Despite a Slow Start in Gaining Market Access & Share, Biosimilars Deliver on Their Promise
Since 2015, the Food and Drug Administration (FDA) has approved 17 biosimilars—nonbrand-name biologic drugs with no clinically meaningful differences from their reference biologic. Much like generic drugs, biosimilars are seen as economical alternatives, priced an average of 15–30 percent lower than brand-name biologics. In a 2017 report, the RAND Corporation estimated their cost-savings potential at $54 billion over 10 years. But to realize those savings, approved biosimilars first have to get to the market launch phase. To date, only seven have hit that milestone.
Confused by the difference between generics and biosimilars?
According to the FDA, a generic must be “bioequivalent,” meaning made up of the same active ingredients as the brand-name drug. A biosimilar, on the other hand, needs to be “highly similar” to the reference product—except for small differences in clinically inactive components. Their dissimilarities should be clinically insignificant in terms of safety and effectiveness.
Slow to Launch
A biologic patent cliff is expected in 2020, which should accelerate market launches for some of these approved drugs. Many others may still be tied up in litigation with reference drug manufacturers attempting to thwart biosimilar competition.
Take Genentech’s Herceptin, a therapy for early-stage breast cancer. In 2017, global sales for the drug totaled $7.2 billion. Three biosimilars of the innovator product have been approved in the United States, but none has made it to market. Instead, they’re each facing lawsuits from Genentech claiming at least 40 patent infringements.
Even when biologic manufacturers haven’t filed suit, they’ve tried to block biosimilars in other ways, notably by offering steep rebates to payers in exchange for preferred status on their formularies. This type of anti-competitive behavior is alleged in a pair of lawsuits filed against Johnson & Johnson, maker of Remicade. The first claim was filed by Pfizer, which manufactures the biosimilar Inflectra, and the second by retailers Kroger and Walgreens. Both cases are still pending, but experts say a decision in Pfizer’s favor could help clear the way for future biosimilars.
Legacy manufacturers may be stalling availability of these copycat drugs, but neither providers nor patients have protested.
“In many ways, it’s the generic market all over again,” says Jason Braithwaite, PharmD, MS, BCPS, senior director of clinical pharmacy services at HealthTrust. “When generics first came out, they were not adopted quickly. It took some time for providers and patients to get comfortable with these products. We’re definitely seeing the same thing with biosimilars.”
LifePoint Health’s Experience
Ken Gagnon, PharmD, BCPS, vice president of pharmacy services for LifePoint Health, oversees his organization’s biosimilar conversions. In 2017, when the system switched from Remicade to Inflectra, Gagnon faced not just reimbursement challenges, but also a lot of provider resistance. With more recent conversions—from Epogen/Procrit to Retacrit and from Neulasta to Fulphila—the process has been smoother.
“You’re always going to see innovator biologic companies do everything they can to hold on to market share,” Gagnon says. “But I think biosimilar manufacturers learned a lot from the Inflectra launch. They got smarter and preempted a lot of potential reimbursement issues by going earlier to commercial payers to make their case for preferred formulary status.”
At the same time, the provider community has become more accepting of biosimilars.
“We have worked hard to educate our providers on the safety and efficacy of these products,” Gagnon says. “The most challenging part is helping providers feel comfortable with them. But once they do, they are not turning back to the branded product.”
However, patient resistance can still slow biosimilar adoption. Many biologics treat debilitating chronic conditions such as Crohn’s disease and rheumatoid arthritis, and patients whose symptoms are well-managed with the reference drug might be reluctant to switch. That’s especially true when counterintuitive reimbursement structures don’t offer them a compelling enough reason to do so.
New Reimbursement Challenges
Under new rules for Medicare Part B reimbursement at 340B facilities, patient copays will end up being higher for biosimilars than biologic drugs.
Previously, the reimbursement structure for all drugs was average sales price (ASP) plus 6 percent. The new formula is ASP minus 22.5 percent—a move to counter profits made by 340B facilities able to purchase drugs at a steep discount while getting reimbursed for the original price.
But there’s a catch. The rule exempts drugs granted pass-through payment status, which is available to all biosimilars and gives manufacturers a three-year pricing advantage to encourage use of their drugs.
“With this new rule, biosimilars could grow more appealing to providers,” Braithwaite says. “But the same can’t be said for patients, who would be saddled with a higher copay for what is supposed to be a cheaper drug.”
Another change to the reimbursement landscape for biosimilars involves the Medicare Part D coverage gap. After the initial coverage period and before catastrophic coverage kicks in, Part D participants have to pay out-of-pocket for their prescriptions. Previously, coinsurance was 30 percent for branded drugs and 37 percent for generics and biosimilars. Branded manufacturers also had to provide a 50 percent discount, but biosimilar manufacturers did not. This arrangement made biologics the better buy for patients in the coverage gap.
The new rule levels the playing field by moving biosimilars into the same category as branded drugs. Coinsurance for both is now set at 25 percent, but the discount has been increased—for both biologic and biosimilar manufacturers—to 70 percent. This change is a win for patients and plans, but the impact on the biosimilars market is uncertain. Biologic manufacturers possibly will offer steeper rebates to make their products preferred. Biosimilar manufacturers, limited in the discounts they can offer so soon after launch, might also shy away from participating in Medicare Part D.
Despite the challenges and unknowns, HealthTrust remains committed to advancing biosimilars among its membership. “If biosimilar adoption doesn’t accelerate, there is a huge risk that companies will drop out of the market and stop manufacturing these cost-saving products,” Braithwaite says. “That’s why we continue to promote biosimilars over brands in all scenarios.”
HealthTrust currently has contracts for four biosimilars in three categories—filgrastim, infliximab and, most recently, pegfilgrastim. Single- and dual-source agreements have secured the best pricing from manufacturers.
Before awarding a contract, HealthTrust conducts an extensive payer analysis to ensure a biosimilar will be covered by the majority of payers across all regions. A new consideration is how the contracting strategy could differentially affect 340B facilities, says Joshua Curtis, MBA, assistant vice president of pharmacy strategic sourcing at HealthTrust.
To protect members when payers will not cover the biosimilar, contracts with biosimilar manufacturers include payment protection programs. Providers will be entitled to a replacement product after two denials from a payer.
“It’s a good bargaining chip,” Curtis says. “If they want most or all of our business, we need some guarantees that our members won’t be left footing the bill.”
Gagnon says he doesn’t expect strategies like these will be needed for long. “We had a little bit of a rocky start, but as more biosimilars come on the market and providers become increasingly comfortable with these lower-cost products, our hospitals and patients—and the healthcare system as a whole—stand to benefit greatly.”