Did you know biologics comprise only 2% of drugs on the market yet account for 37% of all drug spending in the U.S.? 2 Why are biologics so expensive? This article explores five reasons biologics remain expensive. 

Biologics are drugs from living organisms and treat various conditions, including psoriasis, arthritis, and ulcerative colitis. Biosimilars are also made from biological products, but drug manufacturers use a reference product (the original biologic) to create the biosimilar and then compare the efficacy, safety, and immunogenicity of the biosimilar to the reference product. Though generics and biosimilars share characteristics, there are differences between generics and biosimilars.

This article focuses on the cost of biologics, not biosimilars. Biosimilars were developed to decrease the cost of biologic drugs by driving competition.1 However, uptake of biosimilars has been slow due to patent lawsuits, provider hesitation, and the drug rebate system.1 The FDA has approved only 38 biosimilars, but more than 620 biologics are available in the U.S. 

The yearly cost of a biologic can exceed $500,000.1 Biologics are expensive due to their complexity, development process, administration route, competition, and market demand. Whether you are a medical science liaison (MSL) or healthcare provider(HCP), understanding and communicating why biologics remain expensive is essential.

1. They're More Complex.

Compared to small molecule drugs, biologics are far more complex. They are created from biological products, which are inherently larger and more varied than the chemicals used to develop small molecule drugs.8 Biologics are composed of sugars, proteins, nucleic acids, or complex combinations. 

The mechanism of action varies significantly from blocking the production of proteins to gene therapy. The most common types of biologics include the following: 

• Vaccines
• Antitoxins
• Monoclonal antibodies
• Interleukins
• Stem cell therapies

Since biologics are composed of living cells, they are more temperature-sensitive and more likely to require special storage. FDA's Center for Biologics Evaluation and Research (CBER) regulates the development of biologics and ensures high standards throughout the development process. 

2. They Require Expensive Research

Researching, developing, and commercializing a medication takes an average of ten years, with clinical trials of six to seven years. Bringing a single drug to market can cost $2.6 billion, though this figure varies across the literature and reports.8 Biologics costs are especially high due to the specialized materials and equipment required to research, develop, and test the therapy.8

These high costs are consequently passed on to hospitals and patients. Fortunately, the FDA approval rate for biologics is generally high, with CAR-T and RNA interference drugs achieving the highest likelihood of approval. (17.3% and 13.5%) For reference, only 7.9% of Phase I drugs achieve FDA approval.

3. They’re Administered by Injection or Infusion

Due to their large molecular size, biologics are usually administered by injection or infusion.

The cost of storing temperature-sensitive medications, providing space for infusions, and necessitating healthcare provider time, has added to the overall price of biologics in the U.S. healthcare system. For example, the cost of rheumatoid arthritis infusions has doubled in the last five years.

4. They’re in High Demand

In 2020, the global biologics market size was $299.72 billion. By 2028, the market will expand to $567.96 billion with a CAGR of 8.4%. Monoclonal antibodies are most in demand. Why are biologics in high demand?8

• Biologics’ scope: Biologics treat a wide variety of diseases, and biologics remains the gold standard for treating many conditions.
• Aging population: As our population ages and people live longer, there is a greater demand for effective medication.
• Infectious disease rate: The emergence of COVID-19 has created a greater demand for biologics.

5. They Have Fewer Competitors

Compared to small molecule drugs, biologics have significantly fewer competitors.3 Biosimilars are the primary competitor, and the FDA has only approved 38, with even less becoming commercially available. 

With biologics dominating the market share, they have retained their high prices. Researchers have found additional government incentives for biosimilars could save the U.S. healthcare system billions of dollars.6The EU has approved more biosimilars, creating competition and reducing the cost of biologics.7

The following factors have slowed biosimilars' entry into the U.S. market:4,5,8

• Patent lawsuits: Companies manufacturing biologics have been able to extend their patents by creating “patent thickets.”
• Pharmacy Benefits Managers (PBMs): Many PBMs received rebates from companies manufacturing biologics, reducing the financial incentive to offer less expensive biosimilars.8
• Biologic company practices: Companies have incentivized the use of biologics among providers by providing nurse educators to assist with prior authorizations and patient paperwork.5
• Provider education: Providers have expressed safety concerns about biosimilars, and a recent survey found that “84% of US physicians were opposed to switching a stable patient.”8

Though biologics have remained expensive, the market is evolving, and 2023 will be a pivotal year for biologics and biosimilars. As Humira® loses patent rights in 2023, 10+ biosimilars have the opportunity to enter the market and reduce biologics’ dominance. 

There are additional factors favoring biosimilars, including government interventions. The U.S. government wants to reform PBM rebate practices and introduced the Pharmacy Benefit Manager Transparency Act in 2022 to the Senate. 

Additionally, the U.S. government passed the Advancing Education of Biosimilars Act of 2021 to increase biosimilar education among providers. Biologics and biosimilars education for medical affairs professionals, including MSLs, is also essential. 

Medical affairs professionals will need comprehensive knowledge of biologics and biosimilars to educate providers and payers in this new biologics market effectively.

References

• Chen BK, Yang YT, Bennett CL. Why Biologics and Biosimilars Remain So Expensive: Despite Two Wins for Biosimilars, the Supreme Court’s Recent Rulings do not Solve Fundamental Barriers to Competition. Drugs. 2018;78(17):1777-1781. doi:10.1007/s40265-018-1009-0.
• Stiff KM, Cline A, Feldman SR. Tracking the price of existing biologics when drugs enter the market. Expert Rev Pharmacoecon Outcomes Res. 2019;19(4):375-377. doi:10.1080/14737167.2019.1630274.
• Makurvet FD. Biologics vs. small molecules: Drug costs and patient access. Medicine in Drug Discovery. 2021;9:100075. doi:10.1016/j.medidd.2020.100075.
• Kvien TK, Patel K, Strand V. The cost savings of biosimilars can help increase patient access and lift the financial burden of health care systems. Semin Arthritis Rheum. 2022;52:151939. doi:10.1016/j.semarthrit.2021.11.009.
• Lexchin J. Affordable Biologics for All. JAMA Netw Open. 2020;3(4):e204753-e204753. doi:10.1001/jamanetworkopen.2020.4753.
• Dickson SR, Kent T. Association of Generic Competition With Price Decreases in Physician-Administered Drugs and Estimated Price Decreases for Biosimilar Competition. JAMA Netw Open. 2021;4(11):e2133451. doi:.