At the September 5–7, 2018 GRx+Biosims meeting, I had the opportunity to moderate a session with three highly experienced biosimilar industry executives. They included Gary Deeb, Senior Vice President, Global Licensing and Business Development, Lupin Pharmaceuticals; Chrys Kokino, MBA, Head Global Biologics— Commercial, Mylan; and Mike Woolcock, MBA, Senior Vice President, Commercial Operations, Apobiologix. In the hour-long session, we covered a range of sticky topics. This post sums up some of the information gained on one aspect—the question of price transparency, recent FDA action to address drug rebates, and whether deemphasizing drug rebates will help biosimilars gain access.
One issue that is getting an awful lot of attention lately is the question of price transparency. This has been highlighted by the difficulties that Pfizer has had in gaining traction for its infliximab biosimilar, resulting in claims of exclusionary contracting by Janssen to protect the latter’s marketshare. One of the principal tools used by the reference biologic manufacturer is its power to rebate. When a drug has the lion’s share of utilization, rebates become very potent inducements to payers to provide or maintain preferred or exclusionary status on formulary. Therefore, the issue of biosimilars and reference drug rebates can be an important one for the industry.
In response to the challenges of biosimilars gaining uptake in the US, Health and Human Services Secretary Alex Azar has been investigating whether safe harbor laws that currently protect drug rebates from anticompetitive lawsuits can be changed. This move can affect revenues for both pharmacy benefit managers (PBMs) and payers who share in the rebate monies. It raises a related question, however: Would biosimilar manufacturers be better off competing on list pricing (i.e., wholesale acquisition cost) alone? And does the issue of biosimlars and rebates really matter?
In the backstage green room, this topic generated much discussion among our panelists. And quite frankly, the answer to this question is not yet in.
In previous market research and access projects performed for pharma and their agencies, it has been clear that health plan medical directors and pharmacy directors would prefer competition based on discounted WAC, whereas PBMs prefer to retain their rebate revenue. However, the plans do share in drug rebate revenue to varying extents, which they are quick to point out are helpful in holding down premium increases or funding other projects beneficial to members and patient care. Hence, they are stuck in the rebate trap as well. They are not generally eager to add a new preferred drug even if the manufacturer is offering powerful discount WAC plus competitive rebate; they realize that the rebate revenue is based mostly on how much marketshare the drug maker can gain (and how quickly it can amass marketshare).
The biosimilar industry representatives at our panel discussion were similarly reticent. Does it represent an opportunity to break the exclusionary contracting hold of companies like Janssen? Without high rebates to cement a reference drug’s place as a preferred or the only covered biologic, other manufacturers can get their foot in the door and compete for marketshare based on price alone. This does not mean that prices would necessarily be more transparent, however. One would expect that discounted prices negotiated (from one plan to another or one PBM to another) would differ and remain confidential in nature. In other words, Kaiser Permanente Southern California could still only guess what Blue Shield of California was paying for infliximab and vice versa.
If the average sales price (ASP) methodology were unchanged, one would expect the ASP, which reflects discounts and rebates, to be closer to the WAC price by the amount no longer rebated. But the wild card in this scenario would be the pharmaceutical and PBM industries’ reaction. Is there a way to reclassify rebates as some other payment, like “administrative fees”? Our panelists believe that the PBMs, for example, will not easily forfeit a revenue line representing pure profit, regardless of its size. One would need to anticipate some attempt to retain this revenue.
The issue of biosimilars and drug rebates may only be shifted, in the end. Payers would still want to see the lowest net cost for any product. In 2018, they don’t care too greatly about how this is achieved, through rebates, discounts, portfolio contracts, or other means. If pharmaceutical rebates were deemphasized, my own guess is that at least biosimilar manufacturers would not be disadvantaged once approved, simply because they don’t have any existing marketshare. And it would also test a payer’s fortitude in foregoing its own drug rebate revenue.