US healthcare costs far outstrip the rate of inflation. In fact, it has become a political hot button issue. Americans are suffering from the skyrocketing cost of healthcare, and it appears that there are no market-based solutions in sight – until biosimilars hit the scene. Here is a little bit of a background.
One key driver of a sky-high American healthcare cost is the expensive price of biotech drugs. Unlike chemical or chemical compound-based drugs, biotech drugs are created using complicated genetic processes using living cells. They cannot be manufactured easily, nor can they be replicated cheaply. This is why many biotech companies like Amgen make billions of dollars every single year. This is also the reason why biotech stocks are so hot.
If a new biotech drug is in the pipeline and its target market is lucrative enough, expect that biotech stock to skyrocket in value. However, what is good for the biotech goose might actually be quite disastrous for healthcare consumers. Take the case of Neupogen. A 30-day supply of this biotech drug will set you back $3,500. Even if you have healthcare insurance, that is a huge hit to take. This is why the FDA has issued guidelines for approving biosimilar drugs. Since these drugs are not exact generic copies of biotech drugs, they are exempt from typical patent protection.
The biotech industry has put up quite a fight arguing the safety angle of these drugs. However, from a consumer perspective, this might be the saving grace consumers need to manage runaway healthcare costs. Keep in mind that the immediate impact of biosimilars on the broader drug market probably won’t be felt until the point these drugs start grabbing significant market share. By that time, HMOs and other healthcare provider organizations would put more pressure on original branded biotech drug companies to lower their prices as well.