A me-too strategy for me-too drugs

AstraZeneca appears set to follow Merck into the market for “bio-similars.” Congress and the media tend to portray biosimilars are analogous to generic chemistry-based pharmaceuticals, and therefore believe that they will lead to much lower prices as a result of the commoditization of these products. If all goes according to plan, that should cut the price of biologics by 50 to 95 percent as has been the case for generic versions of traditional pharmaceuticals.

Pharma and biotech companies aren’t seeing it this way and neither am I. Although they won’t say so, pharma companies are starting to realize that biosimilars –which unlike traditional generics cannot be subsituted by a pharmacist for a branded product– are really like me-too products within a class of drugs. That’s exactly the model that’s enabled multiple blockbusters within a given class in the mainstream pharma business, and led to higher spending overall. Biosimilars are unlikely to be a lot cheaper than the products they copy, and they will have all the sales and marketing costs associated with a branded product, plus some of the development costs. Don’t be surprised if some biosimilars are actually priced higher than the original products, based on some real or perceived improvement in efficacy or safety. That’s what happened when me-too drugs like Lipitor entered the statin market. (See Generic biologics — or Me Too Drugs 2.0? for more details.)

AstraZeneca won’t be the last company to pursue this strategy. If a regulatory pathway for bio-similars is established in the US, every big pharma will jump on the bandwagon.

If policymakers want to control the cost of biologics, there’s a much simpler and easier way. Simply regulate the price of biologics once their patents expire. That would have several advantages:

  • Guaranteed lower pricing and certainty about when lower pricing will be available
  • No need to subject patients to the hazards of clinical trials
  • No need for FDA to stretch itself further monitoring new biologics manufacturing facilities –which are notoriously difficult to run well

It wouldn’t even be that bad for biologics companies. They’d already have earned their profits during the patented life of the product, and would retain 100 percent market share post-patent expiration. They can’t really complain about the government interfering with the free market, considering that patents are granted by the government in the first place.

The only real losers in this plan would be generic biologics companies. Since the industry doesn’t even really exist yet, now is a good time to implement my scheme.

December 31, 2008

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