Biosimilars can save billions of healthcare dollars

November 1, 2017

Analysis from RAND helps frame the potential of biosimilars to reduce spending on biologics.

Introducing biosimilar drugs could slash healthcare spending in the United States by billions of dollars over the next 10 years, according to a new analysis.

While 1% to 2% of the nation’s population is treated with a specialty drug-including biologics-each year, biologics alone accounted for 38% of prescription drug spending in 2015.

The Rand Corporation analysis, released in October 2017, found that biosimilars will lead to $54 billion less in direct spending on biologics (or about 3% of total spending on biologics) over the next decade. The range of the new savings estimate given reasonable ranges of key assumptions, such as the price of biosimilars versus reference biologics and biosimilar market share, varied from $24 billion to $150 billion from 2018 through 2027.

Mulcahy

Andrew Mulcahy, lead author of the study and a policy researcher at RAND, and colleagues, estimated savings using recent sales data from more than 100 marketed biologics, assumptions on biosimilar prices and market shares, and assumptions on the likelihood and timing of biosimilar entry over time. 

“We also identify and discuss sources of uncertainty that could affect savings and suggest policies that could strengthen the sustainability of the U.S. biosimilars market and the potential for long-run savings,” says Mulcahy. “Understanding the potential savings from biosimilars should inform decisions regarding coverage and payment decisions.”

Higher savings than previously estimated

The savings estimate is about 20% larger than a similar analysis done by RAND researchers three years ago, representing both improved analysis methods and rapid growth in spending for biologics overall.

“The report and its findings help frame the potential of biosimilars to reduce spending on biologics,” Mulcahy says. “We show biosimilar savings will likely accrue in a small number of biologic categories even over the next decade. In aggregate, though, savings will amount to a modest 3% of spending on biologics over the same period.”

In 2015, the FDA approved the first bioimilar. Zarxio (filgrastim-sndz), and there are more than 50 biosimilars on the way, according to the Biosimilars Forum.

Takeaways for health execs

“We advise managed care executives to monitor the U.S. biosimilars market over the next few years as key issues-such as interchangeability, payment, intellectual property, and other issues-continue to evolve,” he says. “Some managed care execs could be in positions to pursue savings from biosimilars through benefit design and payment innovation.”

Mulcahy expects biologics to account for a growing share of total pharma spending over time. “Biosimilars will slowly gain some of the overall biologic market share,” he says.

Support for the research was provided by Sandoz Inc., a Novartis company.