Generic Biologics Unlikely to Lower Drug Costs

[Guest guest]

[biologics include rituximab, Campath, and other monoclonal

antibodies. HillaryCare unlikely to see drug savings]

Duke University

Generic biologic drugs unlikely to offer significant savings

DURHAM, N.C. –- Generic versions of a class of medicines

called " biologics " would not be significantly cheaper than brand-

name versions of the medicines, according to research from

professors at Duke University's Fuqua School of Business.

Biologics are drugs, vaccines and other medicines produced by living

cells in controlled circumstances. The way they are made differs

from traditional pharmaceutical drugs that are produced by

industrial-scale chemistry.

Insulin is a common biologic prescribed to treat diabetes; other

biologics treat arthritis, cancer and other diseases.

The Food and Drug Administration currently does not have a process

for the review and approval of generic versions of biologic

products, several of which are scheduled to lose their patent

protection this year.

" Congress and the FDA are currently addressing this issue and

developing a process for the oversight of generic biologics,

partially in hopes of generating significant cost savings for

consumers and insurers, " said Schulman, a professor of

medicine and business administration and director of Duke's Health

Sector Management program.

" However, our research indicates that any savings to be expected

from the addition of generic biologics to the marketplace will be

significantly less than the savings generally available from generic

pharmaceuticals, " Schulman said.

The manufacture of biologics by living organisms through a process

that resembles fermentation must be closely monitored to ensure that

the final products meet quality and safety standards.

" Our calculations indicate that policy-makers should not assume

significant price reductions from generic biologics, " said Henry

Grabowski, a professor of economics and director of Duke's Program

in Pharmaceuticals and Health Economics. " If the discount is small,

and patients are achieving good outcomes with the branded product,

then generics might get only a small market share, " Grabowski said.

The research team, which also included Ridley, a professor in

Duke's Fuqua School of Business, will publish the paper, " Entry and

Competition in Generic Biologicals, " in the journal Managerial and

Decision Economics. The research was funded by Genentech, which

produces biologics.

In order to predict prices of generic biologics, the researchers

combined a theoretical model of generic biologics with historical

data from the generic pharmaceutical market.

Generic pharmaceutical products are widely accepted as a less-

expensive alternative to brand-name drugs. Companies are able to

sell generics for less because they do not have to repeat the

studies required to win initial approval from the FDA. If

manufactured according to the standards set forth for the initial

approval of the treatment, the generic product is assumed to have

the same safety and efficacy profile as the branded version.

Because of their unique characteristics, however, generic biologics

probably face higher clinical, manufacturing and marketing costs to

enter the market, according to the researchers.

Another barrier for generic biologics is that they probably will not

be approved by the FDA as therapeutically equivalent to the

reference brand, the researchers said. Generic pharmaceuticals can

be substituted for the brand name by a pharmacist under state

substitution laws aimed at cutting prescription costs. But without

equivalency, a physician would specifically have to prescribe the

generic biologic.

In recent congressional testimony, Grabowski called for a 10-year

period in which makers of generic biologics could not use data

developed by makers of original products in marketing applications

for generic biologics. Otherwise, generics potentially could enter

the market before originators have earned a positive return on their

sizeable investments in research and development, he said.

U.S. Rep. Henry Waxman, D-Calif., and U.S. Sens. Hillary Rodham

Clinton, D-N.Y., and Schumer, D-N.Y., have introduced

legislation that would subsidize companies that produce generic

biologics. But Duke's Ridley says that even with such

legislation, " prices might not fall enough to justify the cost to

taxpayers of such a program. "

" We understand the enthusiasm for lower prices for these biologics, "

he said. " But 'generic' is not necessarily synonymous with 'cheap.'

Whether generic biologics have low prices will depend on how many

generic biologic manufacturers enter the market. "

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