The Impact of the Entry of Biosimilars: Evidence from Europe

by Fiona Scott Morton, Ariel Dora Stern, and Scott Stern

Overview — Biosimilars are large-molecule drugs that, while not an exact copy of already-approved large-molecule drugs, have been shown to be therapeutically equivalent. Much like generic drugs, which become available when a small-molecule drug goes off patent, biosimilars are lower in cost than their reference products and present an opportunity for savings when large-molecule drugs’ patents expire. Biosimilars have been available in the United States only since 2015 but have been regulated, approved, and sold in Europe for over a decade. This paper examines the European experience to help inform policy design and institutional choices for the United States. Topics covered include the entry of distributors and unique products; predictors of average product prices following biosimilar competition; and penetration of biosimilars as a share of total sales.

Author Abstract

Biologic (large-molecule) drugs represent a disproportionate and growing share of all drug spending in the United States, accounting for less than 1 percent of prescriptions filled but nearly 28 percent of drug spending. Whereas traditional (small-molecule) drugs have historically faced price competition from generic drugs after patent expiration, biosimilars—biologic drugs that have been shown to be therapeutically equivalent to an already approved biologic drug—have only been approved in the United States since 2015. Europe has had biosimilar entry since 2006. This paper considers how competition from biosimilars may impact the U.S. biosimilar market by examining data from the first eight years of biosimilar competition in 23 European countries. A major contribution of this project is the completion of a detailed survey, allowing us to precisely characterize European biologic drug procurement institutions over time. Using data from three classes of biosimilar drugs, we analyze how market features and public polices predict entry, market prices, and penetration of biosimilars. We find significant heterogeneity across countries and drug classes in all of these outcomes. While we observe that effective buyer institutions (in particular, committed tenders) are associated with increased biosimilar entry and penetration, price patterns are more difficult to glean from the available data. Our estimates can inform ongoing policy discussions on both sides of the Atlantic about the economic implications of biosimilar policies.