The objective of our research program is to analyze competition and policy in the biologics industry. The research will employ current empirical techniques in industrial organization to evaluate the impact of alternative policies in shaping the nature of competition in this science-based industry, with a particular role on the empirical impact of the introduction of biosimilars ("generic biologics") on price, quantity, access, and consumer welfare. To undertake these studies, the project will use recently-acquired data from IMS that includes product, revenue, and quantity data covering both the United States and 14 other countries. Non-US data is particularly important for evaluating entry and competition in this industry; while competition in the United States has been focused primarily on innovation-based competition, several European countries have made innovation policy choices that have resulted in the entry of biosimilars. In an environment where alternative policy choices towards biosimilars are under consideration within the US, this project is able to examine the impact of policy choices in several European countries where entry policies have been developed and entry has occurred.
Biologic drugs are one of the most consequential clinical and commercial consequences of public and private research funding of biotechnology and life sciences research. Because of the greater structural complexity of organic products, the manufacturing process for biologic products is much more complicated than that for chemical drugs. The source cell line must be developed, the cells are typically grown in a specially-designed medium, and filtered in particular ways, and there may be several stages of production process for each batch of the product. The complexity of the products and the manufacturing process, as well as specific aspects of the product markets, raises new questions for industrial organization. The cost and benefit of entry by generic biologics is one very important issue: entry costs in the US will depend on FDA regulations as well as the details of manufacturing, while benefits will depend on the impact of competition among products, which itself depends on the degree of differentiation driven by underlying production technology and the regulatory rules that determine the protection provided by patent terms and FDA exclusivity.
Broader impacts:
There is relatively little research within economics focused on understanding the industrial organization of biologics product markets and the impact of alternative regulatory approaches for the biologics industry. The project will provide the foundational data and analysis to allow evaluation of how alternative entry regulations and intellectual property protection policies impact entry, competition, and consumer welfare. This topic is increasingly policy-relevant due to expenditure trends (an increasing share of both quantities and revenues are realized by biologics) and policy environment. The development of rules for facilitating a pathway for biosimilar entry is part of the PPACA, but most of the substantive policy decisions have been left as a matter for the FDA and other regulatory agencies to develop and implement. Despite the importance of this policy debate for competition policy and the cost of healthcare, the conditions supporting competition among biologic drugs has not been systematically studied by economists. This project will fill that gap.
