Does Legal Approval of Biosimilars Threaten Biotech?

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By Jacob Maslow

Generic DrugsA little bit of a biotechnology primer here before we get down to the business implications of the recent US Food and Drug Administration decision to allow for biotech drug generics. Unlike traditional medicine which are made from chemical compounds or pure chemicals, a lot of treatments and drugs created by biotech companies use living cells to produce material that can cure certain conditions. This process is very different from the traditional chemical synthesis of medication.

This is the primary reason why the biotech industry has been fighting in court systems all over the world against competitors who would produce similar compounds using similar but not exact cellular procedures. Biotech companies are arguing that it is very hard to replicate such treatments at low cost. Because of this, there are extremely expensive drugs on the market. Some biotech drugs can cost up to $100,000 a year.

According to estimates, biotech drugs are one of the main drains on the total US health system spending. Any savings on biotech drugs would be greatly welcomed not just by patients themselves, but also by the medical establishment. This is why it is worth paying attention to the recent US Food and Drug Administration approval for a biosimilar product created by Novartis. This is a tremendous step forward in lowering the price of biotech drugs.

For example, Novartis made a cheaper version of Neupogen. Neupogen cost $3,500 for a 30-day supply. That is how expensive Neupogen is. Now that Novartis has its own biosimilar product, this can lead to price crashes for biotech medication. While this is great news for patients, this is bad news for shareholders in biotech companies.

Be aware of this decision. Assuming that it doesn’t get overturned on appeal, this is going to cast a very dark cloud on the biotech space. Developing these drugs is not cheap. However, it appears that the government may have taken away a strong financial incentive for many biotech companies.

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