As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH:

Most drugs on the market are made the same way you made new compounds in chemistry lab in high school or college: by putting molecules or elements together in a solution and adjusting the temperature, pressure, pH, and other inputs to encourage the elements to combine in a specific way. So if an enterprising high-schooler were to discover a way to produce pure, uncontaminated aspirin in her garage, we could be confident that it would have the same effect as aspirin produced by Bayer.

And generics—unbranded versions of name-brand drugs—really do work to drive down the cost of medications. A 2017 study in the New England Journal of Medicine found that for a drug with a single manufacturer, generic and brand-name prices were roughly the same. But for a drug with three manufacturers, the generic price was only 60% of the brand-name price. So it’s no surprise that 90 percent of drugs used in America are generic.

But newer drugs—and some old ones like insulin—are not synthesized from scratch. Because of their complexity, we have to trick bacteria into making them—as with insulins—or we have to isolate them from living organisms where they naturally occur. We call such large-molecule drugs “biologics,” and instead of calling copies “generics,” we call copies of these drugs “biosimilars.” (As a side note, the first bacteria-produced “recombinant” human insulin ever to be given to a human was injected right here in Wichita by Dr. Richard Guthrie.)

When we make a biosimilar drug to match a biologic drug, the new drug is not necessarily atom-for-atom identical to the brand-name drug. The FDA allows the new drug to be slightly different as long as “no clinically meaningful differences” are noted between the original drug and the biosimilar drug in terms of safety, purity, or potency. This obviously requires more study than what would be required for our garage-produced aspirin. This means a lot of work, much of it in human subjects. Because of this difference, biologics have long operated under a different set of rules than “small-molecule” drugs. Whereas old-fashioned drugs are granted a 20 year patent from the date of application, after which it is relatively straightforward for another company to start producing a generic version, biologics are subject to a kind of natural immunity to generic competition that’s made worse by bad behavior on the part of the reference drugs’ manufacturers, misinformation campaigns, and close-but-not-quite-similar clinical outcomes.

The result has been that, while biosimilar drugs are common in western Europe, their use has been very limited in America. As such, Americans have long assumed that we paid far more for biologic drugs than our peer countries have.

A new study proves this out. Pharmacists and physicians from the University of Pittsburgh looked at the price of the only four biosimilars on the market by December 2018 (white blood cell-producing filgrastim [Neupogen®] and pegfilgrastim [Neulasta®], immunosuppressive drug infliximab [Remicade®], and insulin glargine [Lantus®]) over time. Their findings were striking. From 2007 through 2018 the cost of each of these medications went up by ~5-14% per year. At the time of introduction of a biosimilar (or two years ahead of time in the cases of glargine and infliximab) the cost of the medications immediately plummeted: −7.7% for filgrastim, −7.4% for pegfilgrastim, −13.6% for infliximab, and −23.5% for glargine.

The timing of this information is good. The dam on biosimilars is breaking. Dozens of biosimilar drugs have been approved in the last two years. So as you work with your pharmacy benefit manager to design your drug benefit, make sure that biosimilars are covered for your most expensive biologic agents. This may be harder than you think; abusive contracting practices are some of the obstacles biosimilars face in getting into wide use. However, the benefit to your bottom line will be substantial if you’re able to successfully integrate biosimilars into your pharmacy benefit.