On July 14, 2025, a new whitepaper sponsored by the Association for Accessible Medicines was released. “The Long-Term Effects of Medicare Price Negotiations on Drug Competition” was written by Alex Brill and Christy Robinson at Matrix Global Advisors. It examines the potential long-term impact that the federal government’s role as a price setter could have on drug competition. We interviewed Mr. Brill about the implications of two federal policies that can be detrimental to future biosimilar competition.
Biosimilars Review & Report: Alex, can you provide some background on Matrix Global Advisors?
Alex M. Brill: Matrix Global Advisors, or MGA, is a boutique economic policy consulting firm based in Washington, DC. We focus primarily on healthcare policy and do a lot of work on pharmaceutical competition. Other parts of our work relate to broader economic issues, such as tax or budgetary policy. We also do economic impact studies, where we help businesses or industries understand their economic footprint.
The Federal Price Setting and Biosimilar Development
BR&R: Let’s dig right into your white paper, on the long-term effects of Medicare Price Negotiation on drug competition. The white paper confirms what many in the biosimilar industry have suspected (or feared) since the passage of the Inflation Reduction Act (IRA).
Mr. Brill: The framework of this paper is to help readers and policymakers understand whether the IRA provisions that give the government the ability to negotiate certain drug prices will provide net cost savings or impede biosimilar and generic development, through the lens of existing competitive dynamics.
BR&R: You and your MGA co-author, Christy Robinson, certainly believe the latter outcome will be true. The next question is, to what extent can this policy damage biosimilar development?
Mr. Brill: After thinking through the mechanics of the price negotiation policy and that program, the specifics, and the timelines, we believe that the government’s price negotiations program will substitute for some degree of biosimilar competition that would otherwise occur. It will have a chilling effect on biosimilar development by reducing or eliminating the profit opportunities that will exist for biosimilar manufacturers down the road. That will discourage biosimilar firms from taking the risk.
There are risks in every market, in every industry. For manufacturers, the biosimilar market already involves multiple dimensions of risk. Can they develop the product? At what cost? Will the FDA approve it? How long will that take? What will happen in any patent dispute between the biosimilar manufacturer and the reference product? And there’s also the risks that these manufacturers face with respect to their other biosimilar competitors. If they undertake the effort to bring a product to market, will somebody get there ahead of them? How many other biosimilars will also be competing?
On top of those existing risks is an additional question now. What if biosimilar manufacturers undertake these investments, work through the process, get the approvals, and deal with any patent disputes, only to find that the government got there first, forced down the price of that reference product, eliminating or reducing profit incentive. Will Medicare pick out this drug for negotiation and kill the economic opportunity? That additional risk, on top of all the other market-based risks, is likely to discourage some biosimilar manufacturers from bringing new products to market.
Effects on Filling the Biosimilar Void
BR&R: Thisis occurring in the same period that we’re also experiencing the “biosimilar void.” The breadth of the biosimilar void is also driven by the same financial risks. It’s perfectly logical that biosimilar developers target the highest-revenue biologics.
If the biosimilar maker must target their products eight or 10 years before potential approval and commercialization, there seems a high likelihood that Medicare will target this product as well: That product with $1 billion in annual sales today may only have $500 million (or less) several years from now. And the biosimilar developer may still have three or four biosimilar competitors at their doorstep when it receives approval. Furthermore, the current “most favored nations” pricing proposal would exert this same effect—reducing the size of the future revenue pie for that biologic agent.
Are there manufacturers out there who will actually embrace those risks?
Mr. Brill: It’s a critical question and very difficult to answer.
I’m naturally optimistic. I think that there are players who are committed to the biosimilar industry, who want to find opportunities, and who are inclined towards adventure and risk taking.
These new policies will not eliminate this market, right? I mean, I believe that companies will still try to find a path forward, but it won’t be in every drug category. On the margin, when market intelligence suggests the likelihood of many competitors for a reference biologic, and another new, related innovator product may be approved, and the government will reduce the revenues of the reference product, that may be too many headwinds to overcome. So, yes, we expect some chilling effect.
You mentioned the issue of market size and how biosimilar manufacturers tend to target the blockbusters and not the small products, right? This is my view, too. The government’s price negotiation policy is colliding with the existing marketplace because it is prohibited from negotiating drug prices for small-market products. CMS is required to only negotiate selected high-expenditure products. But that’s the space where we should be most confident the market will work. If it’s not working, then we should ask fundamental questions about competition, patent law, FDA approval processes, and what’s happening in the courts. There are impediments; the market’s not perfect. There remains a strong desire to bring biosimilar competition to the big reference products.
BR&R: My feeling has always been the current environment could actually drive more biosimilar interest in the smaller-revenue biologics. They are less likely to have the fierce competition, are likely not to wind up with the magnitude of immediate discounts (e.g., 85% below wholesale acquisition cost) that we have in the adalimumab and ustekinumab categories.
It could be an opportunity for biosimilar manufacturers to seek out biologics with $400–$500 million annual revenues, where they can more reliably earn $100 million or $120 million on their product. Do you think that is a viable opportunity today?
Mr. Brill: I would say three things. First, I think that policymakers should acknowledge that there’s inadequate competition in these smaller product classes and work towards promoting that competition and figure out what kind of barriers can be eliminated or reduced. We don’t want to give up on the ability to have competition in these categories. We need to look for policy opportunities to open up these markets to competition.
The second thing is that the competition would be more limited, potentially a duopoly or perhaps just two biosimilars for a reference product. We’d still see savings for sure, but not to the same degree. That said, any competition is better than no competition in the quest for cost savings.
Third, will the policies we’re discussing push biosimilar makers to consider these smaller-revenue products? They are evaluating all their opportunities. As the risks go up for higher-cost products, it may shift resources and their focus to other areas.
Will the Most-Favored Nations Pricing Proposal Also Discourage Biosimilar Development?
BR&R: The next huge biosimilar competition opportunities will be coming up soon, particularly with the oncology reference products up with Keytruda and Opdivo. We would ordinarily expect heavy competition for these high-revenue biologics.
Based on the typical research and development timeframes, many of these competitors have initiated clinical studies. There’s a great deal of sunk cost, or money already spent in development. How do you see this playing out, in the context of Medicare Price Negotiation and Most-Favored Nations (MFN) pricing?
Mr. Brill: That’s another great question. There’s no way to know with confidence exactly how that’ll shake out. You’re right, there’s a lot of sunk costs here already. Companies have been working towards bringing these products to market.
With respect to the MFN, we have a slightly different set of concerns, in part because we don’t know that this will be the law of the land. We understand that the current administration has an intent to pursue policies and so that creates a lot of uncertainty.
There is heightened anxiety, though. Companies have already made these investments, and they’re not sure how the policies may change. They don’t want to lose the opportunity to capture the investments that they’ve already made to date. So I suspect that it’s giving a lot of people heartburn. I don’t know the extent to which it’s already changed behaviors.
BR&R: I’m going to ask you one more highly speculative question! Do you believe that the MFN program will result in inflationary pressure on drug pricing in the European Union? Will drug companies try to cover lower revenues in the US with higher net prices elsewhere?
Mr. Brill: My general view is that the drug manufacturers are already maximizing their profits in all their markets. Under the current structures and arrangements, I don’t think that drug manufacturers are leaving money on the table overseas.
They’re charging different prices in different markets. Not unlike how when I buy an airline ticket, the guy sitting next to me is going to the same place and likely did not pay the same price for that airline seat.
BR&R: There may be substantial issue with the goals of MFN. If you’re in a drug company selling to a country that has a tender system, your baseline offer may be higher than before an MFN policy was implemented. Would you assume that pharma companies would simply hold their Spanish price firm, if this was being used as a reference for lowering the US price? This seems a fairly obvious strategy for the industry as a whole. The result would be that “all boats rise” on the rising non-collusion price increases.
Mr. Brill: Yeah. It certainly is. It’s an open, speculative question. We’ll have to see how the market shakes out. I’m not going to bet the farm on that view. These negotiation processes are nuanced, and we could see changes in behavior from either side.
BR&R: This could be a logical reaction by pharma. If you’re basing your reference price on what Denmark is paying for our product, then we will raise Denmark’s price.
That’s sort of the logical way to go about it.
Mr. Brill: That’s right. I certainly hope policymakers have considered that, and there may be this kind of leveling out of the prices. You know manufacturers will think about Denmark’s pricing very differently if the US MFN price is hinging on it.
