By Chad Pettit
December 18, 2018 at 5:00 am ET
Biotechnology in the 21st century is leading to innovative medicines to prevent and cure serious diseases, and that can cost a lot.
In the United States, biosimilars are a new market in the making, on track to introduce competition that is projected to save $54 billion over the next decade and deliver more therapeutic options for physicians and patients to reduce the burden of disease and lower health care costs. Realizing the promise of biosimilar medicines will require a stable market over the long term, where there is a level playing field for both originator and biosimilar manufacturers to compete intensely to the potential benefit of patients, government and private payers.
Amgen is a worldwide leader in biotechnology-advancing science to develop high-quality, innovative biologic medicines. We are also working to make medicines more affordable for patients and payers, with significant investments in 10 biosimilars spanning oncology and chronic inflammatory disease therapies.
We recognize that a viable and competitive biosimilar market hinges on some critical elements: 1) patients, physicians, pharmacists and payers having confidence that regulators will maintain scientifically appropriate standards to demonstrate biosimilarity and interchangeability; 2) marketplace competition through a level playing field for reimbursement; 3) scientifically accurate educational outreach; 4) public policies that support innovation in biological products and widespread acceptance of biosimilars.
Thanks largely to a Food and Drug Administration regulatory framework that is scientifically sound and highly efficient, the U.S. biosimilars pipeline is robust and advancing rapidly. The FDA has approved 15 biosimilars in the eight years since Congress authorized a biosimilars pathway. By comparison, just five biosimilars were approved in the European Union during the first eight years of its biosimilars pathway.
The U.S. outlook is promising. As of July, 68 manufacturer biosimilar programs were enrolled in the FDA’s Biosimilar Development Program. A jump to 92 enrollees is expected next year. In 2019, the FDA anticipates reviewing applications for nine biosimilars and two interchangeable biosimilars.
The first U.S. biosimilar approved by the FDA in March 2015 and launched by Sandoz six months later secured share (40 percent) greater than Amgen’s originator product for short-acting granulocyte-colony stimulating factors in fewer than three years. Over time, the average unit cost for GCSFs declined, saving dollars for patients and payers.
A level playing field, where biosimilar and reference product manufacturers can compete, is sufficient for biosimilars to achieve uptake. Because biosimilars are not exactly the same as the reference product but are highly similar and proven to have no clinically meaningful differences from the reference product, science-based education is essential to provide confidence and lay the foundation for physicians to build experience using biosimilars.
Increasingly, the potential for drug shortages puts a premium on a manufacturers’ commitment to supply reliability and quality. A large percentage of shortages are for sterile injectable biologics, due to highly specialized and costly manufacturing. In one survey, 98 percent of pharmacy directors reported at least one oncologic drug shortage during the prior year, resulting in unplanned switching of patients to another product, dosing changes, treatment delays and even safety events.
Medicare reimbursement policies can either level or tip the playing field. Uncertainty over how and when the government will orient the playing field can deter biosimilar investment, hindering development of a competitive biosimilars market now and into the future, and likewise hinder investment by the originator manufacturer in assessing additional populations that could benefit from treatment and making other advances for patients.
As an example of a policy promoting a level playing field, Congress based Medicare Part B reimbursement for originator and biosimilar products on their respective “average sales prices,” which is a benchmark price that reflects sales prices net of discounts and rebates given in the private market. So far, so good — using the same benchmark price keeps the field level. For biological products administered in a physician’s office, Medicare pays for the products at a rate of ASP plus 6 percent. Congress kept the field level by providing physicians the same dollar markup regardless of whether they prescribe a reference product or a biosimilar, which allows all manufacturers to compete on equal terms.
Conversely, if a drug is administered in a hospital, rather than a physician’s office, the Centers for Medicare and Medicaid Services created an uneven playing field for the nearly half of U.S. hospitals that participate in a government drug discount program called the 340B Program.
Effective this year, Medicare pays for originator and older biosimilar biologics at ASP minus 22.5 percent to reflect the significantly lower acquisition drug costs purchased through the 340B Program. However, Medicare pays for new biosimilars at the more lucrative ASP plus 6 percent for a temporary “pass-through” payment period for two to three years, creating an artificial advantage for newer biosimilar entrants over older biosimilars and reference biologics.
By distorting financial incentives, this policy reduces commercial viability for the reference product as a sustainable competitor and could potentially encourage biosimilar manufacturers to purposefully delay market entry while waiting for a period of high “pass-through” reimbursement, weakening market-based price competition that could save money for the government and patients. An analysis found that manufacturers delaying product launches to maximize the full three-year advantage of pass-through status could increase federal spending by $2.29 billion over 10 years in 340B facilities.
Some manufacturers have even suggested that Congress should extend the “pass-through” period beyond three years. This will only further distort the marketplace to no financial advantage to the government and no clinical or financial advantage for patients. One study estimated that, if 340B pass-through status for biosimilars were eliminated, patients would save as much as $310 million in out of pocket costs.
Biosimilar manufacturers don’t need reimbursement advantages to succeed. Patients and the market are best served by policies that support both innovation and acceptance of biosimilars through competition based on the clinical similarity and the expertise and commitment of manufacturers. Only with a level playing field for both originator and biosimilar manufacturers to compete, and a long-term perspective, will biosimilars deliver more therapeutic options to help reduce the burden of disease, and potentially save billions for patients and the nation’s health care system. Let’s stay on track.
Chad Pettit is executive director of global value access and policy at Amgen’s biosimilars business unit.
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