[Ip-health] CBO report: Cost-savings from follow-on biologics

[Sarah Rimmington]

The CBO prepared an estimate of the cost-savings that would be achieved
if S. 1695 - Senator Kennedy's Generic Biologics Bill - was enacted. You
can read a summary of the key findings, below or you can download the
complete report here: http://www.cbo.gov/doc.cfm?index=3D9496

Cost savings from follow-on biologics
Congressional Budget Office Director's Blog
Wed. June 25, 2008
http://cboblog.cbo.gov/?p=3D137

A major issue in the pharmaceutical world involves the licensing of
biological drugs. (Biological drugs are products derived from living
organisms.)

CBO has now issued a cost estimate for S. 1695, which would establish an
abbreviated regulatory procedure for licensing, by the FDA, of
biological drugs that meet certain requirements and that are similar to
certain existing biological drugs. Savings to public and private
purchasers of biologics would result from the availability of these
lower-priced versions that would be approved by FDA for marketing under
the bill. Such competing products are commonly referred to as =93follow-on
biologics (FOBs),=94 =93biosimilars,=94 or =93biogenerics.=94

CBO estimates that:

* Enacting S. 1695 would reduce total expenditures on biologics in the
United States by $0.2 billion over the 2009-2013 period and by about $25
billion over the 2009-2018 period. (Over that 10-year period, such
savings would equal roughly 0.5 percent of national spending on
prescription drugs, valued at wholesale prices.)
* Direct spending by the federal government would decrease by $46
million over the 2009-2013 period, and by $5.9 billion over the
2009-2018 period; most of those savings would accrue to the Medicare
program. Federal revenues would increase by $6 million over the
2009-2013 period and by $0.8 billion over the 2009-2018 period, because
insurance premiums paid by employers would be lower and taxable wages
would consequently be higher. As a result of those changes, CBO
estimates that enacting the bill would reduce budget deficits (or
increase surpluses) by a total of $52 million over the 2009-2013 period
and by $6.6 billion over the 2009-2018 period.
* Implementing S. 1695 would increase federal discretionary spending, on
net, by nearly $30 million over the 2009-2013 period and by $5.3 billion
over the 2009-2018 period, assuming appropriation of the necessary
amounts, mostly because the bill would authorize discretionary spending
equal to the estimated amount of savings to the federal government under
the legislation. These sums exclude FDA=92s costs to administer the new
regulatory program established under the bill.

Analyzing this proposal has raised many complicated issues, and Julia
Christensen of our Budget Analysis Division and Anna Cook of our Health
and Human Resources Division have worked tirelessly on the cost estimate
over an extended period of time. In my view, the product reflects CBO at
its best!

This entry was posted on Wednesday, June 25th, 2008 at 2:39 pm and is
filed under Health.

--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: (202) 387-8030
Cell: (202) 422-2687
www.essentialaction.org/access/