How Will Biosimilars Be Affected by Trump’s Drug Price Reform Measures?

Trump on BiosimilarsWhen President Trump announced the broad strokes of his drug price reform initiative, some of these measures seemed on target to benefit the biosimilars industry. However long awaited, makers of originator biologics seemed not to be worried about its implications. The President may not be able to effect much change, without causing unintended adverse consequences.

According to its blueprint, the Trump Administration “believes it is time to realign the system in four ways: increasing competition, improving government negotiation tools, creating incentives for lower list prices, and bringing down out-of-pocket costs for consumers.”

Increasing competition is critical to improving biosimilar access. But this cannot be achieved with one action. Several areas—some addressed and others not by the blueprint—are key.

 

Reining in Drug Patent Abuse

Aimed squarely at drug makers who try to extend exclusivity through multiple patent filings, this is the one action that could improve biosimilar prospects. Limited biosimilar access is caused by the inability to market these drugs after Food and Drug Administration (FDA) approval. Patent litigation is the number 1 issue here. The President said, “Our patent system will reward innovation, but it will not be used as a shield to protect unfair monopolies.”

Trump Drug Cost Reform BiosimilarsWithout significant overhaul of the drug patent system (or the system for ruling on the validity of patents), this is unlikely to benefit biosimilar manufacturers in the near term. This effort could take many years and may have negative effects on the protection of legitimate intellectual property.

This is likely to result in little relief for the biosimilar industry.

 

Price Disclosures in Consumer Advertising

The fact that originator specialty biologics—the medications targeted for biosimilar competition—cost thousands of dollars may be a revelation to consumers who pay fixed copays for them. President Trump’s plan would require manufacturers to disclose the cost of the drug on direct-to-consumer advertisements.

Biosimilars The assumption is that this would be required across the board, including biosimilars. Would consumers recognize that their Renflexis® biosimilar costs thousands less than Remicade® in terms of wholesale acquisition cost? Not likely. In terms of net cost to the payer (not the patient generally), the price differential is far less. Even if the true costs were posted on consumer advertising, Mr. and Mrs. Smith would still hear or see that Renflexis costs thousands of dollars. They may even be further confused, because their out-of-pocket cost will likely be far less, unless a deductible applies.

 

An Emphasis on Value-Based Purchasing

The Obama Administration was committed to expansion of value-based purchasing. The present administration wants to further explore the potential of this policy, but it has not spelled out any specifics. It could be a boon to biosimilars based on the implications of value-based purchasing itself. After all, biosimilars are in existence to provide better value. More details are needed on its extent and whether implementation will occur through Health and Human Services or through Congress before useful opinions can be rendered.

 

Lower Drug Prices in US, Higher Elsewhere

The United States has very little ability to compel drug prices to rise for health systems in Europe, Canada, or Mexico, for instance, and as a result, lower them in this country. Pharmaceutical companies charge what the market will bear. Unless the Trump Administration can somehow convince the UK to pay more for Rituxan®/MabThera®, Humira®, or Enbrel®, these drug prices will not be altered.

There are reasons these countries pay the prices they do. It is related to their bidding or tender systems and the fact that other countries will exclude coverage at higher prices.

Trump Drug Cost Reform Consider another practical issue—why does a price increase in Germany mean a price decrease in the US (and for whom—Medicare, Medicaid, 340b facilities, commercial plans)? If such a move could be achieved, how does the Administration convince drug makers to apply those greater revenues obtained globally to greater discounts or rebates to Americans? It is more likely that the pharmaceutical industry will pass the increased profits to shareholders.

If these specialty drugs were forced to lower their price in the US, would that apply to biosimilars as well? That may not work towards long-term viability of the industry, depending on the measures taken.

 

Removing Rebates and Improving the Value of Biosimilars

One thing can actually improve cost transparency and possibly force pharmacy benefit managers (PBMs) to change their value model. If the Congress decides that drug rebates run afoul of laws against kickbacks, this could compel far lower wholesale acquisition costs (WACs). It would also have the effect of lowering patients’ cost sharing. Co-insurance is commonly based on the WAC not the net cost of the drug to the payer or PBM.

In this case, biosimilar manufacturers’ true WAC discounts can be applied directly and drive the “rebate trap” out of existence.

Applying this rule to commercial plans, Medicare Advantage, and part D providers would be a direct improvement in the current situation and could lower system-wide health costs. That assumes that manufacturers don’t sense an opportunity to raise prices by say 8% when they no longer have to pay 15% rebates.

 

Missed Opportunity: Using the Negotiating Power of Medicare

If the Administration was interested in reining in drug costs, the first serious step would be to let the Medicare program negotiate with manufacturers. This large purchaser getting its best deals from the natural competitive marketplace. It may require some adjustments in Medicaid “best price” assumptions, however.

It does seem that biosimilar makers could benefit from several of the policy changes proposed by the Trump Administration. However, the blueprint released is just that—weak on details and not specific to avoiding unintended consequences. Furthermore, it does not anticipate the reactive responses of the stakeholders involved. I guarantee there will be much more discussion as the government’s actions are announced.

Analyzing FDA Chief Gottlieb’s Remarks—Part 2: FDA and Marketing Exclusivity

Food and Drug Administration Chief Scott Gottlieb, MD, received a great deal of coverage for his recent remarks on providing better access to biosimilars. He seems intent on finding solutions to the underlying problems in delayed biosimilar launches.

He discussed in the interview with CNBC perhaps the most intractable problem: The US biosimilar industry has been severely affected by the reference drug manufacturers filing multiple patent filings and extending their market exclusivity well past the 12 years provided by law. For example, it was hoped that an adalimumab biosimilar would already be marketed, but it now seems that 2022/2023 may be the earliest in US launch because of this “patent maze.”

Dr. Gottlieb agreed that patents filed to protect “small changes in how you manufacturer the drugs” shouldn’t convey an additional 12 years of market exclusivity, and he thinks we’ll see less of these actions in the biologic space going forward. However, “there’s no silver bullet here in terms of trying to really make this market go gangbusters. I think Food and Drug Administrationthis is going to be a slow build. But we’re going to be coming out with…about a dozen policies that I think incrementally will each move the ball in the direction of trying to create more avenues of biosimilar competition.”

One of the underlying challenges is that market exclusivity is described by two components: (1) regulatory (defined by Congress and FDA) and (2) patent law outlined in the US Constitution (and governed by the courts). The first is typified by the Biologics Price Competition and Innovation Act (BPCIA), which specifies 12 years of market exclusivity for the biologic manufacturer.

Originally, the Obama Administration wanted 7 years of market exclusivity but settled for 12 in order to pass the BPCIA. Based on Dr. Gottlieb’s remarks, it seems to be a question of what the FDA can do on its own to effect change. Perhaps the only leverage the agency has today over biologic manufacturers is at the time of approval. I really can’t envision what power it can wield in this fight; does the agency have the authority to cut deals with manufacturers to limit patent applications in exchange for drug approval? It may be that Dr. Gottlieb will try to work with Congress to circumvent the problem through amendments to BPCIA.

Another potential area may be to help biosimilar manufacturers take on the risk of launching before patent disputes are settled. Technically, any biosimilar manufacturer is allowed to launch after its 180-day exclusivity period expires postapproval. Pfizer (and its partner Celltrion) was the first to launch “at-risk.” Although biosimilars have been approved for drugs other than infliximab and filgrastim, manufacturers have been reluctant because of the financial penalties, including profits, which may be awarded by a court to the manufacturer of an originator product. This is why Sandoz has not launched Erelzi® (etanercept-szzs), which gained approval in 2016.

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.

Lessons From a New Report: Do More Biosimilar Approvals Necessarily Mean Greater Access to Biologics?

By 2025, biosimilars may well fulfill their potential in the US, and we will be awash in biosimilars approved by the Food and Drug Administration, which have cleared patent issues through expiration, settlement, or litigation. Beyond meaning that we will finally have several adalimumab biosimilars on the market and perhaps even an approved pegfilgrastim biosimilar, access to biosimilars will almost certainly be widespread at that time.

Biosimilar concept art.5-15-2017A new study from Avalere, funded by the Biosimilars Council, was released this week, and its principal finding is that by 2025, an additional 1.2 million US patients could gain access to biologics owing to the availability of biosimilars. The implication is that current restrictions by private, Medicaid, and Medicare Advantage plans on the use of expensive biologics will be eased once less-expensive biosimilars come to the market and that lower costs will result in more patients being able to utilize biologics than before.

Although I’m not aware of any studies specifying the percentage of the insured population (public or private insurance) who do not have access to biologics, we do know a good deal about the way payers approach them in general. One of the greatest priorities of plans and insurers is to manage the specialty pharmaceutical category. The stated goal is to ensure that patients have access to appropriate therapy (not all therapy). The most common way to achieve this is through the use of stringent prior authorization criteria or step therapy. For noncancer biologics, virtually no payer or purchaser (including government and employers) would allow first-line access of a biologic without trials of conventional treatment first. This is done to limit costs of treatment as well as to mitigate the risk of adverse events.

Another routine mechanism for controlling costs of these agents is to leverage their net costs by offering preferred or exclusive coverage to one or two agents in a category. For patients in the US, this means that the vast majority of insured patients may have access to 2 or 3 anti-TNF agents, but not all of them. The introduction of lower-cost biosimilars may influence this, as it could be possible that payers include a wider choice of biologic medications once biosimilars for all of these products are available. The reference products may also benefit, in that the competition-driven lower costs may well allow for wider choice of medicines within a class.

It is questionable whether lower costs will permit the wholesale removal on restrictions of biologics in a category. Will a biologic be available for use as a first-line agent rather than a third-line agent? The major professional autoimmune disorder societies have not written clinical guidelines that urge biologics use far earlier. That is partly because each of these agents carries significant, serious risks, which cannot be minimized. They may occur infrequently, but they can be devastating in patients unfortunate enough to experience them.

In the Avalere report, researchers cite the European experience, in which “introduction of biosimilars led to an average increase in utilization, compared to the year prior to the biosimilar entrance, of 32%.” If that did occur in the US, it would be a boon to manufacturers.

They pointed to the lower costs being the primary driver of greater use. Gillian Woollett, MA, DPhil, Senior Vice President, Avalere Health, confirmed via Email that “[increased biosimilar availability] will disproportionately benefit women and low-income individuals. The assumption is two-fold: That biosimilar competition will lead to better access due to lower-cost products (either the biosimilar or reference biologic or both). Additionally, competition between biosimilars and their reference products is expected to improve tiering through placement on lower tiers, higher rates of coverage, earlier use, etc.”

Their results were based on an evaluation of seven blockbuster biologics in particular: adalimumab (Humira®), bevacizumab (Avastin®), etanercept (Enbrel®), infliximab (Remicade®), pegfilgrastim (Neulasta®), ranibizumab (Lucentis®), and rituximab (Rituxan®). All of these products are expected to be marketed by 2025, although patent litigation could, of course, change this scenario.

The present assumption is that a significant portion of nonoptimized utilization of biologics like Humira is due to high cost-sharing requirements. With the wider availability of biosimilars, special biosimilar tiers (with relatively lower cost sharing) may be a good bet in the future. Dr. Woollett stated, “While the analysis doesn’t specifically assume the increased utilization due to specific actions (we don’t ascribe X% better access to more biosimilars tiers, etc.), we do assume that payers respond with efforts to incent utilization of either the biosimilar or the reference biologic (depending on contracting) and that leads to better access.”

Are the First Significant Cracks Spreading in Humira’s Patent Shield?

On Monday, the Patent Court of England invalidated 2 contentious dosing and indication patents held by AbbVie for Humira®. This development all but ensures that biosimilar adalimumab will reach the European market in 2018.

The resolution of the litigation, brought by Samsung Bioepis in March 2016 and joined by Fujifilm and Biogen, likely means that SB5, which has already been approved by the European Medicines Agency, will be available for market upon the expiration of the composition of matter patent in October 2018 overseas (but not until 2022 in the US).

The lawsuit called into question the validity of AbbVie’s patents covering dosage regimens and indications for Humira® in the treatment of rheumatoid arthritis, psoriatic arthritis, and psoriasis. Likely sensing a negative outcome, AbbVie abandoned the 2 patients and offered to settle the litigation outside of the legal system, but Samsung Bioepis decided to press on with a final court decision. In its ruling, the patent court declared the 2 patents on Humira’s dosing regimens as not proprietary and in fact “obvious” at the time they were filed, and thereby invalid.

This is the first time AbbVie has suffered a Humira patent defeat in a major market. It may signal the beginning of an erosion to the dominance of Humira on the world market, although without faster US biosimilar introductions, this may take several years to play out. Amgen has 2 adalimumab biosimilars awaiting final approval by the European Medicines Agency, and Boehringer Ingelheim will likely have an EMA decision on their investigational product by the time of the October 2018 patent expiration.