First Copycat Biotech Drug Spurs $250B Obamacare Savings

The first U.S. approval of the “generic” biologic prescription version of the widely prescribed anti-infective cancer medicine Neupogen officially opens the door to a new era in cheaper drugs that could save the U.S. health care system tens of billions of  dollars a year.

The so-called biosimilar of Neupogen known as Zarxio from Novartis (NVS), was approved Friday by the Food and Drug Administration. Here's Forbes' David Kroll's look at the approval.

Zarxio's expected to be prescribed as a cheaper alternative to a brand name drug sold by Amgen (AMGN) that had an average monthly price of $3,500, according to pharmacy benefit manager Express Scripts (ESRX).

Biosimilars are possible thanks to the Affordable Care Act and the law’s promise to bring cheaper versions of expensive biotech drugs to the U.S. market.

“FDA approval of the first biosimilar is an important step in improving access and affordability for high-cost biologics,” Express Scripts chief medical officer Steve Miller said in a statement to Forbes.

The biosimilar of Neupogen will save the U.S. health system more than $5.5 billion over the next decade, assuming a “conservative discount of 30 percent off the current brand price,” Express Scripts said.

As more brand biologics lose patent protection, Express Scripts estimates $250 billion in savings over the next decade once another 10 brands lose their patent protection such as the autoimmune drug Remicade made by Johnson & Johnson (JNJ).

But analysts don’t see the savings to be as large right away. In Europe, where there have been regulations to approve biosimilars for years since 2006, the ramp up to cost savings has only now started.

“Acceptance and demand among payers and the public are increasing,” according to a recent KPMG report.

In the U.S., biologic drugs in equivalent forms have been unavailable because they were not part of the landmark 1984 Hatch-Waxman law, which cleared a regulatory path for cheaper generic copies of prescriptions derived from chemicals. The Affordable Care Act changed that.

“While slower than expected, Europe’s biosimilars uptake is now beginning to show more promise,” the KPMG report says. “Global biosimilars sales in 2013 reached only $1.3 billion, but by 2020, biosimilars penetration is expected to have delivered from $11 billion to $33 billion in savings across the (European Union).”

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