First Biosimilar Medicine Launches; Price Disappoints Those Hoping For Deeper Discount

Pharmaceutical prices are dominating public concerns about health care, according to a recent poll by the Kaiser Family Foundation that shows three-quarters of Americans support limiting how much drug companies can charge for high-cost drugs.  So it’s especially disappointing to see that the first imitators of a new generation of biologic cancer drugs approved for the U.S. market will be started with a discount only about 3% below the innovator’s cost to Medicare.

The new drugs, called biosimilars, are meant to imitate the effect in patients of large-molecule biologic drugs containing uniquely engineered proteins.  It’s not possible to stamp out exact copies of the drugs, as it is with chemically-based generic medicines such as statins, because biologics contain unique, living proteins.  Hence the term, “biosimilar.”  Biologics also must be administered by physicians through injection or infusion because of the size of the molecules, adding to their costs.

In a column earlier this year, I wrote about the expectation that the Food and Drug Administration (FDA) would approve Zarxio, a drug that is biologically similar to Amgen AMGN +0.66%’s Neupogen, as the first biosimilar to reach the U.S. market.  Neupogen® is injected as part of the treatment for cancer patients receiving chemotherapy, for patients with abnormally low counts of white blood cells, and other indications.

Zarxio is a product of Sandoz Inc. which already sells its Neupogenbiosimilars in more than 40 countries outside the United States.  Sandoz just received approval to start selling Zarxio in the U.S.

Mark McCamish, Sandoz’s global head of biopharmaceuticals and oncology injectables development, had earlier told an FDA panel that sometimes the product might be priced “at parity” but that overall Zarxio would save the system money through rebates or other mechanisms.  Under Medicare’s payment system, established physician-injected drugs like Neupogen are paid based on a market-based payment mechanism (which includes discounts and rebates).

The Washington Post reports that the initial pricing for a dose of Zarxio ($438.98) will be about 15% less than Neupogen ($516.45). But the average sales price of Neupogen, which is the basis for its Medicare payment amount, is about $449.81.  That means the Zarxio biosimilar represents just a 2.4% savings at launch.  That’s hardly what legislators keeping tabs on Medicare and other federal spending had expected when the biosimilar pathway was created.

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About the author

Grace-Marie Turner is president of the Galen Institute, a public policy research organization that she founded in 1995 to promote an informed debate over free-market ideas for health reform. Full biography