What Are Orphan Drugs, Biologics, and Biosimilars?

Top 3 Things You’ll Learn

  1. The variety of specialty drug classes
  2. How drugs in those classes can influence the drug market
  3. Possibilities for plan sponsors to reduce specialty Rx spend

Over the last decade, the shift in drug mix from generic to specialty has changed how plan sponsors must manage their prescription drug benefits. In just the last five years, specialty drugs have accounted for two-thirds of FDA drug approvals. As manufacturers continue focusing their research and development efforts towards therapies that address smaller patient populations and rare diseases, it’s important to understand commonly used terminology and the differences and connections between the specialty drug categories.

Orphan Drugs

An emerging sub-class of specialty medications is orphan drugs, a pharmaceutical product used to treat rare conditions or diseases. The FDA grants orphan status for drugs that target a population of 200,000 or fewer people. As this class continues to grow, the reality is that one in 10 people have a rare condition that could be targeted for treatment with an orphan drug.  Smaller pharmaceutical manufacturers are highly concentrated in this market, because they can fast-track these drugs to market and set the market price.


Biological products are highly complex and often used to treat patients with severe and life-threatening conditions. (More than 60% of orphan drugs are biologics.) Biologic therapies are large-molecule specialty medications made from living cells. While biologics can be challenging to manufacture, they serve a significant role in the drug market and have an equally significant impact on pharmacy spend. There are more than 350 biologics on the market, some of which persist in dominating spending. For example, Humira®, which is used to treat rheumatoid arthritis and Crohn’s disease, and cancer therapy Avastin®, have maintained record sales growth over the last decade, with sales growing by 8.2% and 9.5%, respectively.[³]


A biosimilar is a type of biologic that closely mimics an existing, approved biologic (called the “reference product”). These are brand-name – not generic – drugs, and they must show no clinically meaningful differences from the reference product in terms of safety, purity, and potency. Biosimilars help to create competition in the market, increase patient access, and reduce the cost of important therapies, with AWP running about 15% cheaper. Additionally, since they are brand-name products, they may have rebates to help offset expenses further.

There are currently 29 FDA-approved biosimilars in the U.S., 18 of which had been launched by the end of 2020.

Unfortunately, the availability of biosimilars is highly variable due to litigation, patent challenges, the FDA’s establishment of the 351(k) pathway, and other factors. Among the new biosimilar approvals in 2019 were two competitors for Humira, as well as long-awaited biosimilar approvals for the anti-cancer biologics Avastin and Herceptin®. These biosimilars have the potential to help plan sponsors reduce pharmacy spend. However, the financial value of transitioning patients to biosimilars has not been widely established in the medical community. In a 2018 survey of clinicians, of those who prescribed biologic drugs, 73% said they rarely or never prescribe biosimilars.[¹]

Download our free e-book, State of the Pharmacy Benefits Industry: 2021 Edition, to learn more about specialty drugs, the new drug pipeline, and strategies for managing their associated costs.


  1. U.S. Government Accountability Office. Orphan Drugs: FDA Could Improve Designation Review Consistency; Rare Disease Drug Development Challenges Continue. November 2018.
  2. EvaluatePharma. Orphan Drug Report 2019, 6th Edition. April 2019.
  3. Kline. Growth of Biologics and Biosimilars Will Drive Above-Average Demand For A Range Of Ingredients Through 2023. Biosimilar Development News, Sept. 30, 2019.
  4. Gaffney, A. How comfortable are physicians with biosimilars? Not very (yet). Price Waterhouse Cooper, October 2018.

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