$10bn savings from follow-on biologics; CBO report
The report predicts that between 2010 and 2019 having an abbreviated approval pathway in place would have a net effect on deficit of $9.2bn.
Additional savings of $2.8bn could be achieved by placing follow-on biologics and their brand name counterparts in the same billing code under Medicare Part B.
The CBO claims this would encourage more widespread use of follow-on biologics as payment rates to physicians are calculated as a weighted average of all products in a billing code.
Consequently those prescribing brand name products would not be fully reimbursed for the brand name products they prescribed when a generic alternative was available.
In turn physicians who prescribe follow-on biologics will benefit financially as they will retain the difference between the products cost and the Medicare payment.
By adopting this carrot and stick approach it is hoped that follow-on biologics will enter into widespread use shortly after they enter the market. As a follow-on biologic becomes more widely used its payment rate under Medicare Part B would decline, offering further savings to the state.
A new market opens
By streamlining the approval process the CBO believes a competitive follow-on biologics market can be created, with multiple manufacturers and a resulting downwards pressure on pricing.
The CBO claims that US spending on biologics exceeded $40bn in 2007 and that products accounting for three quarters of this spending are due to come off patent over the next decade.
This represents a sizeable opportunity for companies entering the follow-on biologics market, such as Merck & Co which is launching a new division for biogenerics, and could confer significant savings to the US.
