Tag: list prices

A Conversation With Steven G. Avey, MS, RPh

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.

Let’s not Knock Innovation, but Biosimilars Exist for the Sake of Competition

A recent Twitter conversation between a blogging colleague of mine and a German advocate of precision medicine propelled this post: What is the real benefit of biosimilars? Does biosimilar development detract from efforts to produce innovative medicines? Is the main societal benefit biosimilar cost savings?

biosimilar cost savings

Biosimilar Development Is Separate From Innovation Development

The main reason that the Biologics and Biosimilars Price Competition and Innovation Act (BPCIA) was signed into legislation was related to cost containment. For biologics, there was no pathway for the evaluation and approval for lower-cost copies in the US health system, akin to the generic-brand name dynamic for conventional drugs. Adding competition has been the first and only point. The specialty drug trend had been rising rapidly, and the long-term estimates were frightening: Costs associated with specialty drugs like biologics threaten to eat 48% of the total drug spending pie in the United States by 2020.

Two factors were responsible. The first, increasing specialty drug utilization, has been especially difficult to address. The pipeline is congested with biologics. Medical societies are increasingly incorporating biologics into their guidelines and clinical pathways. Prescribers have grown more comfortable with these agents, and payers have limited tools at their disposal to put the brakes on their use.

The second, price increases, are well known and publicized. Without competition, drug companies tend to test what the market will bear, and to this point, they have borne quite a bit. Unlike in Europe, where the tender system of pharmaceutical purchasing has resulted in better cost containment, the US payers have been accustomed to stomaching large price increases through increased use of rebate contracts with price guarantees. But the overall costs continue to rise, as contracts expire and new ones are drawn up. Thus, the list prices for drugs like Enbrel® and Humira® have skyrocketed, with Humira’s more than doubling in a few years.

There is no evidence to say that biosimilar manufacturers would have engaged in the development of innovative new agents had they not devoted resources to this area. Indeed, pure-play biosimilar makers, like Coherus or Adello, were only introduced to produce biosimilars. Other makers, such as Samsung Bioepis, are joint ventures of existing manufacturers to do the same. Biogen recently raised its stake in Samsung Bioepis to nearly 50% of the company’s shares. This could be construed as a case of an originator company pouring $700 million into a biosimilar manufacturer, which could be using that money directly for other purposes. Finally, firms like Apotex, Mylan, Sandoz, and Hospira (now part of Pfizer) are heavily involved in generic drug manufacturing. Biosimilar development was a natural extension for them. Even big pharma players, such as Amgen, Merck, and Pfizer, are more commonly engaged in biosimilar marketing partnerships rather than purely R&D efforts (e.g., Amgen/Allergan, Merck/Samsung Bioepis, Pfizer/Celltrion).

One can also make an argument that pharmaceutical innovation is more evident at the drug discovery level. These days, big pharma seems less interested in pursuing drug discovery than in purchasing it.

The Societal Benefits of Biosimilars

The EMA and FDA biosimilar pathways were created to introduce competition that would lower drug costs. This in turn would make innovative biologic therapy available to more patients. Biosimilar cost savings could drive greater access to important drug technologies.

With the EU’s longer and more extensive experience with biosimilar medications, costs have indeed been saved. Although this has varied by country, it is undeniable.

In the US, with very limited economic experience with biosimilars (filgrastim and infliximab), savings figures are more theoretical than real. Although the infusion of a biosimilar into the new market may reduce wholesale acquisition price of the reference drug a bit, it will have a greater effect on net pricing, after rebates. And, of more immediate importance, the new biosimilar has the potential to halt further price increases for the originator product. This aspect of biosimilars cost savings cannot be overemphasized. Between the first adalimumab biosimilar approval and the initial availability of these products in 2023, the list price of Humira can increase upwards of 40% (or more, if Abbvie veers from its pledge to limit price increases). The initial price of the first adalimumab biosimilar will thus be much higher than if it was launched last year. On the other hand, adalimumab biosimilars will launch in the EU in October of this year, which should effectively lower cost products and limit their EU members’ exposure to future Humira price increases.

Biosimilar cost savings can have real benefits in terms of improved access. Payers’ incentives to use biosimilars (if they are motivated to implement them) can result in lower patient cost sharing. For example, a fourth-tier biologic may be subject to a 20% cost share, whereas a third-tier biosimilar may carry a flat copay of $100. This can make a difference in terms of therapeutic choices available to patients.

In conclusion, the German correspondent is only partly right. Biosimilars are not innovative. They are highly complex, cost-control medications. Do they detract the focus of manufacturers from new innovative products? There’s no evidence of this. However, we are beginning to see limited evidence in the US of the societal benefits, namely cost savings, they can bring.