$7.6 Billion Estimate on Savings Lost From Approved, Nonlaunched Biosimilars Could Be Low

$44 Billion by 2024. $250 Billion by 2024. Whatever. I’ve not been very impressed by the many attempts to estimate how much money biosimilars could save the US health care system. Even the more well-known estimates of biosimilar savings, like those from RAND and Express Scripts, have been little more than games of “pin the tail on the donkey,” as the researchers were blinded as to when products would actually launch and the unproved potential for biosimilar uptake.

Of course, this was not the economists’ fault. They had little past information about the US biosimilars market on which to base their view of the future, and they could not have predicted the extent to which patent litigation prevented access to these medications.

I do appreciate the latest effort, however, by the Biosimilars Council (a subsidiary of the Association for Accessible Medicines) to understand biosimilar savings. Instead of predicting the future, the Council reviewed the past to assess how much each biosimilar would have saved the health care system and patients had they launched as expected.

The number they landed on was $7.6 billion since the introduction of the first biosimilar in 2015 through 2018. It applies not to the seven biosimilars (as of June 12, 2019) that were launched but to the 12 that were approved but not available because of ongoing patent litigation.

As impressive as this lost opportunity sounds, I believe that the biosimilar savings estimate is still too low. The calculation by the Biosimilars Council does not seem to include an important aspect: The reference manufacturer takes significant price annually for each year biosimilar competition does not emerge. The analysis assumed a 30% price discount and 40% uptake, split between two biosimilar competitors. Uptake was assumed to increase to 50% if three were three separate competitors. Yet the analysis was based on actual list prices from IQVIA data.

If biosimilar competition existed, these price increases would not have occurred, likely at all. For example, the availability of Inflectra® and Reflexis® did not fuel great uptake of biosimilars at the expense of Remicade®; however, the infliximab market was changed suddenly, by forcing Janssen Biotech to not only halt their price increases in 2016 but significantly lower their net pricing. As a result, average sales prices have been dropping ever since the introduction of the biosimilars (from a high of $85.81 per 10 mg in January 2018 to $69.96 in July 2019 [–19%]).

Consider the same scenario for the adalimumab biosimilars, which I wrote about previously. Without competition, AbbVie can raise its retail prices right through 2022, resulting in upwards of 50% higher list prices. Although this does not account for contracting, each new payer contract it should be remembered, is based on the current price (not the previously rebated costs). In other words, the higher prices work their way into subsequent payer contracts. How much additional biosimilar savings, on top of the calculated $7.6 billion, would that be? I’m not an economist, but it shouldn’t be too difficult to estimate, based on no future price increases (only future price reductions). Over an 18-month period, Amgen raised the price of Enbrel® four times, resulting in a 37% jump by 2016. Had biosimilar etanercept been available at the time, that would not have happened, yielding an instant 37% savings. That does not prevent the reference manufacturer from hiking the drug price in the months before biosimilar competition occurs. This practice is expected to continue. However, the earliest possible availability of biosimilars will yield compounded price savings.

Payers Focus More on a Biosimilar’s Price Than on Clinical Data: A Retrospective

It can be fun to go back in time! That’s the case with an old column I wrote for the Center for Biosimilars, just after Zarxio was approved. Here, I reprint a portion of the column, with some additional commentary.

A RAND study from 2014 boldly predicted $44.2 billion in savings from biologic drugs over the 10-year period ending in 2024. The study’s authors believed that upwards of 20% of the savings would come from the anti-TNF inhibitors alone.

These savings would salve the wounds of payers and purchasers suffering annual double-digit increases in specialty pharmaceutical costs. It has kept them up at night. Worries about the affordability of medicines have kept patients and their families on edge. All of this light focused through the magnifying glass, refracting to a point, has heated up attention on the first biosimilars in the 351(k) approval process. US health plans, pharmacy benefit managers, and insurer executives have been anticipating the push to biosimilars and their possible savings since the implementation of the Biologic Price Competition and Innovation Act in May 2010.

Expectations have pent up that biosimilars will begin to relieve the pressure building from the annual double-digit specialty drug trend. If payers are given 20% and 25% lower net prices, they will likely jump at the opportunity to save millions of dollars, if they can. That means putting net pricing ahead of clinical data when making coverage decisions (assuming no significant immunogenicity differences, as payers and providers would consider this a powerful disincentive).

Payers may presuppose that the Food and Drug Administration (FDA) will do its utmost to evaluate the equivalence in outcomes and pharmacokinetic/ pharmacodynamic characteristics of the agent. The real question is whether payers care enough about the clinical data to make extrapolation a potential issue if the FDA does not. They may well leave that decision to the prescribers, taking a more laisse faire approach, as they did in the very early days of generic drug introductions (before the days of automatic generic substitution).

Today’s Commentary:

Well, the verdict seems to be in, both from payers’ and providers’ perspectives. Payers are leaving it up to the FDA, and in some cases, without any clinical data in patients (just phase 1 trials in healthy volunteers), to determine the appropriateness of biosimilars in several disease states.

Proprietary market research, as well as individual conversations with payers, support that they have crossed a critical point of confidence—the safety and effectiveness of using a biosimilar instead of a reference product is no longer much of an issue. Any question about extrapolation, similarly, is no longer deemed clinically relevant in approved biosimilars. This may not be the case with a future product. We must also await experience involving FDA approvals of products with “skinny labels” or limited indications. In these cases, we don’t know yet whether plans and insurers will discourage use of a biosimilar for the reference product’s full slate of applications (privately, they have told me they wouldn’t discourage this use, assuming similar dosage forms).

However, payers hunger for biosimilar choices. Not necessarily to add to their formularies, but to force originator manufacturers to halt further price increases. They want the opportunity to worry less about one biologic agent for which next year’s expenditures will jump—and by how much exactly? The few biosimilars approved in the US have forced WAC pricing (and ASP pricing) down. We are expecting the same for the latest market entrants, like pegfilgrastim.

As for RAND’s predictions? Not enough has happened from 2014 until now to make one think that cumulative savings of $44 billion is realistic. It is possible, however, if one considers the near-term launches of trastuzumab and bevacizumab biosimilars. The one-year savings from adalimumab biosimilars may top $8 billion by itself (out of total revenues exceeding $20 billion prior to the introduction of these biosimilars).

It should not have even been this close.

Infliximab Biosimilars Savings Could Exceed $400 Million Dollars Annually

Everyone with an opinion believes that biosimilar drug use will save the health system considerable money. Calculations for biosimilar savings have been hampered by several factors. For example, previous high estimates have not been based on real-life scenarios. Only 3 biosimilars have been launched and utilized in the US; so little experience has been gained on which to base calculations.

Yet, isolating the savings associated with a single approved biosimilar does put their potential into perspective. It also demonstrates the promise of cumulative biosimilar savings with their launch and uptake. Based on current infliximab average sales prices (ASPs), wBiosimilar Savingshich considers discounts and rebates, one organization believes that a 50% marketshare for biosimilar infliximab could result in well over $400 million in annual savings system wide.

The analysis, conducted by Wayne H. Winegarden, PhD, Senior Fellow in Business and Economics, Pacific Research Institute, accrued the lion’s share of the annual savings to employer-sponsored health plans ($262 million to $315 million, compared with no sales of infliximab biosimilars). Medicare accounted for up to $150 million savings annually.

Dr. Winegarden tested several scenarios. The calculation considered the cost of the infliximab regimen based its various indications. He calculated biosimilar savings using different add-on percentages to ASP (including the current ASP + 4.3% payment and up to ASP + 20%), as well as different marketshares of the biosimilars (from 10% to 90%).

The current marketshare of the two available infliximab biosimilars—Inflectra® and Renflexis®is below 5%, based on data from the first quarter of this year. This is partly because of Janssen’s tactics in matching the net costs of biosimilars with additional rebates on Remicade. This raises two important points: Dr. Winegarden’s analysis reveals savings accruing to the health care system (not necessarily to the payer). Also, the very existence of infliximab biosimilars has resulted in significant net savings compared with the price increases seen prior to their introduction.

It is a bit more difficult to pinpoint the system savings resulting from the use of the first biosimilar approved in the US, filgrastim-sndz (Zarxio®). The other branded product, tbo-filgrastim (Granix®), was launched a couple of years earlier and gained its own marketshare from the reference brand Neupogen®. No doubt, Zarxio contributed to some level of cost savings. In other words, the infliximab example is an easier calculation with a cleaner result.

With eight biosimilars for six reference products awaiting their turn to hit the market, and drugs like adalimumab and etanercept among them, it is easy to see how biosimilars savings can easily exceed $10 billion. Just not yet.

Payers’ Expectations for Biosimilars Reflect a Conflicted Environment

Hopeful but not enthusiastic. Preparing but not anticipating. Those are the impression one gets when speaking to medical directors and pharmacy directors of health plans, insurers, and pharmacy benefit managers about biosimilars today. Although savings associated with biosimilar use have been limited so far, one recently released survey of these payers revealed expectations that seem to reflect today’s environment.

payer expectations of biosimilarsIn December 2017, executives from the TPG-National Payer Round Table (NPRT) obtained 77 responses to their Web-based survey (a 31% response). At that time, only eight biosimilars had been approved (Pfizer’s Ixifi™ [infliximab] was not yet approved by the Food and Drug Administration). Thirty-nine percent of the respondents were from national plans, 27% were from regional organizations, and the remainder were from local health plans.

Fifty-three percent of the respondents indicated a willingness to permit biosimilar use for all originator-approved indications, regardless of the FDA’s approved labeling. Twenty-five percent expected a biosimilar to be the only product covered on formulary. In order to enhance conversion and uptake, nearly half (48%) believe that the biosimilar will be associated with lower cost sharing than the originator. This could come in the form of a separate biosimilar tier, with a fixed copay or percent co-insurance that is significantly lower than that for the originator drug.

Uncertainty About When and How Much 

The study results were released as a poster at the 2018 annual meeting of the Academy of Managed Care Pharmacy last week. In an interview with Biosimilars Review & Report, Richard A. Brook, MS, MBA, Senior Vice President at TPG-NPRT, said, Health plans generally expect their costs to go down with the use of biosimilars. However, a lot of uncertainty remains as to the timing and magnitude of these savings.”

Indeed, some of the respondents were quite cynical about the savings seen in 2018. Forty-five percent believe there will be less than 10% savings from biosimilars overall this year. A further 16% do not anticipate any savings from biosimilars. The picture brightens significantly when the timeframe is moved two years out—by 2020, 29% believe savings will exceed 20%, and 47% think that savings will be 10% to 20%. Only 2% think no savings will be accrued. This is likely in line with expectations that etanercept, pegfilgrastim, and some oncology biosimilars will be available for use by 2020.