When typical drugs lose their period of exclusivity, new generic competitors arrive on the market with drastically lower prices. As patients switch from brand to generic drugs, the price of treatments declines.
For biologic drugs, biosimilar uptake, however, is significantly less. In part, this is because biosimilars are difficult to manufacture so the price differences between biologics and biosimilars are typically smaller than the differences between brand and generic pills. Nevertheless, a study by Mulcahy, Hlavka and Case (2018) found that biosimilars could reduce prescription drug costs by $44 billion over the next 10 years. So why is biosimilar adoption so low?
A paper by Edgar et al. (2021) provides one rationale: the presence of prior authorization restrictions on biosimilars.
…removing administrative burden from prior authorization requirements was necessary to increase biosimilar adoption…Indeed, a recent study of Medicare formulary placement of infliximab and its biosimilars found that when prescription drug plans covered a biosimilar and its reference product, they were placed in the same cost-sharing tier and required prior authorization at the same frequency, providing little incentive for biosimilar adoption
Another challenges occurs with physician-administered biologic/biosimilar medications due to financial incentives. Physicians can charge payers (e.g., Medicare) 106% of the average sales price (ASP) for products with the same billing code. As noted by a USC-Brookings paper, this system:
…creates meaningful price competition among manufacturers only when multiple manufacturers’ products are placed in the same billing code. Indeed, physicians are actually paid more when they choose a drug in a billing code with a higher ASP and thus have incentives to prefer medicines in billing codes with higher ASPs
The Edgar paper continues on with some suggestions on how to overcome these barriers including educating providers and pharmacists, removing prior authorizations, reducing patient cost sharing for biosimilars, and potentially even increasing provider reimbursement for prescribing biosimilars. While biosimilar offer much promise for reducing cost, enacting steps to make it easier to prescribe biosimilars is imperative.