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.

Merck Sharply Discounts Its Infliximab Biosimilar

In news that will likely be cheered by payers, Renflexis™, Merck and Samsung Bioepis’ entry into the infliximab marketplace, will launch at a significant discount, according to Merck.

Approved by the US Food and Drug Administration on April 21, 2017, Merck’s second-to-market biosimilar will be available immediately. What was truly noteworthy was the pricing: $753.39 per dose, which represents a 35% savings over the current list price of the originator product Remicade® (Janssen Biotech), and about 13% less than the list price of Inflectra®, the first biosimilar infliximab to be launched.

It appears that Merck is gambling that this pricing will help jumpstart marketshare, and perhaps gain serious consideration to payer coverage. It is, in fact, the first biosimilar of the 3 now available that has broken through the 15% discount (relative to the originator product) floor.

Some industry observers believe that this could be the start of a “race to the bottom,” similar to that seen in the multisource generics industry, but the biologics manufacturers may be more reluctant to engage in pricing wars that could result in 70% discounts. The key question will be how Janssen and Pfizer reacts to the introduction of infliximab-abda. According to our sources, Janssen has matched the net price of Inflectra by increasing its rebates to payer customers, retaining its preferred positioning.  [ERRATUM (7/31): In the original published version of the article, we indicated that Pfizer had preferred positioning deals for Inflectra with UnitedHealthCare and CVS Health. This is incorrect. UHC and CVS have given preferred positioning to Zarxio and Basaglar, not at present to Inflectra. We regret this error and hope it does not cause our readers any inconvenience.]

In a quirk that can only be imagined in the biosimilar arena, Merck owns the marketing rights for Janssen’s Remicade in Europe, so it is dedicated to defending an originator brand overseas while cutting this brand’s marketshare in US.

Our database on biosimilar filings indicates that no other infliximab 351(k) applications have been submitted (at least publicly announced), so it is reasonable to expect that no new market entrants will change the competitive dynamic before 2019.

UPDATE (7/26): An article in Bio-Pharm Reporter by Dan Stanton quoted Pfizer executives who say that Inflectra’s allowable ASP level to $753.40–the pricing level of Renflexis, essentially equaling the 35% discount relative to Remicade. However, the WAC price of Inflectra currently stands at 19% (not 15%) below that of Remicade.

 

What Happens When Switching Among Biosimilars?

Late last year, I wrote about a biosimilar challenge that could be on the horizon. With the approval of the second infliximab biosimilar (infliximab-abda by Samsung Bioepis), that horizon is a lot closer. However, we are no closer to understanding how to address the issue.

When Renflexis™ is launched in October (it is unknown whether the US Supreme Court ruling that wiped away the 180-day postapproval waiting period will affect this), 3 noninterchangeable versions of infliximab will be available. Based on patient turnover in health plans, the following scenario will soon occur.

 

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Image Copyright 2017 by Lee Fogel

Mr. Jones, a 39-year-old man with Crohn’s disease, works for a large self-funded employer. He has been taking Remicade®, the reference product, for some time. In January 2018, his employer decides to change its plan offerings. His new health plan does not cover Remicade, favoring Inflectra® (infliximab-dyyb) instead. He could seek a medical exception to continue on Remicade, but his new plan actually offers considerable incentives to switch, including significantly lower cost sharing. After discussing the situation with his doctor, he makes the change, and experiences much the same clinical results. In 2019, his employer makes another change in plan. And this plan covers Renflexis on the specialty tier but has Remicade available on the higher-cost nonpreferred specialty tier. He and his physician are unsure of the best move.

Keep in mind that it would be rare and probably makes little sense for a health plan to cover both biosimilars and the reference product. At some point, the plan will seek a contract that leverages marketshare. In the scenario above, at what point does the patient unduly risk the development of neutralizing or antidrug antibodies?

No data have been published on switches among 3 biosimilar products. These agents are not designated as interchangeable—though Pfizer’s Inflectra may be closest to it based on its NOR-SWITCH investigations; therefore, no one is truly confident of what might or might not occur with regard to efficacy or safety. I suspect it may be some time before switches among reference product, biosimilar A, biosimilar B, or even biosimilar C may be considered routine.

Patients receiving biologic products for serious chronic diseases may also be subject to case/care management. This is not a clean transition when changing health plans. The situation described above will likely happen in the near future with infliximab and possibly adalimumab (once the patent litigation is cleared). It would be a good idea for health plans and insurers to start reviewing their options now to ensure both patient safety and cost-effective decision making.

No Clear Winner on Supreme Court’s Biosimilar Hearing Day

Despite the fact that the arguments at Wednesday’s Supreme Court wrestling match on the patent dance and 180-day notification issue went into overtime, there was no clear winner discernable in Amgen v. Sandoz.

Some observers believe that the Supreme Court justices were more comfortable with Amgen’s arguments, but the justices admitted that there was little clarity in trying to interpret the ambiguous language of the Biologics Price Competition and Innovation Act. Justice Stephen Breyer stated his unfamiliarity with the technical aspects of the field and expressed concern about ruling on these issues.

Indeed, it is possible that the Court will not issue any ruling, since the case specifically arose around Sandoz’s launch of Zarxio®. Sandoz waited out the 180-day notification period before launching the product, which could prompt the justices to decide that the question is moot, avoiding the larger question of whether it should be enforced for future biosimilar launches.

Judicial experts and industry watchers will be pouring over the comments and questions from the justices for some time, until a final ruling is released (thought to be in July).

In other news… US sales of Janssen’s Remicade® slipped 2.4% to $1.18 billion, in the first full quarter following the launch of its biosimilar competitor, Pfizer’s Inflectra®. This does not necessarily reflect lost marketshare but Janssen’s concessions in matching the price of Inflectra to retain its preferred positioning. With a new competitor looming later this year (Renflexis™), Remicade’s earnings slide is expected to accelerate.

Amgen’s Enbrel® is also facing a less-rosy future, as the product’s sales in the anti-TNF category has begun to slip, independent of any active biosimilar competition. However, competition in the rheumatoid arthritis and psoriasis categories from other products, especially interleukin inhibitors, has been stiff. First quarter 2017 sales of Enbrel in the US dropped 15% to $1.18 billion. Sandoz’s biosimilar etanercept, though approved by the FDA and beyond the 180-day notification period, has not yet launched due to patent litigation questions.

FDA Approves Second Infliximab Biosimilar

On April 21, 2017, the US Food and Drug Administration (FDA) gave its nod to a new biosimilar version of infliximab, and will compete against the originator product Remicade®. Manufactured by Samsung Bioepis, it will be marketed by Merck in the US as Renflexis™.

The new agent, the first approved from Samsung Bioepis, will have to elbow its way to marketshare alongside Pfizer’s Inflectra®, which was launched late in 2016. The nonproprietary name of the new agent is infliximab-abda, in keeping with FDA’s 4-letter suffix policy.

Renflexis was approved for the full slate of indications of the other infliximab agents, including Crohn’s disease, ulcerative colitis, rheumatoid arthritis, psoriasis, psoriatic arthritis, and ankylosing spondylitis.

This biosimilar approval was the first by FDA without the formal meeting of its advisory committees. The agency had first indicated that it would not require advisory committee meetings for biosimilar products in September 2016, when an FDA official   stated that “the first biosimilar for each reference product will have an advisory committee, but there will not be hearings for any others ‘unless there’s a specific issue to discuss.’”

This version of infliximab was approved in 2016 by the European Medicines Agency as Flixabi, and this agent is marketed by Biogen. Biogen is a partner with Samsung in Samsung Bioepis.

The manufacturing and licensing partners have indicated that they intend to market Renflexis at the end of its 180-day notification period, in November. However, assuming patient litigation is ongoing, the launch may have to be at-risk, as was Pfizer’s launch of Inflectra, to avoid additional delays in commercialization.

Budgeting the Impact of Inflectra and a Possible Clinical Benefit for Amjevita

Although the biosimilar marketplace is fairly stagnant at the moment, there was plenty of action at this week’s annual meeting of the Academy of Managed Care Pharmacy held in Denver, March 27–30.

Calculating the Breakeven Point for a Health System

A poster presentation from the University of Pittsburgh School of Pharmacy discussed the budget impact of adding biosimilar infliximab (Inflectra®) to the formulary of a model health system.

In this presentation, the researchers assumed the health system had 1,000 patients taking infliximab; of these, 400 were new prescription starts for the biosimilar’s rheumatology and gastroenterological indications, and the rest were receiving maintenance therapy on the originator product Remicade®. The model assumed 3 levels of discounting on Remicade: 10%, 15%, and 20%. They assumed that 60% of patients with a gastrointestinal indication would start on Remicade, and 40% of new start patients would be given Inflectra. At a new start and maintenance price of $20,430 for the biosimilar, they calculate a breakeven point of 15% discount for Remicade to keep only the originator on formulary.

If they assumed that the biosimilar was given not only to new starts but also to 50% of patients initially receiving Remicade , the breakeven discounting point for keeping Remicade only on the formulary becomes far greater. This model is somewhat conservative, because it assumes no further discounting by Pfizer for its biosimilar product. However, it also does not consider additional levels of rebating by Janssen Biotech.

A Biosimilar’s Noneconomic Benefit?

Although biosimilar manufacturers are constrained in the respect that their product has to not only mirror the structure and clinical effect of the originator biologic, it also cannot be produced in a more convenient form of administration (autoinjector vs. vial/syringe). The expectation is that the biosimilar will not be superior in any way to the originator. In a second poster presentation, Amgen researchers disputed this assertion with their biosimilar version of adalimumab. According to their findings, Amjevita® was associated with less injection-site pain compared with Humira®, based on pain scores given by clinical trial patients with moderate to severe rheumatoid arthritis. They found that pain site scores (based on a 100-mm visual analogue scale) were significantly lower at each 4-week office visit for the biosimilar.

The researchers theorize that the reason for the benefit may be the different excipients used in the biosimilar versus the originator drug.

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.