Medicare’s $100 billion decision: Biologics, biosimilars and prescription drug price negotiations

A recent decision by Medicare’s Drug Price Negotiation Program (MDPNP) may unintentionally cause older beneficiaries to lose tens of billions of dollars in savings in the coming years.

By law, the Centers for Medicare & Medicaid Services (CMS) was required to select 15 prescription drugs for Medicare drug price negotiation this year. The agency’s recently announced list includes seven biologic brand-name drugs that have already lost, or are on the verge of losing, patent protection and are facing competition from lower-cost biosimilar versions.

This move by CMS could severely undermine beneficiary savings as well as the growing market for biosimilars. One recent study found that selecting drugs with near-term biosimilar competition for negotiations may produce short-term savings but surrender greater long-term savings achievable through competition. By including brand-name drugs with imminent biosimilar competition in Medicare price negotiation, CMS could unintentionally weaken biosimilar manufacturers’ incentives to launch products and recoup their development and launch costs, undermining the future of biosimilar investment and costing American taxpayers billions in unrealized savings. IQVIA reports that over the next five years, savings attributable to biosimilars are projected to exceed $180 billion.

Brand-name medicines — whether traditional pharmaceuticals that are chemically synthesized or comparatively newer biologic drugs grown from living cell cultures — are granted a set period of patent and exclusivity protection. But once those set periods expire, other manufacturers are allowed to produce biosimilar versions.

And since those competitors don’t incur the multibillion-dollar expenses of inventing, testing and manufacturing a new medicine from scratch, they can afford to sell biosimilar medications at much lower prices. One government analysis found that in 2023 alone, Medicare beneficiaries and taxpayers spent approximately 60% less to treat certain common conditions, thanks to increased use of recently launched biosimilars. Had the new biosimilars not been available, taxpayers would have spent about $4.4 billion more on biologics that year, and patients would have spent an additional $1.1 billion out of pocket.

Right now, the still-nascent biosimilar industry is poised for rapid growth. More than 50 biologic drugs are expected to go off patent over the next seven years. And many biosimilar developers are eager to launch competing products, raising hopes for what some experts have forecast as a golden decade of affordable medicines. In a January 2026 House of Representatives hearing, the former CEO of health insurance giant Cigna estimated that biosimilar competition could save Americans $100 billion over the coming decade.

But these future savings are far from guaranteed.

Biosimilars are still difficult for scientists to develop, even when they have the original biologic as a reference. The development process can take up to nine years and cost up to $300 million. That lengthy development process, plus the need to wait for patent and exclusivity protections to expire, is why biosimilar manufacturers typically don’t launch their own competing products until the original biologic has already been on the market for 18 years. In fact, the fastest ever biosimilar launch still didn’t take place until the original biologic it was competing with had been on the market for about 13 years.

Biosimilar developers will take that risk and expense only if they are confident there will be a viable market for their product. But when CMS selects biologic medications that are on the verge of facing biosimilar competition — and then ultimately sets lower prices on those brand-name medicines — it undercuts the incentive for biosimilar drug development and ultimately translates into reduced savings for patients, employers and taxpayers in the long run.

Primary care physicians, especially those caring for large Medicare populations, see every day how high out-of-pocket costs force patients to skip, delay or ration essential medications. While the MDPNP is a well-intentioned effort, its current approach for selection of biologics risks undermining long-term affordability gains for patients and the Medicare program.

These outcomes are avoidable. First, the FDA can quickly review pending biosimilar applications to help bring them to the market faster. Second, in future negotiations, CMS can promote competition by accounting for these upcoming biosimilar launches when making its selections.

And third, Congress could pass reforms such as the Biosimilars Access and Affordability Act, which would temporarily prevent Medicare officials from selecting brand-name biologics that will soon face biosimilar competitors for the price negotiation program.

Together, those reforms would provide biosimilar developers with the regulatory certainty they need to invest hundreds of millions of dollars into drugs that could save Medicare beneficiaries hundreds of billions in the decades to come.

Sue Peschin, MHS, serves as president and CEO of the Alliance for Aging Research in Washington, D.C.