August 22, 2019
In a very interesting column in the Wall Street Journal, Peter Bach and Mark Trusheim argue that biosimilar drugs have been ineffective in providing effective competition for biological drugs. The gist of the argument is that the testing process required for a biosimilar is lengthy and expensive.
Furthermore, this testing requires a large number of patients for clinical trials. This can lead to the perverse situation where testing for a biosimilar could be pulling potential patients from being used in a trial for a potentially important innovative drug.
If we think of patients with specific diseases who are available for clinical trials to be a limited resource, then it poses a serious problem for having biosimilars as an effective mechanism for bringing down the price of biologic drugs through competition. (Standard generics don’t need clinical tests, they just have to demonstrate chemical equivalence.)
Bach and Trusheim argue for price controls as the best alternative. While this is reasonable given the current funding system, it is difficult to believe that the government will somehow be getting it right, in terms of awarding the right price to appropriately compensate companies for their drugs. (Not that they are rewarded correctly now; their payments are already largely politically determined.)
It would make far more sense just to do the funding upfront on long-term contracts, with all results in the public domain. In the case of biologic drugs, where there really cannot be effective competitors for the reasons Bach and Trusheim explain, having a single supplier on contract and guaranteed a normal mark-up over production costs should do the trick.
In this story, biologic drugs would sell for hundreds of dollars, or perhaps low thousands, for a year’s dosage, not hundreds of thousands. (For more, see Rigged, chapter 5 [it’s free].)
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