June 30, 2021

In a previous blog post, I talked about one tactic (patent thickets) that drug manufacturers use to keep direct competitor products – generics and biosimilars – off the market. On the other side of that coin: What happens to drug costs when direct competitor products enter the market?

The answer may not always be exactly what you think, as sometimes new brand drugs are priced higher than the competition. When alternative drugs are available with the same efficacy, however, pharmacy benefit managers (PBMs) are able to negotiate deeper discounts from drug manufacturers, which results in lower costs for patients. A good example showing the tremendous upside of available alternatives is the case with hepatitis C virus (HCV) drugs. The cost savings generated for those drugs were a result of multiple direct competitor products entering the market – products that were all brand drugs. Although often less discussed than generic-to-brand competitive dynamics, brand-to-brand competition can create leverage points for PBM negotiations in the period before generics are able to enter a market.

The first virological cure for hepatitis C, Sovaldi, burst onto the market in 2013 to much fanfare and even more trepidation that its $1,000-per-pill price tag ($84,000 for a standard course of treatment) would be a budget breaker. With no direct competitors available, the manufacturer was able to set the list price at a level that was widely believed to be too high. If Sovaldi had stayed the only HCV cure on the market for a number of years, it’s possible the dire fiscal predictions would have led to sky-high pharmacy costs for the employers and public programs paying for the drug and greater limits on who could get it.

Today, the HCV market has many alternatives available, and for the three most popular HCV drugs, net costs have never been lower. As more direct brand-name competitor HCV drugs entered the market, three important cost savings trends took shape. First, PBMs were able to leverage the new competition to negotiate for price concessions. Second, unlike with many brand drugs on the market (see, for example, GoodRx), the list prices for nearly all of the brand HCV drugs never rose above their launch price. Finally, the net costs dropped, leading to significant savings for government payers, private payers, and patients. And access to these new HCV drugs led to more than just reduced drug costs, it also had direct impact on the lives of affected patients. Prior to the introduction of these new oral HCV drugs in 2013, the mortality rate from hepatitis C had been increasing annually. Between 2013 and 2018, the mortality rate dropped from 5.03 deaths per 100,000 to 3.72. A competitive marketplace with many direct competitors – whether they are

A competitive marketplace with many direct competitors – whether they are generics, brands, or biosimilars – is good for patients. The existence of brand HCV competitors allowed patients to access a range of innovative products and cure their hepatitis C before any generic could have been developed and launched. More competition leads to greater affordable access for patients.

View Infographic

 

Back to Rx Research Corner