On Tuesday April 8th the House Subcommittee on Health (of the Ways and Means Committee) held a hearing on lowering costs for patients and the health of the biosimilar market. The testimony of several experts in the biologics and biosimilar areas supported the need to recalibrate PBMs’ relationship to the biosimilar market as well as readjust federal policy on biosimilar reimbursement and development.
A Provider’s Perspective on PBMs and Biosimilars
Debra Patt, MD, PhD, a medical oncologist from Texas Oncology, in her Congressional testimony on biosimilars, explained the market distortions that exist between insurance companies and the PBMs (a common theme among those providing testimony), as well as the detrimental effects of the 340B program on biosimilars. “PBMs and their related insurers often force physicians not to use the most effective and affordable drugs for our patients, but the most profitable drugs for those corporations,” she asserted. “Because they are allowed to use safe harbor rebates to force concessions from pharmaceutical manufacturers, these profit-seeking corporations can mandate the use of the more expensive originator biologic or a specific biosimilar most profitable to them when there are multiple biosimilars available to treat a specific cancer.
“This can create logistical nightmares for practices having to stock multiple biosimilars when different PBMs favor their most profitable biosimilar. At a macro market level, PBMs threaten the viability of a healthy biosimilar market. And I will add that these 3 corporate entities have now started sourcing their own private-label biosimilars to even further increase their profitability with biosimilars.”
Dr. Patt added, “The three largest PBMs that control 80 percent of the market may prefer the biologic product due to an advantageous rebate structure. This practice creates a financial environment where there are drivers that incentivize the utilization of more expensive biologics or private-label biosimilars rather than lower-cost biosimilars. And, as we have seen average sales price (ASP) drop precipitously for biosimilars, oncology and other specialty practices may increasingly be underwater—that is, reimbursement lower than acquisition cost—for biosimilar products, making their selection an unsustainable solution.” Dr. Patt recommended increasing biosimilar reimbursement further to ASP + 10% or at least waiving the two-point sequester reduction when prescribing a biosimilar. The drop in ASPs have become so serious, she said, that “some biosimilars have left the market as the cost structure was so low that continued production was not sustainable.”
Can Providers Tread Water With Biosimilars or Will They Drown in Debt?
Colin Edgerton, MD, a rheumatologist and a member of the American College of Rheumatology Board of Directors, focused his Congressional testimony on biosimilars on the reimbursement issue for Part B drugs. He said, “The ACR has been working to address a critical issue affecting rheumatologists, including my own practice, which limits our patients’ access to biosimilars: the lack of adequate reimbursement for biosimilar treatments.” He stated, “The gap between the cost of acquiring biosimilar treatments for administration to patients, and the amount we are reimbursed upon administering those treatments is negatively impacting both physician practices and access to care for millions of patients suffering from chronic diseases.”
“Rheumatologists typically receive reimbursement for biosimilars based on the ASP for the drug. When PBMs and health plans negotiate substantial rebates with manufacturers, as they often do, these rebates are not passed on to the treating physician or their practice to reduce the cost of acquiring the drug for administration,” explained Dr. Edgerton. “These rebates often exceed 50% of the drug price… The rebates are then reflected in manufacturers’ quarterly ASP reporting to CMS, and therefore artificially lower the ASP to the point that many providers’ acquisition costs substantially exceed how much they are reimbursed. If the reimbursement does not cover the acquisition cost of the biosimilar, physicians will be operating at a financial loss.”
He suggested changing reimbursement through the legislative process to “wholesale acquisition cost plus 3%, until the ASP reaches sustainable levels, as determined by the Secretary” or permanently removing manufacturer rebates from the methodology for calculating the ASP of biosimilars.
An IRA Defense
Aaron S. Kesselheim, MD, JD, MPH, Professor of Medicine, Harvard Medical School, and Director of the Program on Regulation, Therapeutics, and Law, at Brigham and Women’s Hospital, defended the Medicare Price Negotiation provisions of the Inflation Reduction Act (IRA), and the utility of biosimilars. He pointed out that in the first decade following the enactment of the BPCIA, “the introduction of biosimilar competition faced approval delays, slow adoption, smaller-than-anticipated cost savings, and inconsistent savings for patients.”
The result has been tens of billions of dollars in additional revenue for reference manufacturers, he said in his Congressional testimony on biosimilars. Dr. Kesselheim stated that this situation has improved over time, but he pointed out the sluggish uptake of adalimumab biosimilars. He focused more on the interchangeability aspects of biosimilars, as a cause of this slow uptake.
He implored Congress to “advance laws that ensure the long-term affordability of biologic drugs, such as making it harder for manufacturers to build large thickets of biologic patents that block timely biosimilar entry.” Dr. Kesselheim also believes Congress should enact “restrictions on PBM drug rebate flexibilities to enhance insurer coverage of lower-cost biosimilars [and change] CMS rules to allow common billing codes for biologics and biosimilars.”
Unintended Effects of the Biosimilar Legislation
Craig Burton, Executive Director, of the Biosimilars Council, noted “Today, biosimilar prices are, on average, more than 40% lower than their brand biologic’s price at the time of biosimilar launch. In addition, due to biosimilar competition, reference biologics’ prices have declined an average of 33%.” He said, “Put simply, biosimilar medicines allow more patients to receive life-altering treatment. But the long-term outlook for a sustainable and competitive biosimilars market is in question. The apparent slowing of investment in new biosimilar competitors should serve as a wake-up call for the need to ensure a sustainable biosimilars market.”
Mr. Burton made important salient points regarding the IRA and its targeting of Stelara. “To compound the challenge facing biosimilars, the law virtually guarantees an additional year of Medicare coverage even after the biosimilar is on the market.” Stelara was selected for price negotiation as part of the initial price applicability year (2026). He said that since it is negotiated, “Stelara is guaranteed formulary coverage in Medicare next year, regardless of the availability of lower-cost biosimilars.”
“Even today, although more of the big PBMs have begun to adopt biosimilar adalimumab, the total biosimilar market share is only 13%, despite their lower prices. Of note, during the same time period that biosimilars have been on the market, more patients have been switched to newer, high-priced brands instead of the biosimilar, leaving biosimilar products outnumbered by the brand manufacturer’s product portfolio by approximately 9 to 1. This product hopping could not have occurred without the buy-in of major PBMs.”
Mr. Burton implored Congress to eliminate unnecessary regulatory barriers, such as late-stage clinical trials and the interchangeability designation; modify the IRA to prevent further damage to the biosimilar industry; end the use of patent thickets; and incentivize the utilization of biosimilars. “We have the tools to fix this. Now, I implore policymakers to use them. The future of biosimilar competition—and the health of millions of Americans—depends on it,” he concluded.
