New Biosimilars Issue Brief Shows Massive State and Taxpayer Savings Possible by Expanding Biosimilars Market

Biosimilars have the opportunity to bring significant savings to state Medicaid programs and consumers with commercial insurance according to a new study released today by Pacific Research Institute.

“Every state would experience significant savings in the state Medicaid programs from expanding the use of biosimilars compared to the more expensive originator biologics,” said Dr. Wayne Winegarden, director of PRI’s Center for Medical Economics and Innovation and author of the new issue brief on biosimilars. “The same benefits will also accrue to patients covered in the commercial market.”

Biosimilars are biologic drugs that have no meaningful difference in terms of safety or effectiveness compared to its originator biologic medication.

This differentiates biosimilars from generic medications, which are chemically identical versions of a branded medication.

The new PRI study finds that biosimilars currently save the health care system over $240.4 million. Of these savings, 19.8 percent (or $47.5 million) is being realized by state Medicaid programs and 56.9 percent (or $136.8 million) is being realized by the commercial market.

But greater use of biosimilars could create significantly more savings. If biosimilars obtained a 75 percent market share, less than the share of these medicines in many European Union nations, the resulting annual savings for the U.S. health care system could be nearly $7.0 billion, based on Dr. Winegarden’s analysis.

It is important to recognize that as of the data evaluated, there was only approved biosimilar competition in nine drug classes. The potential annual savings for Medicaid, Medicare, and the commercial market is even larger if even more biosimilar competition is introduced.
“Biosimilars promote greater affordability for cutting edge treatments for cancer, arthritis, and autoimmune diseases. On average, each state’s Medicaid program can save tens of millions of dollars, and the potential savings for the commercial market are even greater,” said Winegarden.

Estimated savings show that private sector firms and state governments have incentives to support reforms to the current system. These reforms must correct the current ineffective regulatory policies, promote greater education of the benefits biosimilars offer, and eliminate the adverse market incentives that discourage greater use of biosimilars.

In a July 2019 study, Increased Use of Biosimilars Could Bring Billions in Savings for Patients, Providers, Taxpayers, Winegarden outlined the savings on a national basis. By breaking these savings down by state, the current study adds to our understanding of the distribution of these savings.