Biosimilars Could Reduce U.S. Health Spending by $54B over Next Decade

Biosimilar versions of complex biologic drugs could cut health care spending in the U.S. by $54 billion over the next decade, according to the RAND Corporation.

The savings estimate is about 20% larger than a similar analysis done by RAND three years ago, representing both improved analysis methods and rapid growth in spending for biologics overall.

"Biologics account for the fastest-growing segment of prescription drug spending, but biosimilars have the potential to help slow some of the increase," said Andrew Mulcahy, lead author of the study and a policy researcher at RAND. "However, there remains many important industry, regulatory and policy decisions to be made that will influence whether such savings are realized."

Biologics are often expensive and patient copays can be several thousand dollars per year. While 1 to 2% of the nation's population is treated with a biologic each year, the drugs accounted for 38% of prescription drug spending in 2015. In addition, biologics accounted for 70% of the growth in prescription drug spending in the U.S. between 2010 and 2015.

RAND researchers developed their estimate of savings from biosimilars by examining other studies that have examined the issue, reviewing the sales history of more than 100 biologic drugs, and examining the brief experience of the one biosimilar drug that has been marketed in the U.S.

It was estimated that that biosimilars will cut spending on biologics by about 3% over the next decade. The range of the new savings estimate given reasonable ranges of key assumptions—like the price of biosimilars versus reference biologics and biosimilar market share—varied from $24 billion to $150 billion from 2018 through 2027.

"The actual savings hinge on the evolving competitive landscape in the pharmaceutical industry, regulatory decisions, and insurer efforts to promote biosimilar uptake through payment rates and other strategies," Mulcahy said. "Future research will be needed as more biosimilars come to market to see whether savings are realized and who benefits from any reductions in spending."