During his time as FDA Commissioner, Scott Gottlieb, MD, was
an ardent proponent of the biosimilar industry. He, along with Health and Human
Secretary Alex Azar, introduced several proposals to improve biosimilar access
and competition for biologics in an effort to reduce the cost of these
expensive complex molecules.
Scott Gottlieb, MD
Now, as a Resident Fellow of the American Enterprise
Institute, Dr. Gottlieb is still pressing for a biosimilar-friendly environment.
A column in the Wall
Street Journal continues to advocate for several of the initiatives he introduced
at FDA, including those comprising the Biosimilar
Action Plan.
The proposal that may have caused the most disruption to the
biologic status quo was the removal
of the safe harbor for pharmaceutical rebate contracts. The safe harbor
protected drug makers from the antikickback
statute (section 1128B[b] of
the Social Security Act) and helped proliferate
rebate contracts between pharma and the payers, distributors, and health
systems, usually in exchange for preferred positioning or even nonpreferred formulary
coverage.
As discussed
in this space in previous months, several stakeholders besides the
biosimilar manufacturers (including payers) were heartened by the prospects for
removal of the safe harbor. However, fears of rising Medicare premiums for
beneficiaries pulled the plug on hopes for the repeal of the safe harbor.
Peter Bach, MD, at Mount Sinai Medical Center, New York, co-authored
a recent
commentary in the same newspaper, expounding on the belief that price
controls on biologics beyond their marketing exclusivity term would be a
more effective and efficient tool than biosimilars to save money for the health
system. In response to this column, Dr. Gottlieb raised the notion that Congress
could raise the safe harbor repeal from the dead.
“Among other dangers, this could trigger shortages of the
drugs,” he wrote of Dr. Bach’s proposal. “It would also discourage investment
in manufacturing.”
Dr. Gottlieb also pointed out that biosimilar development
could be assisted by prohibiting biologic manufacturers from withholding
samples of their agent from prospective biosimilar makers through either
astronomical pricing or claiming that a REMS program prohibits this type of
distribution. These actions would help encourage very early stage biosimilar development.
They would do little to help encourage competition (and thus lower prices) once
a biosimilar is approved, however.
On the other hand, if drug rebates were taken off the table,
biosimilars and biologics would have to compete on list price and discounts
solely, a move that would decisively even the playing field. It would also remove
the heavy incentive payers currently have to maintain existing formulary coverage
for reference biologics.
Barring the removal of the safe harbor and thus the rebate tool,
biosimilar manufacturers would have nothing to convince payers to cover them
other than tremendous price discounts. In a marketplace like that for the G-CSFs
at present and the very crowded trastuzumab marketplace in the near future,
this will inevitably mean a race to the bottom in pricing and withdrawal of
some competitors. That will result in far less interest in developing biosimilars
for newly expiring biologics.
It seemed like the best opportunity biosimilar manufacturers
had in a long time to gain a competitive
foothold upon launch. Secretary of Health and Human Services Alex Azar had promised
a repeal of the drug
rebate safe harbor as a key component of the Trump Administration’s move to
obtain lower drug prices. Today, the Administration reversed
its course, leaving the biosimilar industry hanging in the balance.
HHS Secretary Alex Azar
According to reports, Health and Human Services found itself between a rock and a hard place. If the drug rebate safe harbor was removed, Medicare part D premiums could rise (plans would compensate for lost rebate revenue by raising consumer costs). There was also no guarantee that lower prices would be passed on to consumers at the pharmacy. Loss of drug rebates would also place great pressure on pharmacy benefit managers (PBMs) to maintain or reduce net drug costs for their plan and employer clients. Accordingly, the removal of the drug rebate safe harbor was opposed by many stakeholders and not supported by enough interests (or with sufficiently influential lobbyists).
The result is a critical missed opportunity for increased access to biosimilars and their attendant savings. Drug rebates can only have value for payers if marketshare exists. In other words, a reference drug manufacturer who holds 100% marketshare before biosimilar launch can offer rebates on every prescription filled—that adds up to millions of dollars for individual PBMs and plans. A biosimilar drug without any marketshare at launch can offer a 50% rebate, but this is meaningless to the payer unless it captures significant marketshare immediately. Without rebates in the equation, biosimilars can compete against reference products on price alone, a much fairer fight for a new drug entering the fray.
Thus, the “rebate trap” will remain a barrier to access.
This episode also makes one wonder which trial balloons given flight by the Administration
will not come back to Earth. The idea of using the Federal Trade Commission to
cut through patent thickets was recently floated
and shot
down by Texas Senator John Cornyn on the Senate Judiciary committee. We’ve
heard about the plan to pin Medicare drug prices to either an international
price index or to “most
favored nations” pricing, or perhaps even both? Improving
the utility of the Purple Book, to actually include useful information about
key patent expirations and market exclusivity periods seems simple enough, but
even this will take some doing. Interchangeability guidelines published in
final form? Well, that should have been completed a couple of years ago.
Despite the approval of 21 biosimilars in the US, the industry does seem to be an awful lot to be worried about. Add in the looming concern in federal appeals court about whether the Affordable Care Act can withstand ongoing attacks concerning the individual mandate, which can then undercut the entire regulatory pathway for biosimilar approval. I know I’m not the only person shaking his or her head. The repeal of the drug rebate safe harbor was a real opportunity to turn the tide.
If you
thought that the Senate hearings on pharmaceutical rebates and pricing was
going to help clarify what might be the best avenue for the administration to promote
biosimilar access, well, you should have known better. With enough finger
pointing to go around, the pharmacy benefit managers and health plans
represented at these hearings passed the ball about as well as the Harlem Globetrotters
during their pregame routines. It was entertaining but not very elucidating.
One
interesting view expressed by Steve Miller, MD, former CMO of Express Scripts
and now Executive Vice President and Chief Clinical Officer for the PBM’s new
parent Cigna, said that the problem was that marketing exclusivity was too long
for the reference biologics. “One of the biggest problems facing the industry
is the lack of biosimilars that have come to the marketplace,” he pointed out,
placing the blame on the overwhelming patent issues.
The hearing
held on April 9 was chaired by Senator Chuck Grassley (R-IA) and co-led by Senator
Ron Wyden (D-OR). Senator Wyden said, “This morning the committee is going to
be looking at one of the most confounding gnarled riddles in American health care
today…whether pharmacy benefit managers bring any value to the taxpayers is a
mystery.”
At a
previous hearing in February at which the pharmaceutical companies provided
their side of the story, the drug makers pointed to the PBMs and the need for
rebates, alleging that they failed to pass through the contracted discounts to
patients.
On the
other hand, the PBMs blamed the pharmaceutical companies for the high list
prices and limited discounts, which require rebating tactics to gain an
equitable net price. In its defense, CVS Health claimed that its ability to
obtain significant rebates is “a powerful tool to offset” the WAC prices set by
drug makers. In response to attacks on the confidentiality of rebating deals,
which benefit plans and PBMs rather than patients, they responded that these
negotiations do not contribute to higher drug costs. Instead, they help secure the
deal-making power of the plan or PBM.
The PBMs did argue a strong case against drug licensing and pay-for-delay deals, which extend beyond generic drugs into the biosimilar space (e.g., AbbVie on Humira). The health plan representatives also emphasized once again that stripping away the rebates would likely result in higher premiums.
One would not call the hearings “clarifying” in any respect. However, it did provide the companies a more public forum to state their positions with regard to the rebate issue and as to the value of their negotiations to the health system in general.
The environment in which managed care has grown since the
1980s is changing at a pace not seen since the introduction of Medicare Part D.
Just a couple of years ago, I visited San Diego (where the meeting was held
March 25–28, 2019), and the city was very much pleasantly unchanged compared
with many visits in the past. This year, an infestation of electronic, dockless
scooters and powered bicycles littered the sidewalks everywhere you turned.
Some leaning on kickstands, many laid broadsides on busy sidewalks.
Inexperienced tourists and seemingly professional riders zoomed through streets
and walkways at top speed, menacing pedestrians and sightseers alike. A rapid
change with potentially dramatic consequences. The same can be said for the payer
environment today.
Although the potential removal of the drug rebate safe
harbor was the focus of conversation, many others reverberated in the presented
sessions and tableside discussions. We heard plenty on posting drug list prices
on direct-to-consumer advertising (and tell me why the US allows DTC
advertising in the first place?). The Trump Administration’s strange decision
to renew support for a judicial effort at repealing the Affordable Care Act.
The imminent departure of Scott Gottlieb, the best friend biosimilar
manufacturers may ever have. The latest integration of payers, the
Centene–Wellcare transaction.
However, the drug rebate safe harbor question did take
center stage. Most payers are convinced that something definitive will now take place after completion of the
comment period (deadline is April 6th). Ross Margulies, JD, MPH, Senior
Associate from the law firm Foley Hoag LLP, provided a review of action so far.
He believes the February 6th proposed rule could be “the biggest
change [to Medicare] since implementation of Part D.”
DRUG REBATE SAFE HARBORS: BEGINNINGS AND ENDINGS
Ross Margulies, JD
Mr. Margulies noted that the current drug rebating environment
is the result of a 1990s settlement between pharmacies, who sued the
pharmaceutical industry and wholesalers, arguing that drug rebates violated the
Robinson–Patman Act, which prevents price discrimination. The settlement
allowed rebates only when it was connected with marketshare.
Last year, the Department of Health and Human Services complained
that rebates are problematic because they can be retained by plans and PBMs, and
not reaching the consumer; the rebate is not considered when consumers’ cost
sharing is calculated; and may be at the root of the rebate trap, which is a
threat to biosimilar uptake.
The Trump Administration sought to address the problem
through the anti-kickback statute, which applies to Medicare Part D and
Medicaid managed care. The rebate is an inducement to convince the plan and PBM
to sell more of the product, said Mr. Margulies. Today, 28 safe harbors protect
these parties from persecution, created by the Office of the Inspector General.
According to Mr. Margulies, the proposed new rule amends the drug rebate safe harbors by eliminating the protection for these manufacturer payments to PDPs, MA-PDPs, PBMs, and Medicaid MCOs. The Administration also proposed the creation of two new safe harbors: (1) for fixed PBM service fees that are set out in writing in advance and based on fair market value and (2) for price reductions taken at the point of sale (i.e., at the pharmacy counter), meaning the rebate is completely passed through to the patient.
These changes would be implemented in 2020. “HHS’s goal is
to get the WAC price reduced all the way down to net,” said Mr. Margulies.
However, it may not lower the cost of drugs overall, per President Trump’s
desire. “It may change some behaviors, though, as plans would not be incented
to prefer high price/high rebate drugs.” He pointed out that moving towards a point-of-sale
discount would represent a new model. “It is a major change for how pharmacies
will be paid,” he noted, and would likely involve the pharmacy receiving the
patient’s copayment, a reimbursement from the health plan, and then a
retrospective chargeback to the manufacturer to make the pharmacy whole.
WILL THE RESULT BE LOWER DRUG PRICES?
How the manufacturers react will be the subject of some interesting
conjecture. Mr. Margulies stated that the federal government hopes 15% of the former
rebates will be retained by the manufacturer, with 75% to be applied as
discounts at the point of sale. The remaining amount would then go towards a
reduced list price. He said, “Manufacturers could theoretically make the WAC
price the net price (no discount), which would cost the system a great deal.
Patients with fixed copays will not likely see much or any difference.” On the
other hand, premiums could rise as much as 25% to compensate for lost rebates
at the plan level. However, it would not be reasonable to believe at this time
that the drug manufacturers would simply lower their prices 15% en masse.
He doesn’t believe that Medicaid will be affected, as their
rebates are already passed directly through to the states (Medicaid
beneficiaries have very low or no copays).
In the end, Mr. Margulies explained, Health and Human
Services has no legal authority to prohibit drug rebates. Any final proposal
must go through Congressional action before it can be enforced as law. Pharmaceutical
contracting is moving head long into a new era, much like personal
transportation in San Diego. I hope neither turns out to be accident prone.
In May 2016, I interviewed Steven Avey, Vice President, Specialty Pharmacy, MedImpact, for the Center for Biosimilars. That conversation speculated on the potential for biosimilars, having only recently experienced the launch of the first biosimilar in the United States, filgrastim-sndz. At the Academy of Managed Care Pharmacy’s 2019 annual meeting last week, I sat down with Steve once again to gain his perspectives on changes in the biosimilar environment.
Biosimilars Review
& Report: Congratulations on winning the Academy of Managed Care
Pharmacy Foundation’s Steven G. Avey Award! This is sort of a double honor,
first having the award initially named after you, and then many years later,
winning it yourself!
Steve, you’re considered one of the real thought leaders in
managed care pharmacy. What do you consider to be the main challenges facing your
colleagues today?
Steven Avey, PharmD: Thank
you. There are many real challenges today. First of all, we have the potential
for drug rebates to go away. It’s clear that something is going to be done (and
we don’t know what that is), and it could apply not
only to Medicare Part D, but possibly Medicaid and commercial. We will need to
wait and see.
Steven Avey, MS, RPh
Another challenge relates to the Administration’s emphasis
on reducing list prices for drugs. This will not only influence the industry,
but managed care pharmacy as well.
That challenge is part of the ongoing concern about the cost
of specialty medications (and continuing price increases), and the greater call
from payers for a better understanding of the value that they’re getting from
these medications. Are the people who are taking specialty medications actually
getting real benefit?
BR&R: In
addition to payers, employer purchasers and others have been requesting a
better understanding of the value of specialty medications. This has been
sought for 10 years or more. Are we any closer today in getting a grip on this?
Avey: I think we
are. Many PBMs are getting more involved in data management regarding these
medications. The better we get at analyzing the medical and pharmacy data
together, the closer we will get to understanding the value of these specialty
medications.
To give you an example, a PBM today is basically reviewed
and assessed on what its financial picture looks like—are you able to bend that
specialty cost trend? But if you don’t know what these specialty agents are really
doing for the patient population, how can you tell if covering them is the
right thing to do? In order for us to know that, we have to evaluate the
medical and pharmacy data together and focus on the total cost of care of that
individual member. Over time, you can say that our costs are either going down
or not. Then, we can ask the question, am I using the right agent or should we
be using those very expensive drugs for these patients?
Given the lack of the medical and pharmacy data, we just
don’t know. That’s one of my greatest frustrations.
BR&R: Let’s
switch to biosimilars. Do you believe that if the rebate safe harbor is removed
for Medicare, payers will also stop seeking them?
Avey: Yes. It
will definitely trickle into the commercial side. I can see a day in the not
too distant future where we don’t rely at all on rebates. It will be a new
world focused almost solely on list price reductions.
BR&R: Will
that give biosimilar manufacturers an edge?
Avey: It will be
a boon for biosimilar makers! When the rebate goes away, then all that remains
is the list price. That will be a huge advantage for biosimilars.
BR&R: Well,
if I’m a reference biologic maker, whose R&D costs were paid off a decade
ago and whose profit margin is extremely high, I can still lower my WAC price
considerably to compete with the biosimilars, right?
Avey: They can,
but they will have to compete with three or even five biosimilars who do not
have to spend millions of dollars on advertising or promotions like the
innovators do to keep their brand’s exposure and visibility high. The innovator
drug maker will do everything possible to avoid losing that high market share.
Now, I haven’t seen much of this in print, but payers are
angry—they’re angry at these 10% to 20% increases in costs each year from the
innovator drug manufacturers. As a payer, if a biosimilar is available, why would
I want to support that innovator maker, who has
dramatically raised costs for the last 10 years? That gives biosimilar
manufacturers the advantage: “Hey, I’m the new guy helping you to reduce costs.
How about supporting me instead?” I think many payers will act on this message.
BR&R: In our
conversation in April 2016, that was the gist of what you said.
Avey: And I
haven’t changed my mind.
BR&R: I
asked, how soon are you going to drop the AbbVie contracts (when there was some
expectation that biosimilars would be available before 2020), and you said, “As
soon as humanly possible.” And you weren’t the only one who said this.
Avey: Absolutely.
And now the timeline has been extended to 2023. This just made us all the more
angry, because this is because AbbVie filed 100 patents on Humira®,
which overwhelmed what the BPCIA was intended to address. The result is that AbbVie
is going to make $16 billion a year (and more each year) for 4 more years
before we’ll be able to see some competition for their market.
BR&R:
Genentech (Roche) is coming out with subcutaneous forms of Herceptin®
and Avastin®. Will these introductions change the way you position the
biosimilars for these two cancer agents, when they are finally launched?
Avey: We’ve dealt
with this 15 years: It’s really no different than what we’ve seen occur with conventional
agents. Consider a sustained-release form of a brand that is approved around the
time the generic for the immediate-acting formulary is launched. You look at
the new product and ask, what does that premium in pricing buy us? Is it a
site-of-care advantage? Maybe, but does it really offset the cost of using that
more expensive agent? We generally decide to cover the lower-priced (albeit it
not as convenient) dosage form. With biologics, the cost differential between
the new agent and the biosimilar is very large, and there is very little
advantage for the new subcutaneous formulation.
BR&R: We are
seeing something similar playing out right now with pegfilgrastim. Most of the
market has moved to the use of Amgen’s on-body injector OnPro®, and
the biosimilars are being launched using prefilled syringes. To the extent that
payers are interested in eroding OnPro’s marketshare, assuming the price
difference is substantial, OnPro does represent a bit more patient convenience.
Some payers may be thinking this way. To the extent that this will happen may
predict some similar effect for the trastuzumab and bevacizumab markets.
Avey: You have to
remember that payers are receiving a lot of criticism that we’re not doing a
good job of supporting the biosimilars. Quite frankly, the biosimilar drugs
that have been approved up until now are really covered under the medical
benefit. We have a little trickle that can be covered under the pharmacy
benefit. Payers have only so much bandwidth. They know that under present
conditions, a new biosimilar has to build market share from scratch. Some have
said, “You know, it’s not worth the effort. We have other fish to fry. We’re
not going to get too excited yet about these products.”
We have an HMO client that did an amazing job moving market share
away from Neupogen® to Granix®. But they own their
prescribers and they can easily analyze the combined medical-pharmacy spend.
They saw a dramatic lowering of expenditures.
BR&R: Are you
expecting biosimilar products for trastuzumab and bevacizumab to be managed
under pharmacy?
Avey: We see
those drugs under the pharmacy benefit now. Remember that those drugs have a
greater utilization than the other biosimilars that have been launched to date.
I do think that they will attract a lot of attention. And if the rebates do go
away, that takes the market share question right off the table. The biosimilars
will do quite well.
BR&R: The
four-letter suffixes: The FDA recently came out with an updated guidance,
saying that the agency will no longer consider adding four-letter suffixes to
previously approved reference agents. However, they will continue to add
suffixes to newly approved biosimilars and interchangeable agents.
Avey: Everybody
is trying to figure out what’s next here. When we look at biosimilars’
pharmacokinetic information, one biosimilar is going to be somewhat different
than another. I don’t think it will be an insurmountable problem, but just a
headache. We’ll just have to be more in synch with our specialty pharmacies to
ensure that they stock and dispense this one biosimilar with this one
four-letter code.
BRE&R: Have
we made any progress from an educational standpoint here? Do providers and
patients still think that a product with a four-letter code is not comparable
to the originator brand? What is the level of discomfort today?
Avey: I’ve
watched this carefully over the last year. I don’t think there will be huge
angst from the payer. The prescribers and to some
degree the patients that will need more educating to make them feel more
comfortable. We will need better educational materials and communications for
them.
The situation is really no different than when we started instituting
the generic substitution laws. We heard a lot of claims that docs will never
prescribe generics, patients will never take them. We had to do a lot of
educating to alleviate their fears, and to help prescribers understand that
these drugs work like the brands work. At the end of the day, I don’t think
that this will be a long-term challenge.
It sounds a bit absurd, but we shouldn’t be surprised at this point: Health plans may not be satisfied if pharma companies simply dropped their drugs’ retail prices. They still want their drug rebates on top of this, says one well-known industry analyst. The pharmaceutical industry is stunned, because its members believed that the net price was the only thing that really mattered (or so they were told). It seems that payers’ addiction to rebates is even tougher to kick than originally thought.
Ronny Gal
Ronny Gal, an analyst from Sanford Bernstein, told Fierce
Pharma on February 11 that
UnitedHealthcare will be seeking “equivalent” rebates on medications,
regardless of whether a company drops its price. According to the article, UHC
executives confirmed the statement. Their logic isn’t completely crazy, but it
is problematic. The rebates, plans have argued, help minimize consumer premium
increases.
Let’s assume that this is the case: larger plans would lose
millions of dollars in revenue if their 20% rebate, for example, were exchanged
for simply a 20% decrease in wholesale acquisition cost (WAC). If the plan is
truly using this revenue to subsidize higher medical costs, then members’ premiums
would have to rise a commensurate amount.
Well, that just puts the pharmaceutical companies (and even
biosimilar makers) in a difficult position. If drug A costs $600 per month, and
to comply with the federal government’s efforts (and those of some pharmacy
benefit managers [PBMs]) to lower medication prices, they drop their price to $400
per month. Don’t scoff, the makers of the PCSK9 hypercholesterolemia drugs just
cut their WAC by 60%.
Similarly, makers of hepatitis
C virus treatments whacked their WACs by significant amounts in 2018. Assume
the manufacturer of drug A was giving the PBM a 20% (or $120 per month per
prescription) rebate to maintain co-preferred position, and the PBM shared half
that rebate with the health plan ($60 per month per prescription). Now, let’s
also assume that the pharmaceutical company refuses to add a rebate on top of
this amount. Who will make up the difference, if the health plan insists upon
it? The PBM? Don’t bet on it.
For biosimilar manufacturers, this lower price plus rebate
scenario can be very discouraging. If you agree that a biosimilar maker can
only gain access if it maintains a 25%+ discount to the reference drug
manufacturer’s WAC, then the prospect of an additional rebate puts further
price reduction pressure on their profitability. That could bolster the
argument that pharma should steer clear of the biosimilar marketplace.
We always understood that from a payer standpoint, net cost
was the primary objective. We were told many times that although it didn’t
matter as much how the number was arrived at, the health plans preferred lower
WAC as opposed to higher rebates. Now, we’re not so sure whether the rebate
trap hasn’t ensnared those health plan executives.
One of the more challenging lines of attack on high pharmaceutical pricing has been solving the “rebate trap.” Although not a singular item in the Trump administration’s Biosimilar Action Plan, Secretary of Health and Human Services (HHS) Alex Azar had begun the process of reviewing how to begin the offensive against the current system of pharmaceutical rebating last summer. On January 31, HHS announced that they have a plan. An open question is how that plan will affect biosimilar access.
Health and Human Services Secretary Alex Azar
“We are taking action to
encourage the industry to shift away from the opaque rebate system and provide
true discounts to patients at the point of sale,” Secretary Azar told the New
York Times.
What Is Known to Date
In releasing its proposed rule, HHS will seek to strip pharmaceutical rebates from the existing safe harbor legislation pertaining to public plans, such as Medicaid, Medicare Advantage, and part D providers. The rule “proposes to amend the safe harbor regulation concerning discounts, which are defined as certain conduct that is protected from liability under the Federal anti-kickback statute, section 1128B(b) of the Social Security Act (the Act),” according to the announcement. “The amendment would revise the discount safe harbor to explicitly exclude from the definition of a discount eligible for safe harbor protection certain reductions in price or other remuneration from a manufacturer of prescription pharmaceutical products to plan sponsors under Medicare part D, Medicaid managed care organizations as defined under section 1903(m) of the Act (Medicaid MCOs), or pharmacy benefit managers (PBMs) under contract with them.” The expectation is that, although the rule would apply to federal health benefits, it would trickle down to private payers.
At the same time, HHS is proposing to establish two new safe
harbors. To encourage the passing of rebates or other discounts directly to
patients at the pharmacy counter, the first safe harbor “would protect certain
point-of-sale reductions in price on prescription pharmaceutical products.” A
second proposed move would protect “certain PBM service fees” under a safe harbor.
This alludes to the use of contracts between a PBM and manufacturer in which
the PBM receives a fixed fee in return for services that assist manufacturers
(in other words, not for services provided to payers).
The pharmaceutical rebating safe harbor would be eliminated in January 2020, if the rule is enacted as written. The public comment period began immediately and will end on March 31. It will take far less time before the stakeholders publicize their views. According to the Pharmaceutical Care Management Association (a trade association representing the PBM industry), the elimination of the current safe harbor protection could create access problems. “While we are reviewing the proposed rule, we stand ready to work with the Administration to achieve our shared goal to reduce high drug costs. Pharmacy benefit managers (PBMs) are part of the solution to high cost prescription drugs. Drug makers alone set and raise prices,” stated JC Scott, President and CEO of the Association.
The trade
association for pharmaceutical manufacturers stated that the proposal
would benefit patient access, by lowering the cost of medications like insulin.
Leveling the Playing Field for Biosimilars
The move away from drug rebates may actually create problems
for health plans, which had professed that the portion of the rebates passed
through to them from PBMs had enabled plans to subsidize care costs. Therefore,
the removal of the rebates may result in premium increases for Medicare
beneficiaries. On the other hand, HHS believes that removal of the safe harbor
could result in lower out-of-pocket costs for Medicare patients. Mr. Azar
believes these lower costs could exceed 30% for not only insulin but for drugs
to treat other chronic diseases.
As written on these pages many times in the past, the rebate
trap significantly disadvantages biosimilar manufacturers who continually fight
a battle for market access. It is at the heart of Pfizer’s lawsuit against
Janssen Biotech for the infliximab business. Stripping away the safe harbor
does not automatically improve access to biosimilars, as the manufacturers for
reference products can simply compensate by lowering their retail prices or
increasing discounts. However, it does take away the impetus for payers to
favor reference manufacturers because of the rebate revenue they receive.
In the long run, this would level the playing field for biosimilar
manufacturers, and the effect would be amplified if these rebating practices
also withered for private payers. We do know that many actions by those with
the best intentions can be subverted by unintended consequences. As an expert
in the pharmacy field once told me, if rebates are disallowed, “the PBMs will
still find a way to make their money.” Health plan premiums may rise as PBM
fees increase to compensate, and this could result in greater numbers of
uninsured overall. At least in this case, it may be more difficult to see a potential
downside for biosimilar makers.
