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FDA Approves First ‘Biosimilar’

March 23, 2015

In a move that could lower prescription drug costs for some of the most expensive treatments on the market, the U.S. Food and Drug Administration (FDA) approved for the first time a “biosimilar” for sale in the United States.

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In a move that could lower prescription drug costs for some of the most expensive treatments on the market, the U.S. Food and Drug Administration (FDA) approved for the first time a “biosimilar” for sale in the United States.

Zarxio, a drug used by cancer patients to help fight infections, will be manufactured by Sandoz.

Biosimilars are generic versions of biopharmaceuticals whose patents have expired. Because they are produced from living tissue instead of chemical compounds, they are not exact duplicates of the original in the same way other generic drugs are, and the FDA did not have a process for approving biosimilars until the Affordable Care Act directed it to develop one.

“The FDA has been in a tough spot when it comes to biosimilars,” said Dr. Richard Dolinar, an endocrinologist who is also a senior fellow at The Heartland Institute, which publishes Health Care News. “They’ve been asked to decide what is ‘close enough’ to the original drug, and that’s challenging.”

Yevgeniy Feyman, deputy director of the Center for Medical Progress at the Manhattan Institute, says approval of Zarxio is good news.

“Biosimilars could begin to do for biologics what generics did for small-molecule drugs, offering a cheaper, similar alternative to what are often high-priced treatments,” Feyman said.

Significant Potential Savings

The potential savings from biosimilars are hard to estimate, but studies by Milliman, a health care consulting and actuarial firm, and Rand Corporation, a research think tank, generally assume they will be priced 20 to 30 percent below the current price of the original brand name biopharmaceutical.

Dolinar agrees a 20 to 30 percent reduction in prices is likely based on what has happened in Europe. He says the cost savings for biosimilars are unlikely to be as dramatic as it is with generic chemical drugs because biological drugs are so much more expensive to make.

“A generic chemical drug can produce immediate savings of 70 to 80 percent when it’s first introduced,” said Dolinar. “With biosimilars, the science is so complex and expensive that there are only a handful of companies that do this.”

According to the Rand Corporation study “The Cost Savings Potential of Biosimilar Drugs in the United States,” released in November 2014, estimated savings for the health care system as a whole would be between $44 billion and $66 billion over the next 10 years.

Benefits to Patients

Savings for individual patients could be more prominent. Neupogen, the original drug Zarxio will be competing with, currently costs around $300 per dose, and cancer patients take the drug daily for up to two weeks. A 25 percent cost reduction for using Zarxio instead of Neupogen would save a patient more than $1,000.

David Hogberg, a health care policy analyst with the National Center for Public Policy Research, says patients will benefit from the competition biosimilars will provide.

“More drugs means more competition,” Hogberg said. “More competition means lower prices and better quality for patients.”

Sean Parnell (sparnell@heartland.org) is managing editor of Health Care News. 

Article Tags
Health Care
Author
Sean Parnell (sparnell@heartland.org) is a research fellow for health policy at The Heartland Institute.
sparnell@heartland.org @seandparnell