A Case for Biosimilar Use: 5 Things You Need to Know

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.

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