Widespread adoption of generic medications, made possible by the Hatch-Waxman Act of 1984, has contained the cost of small-molecule drugs in the United States. Biologics, however, have yet to face competition from follow-on products and represent the fastest-growing sector of the US pharmaceutical market. We compare the legislative framework governing small-molecule generics to that which regulates follow-on biologics, and we examine management tools that are likely to be most successful in promoting biosimilars' adoption. The Biologics Price Competition and Innovation Act established an abbreviated pathway for follow-on biologics, but weak statutory incentives create barriers to entry. Many authors have raised concerns that competition under the biologics act may be weaker than that posed by small-molecule generics under Hatch-Waxman, in part because of legislative choices such as the absence of market exclusivity for the first biosimilar approved and a requirement that follow-on manufacturers disclose their manufacturing processes to the manufacturer of the reference product. Provider skepticism and limited competition from biosimilars will challenge payers and pharmacy benefit managers to reduce prices and maximize uptake of follow-on biologics. Successful payers and pharmacy benefit managers will employ various strategies, including tiered formularies and innovative fee schedules, that can control spending by promoting uptake of biosimilars across both the pharmacy and medical benefits.
Keywords: Biotechnology; Health Reform; Legal/Regulatory Issues; Managed Care; Pharmaceuticals.
Project HOPE—The People-to-People Health Foundation, Inc.