By DAVID E. WILLIAMS

AstraZeneca appears set to follow Merck into the market for “bio-similars.” (See AstraZeneca may join generic rush.)
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.