In a few short days, the United States will mark the eight-year anniversary of the Biologics Price Competition and Innovation Act (“BPCIA”). Signed into law on March 23, 2010, the BPCIA creates a regulatory pathway for the approval of biosimilar drugs in the United States and a mechanism, albeit voluntary, for resolving patent right disputes relating to the innovator biologic products. 

At the time of the passage of the BPCIA, the prediction was that “within a decade,” the biosimilars market in the U.S. would “be as big as the entire generics trade.”[1] Eight years in, however, only three biosimilar products are available in the United States, a fact was emphasized by the Commissioner of the United States Food and Drug Administration (“FDA”), Scott Gottlieb, M.D., in remarks made before the National Health Policy Conference for America’s Health Insurance Plans earlier this month.

At the conference, the Commissioner harshly criticized drug suppliers, distributors, pharmacies, and insurers for the “misaligned incentives” associated with the biosimilar market, demanding contracting and pricing reform for the good of the public. He also offered a sneak peak at the FDA’s upcoming plans for helping improve biosimilar access and uptake in the United States.

The “Rigged” System

Most of the coverage of Gottlieb’s speech has focused on his critical comments made regarding the U.S. drug supply chain market. Calling the system “rigged,” the Commissioner warned that the current environment may “quite literally scare [biosimilar] competition out of the market altogether.”

Specifically, Gottlieb outlined three problems he believes to be hindering the development of a robust biosimilar market in the United States: (1) increased consolidation in the drug supply chain; (2) contracting and rebating “schemes” that discourage biosimilar uptake; and (3) drug pricing “shell games” that distort market incentives.

Increased consolidation

Gottlieb noted in his speech that, “The top three PBMs [pharmacy benefit managers] control more than two-thirds of the market; the top three wholesalers more than 80%; and the top five pharmacies more than 50%.” According to the Commissioner, that consolidation creates self-dealing and may impact competition. In particular, Gottlieb alleged that the FDA has seen “too often” such consolidated firms “team up with payors” and “use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the savings garnered from competition to patients and employers.”

Contracting and Rebating “Schemes

Gottlieb’s remarks often focused on the contracts existing between PBMS, insurers, and others in the drug supply chain. As he explained, PBMs and insurers profit from the difference between the Wholesale Acquisition Cost (WAC) of a drug and the actual rebated price. According to Gottlieb, typical contracts tie the rebate for a drug to the volume of drugs sold or the preferred status of the drug on a health plan. Because biosimilars offer a limited discount (15% or 20%) and are prescribed to a smaller number of patients, at least initially, the Commissioner argued there is an “incentive to limit the uptake of biosimilars to continue the flow of large rebate payments.” According to Gottlieb, PBMs can lose more rebates on the name drug than they gain from the savings associated with the biosimilar.  Health plans are similarly reluctant to replace the brand biologic with the biosimilar given that doing so causes a loss of rebates as well.

The contracting and rebate “mischief,” according to Gottlieb, thus penalizes patients:

“Everybody wins [with decreased uptake].  The health plans get the big rebates.  The PBMs get paid on these spreads.  And branded sponsors hold onto market share.  Everyone that is, but the patients, who in the long run, don’t benefit from the full value of increased competition Congress intended.”

Drug pricing “shell games”

Rebates and contracting arrangements, according to Gottlieb, are complex and unclear. He noted there also is an incentive to increase the spread between the WAC and the actual rebated price and thus have large list prices on drugs. Such arrangements, he argued confuse the market as to the “real value” of drugs:

More transparent pricing signals would encourage the rapid market uptake of lower cost products, and force manufacturers to better establish the real value of their products relative to price, including through innovative payment contracts.

Stating that it was “time to stop shell games over drug pricing,” Gottlieb urged the industry to “disrupt the current model” and “start competing on delivering better health outcomes.”

Biosimilar Access Plan

In addition to his pointed commentary on drug rebates, pricing, and consolidation in the market, Commissioner Gottlieb announced the FDA’s plans to shortly unveil a “Biosimilar Access Plan.” According to the Commissioner, the plan is designed to “improve competition, access, and the chance for patients to benefit from safe, effective, and lower cost biosimilar alternatives.”

The basic aims, according to the speech, include:

  • Increasing efficiency in the review of biosimilar and interchangeable applications;
  • Developing informational resources and tools for biosimilar sponsors;
  • Validating “state of the art analytical techniques,” that can support using smaller, targeted trials;
  • Making it more cost effective and quicker to bring biosimilars to the market;
  • Providing education to patients and clinicians about biosimilars, including through “videos, webinars, and conferences” to discuss the safety and effectiveness of the products; and
  • Harmonizing requirements for biosimilars across countries to develop a global market for biosimilars and create economies of scale.

The full text of Commissioner Gottlieb’s speech at the National Health Policy Conference for America’s Health Insurance Plans is available on the FDA’s website at (last updated March 7, 2018).

[1]           See Trinity Partners, The State of U.S. Biosimilars Market Access:  Payer Perceptions of Past, Present, and Future Hurdles to Adoption, available at (published Jan. 23, 2018).