Despite the innovations and clinical benefits that specialty medicines are delivering, they’re now under greater scrutiny from the public, payers and policymakers for their cost to the healthcare system and patients. It is estimated that one percent of the prescriptions written now consume 50 percent of the prescription drug budget with annual increases of about 15 percent, and these are just the specialty medicines. Many of them are biologics, and were first launched in the 1980’s and have no head-to-head competitors.
Meanwhile, for the biopharma companies creating these unequivocally impressive therapeutic options that revolutionize disease treatments, and in some instances provide cures, there is also uncertainty. The sponsors continue to look to FDA for greater predictability for the clinical requirements as well as the review clocks. And their expectations for reimbursement, especially for treatments for rare diseases and those with breakthrough designation at FDA, are generally considerably higher than for “normal” drugs. With the continuing success of the science, and the possibilities for many more of these biotech medicines (907 being tested in people according to a PhRMA 2013 survey), we face an increasing challenge with whether the healthcare system can balance cost concerns while enabling patient access. The case of HCV has taught us that payers and policymakers fear the pipeline of industry and the tension of providing access to clinically-beneficial therapies while also managing increasingly tighter budgets. Meanwhile, patients become concerned with the wait, and pitch for right-to-try laws in states to get access to all the most hopeful looking treatments even before they are approved by FDA.
The Biologics Price Competition and Innovation Act (BPCIA) was enacted in March 2010 as Title VII of the ACA. In BPCIA, FDA was given the authority to review and approve biosimilars and interchangeable biologics – both relying on FDA’s prior finding of safety and effectiveness of another biologic in much the same manner as occurs today for generic drugs. This FDA-enabled competition is seen to be critical to moderating the costs of biologics just as has occurred with drugs as a result of generics. The U.S. biosimilars pathway has been slow to take off possibly due to the generally greater complexity of biologics versus drugs. The first application, Sandoz’s Zarxio® biosimilar to Amgen’s Neupogen (filgrastim), was approved March 6 – just ahead of the fifth anniversary of ACA. This is a full approval and within the 10 month user fee review clock for a biosimilar. Zarxio® received all five of the indications of its reference product, known as complete extrapolation, but no designation of interchangeability was sought. Given its launch in Europe in 2009, and that it is the single largest filgrastim used by volume in Europe, there is extensive commercial and clinical experience that helped its FDA approval and will likely help its uptake by payers and providers in the U.S. too. This extensive real world experience encouraged the FDA’s AdCom in January to give if their 14/0 recommendation for its approval as a filgrastim biosimilar.
In addition, as of December 10, 2014, FDA indicated that they were discussing 51 different development programs for biosimilars with multiple sponsors, between them referencing 14 different originator biologics already approved in the U.S. FDA also indicated that they expect up to 10 biosimilar applications by the end of FY2015 and two interchangeable biologic applications. We know of four applications already accepted at FDA, in addition to the one already approved, for which the FDA action date is before the end of 2015. These reference Remicade® (infliximab), Epogen® (epoetin alfa), Neupogen® (filgrastim), and Neulasta® (pegfilgrastim).
When these biosimilars and interchangeable biologics will launch in the U.S. and how they will prosper commercially is yet to be determined. While biosimilars and interchangeable biologics share some characteristics with generic drugs, it is unlikely that price competition alone will drive their uptake. Rather than mimicking the generic drug experience, where steeply discounted prices and point-of-sale substitution at the pharmacy counter drive patients to using generics versus brands, the market for biosimilars may more closely resemble classes of products with multiple branded therapies competing for market share. The development costs of biosimilars – costing up to $250 million per product versus less than $5 million for a generic drug – are expected to be one important factor in determining list prices for biosimilars which are estimated to be in a range of a 20-50 percent discount compared to the reference product. From there, biosimilar sponsors will work with health plans to potentially offer additional rebates in exchange for preferred status or formulary inclusion as applicable. Simultaneously, originator manufacturers will likely also negotiate with plans to secure patient access. Further complicating the biologic and biosimilar market dynamics is the role of the prescriber. Unlike small molecule drugs, biologics are largely products delivered by a healthcare provider rather than dispensed through a retail pharmacy and self-administered by the patient. As a result, providers – physicians, hospitals, and infusion centers – are key decision-makers in what product is ultimately purchased and administered to a patient, sometimes mitigating the level of control health plans can exert on product choice. Therefore, the sustainability of a biosimilars market will hinge on both payers ability to encourage uptake and providers’ willingness to adopt.
Carefully watching which products, through which channels, for which patients, prosper in the U.S. market will be essential to understanding the market and reaching any conclusions that biosimilars are a sustainable business in the U.S. Yes, there will be competition in the biologics space, but how products will succeed and fail is yet to be determined. A whole new business model has yet to emerge, just as it did after 1984 for generic drugs. That fledgling industry will need the support of the all elements of the U.S. health care system if it is to play its full part in fostering competition in the specialty space, moderating cost trends while concurrently expanding access to these life-changing biologic medicines on behalf of the U.S. patients and their families.
Gillian Woollett is a Senior Vice President at Avalare Health.