, manufacturing, litigation, and regulatory compliance must be spread across a smaller volume of products, raising per-unit costs, limiting expected biosimilar profits, and discouraging entry.
The complexity of biologics is associated with technical challenges in their discovery, manufacturing, storage, packaging, administration, and use. As these challenges are overcome, manufacturers have been able to obtain larger numbers of patents than is typical of small-molecule drugs, discouraging patent challenges and potentially delaying entry. Unlike the Orange Book (the FDA’s patent register for small-molecule drugs), the FDA’s Purple Book for biologics does not list patents, making it somewhat more difficult for potential biosimilar manufacturers to determine what patents may be relevant, increasing uncertainty.
The costs of testing, manufacturing, storage, and transportation tend to be higher for biosimilars than for generic small-molecule drugs. Biosimilar approval requires a showing of “no clinically meaningful differences” in terms of “safety, purity, and potency,” necessitating more extensive clinical study than is required to demonstrate bioequivalence. Manufacturing processes can be protected as trade secrets, a type of intellectual property that never expires so long as it remains secret, forcing biosimilar companies to reverse engineer secret information or innovate alternate methods. Refrigeration during storage and transportation protects biosimilars from degradation and spoilage, but raises costs.
Some of these costs could perhaps be lowered, for example, if the FDA were to provide greater flexibility on analytical approaches to establishing biosimilarity, or if trade secrets were required to be disclosed upon patent or exclusivity expiry. But the complexity of biologics means that biosimilar costs will likely remain more expensive, discouraging entry regardless of legislative amendments.
Higher biosimilar production costs have led some observers to conclude that biosimilars cannot be expected to produce the level of discounts that have been seen with small molecule drugs. However, estimates of expected biosimilar savings have ranged from 10 percent to 51 percent (mean: 27 percent), which is approximately the savings expected in small-molecule markets with two to five manufacturers. In 2015, an infliximab biosimilar was offered in Norway at a 69% discount. Just two weeks after the launch of four adalimumab (Humira) biosimilars in European markets in 2018, news outlets reported price discounts of up to 80%.
These estimates and reported figures suggest biosimilar markets may be able to produce discounts comparable to those of small-molecule markets of similar attractiveness. However, percent price reductions in both biologic and small-molecule markets are sensitive to starting price, do not necessarily indicate how near to marginal costs prices have fallen, and may not be a reliable means of comparison between markets in which average list prices and marginal costs systematically differ.
Author’s note 1: This post provides updated data on biosimilar approvals through December 2019. An original version of this article was published under the title “Biosimilar Approvals And The BPCIA: Too Soon to Give Up,” available at https://www.healthaffairs.org/do/10.1377/hblog20190718.722161/full/.
Author’s note 2: The author receives grant support from Arnold Ventures and the Harvard-MIT Center for Regulatory Science. The funders had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication. The author gratefully acknowledges Peter Bach, Yaniv Heled, and Aaron Kesselheim for feedback on the completed draft.