The economics of biosimilars - Marginal REVOLUTION

If I understand correctly, a biologic is “any medicinal product manufactured in, extracted from, or semisynthesized from biological sources,” and a biosimilar is a copy of a biologic. Think of a biosimilar as harder to make than a generic drug and also requiring separate FDA approval. Here is Wikipedia:

Unlike the more common small-molecule drugs, biologics generally exhibit high molecular complexity, and may be quite sensitive to changes in manufacturing processes. Follow-on manufacturers do not have access to the originator’s molecular clone and original cell bank, nor to the exact fermentation and purification process, nor to the active drug substance. They do have access to the commercialized innovator product.

Here is a Rand piece on the potential cost savings from biosimilars (pdf), but in percentage terms they do not become nearly as cheap as generic drugs, maybe 65-85% of the price of the original.

Zarxio was the first biosimilar approved by the United States, and the global biosimilars market could hit $55 billion by 2020. Here is yesterday’s FT story about biosimilars draining away sales.

Here is a paper by Blackstone and Fuhr:

Various factors, such as safety, pricing, manufacturing, entry barriers, physician acceptance, and marketing, will make the biosimilar market develop different from the generic market. The high cost to enter the market and the size of the biologic drug market make entry attractive but risky.

Will cell therapies, which are relatively new and also hard to copy with biosimilars, save Big Pharma from the forthcoming patent cliff?

There are 11 biologic drugs that will face biosimilar competition in the next several years, according to data compiled by Evercore ISI. These drugs, which treat ailments from cancer to rheumatoid arthritis, raked in more than $50 billion combined in 2014.

The FDA is outlining biosimilar approval pathways, although the issue seems to be receiving almost zero attention from the outside world.