In simplest terms, traditional drugs are single-molecule formulations typically developed through chemical processes, whereas biologic drugs are large, complex molecules developed from or through the action of living organisms.

Drug reform has definitely been the theme of the day for many days in fact, keeping most industry stakeholders transfixed. However, is our preoccupation with the drug wars and the cost of traditional drugs causing tunnel vision? Now, as the dust settles for the moment in some provinces and new pricing schemes begin to phase in, we need to broaden our view to combat the arrival of biologics.

Get ready for the “new normal” that includes biologics

Biologics are an extremely diverse set of drugs, including insulins, vaccines and a host of other therapeutic classes. Although biologics will continue to represent huge gains in the effective treatment of serious and chronic disease, those drugs specifically for the treatment of rheumatoid arthritis, psoriasis, Crohn’s Disease and similar conditions, as well as cancer, will also result in huge costs in terms of the affordability of employer-sponsored benefit plans.

The cost threat of biologics will have plan sponsors grappling with how to take advantage of the advances in health treatment that biologics represent, while mitigating the higher benefit costs that will follow.

If we thought brand drugs were expensive – we haven’t seen anything yet
The good: Biologics are opening up a whole new world of possibilities for those suffering from a range of conditions, such as cancer, rheumatoid arthritis, multiple sclerosis, Crohn’s disease, diabetes, high blood pressure and high cholesterol, and they should continue to represent tremendous advances in clinical treatments well into the future. For example, considering cancer alone, by 2013, the market for anti-cancer antibodies is predicted to exceed $160 billion, accounting for 50% of the top 100 drugs by 2014.¹

The bad: Biologic drug prices are higher than traditional drugs and they treat a much smaller niche of patients. For instance, in a 2008 claims study, specialty or biologic medications represented 14.7% of drug spend but less than 1% of all claims – with an annual growth rate of specialty drug spend at 17% compared with 3% for all other drugs.²

The ugly: Biologics represented more than 50%² of drugs in the pipeline in 2008, and are predicted to continue to pick up steam. It’s now time to say goodbye to our conventional view of drug research and development and hello to large, complex molecule drugs – forecasted to grow at twice the rate2 of traditional products for the next five years – and likely beyond.

And, the ugly just got uglier – we might make the seemingly logical assumption that less expensive generic versions of biologics will eventually enter the market and save the day, or at least soften the blow. Turns out that this is just a drug pipeline pipedream – banking on generic versions of biologics is a long, if not misguided shot.

The complex makeup of biologics makes it virtually impossible to precisely duplicate their formulations. In fact, biologic “generics” are referred to as Subsequent Entry Biologics (SEBs), which are not actually substitutes but just “similar” versions of the original biologic. Accordingly, when a biologic patent expires, new manufacturers still have to undergo the full development process as was the case with the original biologic – with the end result being a similar biologic that is not considered a direct equivalent to the original biologic and, therefore, does not lead to the kind of cost savings we find with traditional generic drugs.

So what does this all mean?
Balancing the long list of doom and gloom often used to describe the entry of biologics are the positive facts stacked in their favour, describing their advantages in terms of tremendous clinical value. Many biologic drugs are still relatively new on the market, so it’s difficult to say how this will eventually impact benefits programs in Canada. In the meantime, we should all keep a careful watch and work together to find solutions to rising plan costs.

Sources: ¹ – Drug News, Scott Warner, Benefits Canada, April 2010; ² – A Delicate Balance, Suzanne Lepage, Benefits Canada, February 2010