Association of Generic Competition With Price Decreases in Physician-Administered Drugs and Estimated Price Decreases for Biosimilar Competition
November 15, 2021This study aimed to characterize the nature of price competition among brand-name and generic drugs under Medicare Part B and to estimate the cost savings to the program of subjecting biologic and biosimilar therapies to a similar price competition.
Generic competition significantly reduces the price of physician-administered drugs under Medicare Part B, with the first generic competitor lowering prices by 17% and additional competitors driving reductions of up to 70%. In contrast, biosimilars experience limited price decreases due to Medicare’s reimbursement structure, which incentivizes clinicians to select higher-cost biologics over biosimilars. This structure contrasts with the bundled reimbursement model for generic drugs, which incorporates lower prices into Medicare payments and promotes cost savings.
If biologics and biosimilars were reimbursed under a bundled model similar to generic drugs, Medicare could have saved $1.6 billion (26.6%) between 2015 and 2019. High-cost biologics like Remicade and Neulasta represented the greatest potential for savings. Despite biosimilars being priced lower than biologics, their market share remains small, highlighting how the current reimbursement framework limits competition and fails to generate significant price reductions.
Switching to a bundled biosimilar reimbursement model could substantially reduce Medicare spending and lower costs for patients. By fostering greater competition and encouraging biosimilar adoption, this policy change would align biologic pricing with the established approach for generics, unlocking broader savings and improving market dynamics for physician-administered drugs.