Are Biosimilars the Panacea for High Cost Specialty Drugs?

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Bennett Murphy
5 years ago
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2 Growth of Specialty Drugs Specialty drugs are the fastest growing component of a plan sponsor s prescription drug costs and is expected to increase almost 19% in By the end of 2018, specialty drugs will account for up to 50% of an employer s drug spend while representing a fraction of an employer s total number of overall pharmacy claims (1.5%). Will biosimilars or generic specialty drugs reduce the high cost of brand specialty drugs/biologics? Will biosimilars enter the market at a 20%-40% discount to the original reference biologics? Skepticism and limited competition from biosimilars will challenge PBMs and health plans to reduce specialty drug prices and maximize use of follow-on biosimilars Innovative Rx Strategies, LLC. All rights reserved.

4 Specialty Brand Originator Drugs ( Biologics ) vs. Biosimilar Biologics (e.g. Humira) are very complex, highly specific drugs that are proteins produced from living organisms. Biologics are used in the treatment of many diseases including rheumatoid arthritis and leukemia. A biosimilar is a type of biologic with great similarity including no clinically meaningful differences in safety or effectiveness to another biologic that is already approved. Biosimilars are brewed since they are not chemically equivalent to the originator drug and are thus not generically substitutable. Establishing interchangeability (a designation that a biosimilar is regarded as equivalent to the original product) will be key to biosimilars developing market share resulting in lowering specialty drug costs. Without interchangeability doctors/patients may be reluctant to switch.

5 The Difference Between Generic Drugs and Biosimilars Generic drugs are an exact chemical copy of brand-name drugs (e.g. active ingredients in brand and generic drugs must match). ---Lipitor (atorvastatin) ---Prilosec (omeprazole) ---Synthroid (levothyroxine) Biosimilars are proteins that are similar to brand-name biologics. Biosimilars have the same therapeutic function as the brand-name biologic without being an exact copy.

6 Biosimilars vs. Generic Specialty Drugs Unlike biosimilars there are generic specialty drugs that are interchangeable with brand specialty drugs. Generics in the specialty channel include medications for multiple sclerosis, oncology, HIV, and transplantation. Gleevec is an oral oncology drug that is now generically available In August 2017, a generic hepatitis C drug (Mavyret) was introduced to the market to treat adults with hepatitis C genotypes 1 through 6 for a cost of $26,400 compared to Harvoni/Sovaldi which costs $84K.

7 Cost of Developing Biosimilars General consensus was that biosimilars were going to disrupt the specialty drug market through increased competition and lead to lower costs. It takes almost $3M to develop a generic drug and between two to three years for a generic drug to get to market. Since generic drug manufacturers don t incur upfront R&D costs, generic pricing is lower. The development of a biosimilar can take up to seven to eight years at a cost of $100M-$300M. Since biologics don t face generic competition after patent protection expires, higher prices continue due to lack of competition. As of December 1, 2017, the FDA has only approved nine biosimilars, but only three are currently available on the market Innovative Rx Strategies, LLC. All rights reserved.

8 FDA Approved Biosimilars Currently in the Marketplace Originator Drug Biosimilar Condition Neupogen Zarxio Oncology Remicade Inflextra RA, Crohns Remicade Renflexis RA, Crohns Long Acting Insulin Lantus Basaglar Diabetes

9 FDA Approved Biosimilars Not Available in the Marketplace Originator Drug Biosimilar Condition Enbrel Erelzi RA, Crohns Humira Amjevita RA, Crohns Remicade Ixifi RA, Crohns Humira Cyltezo RA, Crohns Herceptin Ogivri Oncology Avastin Mvasi Oncology

10 History of Biosimilar Development The first biosimilar, somatropin (Omnitrope) was approved in Europe in 2006 while the first biosimilar filgrastimsndx (Zarxio)--- was not approved by the FDA until The European Medicines Agency has approved more than 25 biosimilars. Between 2006 and 2014, biosimilars increased patient access by 44% within France, Germany, Italy, Spain, and the United Kingdom. Payors cannot assume that once a biosimilar is approved by the FDA that a physician will prescribe it. Unlike traditional generic drugs, prescribers will need to use biosimilars for them to realize their potential in treating patients, particularly if there is no cost savings opportunity.

11 Barriers to Entry for Biosimilars Lack of Market Access ---So far biosimilar pricing has not offered deeper discounts to offset loss of rebates by switching from reference product to the biosimilar. Regulatory and Legal Uncertainty ---Biologic innovator drug companies have taken legal action to delay the launch of biosimilars and are investing a lot of money in DTC advertising to build brand loyalty. Lack of Comfort in the Physician Community with Biosimilars ---Physicians are skeptical on the efficacy of biosimilars and want to see more clinical and real-world data before switching patients to biosimilars.

12 Regulatory Changes Could Boost Use of Biosimilars New CMS Medicare Part B rule effective January 1, 2018 that each biologic reference product and biosimilar must have its own unique billing code. FDA released draft guidance in 2017 establishing interchangeability between the reference product and the biosimilar. To be deemed interchangeable with a reference biologic, a biosimilar will have to produce the same clinical results as the reference product that the safety and efficacy effects of switching between reference biologics and biosimilars has been evaluated. As of 2018, FDA has not approved any biosimilar as being interchangeable. State governments will play an important part on implementation of interchangeability for biosimilars. Thirty-five state have preempted forthcoming federal rule on interchangeability/switching/notification Innovative Rx Strategies, LLC. All rights reserved.

13 What s In a Name? Greater clarity is needed from the FDA on the naming convention and product labeling of biosimilars. Biosimilar manufacturers want biosimilars to have the same nonproprietary name as their specialty brand drug counterpart to avoid confusion about the safety and efficacy of biosimilars. Brand manufacturers want biosimilars to carry different names from biologics to avoid confusion among physicians/pharmacists. FTC opposed FDA proposal of adding a four-letter suffix to the nonproprietary name shared with brand-name biologics. FTC was concerned this could result in physicians believing biosimilars differ in clinically meaningful ways compared to the biologic. FTC concerned naming convention will hinder competition for biosimilars and not lower prices on biologics.

14 Biosimilars: A Remedy for High Cost Specialty Drugs? While the specialty drug pipeline is robust, there are also 39 specialty drugs losing patent protection through 2018 (e.g. Copaxone; some cancer drugs; and drugs for autoimmune diseases). Plan sponsors need to plan ahead since biosimilars/specialty generics could become a part of a pharmacy benefit plan design (e.g. Step therapy? Prior authorization?) since interchangeability for specialty brand drugs will lead to greater cost savings (20% less). Caveat: Members may be required to switch back from a biosimilar to the specialty brand drug for therapeutic reasons because biosimilars are not exactly the same. The new Shell Game PBM s may try to exclude rebates on biosimilars from specialty rebate guarantee Innovative Rx Strategies, LLC. All rights reserved.

15 Impact of Biosimilars on Future Drug Costs Employers may see a reduction of 2.6%-7.6% of their total prescription drug spend because of introduction of biosimilars in the U.S. market. According to CMS, pricing of biosimilars should be about 15%-30% lower than the reference biologic. $250B could be saved in the next decade if 11 biosimilars (mostly targeting cancer) enter into the market since they have the potential of being massproduced at a lower cost if safety and efficacy is validated. Will market for biosimilars shrink as sales of blockbuster specialty drugs decline? The use of biosimilars and price differences are not known and are the two main factors in determining savings. In 2016 Pfizer launched Inflectra at a 15% discount to Remicade. However, after one year Inflectra only captured 2.3% of the market share. In the future formularies and benefit design may change to steer more patients to biosimilars provided there are acceptable treatment outcomes Innovative Rx Strategies, LLC. All rights reserved.

16 Planning for Biosimilars Plan ahead for release of new to market specialty brand drugs and biosimilars. When will your PBM tell you when a biosimilar is available and when it will be added to the PBM formulary? Consider implementing a fifth tier for biosimilars or place biosimilars in a preferred tier to reduce member s cost share to incentivize the member to switch from more expensive innovator products. Implement a step-therapy where a biosimilar is available before a member can take the innovator product. How is your PBM going to price a biosimilar? Will your PBM pay you a rebate on a biosimilar? Will the rebate be included in your specialty drug rebate guarantee? PBM and employer will have to work with communicating with members regarding the use of biosimilars, particularly around what happens if the biosimilar is not effective compared to the innovator product. Biosimilars may not affect overall costs Innovative Rx Strategies, LLC. All rights reserved.