What is a biosimilar and how is it different from a generic?

A biosimilar is a biologic drug that is highly similar to an already-approved biologic (the reference product), with no clinically meaningful differences in safety, purity, or potency. Biosimilars are approved through a separate FDA pathway (351(k) of the Public Health Service Act) rather than the ANDA pathway used for small-molecule generics.

The key difference: small-molecule generics are chemically identical to the brand and substitutable at the pharmacy. Biosimilars are structurally similar but not identical — biologics are made in living cells and can't be perfectly replicated. Biosimilars are NOT automatically substitutable; substitution requires the FDA to designate them as 'interchangeable' through an additional review process.

For plan sponsors, biosimilars matter most for high-cost specialty drugs (Humira, Remicade, Avastin, Herceptin). The savings opportunity is typically 30-50% off the reference brand, smaller than the 80-90% common for small-molecule generics, but applied to far larger per-claim spend. Biosimilar uptake has been slower than generic uptake due to contract-rebate dynamics with reference brands.