Biosimilar Entry and the Pricing of Biologic Drugs

49 Pages Posted: 1 Feb 2021

See all articles by Luca Maini

Luca Maini

UNC Chapel Hill; University of North Carolina (UNC) at Chapel Hill - Cecil G. Sheps Center for Health Services Research

Josh Feng

University of Utah - David Eccles School of Business; National Bureau of Economic Research

Thomas Hwang

affiliation not provided to SSRN

Jacob Klimek

University of North Carolina at Chapel Hill

Date Written: January 4, 2021

Abstract

Biosimilars are close copies of biologic drugs, a group of complex pharmaceutical products that cannot be exactly replicated. The United States Congress passed regulation promoting biosimilar entry in 2010. Since then, the FDA has approved more than 30 biosimilars. We study how the entry of biosimilars has affected price, volume sold, and formulary placement of their corresponding reference biologic drugs. We find that reference biologics react to biosimilar entry much more aggressively than small-molecule brand drugs do to generic entry. We use a simple model to argue that differences in the perceived quality of biosimilar products can explain this discrepancy, and show empirical evidence in support of our theory. The model and empirical results suggest that biosimilars could eventually replace originator biologics, similar to how generic drugs replace brand products, provided that future research confirms the current medical evidence on biosimilars' safety and efficacy.

Keywords: Biosimilars, Drug Pricing

Suggested Citation

Maini, Luca and Feng, Josh and Hwang, Thomas and Klimek, Jacob, Biosimilar Entry and the Pricing of Biologic Drugs (January 4, 2021). Available at SSRN: https://ssrn.com/abstract=3760213 or http://dx.doi.org/10.2139/ssrn.3760213

Luca Maini (Contact Author)

UNC Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC 27514
United States

University of North Carolina (UNC) at Chapel Hill - Cecil G. Sheps Center for Health Services Research ( email )

725 Airport Road, CB# 7590
Chapel Hill, NC 27599-7590
United States

Josh Feng

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
2016977982 (Phone)

Thomas Hwang

affiliation not provided to SSRN

Jacob Klimek

University of North Carolina at Chapel Hill ( email )

Chapel Hill, NC
United States

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