Is There an Escape From the Rebate Trap?

The rebates given to pharmacy benefit managers to secure a drug’s place on the formulary have become a difficult barrier to coverage for new products. The rebate income for these PBMs is sometimes passed on to health plans, insurers, and employer purchasers, but more often it is not.

A big issue is that managed care organizations tend to become addicted to millions of dollars in rebate “income,” and this mindset prevents serious consideration of new medications at competitive costs. The health plans don’t see the benefit of incurring the administrative costs of moving masses of patients from the preferred product to a new one, or seeing this revenue stream interrupted, without an overall further improvement in net costs.

Managed care plans have long said that discounts of 25% or more will be necessary to release the rebate stranglehold of preferred products. In the case of infliximab, this has not yet occurred, based on recent minor inroads made by Merck’s Renflexis® biosimilar, despite larger discounts. Until greater competition is available, which drives down the WAC prices (and then average sales prices [ASPs]), barriers to accessing new medications will remain. In fact, when competition does increase, makers of the originator products, like Janssen, can simply ratchet up their rebates to maintain a hold on sales (and a billion-dollar plus profit).

Perhaps the best way around this is to force a change in the marketbasket. This can be accomplished in a couple of ways. The first, by instituting separate tiers for biosimilars and reference agents, takes the biosimilars out of the 1 of 2 preferred drug contracting restrictions, and allows patients to access biosimilars as well as preferred brands.

A second way is to reconsider biologic agents according to indication-based contracts or mechanism-of-action (MOA) based differences. Therefore, the marketbasket is modified to consider anti-TNFs separate from interleukins, allowing preferred agents in each separate category. This would allow, for instance, for more effective psoriasis agents to be well covered, and maintain the preferred position of Humira® and Enbrel® for appropriate patients.

A third way is to work out some innovative value-based contract, in which the manufacturer and health plan/insurer reaches an agreement on (usually) the expected outcomes of drug use and additional rebates or performance guarantees if the medication fails to deliver on this performance. The most important consideration in this agreement is the practicality of measuring an outcome of interest or ensuring adherence.

The rebate trap seems to be ensnaring more manufacturers of new biologics and biosimilars. Without greater consideration of the overall good, this trap can cause systematic problems for the pharmaceutical industry and discourage drug innovation and accessibility.

Coverage Uptake: Zarxio® Covered by 94% of Employer-Sponsored Plans

An analysis released by Avalere on July 11 showed that coverage of biosimilar filgrastim is the rule, not the exception, by employer-sponsored plans.

Avalere surveyed medical or pharmacy executives from 45 health plans and insurers, representing 183 million lives, about coverage for their commercial products. They found that 94% had placed Zarxio (filgrastim-sndz) on formulary. Forty-two percent of the plans responding to this online survey indicated that Zarxio was a preferred brand. This is on par with the competitors (Granix®, Neupogen®, and Neulasta®), one of which is preferred for 45% of the plans surveyed.

In the report, titled “Policy 360: Biosimilars—US Payer Perspective,” Avalere found that coverage in these same employer-sponsored plans for Inflectra® (infliximab-dyyb) was trailing, with 42% covering the biosimilar but only 7% listing it as preferred on their 2017 formularies. Pfizer has only been available for 7 months, so these numbers are expected to rise over time.

Unsurprisingly, health plans ranked relative cost as the number 1 factor in coverage decision making for biosimilars (95%), followed by efficacy (80%), safety (73%), and existing contracts (53%).

In other news: Mylan and its partner Biocon hit a stumbling block to approval of its trastuzumab biosimilar in Europe (application filed in 2016). French inspectors cited Biocon’s manufacturing facility in Bangalore, India, for a number of violations that need to be corrected before the partners can receive authorization to market from the Europeans Medicines Agency. An inspection of the facility, conducted in March, also revealed problems that could affect the production of Mylan and Biocon’s pegfilgrastim biosimilar. The companies had filed for Food and Drug Administration approval of both products, with trastuzumab being reviewed by the Oncology Advisory Committee on July 13. It is not known whether a potential US-licensed version of the drug will be produced at the same Bangalore plant.