Photo courtesy United Soybean Board


As a new world of generic drugs beckons, NC lawmakers enact new regulations on how they’re dispensed to patients.

By Rose Hoban

Patients know that when their doctor recommends a brand name pill, a generic alternative might save them a lot of money.

But many newer specialty drugs don’t come in a pill: medications such as Enbrel for arthritis or Avastin for cancer are members of a new class of drugs called “biologics,” usually administered by injection. They’re expensive and don’t have cheaper generic alternatives.

Workers in Jeffrey Wright's lab at UNC Wilmington's Center for Marine Science examine culturable marine organisms as possible sources of new and important compounds for creating new pharmaceuticals. Photo courtesy:  UNC-Wilmington/Jamie Moncrief
Photo courtesy: UNC-Wilmington/Jamie Moncrief

That’s about to change.

In March, the Food and Drug Administration approved Zarxio, a generic equivalent of Neupogen, which is used to help boost white blood cells in cancer patients. Once Zarxio hits the market, it will be the country’s first “biosimilar,” a drug that acts in a way that’s “highly similar” to a biologic drug that’s already in wide use.

Many more biosimilars are on their way. Some of those will be “interchangeables,” a class of biosimilars that meet additional standards. An interchangeable is so close to the original biologic drug that a pharmacist is permitted to swap it for the original drug without letting the prescribing doctor know.

As yet, there are no biosimilar interchangeables in the pipeline.

Nonetheless, with a unanimous vote in the Senate today, North Carolina becomes one of a handful of states that have passed laws creating extra physician notification when a pharmacist dispenses a interchangeable biosimilar to a patient.

“We’re trying to get ahead of the curve on this,” Sen. Tom Apodaca (R-Hendersonville) told the Senate Health Committee earlier this week.

Not everyone thinks such laws are a good idea.

Bigger molecules, higher prices

Most pill-based medications are small molecules, easily manufactured using chemical processes. Generic drugs are cheap because it’s relatively easy to replicate the chemistry of a brand name pill.

But biologics are larger molecules, and creating them is a much more intricate process. Scientists manufacture large protein-based drugs by teaching cells or bacteria in Petri dishes to excrete the drug. Those processes are slow and yield only small amounts of the drug at a time.

That’s part of the reason there won’t be as much savings with biosimilars.

“The assumption always has been that a generic product would be phenomenally cheaper,” said David Kroll, a Triangle-based pharmacology researcher who writes about the industry for

He said that in Europe, which has had a biosimilars market for a decade, “traditional generics are 80 to 90 percent cheaper than the brand, whereas the biosimilars are only about 25 percent cheaper.”

Biologics have meant big profits for the companies that manufacture them.
Biologics have meant big profits for the companies that manufacture them. Data courtesy Ronny Gal, Feb 4, 2014 Federal Trade Commission presentation & Ten-Year Potential Savings from Biosimilars in California, Express Scripts Research Report, Sept. 2013

Mounting costs

Patent battles further increase the cost of biosimilars and interchangeables. A U.S. patent is supposed to enable anyone “skilled in the art” to copy an original product. But though a company’s patent on a molecule may expire after 20 years, that company may have developed processes that they can also patent.

Companies often fight over these “process patents.” And that means lawyers.

Zarxio, the Sandoz biosimilar approved by the FDA in March, is currently caught in such litigation with Amgen, which manufactured the original biologic.

“They’re in an argument about one aspect of the manufacturing that Amgen claimed to have a patent on,” Kroll explained.

The costs of setting up the labs, synthesizing the drugs and fighting the court battles is making pharmaceutical companies more hesitant to get into the business of making biosimilars and interchangeables.

Laws like the one working its way through the General Assembly further complicates things for companies trying to decide whether to get into the business. And there’s yet another barrier: Makers of the biologic brand names often offer discounts to large purchasers, like state Medicaid programs or insurers. Kroll said that with the discounts, those brand names might end up being cheaper than the biosimilars.

So why should a company spend all that money to manufacture a biosimilar? Kroll asked.

Barriers to market

Rep Nelson Dollar (R-Cary) told members of the House in April that the RAND Corporation estimates biosimilars could save the country’s health care some $44.2 billion over 10 years.

Rep. Nelson Dollar (R-Cary)
Rep. Nelson Dollar (R-Cary) Image courtesy of the N.C. General Assembly website

Dollar co-sponsored HB195, which initially stipulated that pharmacists would have to make a call to doctors when they give patients a cheaper biosimilar.

Those who watch the pharmaceutical industry say even such seemingly innocuous laws pose problems for widespread adoption of biosimilars and, down the road, for interchangeables. A consequence of this law is that it could create a false impression that biosimilars and interchangeables have a different effect from the original biologic drug.

“I talk to patients about a certain drug; if they see that’s not the drug they were given, they’ll have questions,” said Gale Adcock, a nurse practitioner, during debate on the House floor in April.

‘Economically prohibitive’

These kinds of prescribing rules also make more work for everyone.

“The idea is to layer on burdens at the point of service to make dispensing as difficult as possible,” said Stacey Fahrner, a vice president for governmental affairs at Prime Therapeutics, a pharmacy benefits manager.

“My sense is that when manufacturers are looking at whether or not a particular biosimilar is a good investment … they’ll consider how easy it is for the drug to be dispensed,” Farhner said.

“And if a lot of states have these rules that make it difficult to distribute the drugs,” she said, “that could dissuade them from entering the market.”

Photo courtesy United Soybean Board
Photo courtesy United Soybean Board

Fahrner’s co-worker economist Alex Brill authored a paper on biosimilars that argued that “the decision of a biosimilars manufacturer to enter the U.S. market is more tenuous than commonly perceived” because the cost of entry into manufacturing is so high. He calculated that a drug company would need to make as much as $1.3 billion on a new biosimilar drug just to break even.

Brill concluded that even small barriers to doctors prescribing, pharmacists substituting or patients accepting the new drugs could add up, making it “economically prohibitive for manufacturers to develop biosimilars for all but the ‘blockbuster’ specialty drugs.“

“If there are things that the regulators or the state legislators do to restrict the size of the biosimilar marketplace, that may create a tipping-point effect,” Brill said in a phone interview. “It may push some manufacturers all the way to ‘no.’”

Emory University law professor Joanna Shepherd wrote in an analysis, “These laws are straightforward in their approach: they seek to impose dubious patient consent, recordkeeping, and physician notification requirements to discourage healthcare professionals and consumers from dispensing or consuming biosimilars”


The bill initially got lots of pushback from groups around the state – pharmacists, insurers, the retail merchants’ association – all of whom provided input into the crafting of the bill. They argued that reaching a doctor by phone to make the substitution would be time consuming.

When the bill passed the House, in April, many of the notification requirements had been eased. Now all that’s left are provisions allowing pharmacists to substitute biosimilar interchangeables if they’re cheaper – something they’re already allowed to do under state law – and to notify the physician “within a reasonable time” that they made the substitution.

And once e-prescribing becomes more common, it should be easy for pharmacists to notify physicians of the swap with the click of a mouse.

By the time the bill came up for votes, the Retail Merchants’ Association and Blue Cross and Blue Shield of North Carolina had taken “neutral” positions.

Ronny Gal, a financial analyst with New York-based investment firm Sanford C. Bernstein & Co., has been watching these bills around the country. He said all the changes to the North Carolina bill have made it “not so bad.”

According to the National Conference of State Legislatures, other states have looked at similar bills. Many of those bills have died in committee. In California, a bill got through the State Assembly only to be vetoed by Gov. Jerry Brown.

Now that HB 195 has made it successfully through chambers, and heads to Gov. Pat McCrory’s desk, North Carolina will become only the ninth state to enact a law over biologics prescribing.

What remains to be seen is how the laws will affect this emerging market.

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