Understanding and Incentivizing Biosimilars

Abstract

Congress recently passed the Biosimilars Act in an attempt to replicate the success that generic small molecule drugs have enjoyed under the Hatch-Waxman Act. The Biosimilars Act provides a pathway for biosimilars to achieve quicker and less expensive FDA approval than what is required for a new biopharmaceutical. There is, however, greater uncertainty and cost associated with achieving the coveted biosimilarity status. This reflects the complex production methods of biopharmaceuticals, along with the many factors that can alter the structure and function of such drugs.

This Article analyzes the Biosimilars Act and the draft guidances recently released by the FDA. The Article identifies areas of uncertainty and other aspects of the current regime that create disincentives for the development of biosimilars, as well as suggesting improvements. If we are serious about reducing the price of biological drugs and encouraging the creation of biosimilars, we will need to develop a more effective pathway for approval. This is no easy task. The greater risks associated with the production of biosimilars should prompt a fair degree of caution in establishing the pathway for approval. Balancing consumer safety with appropriate market incentives is a delicate mission. Nevertheless, under the current regime, we risk the possibility that companies will focus on developing so-called biodifferents and biobetters (new drugs designed to mimic an existing biological drug), completely forgoing the opportunity to develop biosimilars.

The loser, of course, is the consumer. It is doubtful that biobetters and biosimilars will have the same price-lowering effects as generics. These drugs will be patented, creating full exclusivity in the market, and prices will remain high in the biological drug space. It would be unfortunate if the tremendous energy and creativity invested in designing and implementing the Biosimilars Act were to have very little effect in the long run.