Biosimilar Bytes This Week

The Institute for Clinical and Economic Review (ICER) released a report this week that highlighted seven pharmaceuticals with “substantial price increases on top of already high current spending.” According to ICER, these seven agents accounted for billions in unnecessary expense in 2017 and 2018. AbbVie’s Humira® and Genentech’s Rituxan® topped the list, with Neulasta® coming in at number 5. The first two are not that surprising, because relatively high price increases (even net rebates or other considerations) are common reactions of pharma companies to imminent new competition. This has been typical for small molecule brands facing patent expiration and generic challenges. In 2017 and 2018, AbbVie may have been more concerned that it could not reach a settlement with the several biosimilar manufacturers working on adalimumab agents. Genentech also faced similar conditions with Rituxan. On the other hand, Amgen was already facing strong competition from Zarxio® and Granix®.

ICER specified,Net price increases for the seven drugs unsupported by new evidence were responsible for increasing total US drug spending by more than $5.1 billion from 2017 to 2018. The drug whose price increases accounted for the greatest single impact on spending was Humira. Humira’s average US price increased 15.9% over this period.I emphasize, this was net price not list price increases.

In a presentation at the Drug Information Association (DIA) annual meeting, Janet Woodcock, MD, Director of the FDA’s Center for Drug Evaluation and Research, stated that 83 biosimilar development programs were now ongoing, for a total of 38 different biologics. This implies that biosimilar interest in several new classes of biologics remains strong from established and prospective manufacturers.

Tanvex BioPharma announced in late September that its TX-01 filgrastim biosimilar candidate was not approved by the FDA. According to Tanvex, the FDA’s complete response letter did not cite any data deficiencies that might require additional studies. This leads one to suspect that production facilities problems may be the issue. The soonest Tanvex can expect a new FDA decision is 6 months from its new application submission date. As a result, Zarxio® and Nevistym® remain the only two biosimilar filgrastim agents (plus the follow-on product Granix®) to compete with Amgen’s Neupogen.

$7.6 Billion Estimate on Savings Lost From Approved, Nonlaunched Biosimilars Could Be Low

$44 Billion by 2024. $250 Billion by 2024. Whatever. I’ve not been very impressed by the many attempts to estimate how much money biosimilars could save the US health care system. Even the more well-known estimates of biosimilar savings, like those from RAND and Express Scripts, have been little more than games of “pin the tail on the donkey,” as the researchers were blinded as to when products would actually launch and the unproved potential for biosimilar uptake.

Of course, this was not the economists’ fault. They had little past information about the US biosimilars market on which to base their view of the future, and they could not have predicted the extent to which patent litigation prevented access to these medications.

I do appreciate the latest effort, however, by the Biosimilars Council (a subsidiary of the Association for Accessible Medicines) to understand biosimilar savings. Instead of predicting the future, the Council reviewed the past to assess how much each biosimilar would have saved the health care system and patients had they launched as expected.

The number they landed on was $7.6 billion since the introduction of the first biosimilar in 2015 through 2018. It applies not to the seven biosimilars (as of June 12, 2019) that were launched but to the 12 that were approved but not available because of ongoing patent litigation.

As impressive as this lost opportunity sounds, I believe that the biosimilar savings estimate is still too low. The calculation by the Biosimilars Council does not seem to include an important aspect: The reference manufacturer takes significant price annually for each year biosimilar competition does not emerge. The analysis assumed a 30% price discount and 40% uptake, split between two biosimilar competitors. Uptake was assumed to increase to 50% if three were three separate competitors. Yet the analysis was based on actual list prices from IQVIA data.

If biosimilar competition existed, these price increases would not have occurred, likely at all. For example, the availability of Inflectra® and Reflexis® did not fuel great uptake of biosimilars at the expense of Remicade®; however, the infliximab market was changed suddenly, by forcing Janssen Biotech to not only halt their price increases in 2016 but significantly lower their net pricing. As a result, average sales prices have been dropping ever since the introduction of the biosimilars (from a high of $85.81 per 10 mg in January 2018 to $69.96 in July 2019 [–19%]).

Consider the same scenario for the adalimumab biosimilars, which I wrote about previously. Without competition, AbbVie can raise its retail prices right through 2022, resulting in upwards of 50% higher list prices. Although this does not account for contracting, each new payer contract it should be remembered, is based on the current price (not the previously rebated costs). In other words, the higher prices work their way into subsequent payer contracts. How much additional biosimilar savings, on top of the calculated $7.6 billion, would that be? I’m not an economist, but it shouldn’t be too difficult to estimate, based on no future price increases (only future price reductions). Over an 18-month period, Amgen raised the price of Enbrel® four times, resulting in a 37% jump by 2016. Had biosimilar etanercept been available at the time, that would not have happened, yielding an instant 37% savings. That does not prevent the reference manufacturer from hiking the drug price in the months before biosimilar competition occurs. This practice is expected to continue. However, the earliest possible availability of biosimilars will yield compounded price savings.

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.

Teva’s Syprine Generic Priced 14% Below Jacked Up Valeant Product Price

In an announcement that surprised few, Teva Pharmaceuticals announced that its generic version of trientine hydrochloride (Syprine®) for the treatment of Wilson’s disease will be sold for a very nongeneric price. Also unsurprising, Teva executives did not address the fact that the price of Syprine had been jacked up astronomically by Valeant Pharmaceuticals only recently, to $21,267 in 2015 froTeva Pharmaceuticals, maker of the new generic for Syprinem a mere $652 in 2010. Also, Syprine had been available since 1969.

An outrage? Yes of course, but not surprising for a number of reasons. Wilson’s disease is an extremely rare disease, on the order of 5,000 patients. At a price of $652 per person, the resulting revenue might be a paltry $3.2 million.

In preparation for launch, Teva evidently looked at its options for discounts based on the current list price, not the pricing from several years ago. This is also unsurprising. However, the discount offered is not great—$18,375 for a bottle of 100 pills.

Wilson’s disease is the result of a genetic disorder of the liver that causes hepatic cells to accumulate and store excess copper. The disease impairs the liver’s ability to excrete copper into the bile and then into the gastrointestinal tract. The copper build-up is toxic to the liver, and can cause cirrhosis and death. Ordinarily treated with d-pencillamine, patients can be intolerant to it and require additional therapy, such as trientine.

As most payers know, generic pricing today is unlike generic pricing of the past. Even relatively simple compounds, available for decades, are subject to competitive forces like number of mBiosimilars news, reviews, and reportsanufacturers and supply. However, demand seems to be the one market force that is not in play. With so few potential patients, overall demand would seem low, particularly with pencillamine already available to treat patients.

Teva’s pricing could have reflected the reality of 2010 or the reality of 2018. The company chose the latter, which so many others would also do today. If an additional generic was introduced into the market dynamic (though unlikely due to the demand), pricing (or at least net costs) could be strongly affected.

Payers hope to see this dynamic play out in the biosimilars arena as well. With a single biosimilar agent competing against the reference product, the retail cost discounts have been small. But with the introduction of additional competition, net costs (if not wholesale average costs) will fall rapidly.

What Will Cost Savings on 2023 Adalimumab Biosimilars Really Be Worth?

AbbVie executives are sticking to their pledge to restrict annual price increases on Humira® below 10%, but even payer price protections won’t mitigate the increasing expenditures before adalimumab biosimilars hit the market. In 2023, when adalimumab biosimilars become available, the savings biosimilars represent may not be real savings at all.

Pharmaceutical companies generally seek to lock in preferred coverage status for their agents through the use of rebates, which lowers the net costs. Typical in these contracts is a price guarantee, which shields the payer from annual (or more frequent) price increases for the duration of the contract. The contract life is one or two years, after which the health plan, insurer, health system, or pharmacy benefits manager must renegotiate—that means significantly higher costs for each successive contract renewal.

Humira adalimumab

Drug price increases for self-injectable medications like adalimumab, are reported on top of its wholesale acquisition cost (WAC), or the list price. Rebates are applied to WAC pricing. Therefore, if for example, a manufacturer announces 9% price increase to drug X, that applies to the WAC price and does not include consideration of rebates or price guarantees secured by a payer. Rebate information is notoriously difficult to obtain, as payers and pharmaceutical companies consider them proprietary.

However, in a January piece in the New York Times, the author cites research by SSR Health, which concludes that the price of Humira with rebates rose 100% since 2012 to an average of approximately $38,000. Assuming AbbVie executives hold to their price increase pledge, raising their prices by only 6% per year, by 2023 when patent expirations will bring a rash of biosimilars to market, Humira’s price after rebates would have risen 33.8%, to $50,844. If the price is jacked up 9% per year, that would be an increase of 53.9%, to $58,482. This is assuming of course that AbbVie does not increase the rebate at each contract negotiation to offset the higher net cost. To make this dystopian vision complete, let’s not forget that the full savings will not obtained over a population unless all utilization is fully converted to a biosimilar from Humira. That may require an interchangeable biosimilar product (which has not yet been approved) .

As we reported last year, the Institute for Cost-Effectiveness Research established that to meet accepted thresholds for cost-effectiveness, Humira would have to be discounted 55% from its list price. Rises in the cost-effectiveness thresholds (currently $100,000–150,000 per quality-adjusted life-year) would never keep up with this pace of price increases. By 2023, Humira will be even further off the mark in terms of providing value.

The most important point of this, is that the cost savings of the biosimilars that are finally introduced could be an illusion. If a price war in 2023 for newly available adalimumab biosimilars results in 50% discounts, we may have received little but a roll back in costs to those of today. From the perspective of 2018, that’s not savings. That is price stability.

I wrote in 2016 of the same effect for Enbrel®. Because Amgen had taken multiple price increases in the previous years, the WAC cost jumped 37%. And in 2018, no biosimilar is presently marketed for prescription in the United States. The relative discount by Sandoz (presently the sole US company with an approved biosimilar etanercept) needed to actually save payers money for etanercept will not be realistic.

A Modified View of Price Behavior in the anti-TNF Category

A couple of undercurrents are apparent in the payer market when it comes to biosimilar competition. A project that I worked on recently through the Health Payer Council revealed how the thinking of pharmacy and medical directors has evolved in the last few months.

Web image 2I was reminded that in the early days of anti-TNF drugs, series of price increases were fairly common. And this gets to an important point: the introductions of a new anti-TNF biologic did little, if anything, to blunt the effects of new price increases. Why then should I expect that to be the case with biosimilar introductions?

I wrote in February that pharmaceutical companies often raise their prices when new generic competition is anticipated, in an effort to optimize revenue before the insurers and health plans inevitably switch to generic coverage. And these revenue hikes can be eye opening and frequent. For example, the Elsevier Gold Standard Drug told us that Amgen has been hiking the price of Enbrel impressively over the 18 months: 4 hikes at an average of 8%, for a cumulative price jump of 36.7%. I said at the time that perhaps payers can expect the introductions of the first anti-TNF biosimilars to guard against this sort of price-hiking behavior by the manufacturers of innovators—this would be the quickest way to expand the spread in pricing and persuade managed care organizations to move as quickly as possible to the biosimilars.

My most recent input from payers indicates that they are less concerned about this behavior, because they actually apply only to wholesale acquistion cost or average wholesale prices. In other words, price jumps like these will not affect contracted pricing to much extent, especially in contracts with price guarantees.

Now we are nearing a situation in which biosimilars for Enbrel®, Humira®, and Remicade® may all be on the market before mid-year 2017. Price competition for the anti-TNF inhibitors may well be on the contracted business, and it is distinctly possible that WAC prices may continue to rise. “Once biosimilars are on the market, the fight will be over net price and the ability of biosimilars to shift market share away from brands.  At that point, brands are likely to step up their rebating gains to try and outflank the biosimilars,” said one pharmacy director.

Something else that may affect competition is the question among the anti-TNF brands. Of course, some are infusibles and others are self-injectable, which could discourage switching. More importantly, perhaps, is the payer’s suggestion that if a prescriber’s go-to choice of Humira, for example, doesn’t provide the expected benefit, that physician is more likely to move to a therapy with a different mechanism of action—not another TNF inhibitor.