Is Canada paying too much for generic biological drugs?

In an earlier article, we discussed the importance of post-patent competition in generating social value from the pharmaceutical market. Generic competition gives people access to less expensive drugs and allows society to recapture value from patent holders.

This topic is currently relevant because numerous major biopharmaceutical patents, including Remicade, Humira, and Lucentis, are set to expire in the next five years. Biopharmaceuticals, also called biologics, are the largest driver of drug spending in Canada– just these three drugs alone accounted for $1.5 billion CAD in pharmaceutical spending in 2013.

Patent expiry opens the biologics market to newfound competition and savings in the form of biosimilars or subsequent entry biologics (SEBs) – imitations of the original, patented biopharmaceuticals.

However, biosimilars are not merely generic versions of biopharmaceuticals and therefore pose a number of unique regulatory challenges. Unlike small-molecule drugs, complex biologics are incredibly sensitive to changes in production and replications are always marginally different from the reference drug they mimic – hence the term biosimilar, not biogeneric.

From a clinical and regulatory standpoint, small-molecule generics are considered interchangeable with their reference drug. This means they are therapeutically equivalent and can be safely substituted in clinical practice. As perfect substitutes, these generic medications compete with originator drugs based on cost, which drives down their prices.

In contrast, Health Canada does not make decisions regarding the interchangeability of a biosimilar with its reference drug. Where approved small-molecule generic drugs are automatically deemed interchangeable and can be substituted at the pharmacy level, approved biosimilars are not.

Physicians must use their own discretion when choosing to prescribe either branded biologics or biosimilars. But, the lack of regulatory guidance on interchangeability dissuades doctors from switching patients from branded biologics to biosimilars. Moreover, it encourages biosimilar manufacturers to compete based on minor differences in efficacy (differences firms say make their products “biobetters”) instead of cost to capture the interest of prescribing physicians.

The end result is that biosimilar drug markets do not possess the same level of competition or price discounts as generic markets. Not in Canada. And, for now at least, not in many places around the world.

Biosimilars are typically discounted between 15% and 30% from the cost of the reference drug. While Canadian prices for small-molecule generic drugs are relatively high by world standards, they can still be discounted by as much as 80% relative to the patented brands they copy.

Industry makes the argument that higher development and manufacturing costs of biosimilars justify these smaller discounts. In effect, manufacturers of biosimilars ague that they should be priced in ways comparable to patented brands because they are more like innovative new products than small-molecule generics.

Their argument is somewhat compelling. Steep regulatory hurdles and high manufacturing costs may create real barriers to affordable biosimilar pricing. But, we are not convinced these are the only, or the biggest, road blocks.

We believe there is an opportunity for competition to play a greater role in biosimilar markets and to facilitate far more affordable biologic pricing.

It is true that the costs for most biosimilars will be higher than costs for most small-molecule generics. But this does not mean that biosimilar markets should be exempt from the forces of price competition.

Patented drug products – including patented biologics – have markups on production costs that are in the order of hundreds, if not thousands of percent. That is, firms sell their drugs for many times the cost of production, not just a few percentage points above it.

So, if biosimilars were deemed interchangeable we should expect to see significant savings in the form of higher prescribing and greater discount rates.

Clinicians and regulators have understandable concerns that switching to and from a biosimilar could cause adverse immunological reactions for some patients. However, this risk may be more of a perception than reality. A 2012 review found that there is “no evidence from clinical trial data or past market surveillance data that switching to and from different biopharmaceuticals leads to safety concerns.”

The US has tried to address this issue in their Biologics Price Competition and Innovation Act of 2009, which creates a FDA regulatory pathway and guidelines for determining biosimilar interchangeability. However, this initiative is still in development and has yet to be finalized and tested.

Norway is taking an even greater leap towards a competitive biosimilars market by sponsoring a clinical trial on interchangeability known as NOR-SWITCH. The Norwegian Medicines Agency has contributed $20 million NOK ($3.2 million CAD) towards a clinical study examining the safety and efficacy of switching from Remicade to Remsima – a biosimilar with the same active ingredient (infliximab) as Remicade.

The Norwegian government sponsored their study because they saw it in their own national interest. But the rest of the world – which would include Canada – can benefit from the resulting information and improved prospect of interchangeability for at least one biosimilar. If the Norwegian experiment proves successful, funders of medicines worldwide might be advised to work together to plan and fund interchangeability studies needed to encourage multiple, proven competitors in the post-patent biopharmaceutical sector.

Regardless, Canadian health policymakers need to figure out what can be done to foster competition in the biosimilars market – the reward is certainly worth it.

The comments section is closed.

  • Paul Cornes says:

    Norway now pays only 31% of the price of the originator drug for infliximab (2015 agreement). The result has been that now >50% of the Norwegian patient population are using the biosimilar.

    Canada has the highest incidence of inflammatory bowel disease in the world, and the recent GI Society report Card showed that Canadian Access to Biologic Disease Modifying Anti-Inflammatory drugs (bDMRD) is unacceptable to needing improvement on 18 out of 25 criteria. More effort and investment is needed to solve this.

    In 2012 bDMRDs cost Canada 521 Million Can Dollar. The savings – if Canada could access bDMRDs at the current price in Denmark for Biosimilars (70% price fall) she would have 365 Million to reinvest in improved access to innovative treatment, better care and research.

    Canada is paying a price for failing to approve these drugs compared to the European Union.

  • Nathalie R. says:

    I have been living with rheumatoid arthritis for more than 10 years. Taking a biologic changed my life, and I know it has done the same for others. The risk of someone – not my physician or specialist – taking that away to save a few dollars, concerns me greatly.

    The article refers to a 2012 study that states that “no evidence from clinical trial data or past market surveillance data that switching to and from different biopharmaceuticals leads to safety concerns.” However, the expert opinion in the same article predicates that statement with “Data on the frequency of switching in clinical practice is scarce…”. While I fully support the exploration of additional tools to help in the battle against chronic diseases like arthritis, I think it is also a mistake to downplay the potential impact on the patient when little is really known about the impact of switching from biologics to biosimilars.

    I would encourage policy makers to consider all views associated before making decisions regarding biosimilars….which include costs from both a monetary perspective, but also from an intangible perspective.

  • Dawn Richards says:

    From a purely economic point of view, the authors make many valid points, however Dr. Morgan’s previous research that Canada pays the second highest prices for prescription drugs (generic or otherwise) next to the US is not mentioned. I suggest that there are many considerations with respect to biosimilars, which I would like to explain through being both a person who lives with rheumatoid arthritis and as an advocate for other arthritis patients.

    For one, it is unclear why biosimilars and originators have the same International Nonproprietary Name (INN) – this is bound to cause confusion unless changed soon. The clinical trials that have been conducted in inflammatory arthritis are comparisons of biosimilar and originator in patients with rheumatoid arthritis (302 patients treated with biosimilar and 304 with originator) and ankylosing spondylitis (128 patients treated with biosimilar and 122 with originator). Typically phase 3 studies have many more patients than either of these studies did. No clinical trials have been conducted in plaque psoriasis or psoriatic arthritis, yet extrapolation is being permitted to these indications. This is new territory.

    While I support biosimilars as new treatment tools, if someone is stable on an originator biologic, why would a physician or a patient risk that state? I understand considering a biosimilar if a treatment has run its course and it is time to consider a change.

    I’m asking our policymakers to consider all factors involved with biosimilars becoming available – both the cost as well as the potential cost to patients, their families, and patients’ abilities to be functioning and contributing members of society.

    Dawn Richards
    Person who lives with rheumatoid arthritis
    Vice President, Canadian Arthritis Patient Alliance

  • Debbie Milliken says:

    Another aspect that we need to consider that relates more specifically to pricing in the Canadian marketplace is the role that patient support programs play in the direct care delivery of biologic treatments to patients. Pharmaceutical companies currently spend significant dollars on nursing care and in many cases private infusion clinics through these programs. Without these programs, many patients would not have access to the clinical services they need to have the drug administered. These clinical services are costly and companies launching biosimilars will need to create similar programs that equally support patients in order to be successful in marketing their products. The cost of these patient support programs is likely to impact the pricing of biosimilars in Canada. At this time of change, there may be an opportunity for governments to play a role, perhaps even though partnerships with the pharma industry, vendors, and private payers to create a more coordinated and patient-focused system of care delivery that includes high quality standards and look towards improving upon the patchwork and somewhat fragmented approach that currently exists today.

  • Linda Wilhelm says:

    As a patient who has been living with Rheumatoid Arthritis for over thirty years and for whom biologics were life changing fifteen years ago talk of interchangeability for bio-similars with the current level of evidence terrifies me. I am currently in the process of switching to a new biologic afte the previous one had run it’s course. This process began three months ago, with a lengthy and comprehensive discussion with my specialist, a Rheumatologist who understands the devastating effects of inflammatory arthritis. The past three months have been no picnic for me, my life has been placed on hold and each day is filled with unspeakable pain, waiting in hopes that this new biologic will talk hold and allow me to continue living my life without too much additional disability. The thought that someone other than my specialist could switch my drug when I was doing well on a specific biologic forcing me into my current situation is unbelieveable. There is far more at stake than saving a few dollars on a biologic. Don’t get me wrong, bio-similars are a great addition to the Canadian Health care system and will be an option for treatment for many patients but they need to be prescribed appropriately and with care, as should be the case for all drugs.

  • anne lyddiatt says:

    I would like more detail on the Norwegian study – if you are a patient stabilized on a reference drug can you just be switched to the biosimilar? Fine – IF – it can be guaranteed to work as effectively and safely and keep me stabilized the same as the reference drug. If it doesn’t then I, as the patient, pay the price. Extensive testing and trials were done on the reference drugs but the feeling seems to be that even though the biosimilars are just that – similar – they don’t require the same testing and this is a short-cut – one that could be very costly in very many ways. I feel there is a place for biosimilars but their use should be governed by caution and rheumatological expertise – not a (possible) 15-30% discount. Patients are worth much more than that.

  • Laurie Proulx says:

    I am a patient who taken biologics for Rheumatoid Arthritis for approximately 16 years. More needs to be done to show that biosimilars are therapeutically equivalent to the reference drug. The biosimilars are not tested in clinical trials in the same manner as new drugs so not alone do I not know if they are as effective but are they even safe. Patients already go through a long process of trial and error to find a biologic that works for them. The risk is that our health is destabilized if we are forced to switched to a biosimilar which may or may not be as effective. Ultimately, patients pay the price and the healthcare system bears the cost, whether it is more visits to their specialist, family doctor, ER or admission to a hospital. I understand that biosimilars have their place in the market but let’s not forget the risks to the patient and the system at large.

  • David Henry says:

    The most lucid article I have read on this topic – as expected from these authors. This is a real opportunity for governments to get involved in the sponsorship of comparative clinical trials – this could be an important role for SPOR – which is co-funded by CIHR and provincial ministries.

    • Mantombi says:

      Dr. Dolinar seems to be saying that each of the seven or so maarnfctureus of human growth hormone (or, respectively, insulin) should be using different nonproprietary names, even if they are supplying the same amino acid sequence. Most of those maarnfctureus have never demonstrated bioequivalence to a reference product and yet they have been using the same nonproprietary names in many cases. Evidence based medicine demands consistency.


Matthew Renwick


Steve Morgan


Steve Morgan is an associate professor at the University of British Columbia.

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