Can Biosimilars Fund New Specialty Pipeline Development?

One of the main societal benefits of biosimilar introductions has always been to create savings that can be used to finance the utilization of future novel agents. The introduction of generic drugs saved the US healthcare system billions from the 1980s through 2010, and this money helped finance our ability to pay for specialty pharmaceuticals.

Savings from biosimilar introductions will accumulate much more quickly, simply because the biologics they replace cost so much more than small-molecule drugs. According to the newly released Amgen Biosimilars Report, the cumulative savings associated with biosimilars over the past 6 years totals $21 billion. And that will be dwarfed by the addition of adalimumab, ranibizumab, aflibercept, and ustekinumab biosimilars in the next 2 years.

Generally, estimates of future savings should be viewed with skepticism because of many factors, including delays in launches, annual price increases of innovator products, and how these supposed savings may accrue or be used in the future. My own skepticism aside, suffice it to say, that biosimilar savings will be increasing and accelerating from 2022 through 2025.

The Cost of Specialty Drugs, Including Orphan Drugs, Will Be Sky High

At last week’s meeting of the Academy of Managed Care Pharmacy, Aimee Tharaldson, PharmD, Senior Clinical Pharmacist of Emerging Therapeutics, Evernorth (the new name for Cigna’s health services business), gave her regular, impressive update on the specialty drug pipeline. The breadth and scope of the presentation never fails to astound, all packaged by Dr. Tharaldson into a 75-minute session. She pointed out that the average list price of the 15 novel oncology drugs approved in 2022 by the FDA was $350,000. Orphan drugs and gene therapies will no doubt cost much, much more.

Specialty Drug Pipeline
Aimee Tharaldson, PharmD

Orphan drugs are medications used to treat rare diseases: any of 7,000 disorders that affect up to 200,000 Americans each. Up to 30 million US citizens have a rare condition; using that threshold, rare conditions aren’t very rare at all. Dr. Tharaldson pointed out that orphan drug development accounts for 49% of the specialty pipeline today.

Gene therapies, which target both orphan diseases, cancers, and chronic conditions, promise to be a $25 billion business by 2034, said Dr. Tharaldson. Only 12 have been approved to date. The gene therapies already approved cost up to $4 million per use.

This could add up to a potentially alarming situation, in terms of financing of future drug development. To demonstrate, let’s make some arbitrary assumptions: Say that at some time in the future, 30% of Americans with an orphan disease will use an orphan drug each year, resulting in a population of 9 million. If orphan drug prices averaged $50,000 per year, this would require $450 billion in financing to pay for these orphan agents. This assumes, of course, that orphan drugs are developed for every orphan disease, and the reality is that only a very small fraction of the 7,000 orphan diseases can be adequately treated today through drug therapy. However, Dr. Tharaldson would argue that $50,000 per year orphan drug cost is a very low estimate. Frankly, those potentially high drug prices are driving the orphan drug pipeline.

Can an Orphan Drug Support a Pharmaceutical Business?

We know that high drug costs are the real problem, and in the case of orphan drugs, it is not really the fault of the pharmaceutical industry. If you have a product that may treat only 5,000 people, a $5,000 per year cost for the orphan drug will only yield $25 million in annual revenues—hardly enough to build a pharma business. If you charge $10,000, or $50 million per year, this could be viable business if you have multiple orphan drug products for sale. This may be why the bulk of orphan drug development is being carried out by small firms.

The Institute for Cost-Effectiveness Research (ICER), which doesn’t consider business viability in its cost-effectiveness calculations, might conclude that a drug that effectively treats a debilitating orphan disease is worth the high cost. On the other hand, a drug that only partly addresses the clinical problem is not worth anything near the asking price or a drug that cures the condition might well be worth more than the $1 million lifetime cost of the product. In other words, the cost must be more closely linked to some true outcome.

Considering the current rate of biosimilar launches in the US, it may be difficult to meet the savings required to pay for future development of the highly expensive therapies in the specialty drug pipeline. It may be unfair to expect biosimilars alone to carry the burden of funding of new oncology treatments, gene therapy development, and orphan drug research and launches.

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