A Case for Biosimilar Use: 5 Things You Need to Know
Biosimilars are a potential solution to the ever-growing problem of high specialty drug costs.
Biologics are generally considered specialty drugs and can be paid for under either the pharmacy or medical benefit. Nationally, specialty drug spend has been steadily increasing. In 2017, Prime Therapeutics reported a 13% annual increase in specialty drug expenditures under the pharmacy benefit for its commercial clients. There is a real need for lower-cost therapies in specialty categories to help mitigate this trend. Biosimilars are 1 potential solution to the ever-growing problem of high specialty drug costs.
Here are 5 things you need to know about biosimilars.
1. The current state of the US biosimilar market
The Biologics Price Competition and Innovation Act of 2009 was originally developed to provide an abbreviated pathway for the FDA to approve highly similar biologic products in hopes of creating accessible therapeutic alternatives and driving substantial cost savings in the US market. There have been varying estimates of the potential savings that can be derived from biosimilars, ranging from $40 billion to $250 billion over the next decade.
There are currently 11 biosimilars approved in the United States for 8 originator products. Of the 11 approvals, only 4 have launched: Zarxio, a biosimilar of Neupogen; and Inflectra and Renflexis, biosimilars of Remicade. The latest biosimilar approval for Neulasta, Fulphila, is anticipated to launch in Q3 2018. The remaining approvals cannot launch because of ongoing patent litigation. As of the second quarter of 2018, there were an additional 10 biosimilars submitted to the FDA for approval in 2018. Of these, 5 have received complete response letters, and some of the remaining candidates may also have delays in their launch dates because of patent litigation, even if they are approved.
Additionally, there are many biologics with patents that are expiring, with ongoing development of biosimilars for these products. Many new biosimilars are anticipated in the coming years, often with multiple biosimilars for a single reference product. This research and development should help reduce drug spending, as many of these products (eg, oncology drugs) do not have competitive pricing strategies such as rebates. Price reductions at launch may have a significant impact on the use of biosimilars.
The uptake of biosimilar use to date has been slow in the United States because of a variety of factors. These include uncer- tainties regarding regulatory policies, such as naming conventions, CMS pricing, lack of an interchangeability designation, ability to drive market share, and familiarity by prescribers and patients. Zarxio, the first biosimilar approved, currently has 35% of market share in Prime Therapeutics’ book of business, compared with its reference product’s (Neupogen) 65% of market share. Zarxio’s use has increased in the past year because of better pricing—leading to medical and pharmacy policies that influence market share shift—along with familiarity within the prescribing community.
2. The role of payers in shaping biosimilar use
The role of the payer in determining the potential of biosimilars for the broad market is evolving. As payers individually assess each biosimilar that is approved, their contracting decisions will influence the direction of manufacturers as they seek to innovate and create value. Most claims for the 4 approved biosimilars are adjudicated on the medical benefit; therefore, a payer’s primary tool to influence prescribing decisions is through medical policy. Decisions about whether to prefer reference drugs, to prefer biosimilars, or to consider them equally, affect multiple stakeholders and require careful consideration.
Payers must first decide whether a biosimilar is interchangeable with the reference product and in which population it is appropriate to request switching to the biosimilar from the reference product. To date, the FDA has not assigned an interchangeability designation to bio- similars, so this decision is left to the prescribers, patients, and payers. Given the rigorous FDA review to determine that there are no clinically meaningful differences between reference products and their biosimilars, many payers will consider them interchangeable. In fact, some biosimilars already have switch data within their clinical development that show patients remained stable after switching products. However, there may still be reluctance in the beginning to switch patients on a stable therapy to a new biosimilar. Strategies such as medical policy and utilization management programs are needed to outline the potentially affected patient population(s) to move market share.
To determine the cost-effectiveness of moving market share to a biosimilar, payers need to assess current use of the reference drug segmented by place of service (ie, hospital outpatient facility, physician office, home infusion, or another site). Hospital outpatient facilities are typically paid as a percent of billed charges, in which physician offices and home infusion providers are typically paid according to a fee schedule based on average sales price (ASP) or average wholesale price (AWP).
These reimbursement methods have a major impact on financial viability given the differences between wholesale acquisition cost (WAC), AWP, and ASP. For example, the second quarter 2018 ASP of Remicade is 20% higher than that of biosimilar Renflexis, but Remicade’s WAC and AWP are 55% higher than those of Renflexis. Any reimbursement methodology that uses WAC or AWP as opposed to ASP will yield a greater payer savings opportunity for Renflexis compared with Remicade.
Rebate contracts are also important when considering payer financial viability. If a payer is receiving a rebate on a reference drug, it will lose that rebate if the reference drug is disadvantaged within the medical policy. Even if the biosimilar has a lower net price (list price minus rebate) than its reference drug’s, savings can be achieved for a payer only if a specific market share shift occurs from a reference drug to a biosimilar within a set period. Factors such as prior authorization renewal timing, how strictly a payer will enforce the medical policy through prior authorization and/or claim edits, and whether the policy will affect only new starts compared with all existing utilizers will all have a major impact on market share shift and ultimately whether a payer will save money by advantaging biosimilars.
Biosimilars that adjudicate on the pharmacy benefit (eg, Erelzi and Amjevita, biosimilars of Enbrel and Humira, respectively) will likely see quicker adoption, as there are many strategies in place that can drive to preferred products, such as utilization management programs and exclusion formularies. Careful analysis still needs to be completed to ensure the ability to move market share to drive savings. A plan’s ability to move market share, interchangeability designation, and buy-in from members and/or prescribers will each affect the uptake of biosimilar products.
3. What providers need to know about biosimilars
Prescribers have varying degrees of understanding of the approval process for biosimilars and varying degrees of comfort with substitution. Educating prescribers on how biosimilars are approved will help build confidence in these products. A biosimilar does not have any clinically meaningful differences in safety and efficacy from the originator product; however, without an interchangeability designation, biosimilars cannot be substituted for the reference product at the pharmacy level. As more biosimilars come to market, the hope is that prescribers will gain a higher comfort level with more experience in using these new therapeutic options. Additionally, the FDA biosimilar approval with an interchangeability designation will also likely increase the trust in these products for therapeutic interchange and substitution.
Providers are also assessing profitability when evaluating biosimilars relative to 2 components: acquisition cost through wholesaler/group purchasing organization and reimbursement from payers. A provider’s acquisition cost is partially determined by its class of trade. There are different procurement costs and other incentives, such as market share rebates, for purchasing biosimilars and reference drugs for 340B hospitals, non-340B hospitals, and physician offices.
Providers need to be aware of which drugs are covered through medical policy by the large payers in their market and know reimbursement rates of all reference drugs and biosimilars. Strong procurement cost of a drug means little if payers are reimbursing at a low rate. To provide equal margin to physician office practices that prescribe biosimilars, CMS recently changed Medicare reimbursement of biosimilars so they are reimbursed ASP plus 6% of the reference drug ASP. When acquired through the 340B program, biosimilars are generally paid ASP plus 6% of the reference drug, compared with ASP minus 22.5% for the reference product. Some commercial payers have adopted the tactic of creating a reimbursement incentive by paying a higher percentage above ASP for biosimilars compared with the reference drugs.
The health care system needs more cost-effective specialty drugs to help manage drug spend and total health care costs. Further biosimilar development may present opportunities for competition in key therapeutic areas as more biologics approach patent expiration.
4. What biosimilars mean to patients
As with any new therapy, it takes time for patients and prescribers to adopt a new drug. The success of biosimilars will hinge on the level of patient and prescriber education, trust, and adoption. Real- world evidence showing biosimilars are interchangeable with the originator product will likely be needed for patients to feel secure about safety and efficacy, especially when switching from an origi- nator product to a biosimilar. In the begin- ning, patients will likely be more comfortable initiating therapy with a biosimilar than switching therapies, especially if they are stable or seeing success with their current therapy. As more data become available and comfort levels increase, biosimilars will likely be adopt- ed in a similar manner as generic drugs.
The approval of biosimilars will potentially provide lower-cost options for drugs that frequently have higher co-payments or coinsurance. Payers and prescribers will have the greatest influence on patient behavior. Prescribers who are comfortable with biosimilars and recommend their use based on their experiences have the potential to greatly influence their patients. Payers that adopt policies and benefits that favor biosimilars will also influence patient selection of medication based on the patient’s out-of-pocket costs or drug coverage.
5. What biosimilar uptake means for specialty pharmacies
Without an interchangeability designation, pharmacies are likely to be neutral in the process of driving biosimilar use. They will receive direction from providers, pharmacy benefit managers (PBMs), and/or payers on which product is dispensed. Financial dynamics will likely be less favorable when dispensing a biosimilar compared with a reference product based on typical reimbursement methodologies.
As stated above, drug spend for specialty is still on the rise, and the pipeline for specialty products is full. Specialty pharmacies will be on the front line for the distribution of many biosimilars. Specialty pharmacies are in communication with prescribers and patients and can play a unique role in providing education about these products. Additionally, they will gain firsthand knowledge of the concerns (or lack thereof) related to biosimilars. There will also be partnership opportunities between health plans and/or PBMs related to drug policies and payments. This information could be very effective in moving biosimilars to first-line therapies.
There is still a learning curve for the development and use of biosimilars in the United States. Biosimilars have an opportunity to become first-line therapeutic options for many chronic illnesses in the next 3 to 5 years. It will take a team of advocates including payers, prescribers, and pharmacies to help drive biosimilar use and ease patient concerns. All the players in this field have a unique role in developing solutions to promote the use of biosimilars and the continued development and oversight of these products. Careful attention needs to be given to this ever-changing environment, including the monitoring of regulatory changes, patient safety, and benefit designs. In time, the use of biosimilars should help mitigate costs for patients and the health care system.