Posts
On July 24, 2014, Novartis announced
that the FDA had accepted for filing the first application seeking marketing
approval in the U.S. for a biosimilar version of filgrastim (Neupogen). In my May 19, 2014, post “A Few Thoughts About
Biosimilars” I discussed the problem of driving down the price of
these somewhat cheaper, but still very expensive, drugs. Biosimilars have been available in Europe for some time but
none have been approved yet in the U.S. In
this post I will discuss a different but related problem in biosimilars
development, which is built into the Biologics Price Competition
and Innovation Act (BPCIA).
The BPCIA divides biosimilars into two categories—biosimilars and
interchangeables. Biosimilars require extensive testing to demonstrate that
they are “highly similar to the reference biologic,” defined in terms of
mechanism of action, clinical studies of immunogenicity and toxicity, safety
and efficacy, and clinical action at the same doses and route of administration
as the reference product. However, biosimilars may not be automatically
substituted for the reference drug, but rather must be specifically prescribed
by the physician, which of course requires marketing efforts to drive sales.
The second category, interchangeables, was intended to parallel
to the existing generic category for small molecules in that interchangeables
could be freely substituted for the reference drug. In theory, this means that marketing costs
would be greatly reduced, just as they are for generic drugs. However, interchangeable
approval requires extensive additional clinical testing beyond that required
for biosimilars. In return for this
additional expense, the first approved interchangeable version of any reference
biologic is rewarded with one year of exclusivity, during which the FDA cannot
approve any additional interchangeables for that biologic. Nevertheless the development pathway for
interchangeables creates something of a business paradox. After the statutory
year of protection against competition from other interchangeables, the drug can
only compete on price with subsequently approved interchangeables. Thus it
requires more expense to develop an interchangeable biologic that will be sold
at a lower price. Moreover, there would almost certainly be a downward price spiral
if any additional interchangeables are approved. This would seem to discourage the development
of interchangeables from a business strategy perspective. That is why it is
unlikely that multiple interchangeable drugs would be developed for any single
reference drug, because that would be likely to lead to steep price reductions
in the biosimilars marketplace that approach the discounts common in the
generics market.
So how is Norway shifting the entire paradigm of the
biologics marketplace? Quite simply by
undertaking its own, government-funded “interchangeability” study of a
biosimilars version of Remicade, one of
the biologics that is costing Norway’s health care system the most krone. Although the EU, unlike the U.S., has no interchangeable
category and cannot approve a biosimilars as freely substitutable for a
reference biologic, Norway
can use the power of its national health insurance
reimbursement system to cover only the cost of a preferred drug or
biologic (which is also true in a number of other European countries). This results in a de facto policy of strongly encouraging, while not formally
requiring, substitution of the preferred drug.
The willingness of a payor to take on the financial burden
of gathering data to demonstrate that a biosimilar and its reference drug are
pharmaceutically equivalent is an exciting development. In the U.S., the Affordable Care Act (ACA)
provides funds for comparative effectiveness research on both medical
procedures as well as pharmaceuticals.
However, it would be difficult to fund many “pharmaceutically equivalent” studies of biosimilars from the ACA
budget of $106 million in 2015 for comparative effectiveness research. If U.S. health insurers are willing to fund
studies similar to the Norwegian study to support their own formularies, the
impact on pharmaceutical budgets could be very significant.
It would make bottom-line sense for the big insurers to do
so. For example, in 2013 Humira, Enbrel,
and Remicade, drugs that target TNF to treat autoimmune inflammatory diseases
such as Rheumatoid Arthritis and Crohn’s disease, had U.S.
sales of approximately $5.6, $4.7, and $4.1 billion respectively. A study of the type Norway is doing on
Remicade could have a very large financial impact if it leads to significant
price reductions through biosimilar substitution for those drugs. In 2012 the
two largest health insurers in the U.S., United Healthcare and Wellpoint, each
provided health insurance coverage for
approximately 34.3 million persons. Also in 2012, all insurers in the U.S. health
insurance insurance market spent $50.62 per member per year on specialty
drugs in the inflammatory class, the class of expensive drugs in which Humira,
Enbrel, and Remicade are the sales leaders.
That would mean that United Healthcare and Wellpoint each spent about
$1.74 billion on specialty anti-inflammatory drugs.
There is no publicly available breakdown of United
Healthcare's or Wellpoint's spending on individual biologics; however, it would
not be unreasonable to assume that they are now each spending in the
neighborhood of $500 million per year on Humira and slightly lower but still
very large amounts in excess of $400 million on Enbrel and Remicade. We can use Remicade merely as an example of a
reference biologic. Even with a capital
outlay of $20 million to perform a biosimilar substitution study, a savings of
approximately 25% of United Healthcare’s Remicade costs would return that
amount in a single year, provided United Healthcare’s formulary was successful
in inducing the great majority of doctors to switch their patients to a
biosimilar which costs 30% less. The Norwegians are showing us the way to a
much more efficient market for biosimilars. Skål (Cheers)!
No comments:
Post a Comment