Biosimilars, a deflationary pull against the upward push of inflation

With eight new biosimilars approved by midpoint 2024, these lower-cost biologics are one of the few deflationary factors in an otherwise relentlessly upward trend of medical cost inflation.

In gross expenditures, before manufacturer discounts, overall prescription drug spending up 13.6%, or $89 billion, in 2023, to $722.5 billion.

Overall, medical costs were expected rise 7% in 2024, according to the PwC Health Research Institute, the driven in part by unstoppable demand for glucagon-like peptide 1 agonists for weight loss and the rising number of highly costly cell and gene therapy products.

For years, the price of medical care has outpaced the price of consumer goods and services. According to a Peterson Center on Healthcare and KFF tracker, the price of medical care, including services for insurance, drugs, and medical equipment has more than doubled since 2000, increasing by almost 120%, while prices for all consumer goods and services rose by 85% during the same period. However, the Peterson-KFF tracker showed some deviation from that long-term recently. The consumer price grew by 3.5% in March 2024 from the previous year,while prices for medical care increased by only 2.2%, according to the Peterson-KFF tracker.

Source: "How does medical inflation compare to inflation in the rest of the economy," May 17,2024, Peterson KFF Health System Tracker

Still, there is no doubt that healthcare spending, particularly drugs, is increasing. Novo Nordisk, the producer of weight loss drug Wegovy (semaglutide) reported U.S. sales of $11.3 billion for this product in 2023. Wegovy is now considered to have surpassed the former top-selling worldwide drug, Humira, in total sales.

Humira has biosimilar competition now, but in 2023 managed to fend off these competitors. Biosimilars are expected to gain more traction against Humira this year and next.

Biosimilars generally enter the market priced at roughly 50% of the amount of their reference drugs (sometimes referred to as originators). They also tend to pull down the cost of the reference drugs by an average of 25% at the time of launch as drugmakers jockey for market share with new lower-cost competition.

A total of 53 biosimilars had been approved by mid-year 2024, with roughly 40 of them launched by that point. These approved specialty drugs represent 17 different reference drugs.

Anticipated biosimilar entries with potential to exert downward pressure on overall medical costs include:

Source: PwC Health Research Institute

In April 2024 CMS finalized a new rule allowing Medicare Part D plans to switch patients to biosimilars whether or not these biosimilars have interchangeable status. This goes into effect in 2025 and is part of a growing effort by federal policymakers to remove impediments to biosimilar use

Besides biosimilars, a few other trends in medicine are exerting downward pressure on prices. These include a shift to outpatient care from inpatient care, which was partly triggered by the COVID-19 pandemic.

Ongoing efforts to broaden value-based care, utilization management and care management also are expected to help counter medical inflation; further, the use of AI in advanced data analytics in medicine also could make a difference.

But the overall trend in medical price inflation is up, and there is no top in sight.

As of the end of April 2024, the FDA had approved 37 cell and gene therapy products, and more were in the pipeline, and these can cost substantially more than other drugs.

Hemgenix, a one-time treatment for hemophilia B, costs $3.5 million. Skysona, for neurologic dysfunction, was approved April 5 of this year, with an estimated cost of $3 million for a one-time infusion.

Overall, the proportion of newly approved drugs costing $150,000 per year or more was just 8% between the years 2008 and 2013, but that proportion increased to 47% between 2020 and 2021.

Statistics like that are why a prominent medical economics consultant predicts Americans will have to dig deeper into their pockets in coming years to pay their medical bills.

IQVIA, in a report released in May, said total prescription drug spending in 2028 will reach $562 billion, up $127 billion from where it stood in 2023