Study: Allowing Generic Biotech Drugs Could Save $70 Billion

By | February 16, 2007

Patients and health insurance providers could save at least $71 billion over 10 years if there were a regulatory mechanism that allowed for the marketing of generic biotech medicines, according to a new study.

Currently there is no legal pathway that allows generic drug makers to produce biotech medicines, so the pricey treatments, which are derived from a living source such as proteins, have never had to compete with copycat products that drive pharmaceutical costs lower.

Controlling the cost of biotech medicines has become a top priority for those providing health insurance because the cost of such treatments is dramatically increasing. Biotech treatments now account for 25 percent to 30 percent of a company’s overall drug costs, according to pharmacy benefit manager Express Scripts Inc., which conducted the study.

Express Scripts said that the average biotech drug costs $71,600 (euro54,731.69) a year, compared with the annual average for a traditional drug of $1,200 (euro917.29). It said that escalating biotech drug costs, which reached $40 billion (euro30.58 billion) in 2005, are expected to more than double in four years to a total of $90 billion (euro68.8 billion) in 2009, a rate three times faster than traditional drug costs.

But on Wednesday, a bill was introduced by a group of bipartisan lawmakers in Washington, D.C., that would give the U.S. Food and Drug Administration the authority to approve copies of biotech drugs. Similar legislation was introduced last year.

Express Scripts conducted the study by taking a 25 percent discount off brand name medicines in four classes of drugs that would already have generic competition because of patent expirations if copycat biologics were allowed. Express Scripts decided on that discount because it said that the generic version of human growth hormone sells at a 25 percent discount to its brand name counterparts in Europe.

The four categories of drugs were: insulin for diabetes, erythropoietins for anemia, growth hormones and treatments for multiple sclerosis.

Dr. Steve Miller, chief medical officer at Express Scripts, said its estimates were conservative because it didn’t include other drugs that would lose patent protection over the next 10 years.

Express Scripts said a generic drug typically costs 60 percent less than its brand name counterpart. However, some experts have said that generic biologics may not be that much cheaper than their branded counterparts because it is likely the FDA will require more testing on generic biologics than chemical drug copycats. Biotech drugs are also more expensive to produce.

Kathleen Jaeger, president and chief executive of the Generic Pharmaceutical Association, said her trade group supports the new legislation and that numerous companies within the organization had expressed interest in entering the biotech arena, even though the process might be more expensive and complicated than producing generic chemical drugs.

Jaeger said that even if generic biologics were only 25 percent less than their brand name counterparts, it would be a huge savings for consumers.

“If it (the legislation) gets passed it will be a great win for consumers,” she said.

Jim Greenwood, president and CEO of the Biotechnology Industry Organization, cautioned against forecasting any savings from generic biotech drugs without knowing how much testing regulators would require. BIO maintains the drugs will not be true generics because a product made from a living source can never be exactly copied.

“We would be happy to support follow-on biologics legislation as long as that legislation is consistent with some very critical principles: first and foremost of course is safety,” Greenwood said.

FDA spokesman Kathleen Quinn said the agency hadn’t seen the newly introduced legislation but that it plans to provide technical assistance on the bill. She added that as science has evolved, the agency may be able to eventually approve generic biologic drugs.

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Associated Press Writer Andrew Bridges in Washington contributed to this report.

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