M-RCBG Associate Working Paper No. 121
Pharmer's Market: How Biosimilars are Shaking Up the Pharmaceutical Landscape
2019 Dunlop Thesis Prize Winner
In such a divisive political climate, there are few issues that have bipartisan support in the US; however, both parties agree it is time to tackle sky-high drug prices. Pharmaceutical prices in the US continue to increase every year with many drugs known as biologics leading the way. As innovation continues, biologics are becoming a larger proportion of the drug market, and they represent some of the most expensive treatments. Nevertheless, there is little competition in these markets from biosimilars, which are like generic versions of biologics that can drive prices down. In this thesis, I examine the association between the entrance of biosimilars in the US and following changes in quantity of the biologics. I find that biosimilar entrance into the market is related to large decreases in utilization for biologics and that biosimilars in the US tend to penetrate faster than estimates in Europe but slower than what is seen in the US generic market. With these results, I estimate that potential savings due to biosimilars could be $29 billion USD over the next ten years with the capacity to be seven times greater if future policies properly incentivize biosimilar competition.