A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation explains key elements of the Biologics Price Competition and Innovation Act (BPCIA), a provision of the Affordable Care Act. The BPCIA authorizes the Food and Drug Administration (FDA) to develop an accelerated approval process for biosimilars. Biosimilars are follow-on versions of original therapies derived from a biological source, including vaccines, antitoxins, and blood products—commonly referred to as biologics.

The FDA released draft guidelines for an accelerated approval process for biosimilars in February 2012, but the widespread introduction of biosimilar drugs is likely several years away. This policy brief discusses the opportunities and challenges of producing and introducing biosimilars into the US marketplace.

Topics covered in this brief include:

What’s the background? The brief explains the evolution of the 1984 Hatch-Waxman Act, which provides the regulatory foundation for modern generic drugs. However, Hatch-Waxman does not apply to biosimilars, and, with demand for biologics expanding rapidly in the global marketplace, the Obama administration needed to establish a new regulatory review process in the United States for this type of drug. The United States can look to the work of the European Medicines Agency, which has an approval process in place. An article in the October 2013 issue of Health Affairs, by Francis Megerlin and colleagues, describes the European experience.

What’s in the law and what’s the debate? The brief details how the BPCIA authorizes the FDA to proceed. The provision also includes a range of market incentives for both pioneer biologic and biosmiliar product development. The BPCIA authorizes the FDA to establish two levels of biosimilarity. At the first level, the products must be “highly similar,” such that “there are no clinically meaningful differences between the biological product and the reference product in terms of…safety, purity, and potency.” At the second and more stringent level, the two biologics are judged to be similar enough to be considered interchangeable. Since state, not federal, law governs issues of pharmaceutical substitution, more than 20 states have already introduced legislation. So far such bills have passed in five states. Supporters of these bills say that these requirements will ensure better safety monitoring; opponents maintain that these laws present unnecessary barriers.

What’s next? Because of the expense of developing and marketing biosimilars and an uncertain regulatory environment, the potential for biosimilars in the United States has not yet been realized. The United States is the largest pharmaceutical market in the world, making the opportunity for growth substantial. However, developments will take time, and the cost-saving benefits are likely years away. To capitalize on the promise of biosimilars, the FDA will have to continue to offer guidance to manufacturers on how to establish and simplify the approval process and bring stability to this emerging market.

About Health Policy Briefs. Health Policy Briefs are aimed at policy makers, congressional staffers, and others needing short, jargon-free explanations of health policy basics. The briefs, which are reviewed by experts in the field, include competing arguments on policy proposals and the relevant research supporting each perspective.

Sign up for an e-mail alert about upcoming briefs. The briefs are also available from the Robert Wood Johnson Foundation’s website. Please feel free to forward the briefs to any of your colleagues who are tracking health issues. And after you’ve taken a look, we welcome your feedback at: hpbrief@healthaffairs.org