Even in the giddy afterglow of the new Congress, when all things seem possible, few Republicans seriously think that the Affordable Care Act will be repealed in 2015. More realistically, various politicians have averred that a Republican Congress may have the wherewithal to repeal some of its more unpopular provisions and fix a few others.
But even this modest goal is probably unattainable, at least as long as President Obama is around to veto legislation. Someone who has paid a heavy political price for getting his signature legislative achievement into law isn’t anxious to entertain proposals to roll it back.
If the goal of Republicans is to fix the flaws in the legislation then they should begin by focusing on the failure of the Affordable Care Act to constrain health care costs. Its shortcomings in this realm are many and manifold: it punted on limiting the deductibility of employer-provided health insurance in any meaningful way, it does no more than a give a gentle nudge to get people into managed care, and the Independent Payment Advisory Board thus far appears as if it will be only marginally effectual at reining in costs, despite Sarah Palin’s warning of it becoming akin to a “death panel.”
But there are a number of less controversial steps that Congress could take to lower healthcare costs, and a good place to start would be to act to get biosimilar drugs to the market in a timely way. Biosimilars are nearly-identical replicates of biologic drugs, which are drugs manufactured via genetic engineering. They cannot be perfectly replicated without access to the same genetic building blocks used in the original, but drugs that closely resemble these biologic drugs and work the same way can be produced. Biosimilars can be thought of as the rough equivalent of generic drugs for biologics.
Nearly all of the best-selling drugs these days are biologics. The U.S. currently spends $140 billion per year on biologic drugs and the top ten biologics account for 40 percent of all drug spending by themselves. The wonder drug Sovaldi, which can actually cure Hepatitis C and costs almost $100,000 for a course of treatment, is a biologic drug.
Smoothing the path for biosimilars to enter the U.S. market would save the government and consumers billions of dollars: A newly-released study by the Rand Corporation suggested that the cost savings would approach $50 billion over the next decade. Other economists have suggested the savings could be two or three times that high.
This would do more than just save the government money–the Rand study suggests that the competition from biosimilars would reduce drug prices by an average of 30 percent, which would reduce price pressure on insurance costs as well as out-of-pocket drug expenses.
The authors of the Affordable Care Act realized the potential savings of biosimilars and the law includes a provision that specifies a path for biosimilars to enter the U.S. market–they’ve been available in Europe and elsewhere for a number of years now, with no untoward consequences. However, the government has yet to take the steps necessary for the drugs to be sold here: the FDA is currently pondering whether to make biosimilar drugs use different identification numbers than their biologic equivalents, which would undoubtedly make doctors and pharmacy benefit managers less apt to use them. Also, the Center for Medicaid and Medicare Services have yet to figure out how to give any biosimilar drugs a code that would allow doctors of Medicare patients to get reimbursed for these prescriptions by the government.
There are signs that the FDA may soon get on board: on January 7th the advisory panel voted unanimously to approve the first biosimilar drug, which would be manufactured by Novartis and is designed to help offset the side-effects of chemotherapy. The FDA is not bound to follow the advice of its advisory committee, but it frequently does.
These hurdles that the FDA would still have to clear do not constitute a barrier erected by discrete policy differences: both Republicans and Democrats have been vocal in their desire to get biosimilars to the marketplace. Bipartisan congressional pressure on the bureaucratic and regulatory entities tasked with resolving these problems could help fix this problem–which, after all, legislation said needed to happen by 2015.
A bipartisan effort that hastens the introduction of biosimilars would not only create a new way to alleviate health care cost pressures but it could also set a precedent for bipartisan cooperation on other ways to reduce healthcare costs as well. It’s hard to see who loses from such an overture.
Ike Brannon is a senior fellow at the George W. Bush Institute and president of Capital Policy Analytics, a consulting firm in Washington D.C.
