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Updated 27 June 2017

Why are biologics so expensive?

Biologic medicines can certainly save lives – but the cost is extremely high. Why is this the case?

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Biologics are a new kind of medicine, not produced chemically, but made from a variety of natural resources.

Biologics are complex proteins and biotechnology is used to make them. To put it very simply, the process involves getting living cells to make proteins, and this is not only complicated, but also often not successful. They are not chemically produced in a laboratory, as many other medicines are.

What are biologics used for?

Biologics can be used to treat conditions for which other treatments are not available. In different forms, biological medicines have been around for a long time: insulin treatment and certain vaccines fall into this category. Biologics are used more and more often these days to treat non-communicable diseases, which are more widespread.

For some people with complex and rare diseases (as well as some not-so-rare diseases) biologic drugs from the last decade or so are a last refuge of hope. Some of the most baffling diseases, such as cancer and autoimmune diseases, are best treated with biologics. But the high cost associated with them is currently in the news, as the vast majority of South Africans are unable to access these medicines.

For women with a specific form of breast cancer (HER2 positive), a 12-month course of the biologic medicine Herceptin (as it is called in SA) can cost close to R500 000 per year. The biologic medicine for rheumatoid arthritis is called Enbrel, and can costs R4 800 – R9 404 per injection, depending on the strength needed.

Your medical scheme and biologics

Clearly, most South Africans will not be able to pay for this, and many medical schemes are also unable to afford these medicines for their members. But if the condition you have is a prescribed minimum benefit (PMB), and there is no alternative treatment available, the scheme will have to foot the bill. The state hospitals are bound by the same rules. 

This could have a serious effect on other members, as payment for these medicines could deplete the reserves of the scheme. When PMBs were introduced (with the Medical Schemes Act of 1998), high-cost biologic medicines were not yet freely available, and the knock-on effect of their high cost therefore not considered when passing the legislation. 

More and more schemes are now introducing a separate benefit for biologic medicines, but before these are paid for by any scheme, very specific clinical guidelines are followed. The proven efficacy of the medicine for the particular condition being treated, as well as the availability of treatment alternatives are considered before the green light is given. 

Mediscor, a managed healthcare company that manages the medicines claims for 32 medical schemes, said that their expenditure on biologic medicines rose by 29.7% between 2010 and 2015. Cytostatics, a type of cancer medicine, accounted for 6.7% of the medical expenditure in 2015, but only 0.3% of the total items claimed.

The ethical issues

A debate has been raging in the press on the high cost of these biologic medicines, with consumer organisations blaming pharmaceutical companies for being greedy, and putting effective treatment beyond the reach of people who need it.

The pharmaceutical companies cite the high development and research costs in their defence. They are, after all, businesses. These issues are not new to South Africans – for many years the high cost of ARVs put these beyond the reach of millions of South Africans who were HIV-positive. It raises the ethical issue of putting a cost on someone’s life – a debate that has been ongoing for centuries. The following ethical questions have arisen:

What role do patent laws play in the high cost of these drugs?

Generally, a patent on a medicine developed by a pharmaceutical company is held by the company for 15–20 years, after which these medicines may be "copied" and sold by other pharmaceutical companies, who pay the originator companies a license fee. These "copied" medicines are called generics and are equivalent in dosage and strength and performance to the original medicine. As the second company did not have to carry the research and marketing costs, they can afford to manufacture and sell the medicine at a much lower cost.

Why are biologics so expensive?

There are a few reasons for the high cost of biologic medicines. The research and development costs are extremely high and the testing and manufacturing process is lengthy and complicated. There are eight stages to developing a new medicine from start to finish, and, only one in every 5 000 new medicines make it through from discovery to licensing, says Roberto Solari, a senior research fellow at the Imperial College in London.

This process takes years and costs billions. Unlike medicines made from chemical compounds, biologic medicines are made from natural resources and the failure rate of the manufacturing process is high. Many biologics also target rare diseases, so the market for them is small.

Are there generics available for these drugs?

Generic medicines are bioequivalents for originator drugs – in other words, they have the same active ingredients, and work in the same way. Because of the complicated manufacturing process of biologics, they are difficult to replicate. Once a patent expires, other companies can make what is called "biosimilars" which are generally much cheaper than the original biologics, but they are still relatively expensive to produce.

How are the prices of medicines determined in SA?

International drug patents are applicable everywhere. Apart from those, South Africa has a single exit price (SEP) mechanism in place which determines the maximum price at which medication may be sold. Dispensing fees pharmacies can charge are determined by the SEP. In practice, this means that everyone (the state as well) pays the same for particular medicines – and that includes biologics medicines.

More and more non-communicable diseases (NCDs) such as arthritis, diabetes and heart disease can now be treated with biologics. With four of the top ten leading causes of death in SA being NCDs, the debate on the high cost of biologic medicine, and how this can be reduced, will clearly not be over anytime soon.

Read more:

Biologics and breast cancer

Difference between small chemical products and biologics

Biologics not a cure-all, says scheme

 
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