Lowering Drug Costs and Prices by Expanding Access to Biosimilars

By Jeffrey A. Singer of Cato.

"Today Senator Mike Lee (R‑UT) introduced the Biosimilar Red Tape Elimination Act. The bill seeks to reduce health care costs by streamlining the Food and Drug Administration’s process to approve biosimilar drug products. It does this by prohibiting the FDA from requiring biosimilar drugs to undergo “switching studies” before the agency approves them as interchangeable with the original biological medicine.

Unlike conventional medicines, which drug companies chemically synthesize to a specific molecular structure, biological medicines have natural sources, are complex, and may contain combinations of carbohydrates, proteins, nucleic acids, and even living material such as cells or organisms. Vaccines and blood products are examples of biologicals. When conventional drug patents expire, pharmaceutical makers produce generic versions to compete with the original drugs. The competition usually causes prices to come down. When biological drug patents expire, drug makers make biosimilar versions to compete with the original, thus driving down prices.

Biological drugs were only 0.4 percent of U.S. prescriptions, yet they accounted for 46 percent of U.S. drug spending in 2018. FDA regulations can make it cost up to $250 million and take up to eight years for a drug maker to bring a biosimilar to market. The barriers to entry for biosimilars are much more challenging to overcome than those typically seen for generics.

One of the barriers is the FDA’s requirement that, in addition to providing convincing evidence that there is no clinically significant difference in health outcomes between the original biologic (reference drug) and the biosimilar, manufacturers must put biosimilars through switching studies, which further delay and increase the cost of bringing biosimilars to market. Switching studies are trials where participants alternate back and forth between the reference drug and biosimilars to prove safety and efficacy. Unless they pass switching studies, the FDA will not approve biosimilars as substitutes for the reference drug.

However, years of research suggest that “interchangeability” is unnecessary. In September, the European Medicines Agency (the European Union’s equivalent of the FDA) announced that it would not require switching studies to approve biosimilars and that all approved biosimilars “can be interchanged.” In its Information Guide for Healthcare Professionals, the EMA stated:

Over the last ten years, the EU monitoring system for safety concerns has not identified any relevant difference in the nature, severity or frequency of adverse effects between biosimilar medicines and their reference medicines.

Ending the switching studies requirement will bring FDA regulations into better harmony with EMA regulations. It should also help lower health care costs and improve patient access to the rapidly growing biological medicines market. But as Michael F. Cannon and I point out in our white paper, the pharmaceutical regulatory system badly needs a complete reformation. Unfortunately, the Biosimilar Red Tape Elimination Act leaves the rest of the cumbersome pharmaceutical regulatory regime intact. But it is a small step in the right direction."