Biologics: What Price a Miracle?

Why do biologics cost so much?

"Biologics are proteins taken from living things," says Thomas Hazlet, Pharm.D., a professor at the University of Washington. That means they're naturally more expensive to develop and manufacture than chemical drugs (see "How They're Made"). But there is also no competition for biologics in the pharmaceutical marketplace, in part because the FDA does not have a process in place for approving generic biologics (or biosimilars). AARP and a host of other organizations lobbied Congress intensely during the health care debate, calling for legislation that would allow the FDA to approve such a process.

We have generics for chemical drugs. Why not for biologics?

The primary point of contention has been the period of exclusivity. The pharmaceutical industry has asked for at least 12 years of exclusivity before a generic biologic is allowed, arguing that the steep cost of developing a new biologic medicine ($1.2 billion) and the lengthy time it takes a drug manufacturer to go through the research-and-development process (roughly ten years) warrant this period of exclusivity. AARP and others have argued that drugmakers typically recoup the costs of developing biologic drugs within three years, and that the time to develop a biologic is only slightly longer than that required to develop a chemical drug, so the exclusivity period should be limited. The Federal Trade Commission (FTC) recently released a report saying that a 12- to 14-year exclusivity period would actually discourage drugmakers from developing new drugs, and that a shorter exclusivity period is needed to bring down prices. "These drugs are both very important and very expensive and may become more important in the future," says John Rother, vice president and director of policy and strategy for AARP. "In order for the people who need them to have access to them, we need to make them more affordable."

How much could generics save?

Not as much as generic equivalents of chemical drugs (which reduce prices by up to 80 percent). That's because we currently lack the technology to duplicate biologics exactly, so any biosimilar drug would still need to go through clinical trials in humans before being approved, which could add millions in development costs. Still, the FTC predicts that biosimilars will save consumers 10 to 30 percent over brand-name biologics. Current government estimates say biosimilars could save Medicaid and Medicare $9 billion over ten years.