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Biosimilar competition: Early learning

Author

Listed:
  • Richard G. Frank
  • Mahnum Shahzad
  • Aaron S. Kesselheim
  • William Feldman

Abstract

Biologics accounted for roughly $145 billion in spending in 2018. They are also the fastest growing segment of the pharmaceutical industry. The Biological Price Competition and Innovation Act (BPCIA) of 2010 created an abbreviated pathway for biosimilar products to promote price competition in the market for biological drugs. There was great anticipation that the BPCIA would lead to a moderation in drug prices driven by market competition. The observed levels of competition and the accompanying savings have not reached those expected levels. We investigate the early impacts of biosimilar competition on the use and pricing of biological products. We focus especially on the ways in which altered market structures stemming from the implementation of the BPCIA have affected the prices for biological products subject to biosimilar competition. We do so by studying seven products that have recently faced biosimilar competition. We estimate fixed effects and Instrumental Variables models to estimate the impact of market competition on prices. Our results indicate that in the range of one to three entrants each additional marketed product results in a reduction in weighted average market prices of between 5.4% and 7% points. These are the result of a combination of reductions in originator prices and shifting in demand to biosimilar products.

Suggested Citation

  • Richard G. Frank & Mahnum Shahzad & Aaron S. Kesselheim & William Feldman, 2022. "Biosimilar competition: Early learning," Health Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 647-663, April.
    • Handle: RePEc:wly:hlthec:v:31:y:2022:i:4:p:647-663
    DOI: 10.1002/hec.4471
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    References listed on IDEAS

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    1. Steven Berry & Martin Gaynor & Fiona Scott Morton, 2019. "Do Increasing Markups Matter? Lessons from Empirical Industrial Organization," Journal of Economic Perspectives, American Economic Association, vol. 33(3), pages 44-68, Summer.
    2. Fiona M. Scott Morton & Ariel Dora Stern & Scott Stern, 2018. "The Impact of the Entry of Biosimilars: Evidence from Europe," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(1), pages 173-210, August.
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