Competition at risk in an era of 21st century cures
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Recently, the commissioner of the Food and Drug Administration (FDA), Dr. Scott Gottlieb, spoke to an audience of health insurers regarding competition in the biopharmaceutical marketplace. 

A key part of his remarks received scant attention; the part where he explained the magnitude of cost and complexity to develop a biosimilar therapy.   

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Biosimilars are intended to be lower-cost versions of biologics, which treat diseases such as cancer and rheumatoid arthritis.

Congress gave the FDA the power to review and approve biosimilars as part of the Affordable Care Act. Eight years later, nine biosimilars have been approved by the agency, but only three have made their way onto the market.

“The cost of developing biosimilar drugs is always going to be substantially more expensive than copying a small molecule drug,” said the FDA commissioner.

“While it can cost about $10 million to develop a generic version of a small molecule drug, the complexity of manufacturing and testing biosimilars currently requires much more significant outlays by biosimilar sponsors: typically $100 million to $250 million per program.”

These numbers warrant highlighting because they serve as a warning sign to policy makers. A warning not about the functionality of the biosimilars market, but for what lies beyond it.

As we move towards a new era of medicine where drug products are far more complex and costlier than the ones we are grappling with today, the policy levers we have historically used to balance innovation and affordability are becoming less effective.

In 1984, Congress passed the Hatch-Waxman Act, which established a regulatory framework meant to encourage the development of innovative new therapies, while also supporting competition and lower drug prices.   

Under Hatch-Waxman, companies who research and develop new drugs that win FDA approval are able to sell their products without competition for a set period of years to help them recoup their investments. 

At the same time, the law provides separate incentives for generic drug manufacturers to develop and market safe, quality, and lower-cost versions of branded drugs.

This twin-pillar approach has largely been viewed as a tremendous success. 

Countless innovative drugs have been developed that save and improve patients’ lives. And today, we have a thriving generic drug market that has saved the nation more than a trillion dollars in spending over the last decade. 

The model worked so well that it served as the basis for the biosimilars framework established under the ACA. 

Innovator companies developing biologics are rewarded with protections that keep competitors at bay for a set number of years. Separately, companies that develop biosimilars deemed interchangeable by the FDA are provided their own incentives as a reward for taking on this difficult task. 

The hope has been that a robust biosimilars marketplace would take hold in a similar way that the generic drug market has flourished.   

Though high investment costs for biosimilars has meant there are fewer firms who can afford to compete in this space than more traditional, small-molecule drug market. And as we have seen there are smaller discounts on pricing because of the complexities associated with bringing a biosimilar to market.

This isn’t a critique of biosimilars or the framework that was established. A well-functioning biosimilars market still has the potential to save our health system billions of dollars. We should be committed to making sure it works properly.

Yet, it does raise an important question as we consider the future of medicine. As 21st century therapies continue to advance, can we continue to apply a 20th century policy solution? In a world where medicine has the power to be tailored to individuals, can robust competition be counted on to improve access? 

As medicine becomes more complicated one of the main pillars under the Hatch-Waxman framework – affordability through competition – may be at risk. It is imperative that policymakers examine this shift and how to remedy it. 

In 2016, Congress passed the 21st Century Cures Act. The bipartisan law was the culmination of years of work and focuses mostly on advancing research and drug development to bring about new cures.  

With that work behind them, Congress should now embark on similar, rigorous and bipartisan effort to investigate how to maintain the necessary balance between supporting medical innovation and our ability to afford it.

Bobby Clark is a public policy consultant based in Washington, D.C.  He previously served as a senior health policy advisor for the House of Representatives and the Department of Health and Human Services during the Obama administration.