A better idea than biogenerics
November 27th, 2006 by 
David E. Williams of the Health business blog
A better idea than biogenerics
Generics are a bright spot in the world of health care costs. Safe, efficacious generics are available in an increasing number of key therapeutic classes. Producer level prices have been low for years. Thanks to Wal-Mart those low prices are now making their way through to patients. With Democrats in control of Congress, barriers to the introduction of generics are likely to fade.
But there’s a large and growing exception to the generic trend: biotech. Biotech drugs are an expensive and rapidly growing component of drug spending and the trend is likely to continue.
It’s hard if not impossible to make exact copies of biotech drugs and there’s no clear regulatory framework for their approval. According to the Wall Street Journal (Democrats’ Rx? Generics):
Some biotech officials argue that generics makers will need to redo all the studies performed by the original manufacturer, in order to guarantee their copycat products are effective and safe for patients. That would likely eliminate much, or all, of the price advantage offered by the generics rivals. “There is no way to characterize a biological,” says James Greenwood, a former congressman who heads the Biotechnology Industry Organization, a trade group.
You should take the self-interested statements above with a grain of salt. Still it probably doesn’t make sense to apply the same generic model to the biotech industry, even though it’s worked well for traditional drugs. Instead I suggest the following:
- Allow biotech drugs to be approved and marketed as they are now, without price regulation
- After patent expiration or after a certain number of years on the market, regulate price. The price could be based on cost of goods, a percent of the previous selling price, or some other mechanism
This would avoid the costs and risks of biogeneric development and regulatory approval while delivering the benefits of lower costs to payers. The original maker of the product should be happy too. Although their price will be lower than it is today, they won’t have to share the market with generic players or spend money blocking the entry of new players. They will still enjoy a substantial period of high margin sales as they do today. It just won’t go on forever.
When, at some point in the future, science improves to the point where truly identical biogenerics can be developed, these rules could be revisited.
Posted in Pharma, Policy and politics | 
9 Comments »
November 30th, 2006 at 5:24 pm
While I understand a lot of the cost of traditional medication is the R&D – a large portion is also the advertising and the monopoly powers. Why do I state the obvious?
Well, from my perspective, even if biogenerics cost a lot more than current generics (higher R&D costs for new manufacturers) there will still be an incentive to do that research (and theoretically R&D should be cheaper than a new technique because you know what the end result should be). Once someone overcomes the R&D they should be able to lower the market price by ending the monopoly, advertising less, and all the rest. Meaning that if the market is functional, biogenerics could still be a viable option.
I am sure I am missing something, just food for thought.
December 6th, 2006 at 1:10 am
This is a great discussion topic and interesting proposals, but I actually don’t think either approach is really viable. As for the biogeneric approach, although the cost for R&D might be a bit less than that of the original manufacture, the risk is still very high and the clinical development program long. There is the very real possibility that the generic company will still not be able to show non-inferiority to the innovator product. Even if similar efficacy could be established the generic company will also have to demonstrate a similar safety profile. With biotech biologicals, product contaminants and lot variations (even within FDA standards) could produce potential side effect profile differences. You also have to consider how well you would be able to recruit patients for these studies. Why should patients participate in a long-term generic equivalence clinical outcomes study if the patient can already get what is likely a safe and efficacious breakthrough drug covered in large part by their health plan? If the generic company product is approved, marketing costs will likely go up as there is now competition. The generic company marketing costs will be substantial as they will have to show physicians more than that their product is just bioequivalent.
With regard to a price regulation approach, I can’t see that “the original maker of the product should be happy too†either. After a company spends hundreds of millions of dollars at risk to produce a biotech drug for an unmet medical need, they’re more than likely to respond…bring it on, we’ll take our chances in a competitive market place.
May 1st, 2007 at 4:19 pm
[...] The authors apply analytical rigor to their work, but let’s face it, the conclusions are obvious. Generic biologics are a dumb idea as I’ve been saying for a while now. It guess it’s good to have a bit more evidence out there to back up that argument. [...]
May 3rd, 2007 at 9:55 pm
[...] On Tuesday I shared my disdain for Duke University research on biogenerics (Nice work if you can get it). The authors failed to even pose the real question they should have addressed: how to bring down spending on biotech drugs. This oversight may have had something to do with their funding source: Genentech. I’m still waiting for a response to the email inquiry I sent to the lead author asking why he didn’t even mention price regulation as a way to bring down prices. [...]
January 17th, 2008 at 12:52 pm
hmmmm…very interesting!
Thanks google
June 11th, 2009 at 6:45 am
[...] I’ve written before (starting almost three years ago), I don’t favor generic biologics or “biosimilars” to control the cost of [...]
June 11th, 2009 at 7:40 am
[...] I’ve written before (starting almost three years ago), I don’t favor generic biologics or “biosimilars” to control the cost of [...]
August 25th, 2010 at 8:01 am
[...] This item originally ran on November 27, 2006. If you’d like to leave a comment please do so on the original post. [...]
August 25th, 2010 at 8:19 am
[...] This item originally ran on November 27, 2006. If you’d like to leave a comment please do so on the original post. [...]