Amitabh Chandra, PhD, Ethel Zimmerman Wiener professor of public policy and director of health policy research at the Harvard Kennedy School of Government, says that while price regulation is not impossible, “It’s very, very hard to do. Given that it’s hard to do, do we need to do it?”
Earlier this year, Peter Bach, MD, and coauthors published an argument in Health Affairs in which they argued that biosimilar competition is an inefficient way to achieve the goal of lower prices for drugs and that the US government should instead regulate the prices of off-patent originator biologics.
That proposal led to dueling editorials from Bach’s camp—who write that it’s “time to throw in the towel” on biosimilars—and those who prefer to see a better set of conditions for competition in the US biosimilars market. Dissenters include Alex Brill, MA, and Benedic Ippolito, PhD, of the American Enterprise Institute (AEI), who shot back at Bach in their own Health Affairs blog, as well as former FDA Commissioner Scott Gottlieb, MD (who now also works with AEI), who argued in the Wall Street Journal that Congress “can make straightforward changes” that would help biosimilars to thrive.
Those changes could include, writes Gottlieb, mandating that innovator drug developers make samples available for testing, blocking rebates that “squelch” competition from biosimilars, and investing in more biosimilar education.
As the war of words between Bach and his critics shows little evidence of abating, The Center for Biosimilars® spoke to an expert in health economics—Amitabh Chandra, PhD, Ethel Zimmerman Wiener professor of public policy and director of health policy research at the Harvard Kennedy School of Government—about how feasible it would be to implement Bach’s proposal to regulate biologic drug prices rather than to continue to invest in the biosimilars market.
According to Chandra, “The key issue here is, if you were to regulate the price, how would you do it? We’re not very good at knowing how to regulate prices in this industry for a drug where the exclusivity period has run out.”
One issue in understanding how to regulate biologics’ prices would be the collection of a vast quantity of data on manufacturing costs for biologic medicines in order to reimburse drug makers on the basis of those costs. That could create a perverse incentive, says Chandra, to pad manufacturing costs: “We might end up paying more than we actually need to pay them.”
On the other hand, fear of overpayment could lead to paying drug makers too little, and “then we’ll get a raft of shortages.”
On a broader level, Chandra points out that US experience with regulating public utilities has not been altogether successful. “You can see that all the time with the postal service, with the railroads. Every time we try to do it, it’s not particularly clear that we do a good job.”
He adds that, in the healthcare sector, where Medicare sets prices for some services, “there’s a strong sense that those rates are not the right rates.” If price regulation fails in such areas of the healthcare system, “I’m not sure we’re going to be able to do it for a single manufacturer whose exclusivity period has expired. They might just leave the business completely.”
According to Chandra, while price regulation is not impossible, “It’s very, very hard to do. Given that it’s hard to do, do we need to do it?” The biosimilar market in the United States does not appear to be as dismal as Bach and colleagues have made it out to be, says Chandra. “If you look at something like Neupogen…volume of Neupogen is down about 50% as a result of biosimilar entry…maybe we would like it to fall more, which is the side that I’m on, but it’s not like it isn’t falling. It’s falling quite a bit.”
In terms of what he sees as needs in the biosimilars space, Chandra says that we cannot expect biosimilars to succeed purely by relying on market forces, and in that sense, Bach and colleagues “are on to something really important.”
We will need more regulation to help the industry to flourish, he said, and agreed with Gottlieb that better access to samples for testing would help expedite biosimilar market entry. He called sample availability one example of an area where the United States would benefit from increased regulation, and added that “the FDA could be of great assistance there.”
“My own sense of this is that we need more regulation to increase and expedite their entry. We do not need regulation that goes as far as price regulation.”