If Congress were to pass legislation establishing a pathway for the Food and Drug Administration to consider and approve so-called "biogenerics," the Medicare Part B program could save an estimated $14 billion on drug costs over the next 10 years, according to an analysis released on Jan. 4th.

The analysis, conducted by Engel & Novitt, was released by the Pharmaceutical Care Management Association (PCMA), which represents America's pharmacy benefit managers (PBMs).

PCMA members seek to hold down the cost of prescription drugs for more than 200 million Americans with coverage provided through Fortune 500 employers, health insurers, labor unions, and Medicare Part D.

Life-saving and enhancing biologics can cost tens or even hundreds of thousands of dollars per patient per year, a PCMA spokesperson said, so introducing as much competition as possible is vital to making these treatments more accessible to consumers.

But unlike conventional drug products, the FDA currently lacks a clear regulatory pathway to approve follow-on biologics, or "biogenerics."

"It is vitally important that the new Congress create a legal pathway for the FDA to approve lower-cost follow-on biologic products," said PCMA President Mark Merritt.

"In Medicare Part B, the creation of a regulatory pathway would save $14 billion dollars, with billions in additional savings opportunities available in the new Part D program and the commercial sector.

"Everyday, millions of lives are positively impacted by revolutionary biologic drugs. The time to act is now for policymakers in creating a pathway for lower-cost alternatives in order to increase options and competition for consumers and payors."

Among the key findings:

• Expenditures on biologics are substantial and increasing rapidly. In 2006, the Medicare Part B program spent more than $5 billion on biologics, one of the fastest growing segments of Medicare expenditures.
• Medicare must continue to pay higher costs -- even on older, off- patent biologics -- because the FDA lacks a clear regulatory pathway for approving "biogenerics." Medicare is a significant payer for biologics, but currently pays high costs even on older, off-patent biologics. The enactment of legislation introduced in the 109th Congress (H.R. 6257/S. 4016), would enable FDA to approve follow-on biologics.
• Follow-on biologics would save Medicare billions of dollars. If follow-on biologics became available, the Medicare Part B program could save an estimated $14 billion over the next 10 years. Additional savings would also accrue to Medicare Part D and other government programs.

Follow-on biologics would substantially reduce costs for employers and consumers. The availability of follow-on biologics would allow PBMs to more effectively manage expenditures on high-cost biologics and thereby reduce health insurance costs for employers and out-of-pocket expenditures for consumers.