Oncology Biosimilars Are Proof That the Market Works

If there is anything that Ted Okon, MBA, Executive Director, Community Oncology Alliance, and Peter Bach, MD, from Memorial Sloan Kettering agree upon, it is that hospital systems make more profit by prescribing high-cost drugs than they do with lower-cost agents, like biosimilars.

Ted Okon

Beyond that, these two wouldn’t be expected to agree on much when it comes to the pharmaceutical market. In his presentation at the World Biosimilar Congress in late March, Mr. Okon tried to dispel Dr. Bach’s main argument, that the biologics market is broken in the US and the best way to address it is through statutory regulation.     

“The fact is,” claimed Mr. Okon, “that the US biosimilar market is working. The market could be stronger and produce more savings, but there is a good deal of price competition.” He cited Bernstein Research’s latest figures, showing strong net price reductions in all biologic areas with biosimilar competition. In addition, bevacizumab and trastuzumab biosimilar marketshares are around 60%.  

The problem is that for select drugs—especially biologics—the mark-ups paid before rebate can average 250%, he said. Hospitals get high rebates, which lower the net cost down to a reasonable average selling price (ASP). “This makes biosimilars financially unattractive to the hospital,” according to Mr. Okon, and as a result, a substantial proportion of hospitals carry only the innovator product. However, the amount the hospital is paid by the insurer varies considerably across payer. For example, Wake Forest Medical Center may receive between $7,000 and $15,800 when billing for Neulasta®, depending on whether the payer has negotiated a good deal with the manufacturer. When it comes to 340B institutions, the hospital systems receive additional discounts that make the reference product even more attractive, he pointed out. Biosimilar makers would have great difficulty getting 340B hospitals to utilize their products.   

Even today, Mr. Okon said, biosimilars are still subject to a fictional narrative, like “physicians don’t want to prescribe them,” or “patients don’t want to take them.” These are demonstratively false, said Mr. Okon, as is the assertion that biologics are a natural monopoly and have to be regulated as one.

The type of mandated price fixing that Dr. Bach and colleagues propose “has never worked long term, and always has unintended consequences,” said Mr. Okon. Indeed, the need for this regulatory approach does not seem to be grounded in the facts. “But biosimilar growth and savings are being held back,” he said, by rebate traps, patent litigation, and other factors.

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