Pfizer’s Anticompetitive Suit: A Slippery Slope to Competitive Bidding?

When Pfizer first announced its lawsuit against Janssen’s parent Johnson & Johnson in September 2017, it pointed to exclusionary contracting, “anticompetitive” behavior of Remicade®’s maker as the reason for its very limited market access.

The lawsuit claimed that Janssen has withheld or threatened to withhold rebates if payers do not keep Remicade in an exclusive preferred position. The degree to which health plans knuckled under to these demands may only be inferred from the 3% marketshare Pfizer’s Inflectra® now holds. For these drugs, which are still typically covered under the medical benefit, “nonpreferred positioning” usually means no coverage. For drugs covered under the pharmacy benefit, this is not the case.

In August, the Eastern Court of Pennsylvania ruled against J&J in its request that the lawsuit be dismissed. While discovery in the case may be ongoing, we could not find mention of a resolution date for the suit.exclusionary contracting

For the sake of argument, let’s say that the Eastern Court of Pennsylvania rules in favor of Janssen. In other words, exclusionary contracting was not an anticompetitive behavior. That means the status quo is intact, but some factors may affect this situation going forward. These include the Center for Medicare and Medicaid Services’ desire to move part B drugs (the medical benefit) to part D (the pharmacy benefit) for Medicare beneficiaries.

The scrutiny on rebate contracting coming from several sectors, and lack of transparency, may also independently influence future use of these pharmaceutical company tactics. I helped conduct a market research project recently on a nonspecialty drug. As part of these interviews, we were asked by the client to inquire about the range of rebates they were receiving from competitor manufacturers. Their responses were requested as a range (e.g., 20% to 30%), not specific contract details, and we had no intention of providing reports of individual payer deals, only anonymous, aggregate information. We expected little to no response to that query, and that is exclusionary contractingexactly what we received.

Let’s discuss the other potential outcome, in which the Court rules in favor of Pfizer. That implies that this exclusionary contracting practice is indeed anticompetitive. If this is the case, we may be on a very slippery slope. What is the difference between payers and pharma companies engaging in a “1 of 1” contract when there are multiple potential products and a “1 of 2” contract? In both cases, drug makers are committing payers to anticompetitive behavior (as perhaps defined by the Court’s new precedent).

The preferred drug tier (whether preferred generics, preferred brands or whatever) is supposed to be for products with proven clinical, patient care, or economic advantages. Truthfully, payers rarely place medications in the preferred tier for reasons other than net costs or rebate contracting, which is based on marketshare.

Now add in the potential effects of the Administration’s desired shift to part D, where pharmacy benefit rules can be applied. That exposes injectable products that were shielded under Medicare part B to commonly applied formulary placement practices.

To be complete, Janssen’s strategy was not solely based on Remicade. It may be found to have bundled Remicade with other agents in deals to exclude Pfizer’s products. The Court may also react specifically to Janssen’s contract stipulation that threatens to withhold rebates connected to future use of the product, to increase its leverage.

However, if the Court determines that 1 of 1 or exclusionary contracting with rebates are the root of the anticompetitive behavior, why should 1 of 2 or even 1 of 3 contracts in a drug category with 5 similar agents be less so? This is the slippery slope that could undo rebate contracting, and push us towards a system that more resembles a competitive bidding process like in Europe. Alternatively, it could accelerate the move towards outcomes- and value-based contracting. The result could be a system-wide revamping of the drug formulary and the pharmacy–drug maker relationship.

In other biosimilar news…Sandoz has signed a licensing agreement with Abbvie, allowing it to market its biosimilar version of Humira in 2023. The agreement, as with Abbvie’s settlements with other biosimilar makers, halts all patent litigation with Sandoz in exchange for a licensing royalty paid to Abbvie.

Biosimilars and Drug Rebates: A Foot in the Door to Access?

At the September 5–7, 2018 GRx+Biosims meeting, I had the opportunity to moderate a session with three highly experienced biosimilar industry executives. They included Gary Deeb, Senior Vice President, Global Licensing and Business Development, Lupin Pharmaceuticals; Chrys Kokino, MBA, Head Global Biologics— Commercial, Mylan; and Mike Woolcock, MBA, Senior Vice President, Commercial Operations, Apobiologix. In the hour-long session, we covered a range of sticky topics. This post sums up some of the information gained on one aspect—the question of price transparency, recent FDA action to address drug rebates, and whether deemphasizing drug rebates will help biosimilars gain access.

One issue that is getting an awful lot of attention lately is the question of price transparency. This has been highlighted by the difficulties that Pfizer has had in gaining traction for its infliximab biosimilar, resulting in claims of exclusionary contracting by Janssen to protect the latter’s marketshare. One of the principal tools used by the reference biologic manufacturer is its power to rebate. When a drug has the lion’s share of utilization, rebates become very potent inducements to payers to provide or maintain preferred or exclusionary status on formulary. Therefore, the issue of biosimilars and reference drug rebates can be an important one for the industry.

biosimilars and rebatesIn response to the challenges of biosimilars gaining uptake in the US, Health and Human Services Secretary Alex Azar has been investigating whether safe harbor laws that currently protect drug rebates from anticompetitive lawsuits can be changed. This move can affect revenues for both pharmacy benefit managers (PBMs) and payers who share in the rebate monies. It raises a related question, however: Would biosimilar manufacturers be better off competing on list pricing (i.e., wholesale acquisition cost) alone? And does the issue of biosimlars and rebates really matter?

In the backstage green room, this topic generated much discussion among our panelists. And quite frankly, the answer to this question is not yet in.

In previous market research and access projects performed for pharma and their agencies, it has been clear that health plan medical directors and pharmacy directors would prefer competition based on discounted WAC, whereas PBMs prefer to retain their rebate revenue. However, the plans do share in drug rebate revenue to varying extents, which they are quick to point out are helpful in holding down premium increases or funding other projects beneficial to members and patient care. Hence, they are stuck in the rebate trap as well. They are not generally eager to add a new preferred drug even if the manufacturer is offering powerful discount WAC plus competitive rebate; they realize that the rebate revenue is based mostly on how much marketshare the drug maker can gain (and how quickly it can amass marketshare).

The biosimilar industry representatives at our panel discussion were similarly reticent. Does it represent an opportunity to break the exclusionary contracting hold of companies like Janssen? Without high rebates to cement a reference drug’s place as a preferred or the only covered biologic, other manufacturers can get their foot in the door and compete for marketshare based on price alone. This does not mean that prices would necessarily be more transparent, however. One would expect that discounted prices negotiated (from one plan to another or one PBM to another) would differ and remain confidential in nature. In other words, Kaiser Permanente Southern California could still only guess what Blue Shield of California was paying for infliximab and vice versa.

If the average sales price (ASP) methodology were unchanged, one would expect the ASP, which reflects discounts and rebates, to be closer to the WAC price by the amount no longer rebated. But the wild card in this scenario would be the pharmaceutical and PBM industries’ reaction. Is there a way to reclassify rebates as some other payment, like “administrative fees”? Our panelists believe that the PBMs, for example, will not easily forfeit a revenue line representing pure profit, regardless of its size. One would need to anticipate some attempt to retain this revenue.

The issue of biosimilars and drug rebates may only be shifted, in the end. Payers would still want to see the lowest net cost for any product. In 2018, they don’t care too greatly about how this is achieved, through rebates, discounts, portfolio contracts, or other means. If pharmaceutical rebates were deemphasized, my own guess is that at least biosimilar manufacturers would not be disadvantaged once approved, simply because they don’t have any existing marketshare. And it would also test a payer’s fortitude in foregoing its own drug rebate revenue.

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.

Plans Use Step Therapy to Encourage Utilization of Remicade Over Biosimilars

Health plans and insurers are not yet turning to biosimilar infliximab as a preferred therapy, according to Gillian Woollett, DPhil, MA, of Avalere. Her new report surveyed publicly available policy about health plans across the nation. The principal finding was that step therapy was commonly used  to encourage use of the originator product.

In fact, just one health plan (representing 1% of the 172 million lives covered in this study) supported the use of either Inflectra® or Renflexis® over the reference product Remicade® through step therapy. One plan (2% of the covered lives) allowed the use of either the originator product or Inflectra as a first step.

Gillian Woollett of Avalere on step therapy and biosimilars
Gillian Woollett

Four of the 18 plans with publicly available information did not utilize step-therapy rules for any forms of infliximab. However, “10 of the 18 plans (55% of plans, 52% of covered lives) require the use of [Remicade] first, alone or in combination with another DMARD,” stated Dr. Woollett in the report. A total of 81% of the covered lives from these 18 plans were subject to step therapies limiting access to one infliximab product or the other.

On its face, this type of step policy makes a bit of sense. Step therapies are often used alone or part of prior authorization mechanisms to make sure patients try more cost-effective agents first. In rheumatoid arthritis, that may comprise use of nonbiologic drugs before proceeding to a TNF inhibitor and then to another biologic in patients with rheumatoid arthritis. However, there is no proven benefit (or even logic) to offering a biosimilar infliximab after failing Remicade, or vice versa. If there was a significant clinically relevant difference in immunogenicity, this could be an issue, but this also has not been seen in practice. It makes more sense to try another anti-TNF or perhaps even move to an interleukin inhibitor—something with a different (or slightly different) mode of action.

A policy such as this can confuse the issue for patients, whose knowledge of biosimilars seems tenuous, and even providers, some of whom have little experience prescribing them, particularly because of payers’ Remicade-first policies.

The Avalere report provides some support for how payers are arresting utilization of biosimilar infliximab in favor of the originator infliximab product.

Dr. Woollett paints a very different picture for subcutaneously administered filgrastim products. Forty-nine percent of the covered lives (five large plans) had policies favoring Zarxio®, whereas 27% of covered lives were encouraged to use Neupogen® first.  For these 18 plans, five (28% of plans, 49% of covered lives) demonstrate a preference for the biosimilar, filgrastim-sndz. Five (28% of plans, 27% of covered lives) demonstrate a preference for the reference filgrastim. Eight plans (44% of plans, 24% of covered lives) do not indicate a preference through formulary design. A further 24% were not subject to any preference.

FDA’s Gottlieb to Health Plans: Move Away From Short-Term Rebates on Reference Drugs to Enhance Long-Term Biosimilar Savings

According to Food and Drug Commissioner Scott Gottlieb, MD, the managed care sector’s willingness to accept larger rebates from manufacturers of originator biologics to preserve formulary coverage may seriously hinder the long-term success of the biosimilar industry. And more importantly, the ability to control biologic costs through competition.

FDA Commissioner Scott Gottlieb, MDIn remarks made to a national meeting of America’s Health Insurance Plans’ (AHIP) in Washington, DC, Dr. Gottlieb worried that biosimilar manufacturers may start to believe that “the system is rigged against them.”

In terms of patent litigation, that certainly may seem true. However, Pfizer’s complaint that Janssen is undercutting its discounts by providing plans and insurers additional rebates would seem to be a practice that big pharma has used for years (Pfizer included). Therefore, Dr. Gottlieb is asking payers to turn aside those rebate offers and instead cover the biosimilars, at least for new patients.

He stated that the FDA is “invested in making sure that the new biosimilar pathway works, and that we can help facilitate a robust market for these products. So, we take note when we see market practices that can reduce the incentive for sponsors to invest in the development of biosimilars in the first place.”

Dr. Gottlieb put it to health plans succinctly: “Payors are going to have to decide what they want: The short-term profit goose that comes with the rebates, or in the long run, a system that functions better for patients, providers, and those who pay for care…Do they want to continue to benefit from monopoly rents today, or help generate a vibrant biosimilar market that can help reset biologic pricing—and drug pricing more generally— through competition.”

He suggested that payers help increase biosimilar uptake by lowering or waiving copays for biosimilars or removing prior authorization requirements when biosimilars can be prescribed. “FDA has a strong interest in seeing the biosimilar market grow,” he reiterated, “but some of that is going to be up to the choices you all make.”

Pfizer’s At-Risk Launch of Inflectra Pays Off (at Least a Bit)

The US Court of Appeals handed Pfizer a big victory in its gamble to bring its biosimilar version of Remicade® to the market before the completion of patent litigation. On January 23, the Appeals Court ruled that Johnson & Johnson’s ‘471 patent in the case was declared invalid, clearing the way for sales of Inflectra® (infliximab-dyyb). Had Pfizer lost the suit, J&J could have sought Inflectra’s (and Samsung/Merck’s Renflexis®’s) revenues in addition to other damage claims.

Remicade’s ‘471 patent expiration was September 2018, but the US Patent and Trademark Office earlier ruling contended that the antibodies at the center of this patent were already included in patents that had previously expired.

Remicade is manufactured and sold by J&J’s subsidiary, Janssen Biotech.

In a widely publicized case, Pfizer sued J&J in September 2017 for anticompetitive practices, which it believes held down the sales of Inflectra to a spare $74 million for the first three quarters of last year. Although J&J is seeking to appeal the decision, with the patent expiration date looming, as well as limited sales of Inflectra, this would seem to be of relatively little benefit.

In any case, J&J is wary of losing marketshare and revenues on Remicade. According to Bloomberg News, Janssen Biotech saw fourth-quarter revenues from the biologic drop almost 10%, to $1.47 billion. Increasing competition from other biologics for similar indications and other biosimilar versions of infliximab worldwide have contributed to reduced sales.

News in the Courts on Biosimilars

According to a Reuters report, Janssen Biotech withdrew its patent lawsuit against Samsung Bioepis on November 10. The suit alleged infringement in the manufacture of Samsung’s infliximab biosimilar.

Related imageThe action, which was filed in U.S. District Court of New Jersey, means that Merck and Samsung, which launched Renflexis™ in July, is no longer at risk for revenues earned in the sale of its biosimilar. If Janssen had maintained the lawsuit and later earned a victory in the courts, it could have been awarded a large percentage of Samsung’s Renflexis revenues.

In a separate case, an appeals court found that the Southern District of Florida was correct in its decision clearing Apotex Inc of any patent infringement in its development of biosimilars of Amgen’s Neulasta® and Neupogen®. The initial ruling, in September 2016, helped cleared the path for the biosimilars to reach the market. However, the organization’s filgrastim biosimilar was first filed in February 2015, without an approval. Its pegfilgrastim biosimilar was filed earlier, in December 2014, but has not advanced through the Food and Drug Administration’s 351(k) approval process. Apobiologix is the Apotex subsidiary that would manufacturer and market the biosimilars in the US, should they gain approval.

Pfizer Sues J&J on Anticompetitive Practices on Infliximab in the US

In late May, Merck was named in a UK lawsuit by Pfizer, which has been trying to expand its market for Inflectra®. Merck, which markets Remicade® (infliximab) in the EU, was accused of anticompetitive practices. On September 20, Pfizer brought a similar complaint against Johnson & Johnson (the parent of Janssen and the manufacturer of Remicade®) in the US, according to a lawsuit filed in US District Court (Eastern District of Pennsylvania).

Whereas Pfizer has made some inroads to the US market, since its launch at the end of 2016, Janssen has done a good job of blocking and tackling—playing the contracting game. The lawsuit claims that Janssen has withheld or threatened to withhold rebates if payers do not keep Remicade in an exclusive preferred position. Pfizer may have invited such action to an extent by entering the market at a 15% discount to the originator’s wholesale acquisition cost (WAC). Many experts expected this type of approach by Janssen. Payers were candid in their reluctance to switch to the biosimilar, especially if Janssen would counter the modest discount with rebates that narrow or eliminate the difference in net costs. In other words, a greater discounted price may have opened the market to Pfizer more rapidly, because Janssen may have been less aggressive in its efforts to match the net cost.

In an August earnings call, Pfizer indicated that although Medicare is covering Inflectra, its overall US marketshare was only 2.3%.

According to the press release announcing Pfizer’s lawsuit, “[Johnson & Johnson’s] exclusionary contracts and other anticompetitive practices have denied U.S. patients access to therapeutic options and undermined the benefits of robust price competition in the innovative and growing biologics marketplace for patients… J&J’s systematic efforts to maintain its monopoly in connection with Remicade® (infliximab) by inappropriately excluding biosimilar competitors violates federal antitrust laws and undermines the principal goals of the federal Biologics Price Competition and Innovation Act (BPCIA).”

This may be the first time that routine contracting efforts to defend against generic competition and maintain a monopoly within a drug category have been cited as a violation of antitrust legislation. What may have amplified Pfizer’s ire was its assertion that several insurers originally placed Inflectra at parity coverage with Remicade. These payers changed their position after “J&J threatened to withhold significant rebates unless insurers agreed to effectively block coverage for Inflectra and other infliximab biosimilars.”

Furthermore, the suit claims that clinicians and hospitals were reluctant to purchase Inflectra, with the belief that insurers may not reimburse them for its use. These providers may have been further influenced by an insistence by J&J on their signing contracts that dictated significant discounts on Remicade only if they would not purchase Remicade or other infliximab biosimilars.

At this time, Inflectra is priced at an average 19% discount to Remicade’s wholesale acquisition cost (WAC). Pfizer says that it is offering additional discounts on top of this to persuade payers into covering their biosimilar. Merck’s launch of its own biosimilar infliximab (Renflexis®) comes with a price tag of 35% below that of Remicade, which adds tremendous pressure on payers to reconsider their positions. This also signals the early closing of Pfizer’s window of opportunity as the first biosimilar entrant, on which it gambled an at-risk launch.

Biosimilars and Generics: Are the Drug Companies Using Similar Tactics?

The rebate game seems to be overrunning patient affordability and common sense, according to an article in the New York Times. This has been a problem for biosimilars and other high-cost specialty brands, but now it seems to be extending to generics as well, with patients on the losing end of the deal.

Pharmaceutical manufacturers offer rebates to health plans and pharmacy benefit managerLee 2s to offset a drug’s higher wholesale acquisition costs (WAC) and entice these payers to cover their drug, often at preferred tiers. The result is that new products can be locked out of the formulary or placed on nonpreferred tiers, because the contract requires exclusivity. This has been called the “rebate trap.” The rebate trap was never really a problem for generics in the past, because they were far less expensive than the brands, and with generics made by several companies, the price and rebating competition was too fierce for branded manufacturers to compete.

The New York Times article cited the case of Adderall XR for people with attention deficit hyperactivity disorder (ADHD). The drug has been available as a generic for some time. However, Adderall’s manufacturer, Shire Laboratories, has aggressively rebated their product to compete with the generic, providing a net cost to the health plans and PBMs that is less than the generic. Shire wants to retain some revenues on their products rather than leave the battle to the generic manufacturers. There is nothing wrong with that, and it results in lower net costs—but not for many patients.

First, if the plan has a substantial copayment difference for generics and preferred products, this can mean the average patient will have to pay the higher amount (unless the plan makes adjustments and allows the patient to purchase the brand at the generic copayment level). Second, the rising number of people with high deductible plans (including pharmacy deductibles) will have to pay the higher full price of the branded drug than the generic (according to the Times’ sources, this is about $50/mo). Thus, until they have paid their deductible, these patients are disadvantaged by this rebate arrangement. Consider also that the rebate savings to the payer are rarely, if ever, passed on to the patient.

Here’s the kicker: The pharmacist may be required by the plan to go back to the doctor to ask that they redo their prescription, by checking off the box that requires it be dispensed as written (for the branded product only). This is after generations of pharmacists have been trained on automatic substitution of generics for brands and patients have been persuaded to accept it.

Although the problem is very evident with ADHD, the lack of multisource generics means less competition for other drug classes as well. This is not limited to one payer either. The article mentioned Humana specifically, but it is likely that other payers (national and regional) are also party to these contracts.

This scenario can also hurt competition for biosimilars. Before the entry of Merck’s Renflexis®, Janssen had only contended in the infliximab marketplace with Pfizer’s Inflectra®. Janssen has been willing to cut deals with payers to keep Inflectra off the formulary. However, this could also affect some patients, even though infliximab, an infusible product given in the doctor’s office is usually paid through the medical not pharmacy benefit. If these drugs were covered with a fixed copayment (e.g., $100), patients would not be harmed economically by using any particular product. However, if the patient pays a fixed coinsurance (e.g., 10%), that person may then pay more for the originator drug, because the co-insurance is often calculated according to the WAC (which does not include the rebate) instead of the average sales price ASP (which does).

The problem of rebate traps and the lack of transparency of the system is not new. It may be a different situation if the manufacturer–payer transaction was based solely on simple WAC discounts. There is simply too much rebate money up for grabs for plans and PBMs that the system can be changed easily.

Inflectra Sales Lagging for Pfizer in Second Quarter

Pfizer announced some disappointing results for the second quarter in its quest to advance a foothold in the biosimilar market. The second-quarter results hinted at more difficulties to come for the Inflectra® brand, with the most recent launch of Merck’s Renflexis®.

Amid somewhat positive signs with group purchasing organizations, which supply hospitals and health systems, commercial health plans have lagged in covering the product. On the earnings call, John Young, Pfizer’s Group President for Pfizer Essential Health, said that in the second quarter, “our Inflectra share was 2.3% of the overall infliximab volume,” including both patients who had not used infliximab before and those who switched to Inflectra. The total US revenue for the quarter was only $23 million. In Europe, sales were $94 million—better but not yet gaining the penetration of other biosimilars in the EU.

The 15% discounting strategy may have limited uptake by US health plans and insurers to date, but Janssen’s actions to defend marketshare have no doubt been effective. Pfizer’s most recent price drop, coinciding roughly with the launch of Merck’s (and Samsung Bioepis’) infliximab biosimilar, will likely muddy this picture in the near term.

Overall, Pfizer’s revenue decreased by 2% (to $12.9 billion) compared with the second quarter of 2016. This is not terrible, considering that its European revenues from Enbrel® (etanercept) continue to be under siege from biosimilars, dropping 20% compared with Q2 2016.

Pfizer’s pipeline remains robust, however, with 8 biosimilars in the works, including 4 in phase 3 trials. Its epoetin alfa product Retacrit® had been rejected by the Food and Drug Administration (FDA) because of potential manufacturing concerns. The second-quarter financial report did not update its progress in discussions with FDA.