Opinion: The Inflation Reduction Act is a Step Backward for Biosimilar Competition

Since the first biosimilar launched in 2015, these innovative medicines have generated significant savings for patients and the health care system, with future savings projected to grow exponentially in the coming years.

However, a Medicare “negotiation” provision within the recently passed Inflation Reduction Act threatens to undermine biosimilar competition by creating unprecedented price controls. This misguided provision could compromise future biosimilar development and inadvertently leave patients with costlier brand-name treatment options. As this bill becomes law, it is critical that lawmakers broaden patient access by pursuing solutions that promote fair biosimilar competition.

In a recent opinion piece, Sarfaraz Niazi, PhD, outlined concerns with the characterization of price controls within the Medicare drug price negotiation provisions. Niazi claims “[the Inflation Reduction Act provision] is price negotiation, and no one is forced to accept it”. Further, he states “it will help the adoption of biosimilars as they are in a better position to negotiate.” However, these claims must be scrutinized through the context of the real-world application of the provisions set forth within the language of the legislative text.

In this burgeoning market, biosimilars compete on comparable efficacy and lower prices. The Inflation Reduction Act would significantly reduce the competitive edge just as the market considers which potential competitors to bring to market.

Under the bill, the Department of Health and Human Services would be required to negotiate prices for over 100 drugs—many of which would be reference biologics subject to biosimilar competition. Biosimilar manufacturers have no role in the negotiation process and would instead have to gamble on whether or not a reference biologic becomes 1 of the 100 negotiated drugs. If the reference biologic is selected for negotiations near the end of its exclusivity period, it’s product’s price will drop precipitously. This would then require the biosimilar competitors to price themselves even lower than the point of economic viability and out of the market entirely.

From product development to launch, the initial investment required to bring a biosimilar to market range from $100-$250 million. By creating substantial uncertainty in the market for the reference product, the Inflation Reduction Act makes it too risky for would-be biosimilar manufacturers to invest the decades of time and hundreds of millions of dollars required to produce lower cost alternatives. This would give costly brand-name medicines a de facto monopoly at a price likely higher than what patients would have paid in a traditionally functioning market with multiple biosimilar competitors.

While the bill does include a provision allowing the Secretary to temporarily pull any biologic drug from negotiations if biosimilar manufacturers prove unequivocally that biosimilar competition was feasible in the foreseeable future, brands would still be able to block biosimilar competition from getting off the ground. Biologic brands often file non-innovative patents that, in this case, would delay biosimilars past the point of the negotiation window – effectively rendering this safeguard provision useless.

Essentially, biosimilars are forced to accept the outcome of the negotiation process, and they would be in no position to establish any incentives for themselves.

What’s ironic about the Inflation Reduction Act is that by artificially setting prices, it ignores the proven benefits of competition established by the Hatch-Waxman Act. Further, it bypasses bipartisan legislative solutions that would nurture future competition and sustainably lower prices.

According to IQVIA, biosimilars have, in a relatively short time, proven themselves as a primary drivers of savings on prescription drugs. Biosimilars, on average, cost 50% less than the brand price at the time of the biosimilar launch and drive reference biologics to reduce prices by more than 28% on average. Biosimilar competition has already resulted in more than $12 billion in savings since 2015 and is projected to generate more than $130 billion by 2025 as uptake and adoption continues to grow. These figures overwhelmingly outweigh any potential savings from price controls.

Biosimilar competition has already delivered on its promise to generate savings and increase the availability of lower cost treatment options available to patients. Congress must work to bolster biosimilar competition by eliminating market and regulatory barriers to entry, cracking down on patent abuse and amending perverse incentive structures. These actions will create a more sustainable, more competitive, and more affordable pharmaceutical market than any price control ever will.

Author Bio

Criag Burton is the senior vice president of policy and strategic alliances at the Association for Accessible Medicines. He is also the executive director of the Biosimilars Council. In his current role, Craig is responsible for leading policy development and issues management for AAM, directing the Biosimilars Council, and building relationships with strategic partners in the health care sector, including patient advocacy groups.