A new paper in JAMA** looks at the price state Medicaid agencies paid for long lasting insulin over a decade. Near substitutes mattered a lot:
Insulin prices increased by 320% from 2001 to 2014,1,2 partly because of limited competition and barriers to generic entry…
Reimbursement rates for Lantus and insulin determir increased in parallel in 2006-2014 by an average of 13% annually but stabilized following new product entry….
new product entry was associated with a halt in increases in reimbursement levels for incumbent products.(my emphasis)
A bio-similar is a “me-too” or a “copy-cat” drug. It is expensive to develop, it is expensive to go through approval and it seems like a duplication of effort. But it is a counter-vailing force that introduces competition and reduces monopoly rents. Insulin is wicked expensive even with bio-similars but it probably would have been even more expensive without bio-similar introduction. There is a lot of value in near substitutes.
Hernandez I, Good CB, Shrank WH, Gellad WF. Trends in Medicaid Prices, Market Share, and Spending on Long-Acting Insulins, 2006-2018. JAMA. Published online March 25, 2019. doi:10.1001/jama.2019.2990