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It is an exciting time for generic versions of high-priced, complex therapies known as biologics. Biopharmaceuticals that treat cancer, rheumatoid arthritis and other life-threatening diseases have come a long way in the last decade.
However, biologics also come with high price tags, sometimes in the hundreds of thousands of dollars to treat one patient. Payors, employers and PBMs (pharmacy benefit managers) welcome biosimilars to help curb escalating prescription costs.
Biosimilars can help bend the cost curve as well as save lives. Right now, the Food and Drug Administration (FDA) and Centers for Medicare and Medicaid Services (CMS) are being tested on the regulatory and reimbursement fronts.
Federal Initiatives on Biosimilars
The Affordable Care Act (ACA), signed into law on March 23, 2010, created an abbreviated pathway for biological products that are demonstrated to be “biosimilar” to or “interchangeable” with an FDA-licensed biological product.
A relatively simple biosimilar will likely enter the US market this spring. A similar version of Amgen’s Neupogen has been manufactured by Sandoz, a unit of Novartis.
However, the FDA will be challenged this year and beyond with subsequent biosimilar applications and interchangeability requests. For instance, Celltrion’s Remicade, a monoclonal antibody marketed by Johnson and Johnson and Merck, was submitted for biosimilar approval in late 2014.
Additional FDA requirements, reimbursement /pricing, physician practice, and legal challenges complicate the story.
The US healthcare system will benefit from biosimilars over time, but uptake will be slow and discounts modest. The EU can be treated as a model of what’s to come in the US, and regulators as well as healthcare providers should proceed with caution due to the complex nature of generic large molecule medicines.
Catching up to Europe
When it comes to biosimilars, the US lags behind other markets, particularly the European Union.
In Europe, the legal and regulatory framework has been in place since 2005. Specifically, over 19 biosimilars have been approved since 2006, including copycat versions of human growth hormone, anemia treatment EPO and G-CSF for low white blood cell levels.
By contrast, the US has not approved a single biosimilar in 5 years. That will likely change in 2015.
The FDA has emphasized a case-by-case approval standard, and has chosen to focus on immunogenicity as a risk that could not be addressed by in vitro tests alone.
Sandoz should receive news of FDA approval (or non-approval) of biosimilar Neupogen sometime in March.
Also of interest will be the naming mechanism used. That is, will the agency assign an identical name for the biosimilar? Or, would it require a similar name, with a prefix or suffix?
The FDA ought to take a cautious naming stance.
Identical names may create a safety risk, as patients may not be aware that they are taking a similar version, not an identical version, of a branded product. Payors and generic manufacturers prefer identical names so as to encourage interchangeability and therefore, substitutability at the pharmacy or prescription level. Branded companies believe different names will ensure accurate medical records, manufacturer accountability, and appropriate use.
The FDA knows that it cannot please all stakeholders, but it can effectively please everyone by naming products on a case-by-case basis and/or reserving the right to change any naming policy in the future.
Zarxio, the Neupogen or filgrastim follow-on, is likely to gain biosimilar designation. Interchangeability is also a distinct possibility, after biosimilarity is established. FDA could allow biosimilar Neupogen for all 5 indications on the Amgen label, as this is an “easy” biosimilar.
Celltrion’s Remicade could be next. This is a generic version of the Merck/Johnson and Johnson monoclonal antibody treatment for rheumatoid arthritis.
As of late 2014, the FDA had received 78 requests from companies for initial meetings to discuss biosimilar development programs for 14 different reference products, and held 63 such meetings.
Overall, the FDA has received 28 Investigational New Drug Applications for biosimilar development (as of late 2014).
Express Scripts estimated in a report released last month that approval of generic Neuopgen could save patients and payors as much as $5.7 B over the next decade. The report estimated that as much as $250 B could be saved in the next 10 years if biosimilars for 11 existing biologic drugs are developed and come to market.
A Pathway in Progress
FDA is scheduled to release a labeling guidance document in the near future. This would cover the policies and procedures that FDA will follow when reviewing & approving biosimilar applications for various indications.
Biosimilar naming, as discussed in the section above, may not be a part of the labeling guidance document.
Interchangeability guidance is on the horizon as well. Pressure is on the agency to complete the regulation since Sandoz believes that its filgrastim product is interchangeable with Neupogen.
FDA has always stated it envisions a 2-step assessment process: first, biosimilarity; then, interchangeability.
Interchangeability will almost certainly mean greater biosimilar uptake rates. That’s because pharmacists will be able to substitute biosimilars for brand drugs, with little fear of adverse events.
However, interchangeability means a higher bar for approval. Switching studies will be a must. Also, FDA will almost definitely require separate clinical data, per indication.
Reimbursement and Pricing
Private payors, as well as the Medicare and Medicaid agency (CMS), will have to deal with biosimilars in 2015.
Do biosimilars warrant their own pharmacy tier? Could they be included on the specialty tier? How do cost-sharing or co-pays work?
Also, recall that the biosimilar pathway (as per ACA) allows for biosimilar reimbursement at average sales price, or ASP, plus 6%. That 6% is off the innovator price, not biosimilar price, and is kept by the provider.
In theory, that should mitigate the disincentive to compete on price in Medicare, where a lower price translates to a lower “spread” for the provider.
Traditionally, generic drug prices have plummeted to sometimes 90% off the innovator price, several years after generic introduction, as many players enter the market. With biosimilars, the expected price discount is more modest, only about 15-30%. Therefore, manufacturers will have to treat biosimilars as any other branded product.
Physicians will probably treat biosimilars with caution, and we could see registries and coverage with evidence development requirements from payors to assess safety and efficacy of biosimilars.
It should be mentioned that the paths for these drugs could be fraught with hurdles beyond FDA approval and reimbursement challenges. Some biologic manufacturers have already brought legal challenges to biosimilars that could block their entry to the market for some years.
While it’s an exciting time for biosimilars, approval will require a high bar, uptake may be slow, court proceedings could drag on, and price discounts are likely to be modest. Still, generic biologics are a long time coming, and will eventually impact biopharma cost trends. After all, since the passage of the ACA, the US represents a country where the government spends a disproportionate percentage of the budget on Medicare, Medicaid, military health and now Exchange-covered benefits.
Ipsita Smolinski is Managing Director for Capitol Street, a healthcare research and consulting firm in Washington, DC