Generic Alternatives Proven Avenue to Lowering Drug Costs
For Consumers & Private, Public Payors

(Washington, DC)—If Congress were to create a clear regulatory pathway for follow-on biologics, the Medicare Part B program could save, conservatively, an estimated $14 billion on prescription drug costs over the next ten years, according to an analysis conducted by Engel & Novitt and released today by the Pharmaceutical Care Management Association (PCMA). PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D.

Life-saving and enhancing biologics can cost tens or even hundreds of thousands of dollars per patient per year so introducing as much competition as possible is vital to making these treatments more accessible to consumers. Unlike conventional drug products where generic competition is robust, the FDA lacks a clear regulatory pathway to approve follow-on biologics, or “biogenerics.”

“It is vitally important that the new Congress create a legal pathway for FDA to approve lower-cost follow-on biologic products,” said PCMA President Mark Merritt. “In Medicare Part B, the creation of a regulatory pathway would save $14 billion dollars, with billions in additional savings opportunities available in the new Part D program and the commercial sector. Everyday, millions of lives are positively impacted by revolutionary biologic drugs. The time to act is now for policymakers in creating a pathway for lower-cost alternatives to these drugs in order to increase options and competition for consumers and payors.”

Among the key findings:

Expenditures on biologics are substantial and increasing rapidly. In 2006, the Medicare Part B program spent more than $5 billion on biologics, one of the fastest growing segments of Medicare expenditures.

Medicare must continue to pay higher costs—even on older, off-patent biologics—because the FDA lacks a clear regulatory pathway for approving “biogenerics.” Medicare is a significant payer for biologics, but currently pays high costs even on older, off-patent biologics. The enactment of legislation introduced in the 109th Congress (H.R. 6257/S. 4016), would enable FDA to approve follow-on biologics.

Follow-on biologics would save Medicare billions of dollars. If follow-on biologics became available, the Medicare Part B program could save an estimated $14 billion over the next 10 years. Additional savings would also accrue to Medicare Part D and other government programs.

Follow-on biologics would substantially reduce costs for employers and consumers. The availability of follow-on biologics would allow PBMs to more effectively manage expenditures on high-cost biologics and thereby reduce health insurance costs for employers and out-of-pocket expenditures for consumers.

Study Summary

Engel & Novitt Follow-on Biologics Paper

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PCMA is the national association representing America’s pharmacy benefit managers (PBMs), which lower the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D

Contact Information:
Phil Blando, 202-207-3614
Charles Coté 202-207-3605