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In a recent op-ed in USA Today, Rutgers University professor Sandip Shah, argues that the price-setting provisions of the Inflation Reduction Act (IRA) are unintentionally disincentivizing biosimilar development:

The IRA permits Medicare officials to impose price controls on certain brand-name drugs, including many biologics. But the government does not have to reveal which medicines will be subject to price caps until just two years prior to the lower prices taking effect. As a result, a firm could hypothetically spend nearly a decade and hundreds of millions of dollars developing a biosimilar — only to find out that the original brand-name biologic will suddenly be much cheaper, courtesy of government price controls. In such a scenario, the biosimilar developer would be unable to gain enough market share to break even on its R&D investments, let alone earn a modest return.

Lawmakers can restore incentives for biosimilar drug makers by automatically — and permanently — exempting from price controls any biologic for which there is a biosimilar competitor in development. Unless and until that happens, the legacy of the Inflation Reduction Act will be reduced access to low-cost biosimilars — ultimately leading to higher drug spending. 

On October 31, 2023, FDA approved Amgen’s Wezlana (ustekinumab-auub) as a biosimilar to and interchangeable with Janssen’s Stelara (ustekinumab). Stelara has been selected by the Center for Medicare & Medicaid Services (“CMS”) as one of the first 10 drugs subject to the Inflation Reduction Act’s (“IRA’s”) price negotiations. Because of price caps that the IRA will impose on Stelara, Wezlana will face a different competitive landscape than the six interchangeables for other drugs approved to date. Wezlana’s example calls into question whether the IRA will disincentivize the development of biosimilars for the most popular biologics at a time when more biosimilars are critical to reducing healthcare costs.

Over the next 4 years, Medicare will set prices for up to 60 drugs covered under Medicare Part D and Part B. This shortsighted move won”t control costs and threatens to limit patient access to new medicines, ultimately resulting in worse health outcomes for U.S. patients, warns ASBM.