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FDA approves first lower-cost biotech drug

Federal health officials on Friday approved the first lower-cost copy of a biotech drug in the U.S., a long-awaited milestone that could save billions for insurers, doctors and patients.

Biotech drugs are powerful, injected medicines produced in living cells. They are typically much more expensive than traditional chemical-based pills.

The Food and Drug Administration approval of Novartis’ version of the blockbuster drug Neupogen paves the way for a new market of quasi-generic biotech medicines. Express Scripts Holding Co., the country’s largest prescription benefit manager, estimates the Novartis drug, named Zarxio, could save the U.S. health system $5.7 billion over the next decade.

Neupogen, used to boost blood cells in cancer patients, had U.S. sales of $839 million last year. Express Scripts said the average price for a 30-day supply was about $3,500 last year.

Novartis won’t announce Zarxio’s price until its launch, through its Sandoz subsidiary, later this year, spokeswoman Julie Masow said. She said the biosimilar would be “competitively priced.”

The FDA approved the drug for use in several types of patients, including those undergoing bone marrow transplants or receiving certain forms of chemotherapy.

Dr. John Jenkins, director of FDA’s Office of New Drugs, said during a conference call that Zarxio and Neupogen “should perform the same” in patients.

Many newer biotech drugs cost more than $100,000 per year, and together they account for nearly 30 percent of all U.S. drug spending. Five of the top 10 U.S. drugs by revenue are biotech medicines, according to IMS Health. Since their introduction in the 1980s, biotech drugs haven’t faced generic competition because the FDA did not have a system to approve copies.

In 2012, the FDA laid out a regulatory pathway to approve so-called “biosimilars.” That’s the industry term for generic biotech drugs, indicating they’re not exact copies. For years the biotech industry staved off competition by arguing their drugs were too complex to be reproduced by competitors.

Now insurers will press makers of original biologic drugs to lower prices once a biosimilar arrives, predicts Les Funtleyder, health care portfolio manager at ESquared Asset Management.

Edward Jones analyst Ashtyn Evans said that won’t happen as dramatically as when generic pills hit the market.

“It won’t be a race to the bottom,” she said, and will depend on how quickly the biosimilar starts grabbing market share.

Prices for insulin, human growth hormones, drugs for chemotherapy side effects and others could plunge 20 percent to 40 percent as biosimilars arrive, according to a forecast by KPMG Strategy.