Impact of biosimilar entry on prices of biologic drugs

I previously covered research from Dickson and Kent (2021) that examined how the entry of generic drugs impacts the price Medicare pays. In that study, the authors found that “the presence of 1 generic competitor was associated with a 14.9% mean price reduction in the bundled ASP, 2 generic competitors were associated with a 32.7% mean price reduction, and 3 generic competitors were associated with a 52.0% mean price reduction.” Many of these large price reductions, however, come from the entry of generic versions of small molecule branded products A key question is, how large are price reductions for biologic drugs.

A new paper from Frank et al. (2022) estimates a much lower figure. The authors use data on prices from CMS’s Average Sales Price (ASP) files and use volume data from IQVIA’s national sales perspective data across 11 biologic drugs: Neupogen,Remicade, Epogen, Neulasta, Avastin, Herceptin, Rituxan, Enbrel, Humira, Lantus and Humalog. Rather than just measuring market entry directly, they also use an instrumental variables approach where FDA regulatory decisions to approve 1 or more biosimilars for marketing is used as an instrument for the number of biosimilars that enter a market. Using this approach, the authors find that:

Our results indicate that in the range of one to three entrants each additional marketed product results in a reduction in weighted average market prices of between 5.4% and 7% points. These are the result of a combination of reductions in originator prices and shifting in demand to biosimilar products.

Needless to say, estimates price reductions of 5-7% in biosimilar much lower than the 15-50% price reductions among small molecules.

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