Economic Analysis of Availability of Follow-on Protein Products. Conclusions and Policy Implications


The matter of expediting competition in the costly and rapidly evolving therapeutic biologics market has great medical and economic significance.  Proposed approaches involve abbreviated regulatory approval pathways analogous to the 505(b)(2) or 505(j) processes for drugs regulated under FDCA.  In this analysis, we attempt to quantify the financial impact of expedited competition of FoPPs in major therapeutic biologics markets.

The uncertainty associated with market response to FoPP entry is demonstrated by the variation in estimates reported in prior studies.  Our analysis combines microeconomic models of the pharmaceutical industry with empirical data and the considered opinion of clinical experts and experts in the fields of pharmacoeconomics and pharmaceutical economics to systematically address the question of “How would FoPP entry affect expenditures on major biologics?”

Our base case analysis estimates total cost savings of $10 billion over the period 2009-2019, assuming entry of the first FoPP into the markets considered no earlier than 2012.  Notably, six of the ten biologics that we assess are not expected to be exposed to FoPP competition until 2014 or later.  Of even greater significance is that our estimates of the likely fixed costs of entry associated with satisfying clinical requirements similar to those required by the EMEA are projected to limit the number of market entrants per biologic to at most three, and in most cases two or less.  As a consequence of the relatively small number of predicted entrants, our estimate of the accompanying FoPP price discount is also low, in the range of 12–20%. 

The ability of regulatory authorities to affect this estimate varies in the context of this model.  We assume that increased regulatory rigor would arise in the form of requirements to generate greater amounts of clinical evidence, delaying the time to FoPP market entry.  Moreover, any requirement for FoPP manufacturers to follow published FDA guidance is likely to introduce further delays.  Delaying projected FoPP entry in each market by two years reduces estimated cost savings by $3.4 billion from the base case, or 34%.  Further, additional requirements for clinical evidence are more costly to implement.  Requiring all FoPP entrants to meet a “very high clinical standard,” which we model as having to conduct a clinical trial involving 900 patients, reduces projected overall cost savings by $1.5 billion from the base case, or about 15%.

In addition to considering alternative scenarios of regulatory rigor, we conducted multiple additional sensitivity analyses around the baseline assumptions at each stage of the analysis including: the year in which branded biologics are exposed to FoPP competition, the increase/decrease in utilization for branded biologic drugs over the period,  the size of the fixed costs of entry for FoPP manufacturers,  the number of eventual FoPP entrants into each market, the price discounts offered by FoPP manufacturers,  brand price inflation in the context of FoPP competition, and the market shares captured by FoPP entrants.

Our sensitivity analyses suggest that the effect of variation in regulatory requirements is small compared to the effect of variation in pricing behavior by originator and FoPP manufacturers.  Indeed, the estimates of cost savings are most sensitive to assumptions about the size of FoPP price discounts.  If FoPP manufacturers discount conservatively, then projected cost savings will be relatively small.  If, however, the opening of the market brings about highly competitive behavior on the part of the originator or FoPP manufacturers, projected cost savings over the period 2009-2019 can be significant, i.e., in excess of $40 billion.

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