Escalating Drug Prices
November 30, 2016
Escalating drug prices have been a major issue plaguing the health industry in recent years. The drug prices in the US have reached staggering levels and are becoming less affordable to the patient population every year. Based on a recent report by the Centers for Medicare & Medicaid Services, it is estimated that prescription drug spending is projected to increase at an average rate of 6.7 percent per year for 2016 through 2025 . These statistics indicate that drug prices will continue to escalate.
According to a Kaiser Family Foundation survey, over 70 percent of survey respondents felt that manufacturers are more concerned with making profits and that drug prices were becoming too expensive . Another survey by PwC found that patients find it difficult to pay for a drug that costs more than $12,000 per year, even with insurance or other assistance . A contributing factor for these high prices could be the absence of any regulatory authority that monitors how a drug is priced and since the pharmaceutical companies are concerned with making profits, they can price it however they want. Recent incidents such as the case of Epipen®, an epinephrine auto-injector used to treat allergy reactions, where Mylan Pharmaceuticals raised the price of the life-saving drug almost six times have forced the industry to take notice. The increasing rate of mergers and acquisitions in the healthcare industry could be another reason for the rising drug prices. For example, in 2011, Gilead Sciences paid $11 billion to acquire Pharmasset, who were developing a drug that could prove to be a cure for hepatitis C. Gilead called the drug Sovaldi®, and priced it at $1,000 a pill. The price was more than double of what Pharmasset planned to charge .
A viable option to combat the rising drug prices would be biosimilars. A biosimilar is defined by the Biologics Price Competition and Innovation Act of 2009 (BPCI Act) as a biological product that is approved based on proof that it is highly similar to an FDA-approved biological product (reference/originator product). Over the next several years, biosimilars are expected to witness significant growth as a number of expensive originator drugs are set to lose their patent protection. An example of the savings that biosimilars could offer is demonstrated by Sandoz’s Zarxio® (filgrastim-sndz), the first biosimilar approved by the FDA in US. It was launched in the market in September 2015 and was priced at a 15 percent discount as compared to the originator drug . Industry experts estimate that savings from Zarxio could potentially reach up to $6 billion in the next decade . Biosimilars are expected to drive down the cost of biologics by increasing the number of less expensive drug options available in the market. Unfortunately, there are still a number of factors limiting the widespread adoption of biosimilars such as the lack of awareness among patients and physicians. An industry survey identified that 70 percent of the population had never heard about biosimilars. Therefore, patients and physicians need to be educated about the benefits of using biosimilars before they could be adopted on a broader basis. Biosimilar manufacturers would need to make efforts to increase awareness among patients and physicians regarding the safety and efficacy of biosimilars and their potential benefits.
TCI has an extensive background of working with biosimilars and would be pleased to discuss any specific needs that you may have regarding biosimilars. To discuss potential projects, please contact:
Senior Research Analyst
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