When it comes to lowering drug prices, Congress faces a fundamental choice: trust competition, or trust government price-setting.
In 2022, Congress passed legislation directing Medicare to “negotiate” drug prices through a new, opaque government process. At the time, the Biosimilars Council warned that true savings come from open market competition, not from bureaucratic intervention. We also warned that future biosimilar development, and the long-term savings it delivers, would suffer under this unpredictable and non-transparent system.
Two years later and two things are clear: Competition still drives prices lower than government mandates and biosimilar innovation is slowing, just as feared.
This is seen most recently with new competition for the brand biologic Stelara (Ustekinumab). Used to treat inflammatory conditions like Crohn’s disease, ulcerative colitis, and plaque psoriasis, Stelara cost the Medicare program $2.6 billion in 2023. Given this number, it is unsurprising that it was selected for price negotiation.
After an opaque process, CMS announced the “maximum fair price” (MFP) for Stelara – a 66 percent discount compared to the list price of the drug. Stelara’s MFP will go into effect on January 1, 2026, and Medicare plans will be required to cover the drug.
But only months after the CMS announcement, the first biosimilar version of Stelara launched with price more than 80 percent less than the brand. Today, there are six biosimilars on the market, with prices as much as 90 percent less than the brand.
To be clear, in less than 3 months, market competition between multiple biosimilars has produced prices significantly lower than the price dictated by the Biden Administration. The take-away is simple. Competition works.
But what’s wrong with the drug price negotiation program? Isn’t kickstarting lower prices for high-spend brand-name drugs a good thing, even if it takes a little governmental intervention?
First, competition from generic drugs and biosimilar medicines is a proven approach to reducing drug prices. According to the FDA, when there are four or more generics, the average manufacturer price falls by 75 percent. And biosimilars are driving prices as much as 80 percent less than the brand.
In fact, while much attention has been paid to the prices of brand drugs in the U.S. compared to the rest of the world, few recognize that the U.S. has lower prices on generic drugs – and greater patient access to generics – than the rest of the world.
It follows then that, rather than creating a government office to set prices, Congress would be better served by ensuring that lower-priced generic and biosimilar medicines can come to market as quickly as possible.
Unfortunately, by creating an unpredictable and opaque price-setting process, the IRA threatens the likelihood of such future competition. Developing a new biosimilar takes time and money – up to $300 million and nine years. The decision to invest in a new biosimilar occurs years before the IRA price setting process begins – meaning that a developer has no way to predict the potential market when considering an investment of such magnitude.
Specifically, biosimilar companies begin to determine development candidates shortly after a brand biologic comes to market. However, by law, the earliest date a biosimilar can receive FDA licensure is 12 years after the reference biologic is licensed (after a product has been selected for the price-setting process).
In other words, price setting occurs years after the biosimilar developer has made its investment decision, and yet, will almost certainly take effect before the biosimilar even has a chance to come to market.
To recap:
- Discounts from biosimilars immediately topped the government-established MFP for Stelara.
- Despite this, next year the higher-priced brand will be guaranteed Medicare coverage instead of biosimilars.
This not only denies Medicare patients access to lower-cost medicines, but it makes it more difficult for biosimilar manufacturers to justify the $300 million or more investment needed to bring a biosimilar to market in the future. And this is not an isolated example – for IPAY 2027, the most recent round of fifteen drugs selected for price negotiations announced in January 2025, there were 152 approved ANDAs, tentatively approved ANDAs, or pending ANDAs.
Is there any surprise then that biosimilar development has slowed, leaving a significant void whereby almost 90 percent of brand biologics losing exclusivity over the next ten years do not have biosimilar competition in the pipeline?
Ironically, the legislation intended to impose price controls on high-priced brand-drugs could have the perverse effect of extending the very brand-drug monopolies it sought to end.
The choice is simple: empower competition, or risk losing it.
Unless policymakers act now to reform the IRA price-setting process, speed the approval of biosimilars, end patent thickets, and support adoption of lower-cost options, they will entrench monopolies, stifle future savings, and deny patients better access to affordable medicines.
Let’s not undermine the engine that drives innovation, lowers costs, and expands access. Competition works — if policymakers will let it.
