This study evaluates the impact of biosimilar competition on the price of reference products and biosimilars in the US pharmaceutical market. We focus on average sales price (ASP) dynamics since 2015 in Medicare Part B because Medicare is a critical payer stakeholder in biosimilar price dynamics.
Using Centers for Medicare and Medicaid Services data over 34 quarters beginning in 2015, we analyzed the price effects of biosimilar competition in 8 biologic product markets. First, we evaluated the effect of biosimilar competition on ASP. Second, we evaluated the effect of market concentration on ASP using the Herfindahl-Hirschman index. We used instrumental variable methods to address the endogeneity between competition and ASP. Across analyses, our outcome variable is price ratio—the ratio of ASP measured over time relative to the fixed ASP at study baseline.
Our results showed a 10% to 13% decrease in the originator price ratio for entry of each additional biosimilar competitor, and a 1.8% decrease in the originator price ratio with a 10% decrease in market concentration at the lowest Herfindahl-Hirschman index observed in study period. These findings highlight the statistically significant effect of biosimilar competition and market concentration on prices in high-cost biologics drug markets.
Our findings demonstrate that the US biosimilars market has become highly competitive, and as a result, prices have declined significantly over the period 2015 to 2023. These price dynamics have generated substantial savings for Medicare; however, there is a potential threat to market sustainability if these price trend dynamics persist in the coming years.
This research explores how biosimilar drugs have impacted pricing in the US pharmaceutical market, especially focusing on Medicare Part B from 2015 to 2023. Biosimilars are similar to already approved biologic drugs but are usually more affordable. The study shows that increased competition from biosimilars has led to significant price reductions for both original products and biosimilars. Specifically, the entry of each additional biosimilar competitor reduced the price of originator products by about 10% to 13% and overall market prices by 13% to17%.
The study analyzed data from 8 biologic markets over 34 quarters, utilizing pricing information from the Centers for Medicare & Medicaid Services. Findings indicate that as more biosimilars entered the market, prices dropped significantly, generating substantial savings for Medicare. This price reduction is linked to increased competition, as measured by the Herfindahl-Hirschman Index, which assesses market concentration. A 10% decrease in market concentration corresponded to a 1.8% drop in originator product prices.
Compared to earlier studies, the impact of biosimilar competition on prices appears to have grown over time. The biosimilar market continues to expand rapidly, with new biosimilars launched in 2023, including those competing with Humira, the world's top-selling drug. The US Food and Drug Administration is considering regulations that might further enhance biosimilar competition, potentially leading to more price reductions.
However, these aggressive price declines raise concerns about the long-term sustainability of the biosimilars market. Lower prices could discourage manufacturers from investing in research and development for new biosimilars. Moreover, supply chain challenges may arise, potentially leading to shortages of biosimilar drugs. These effects could destabilize the market, which already experiences issues with generic drug availability.
Despite the benefits of reduced prices and Medicare savings, the study warns that if these trends continue, the biosimilars market might face sustainability challenges. The potential for reduced competition could lead to price increases in the future, affecting both patients and healthcare systems. For policy makers and healthcare decision makers, these findings highlight the need to ensure a balanced approach that maintains the benefits of competition while safeguarding the market's long-term viability.
Overall, while biosimilars have significantly disrupted the pharmaceutical market by lowering costs, careful consideration is needed to address sustainability and supply chain concerns to ensure continued access to affordable medications.