The Price Effects of Biosimilars in the United States

This study evaluates the impact of biosimilar competition on the price of reference products and biosimilars in the US pharmaceutical market. We focus on average sales price (ASP) dynamics since 2015 in Medicare Part B because Medicare is a critical payer stakeholder in biosimilar price dynamics.

Using Centers for Medicare and Medicaid Services data over 34 quarters beginning in 2015, we analyzed the price effects of biosimilar competition in 8 biologic product markets. First, we evaluated the effect of biosimilar competition on ASP. Second, we evaluated the effect of market concentration on ASP using the Herfindahl-Hirschman index. We used instrumental variable methods to address the endogeneity between competition and ASP. Across analyses, our outcome variable is price ratio-the ratio of ASP measured over time relative to the fixed ASP at study baseline.

Our results showed a 10% to 13% decrease in the originator price ratio for entry of each additional biosimilar competitor, and a 1.8% decrease in the originator price ratio with a 10% decrease in market concentration at the lowest Herfindahl-Hirschman index observed in study period. These findings highlight the statistically significant effect of biosimilar competition and market concentration on prices in high-cost biologics drug markets.

Our findings demonstrate that the US biosimilars market has become highly competitive, and as a result, prices have declined significantly over the period 2015 to 2023. These price dynamics have generated substantial savings for Medicare; however, there is a potential threat to market sustainability if these price trend dynamics persist in the coming years.