The partial federal government shutdown is having specific effects
in various important areas of government, but it may not be particularly
troubling for FDA user-fee funded activities.
Scott Gottlieb, MD, Commissioner of the FDA, has been
especially busy on Twitter, trying to inform the public how the government shut
down is affecting FDA operations. He made it clear that the agency is
prioritizing its efforts on ensuring consumer safety.
During an extended tweet storm (the past 7 days), he has not directly addressed the effect of the shutdown on current drug approvals. However, since the pharmaceutical companies have paid into the drug approval activities of the Center for Drug Evaluation and Review, there may be sufficient funds and resources for ongoing approval activities. In a tweet last week, Dr. Gottlieb mentioned that FDA was bringing onto staff several new user-fee funded staffers. Yet, in a January 7 tweet, he promised additional information on how the shutdown would affect biosimilars; this has not yet been addressed.
In terms of biosimilars, two trastuzumab drug makers are expecting FDA decisions this quarter (Pfizer and Samsung Bioepis). However, Pfizer’s biosimilar launch is subject to a licensing agreement with Genentech (Roche), the maker of the reference product Herceptin®. Therefore, if there was a short delay in FDA approval, it will not likely have a material effect on availability for prescription. We anticipate that Pfizer will also be hearing from the FDA on its rituximab biosimilar in the second quarter.
This could raise a secondary problem with the shutdown: Will
the current furlough cause a chain reaction of delays in the evaluation of
existing biologic licensing applications? How long might it take the full FDA staff
to catch up, if that is the case?
In a January 13 tweet, Dr. Gottlieb said, “The lapse in
funding represents one of the most significant operational challenges in FDA’s
recent history. But as an agency, we’re committed to fulfilling our consumer
protection mandate, to the best of our abilities, under our current
In other biosimilar news… A January 10 story in The Pink Sheetreported that Leah Christl, PhD, Associate Director of Therapeutic Biologics at FDA intends to depart the agency in the near future (a specific date was not given).
On December 11, the Commissioner of the Food and Drug Administration (FDA), Scott Gottlieb, MD, issued a far-ranging statement on actions to be taken by the federal government to improve access to biosimilars and to begin the transition of insulins, growth hormones, and other selected drugs to biologic status, under section 351 of the Public Health Service Act.
“Today, we’re taking additional actions to advance this framework,” stated Dr. Gottlieb. “Among them, we’re issuing four new draft guidance documents today. The first two guidance documents provide greater clarity on scientific and regulatory considerations for the development of biosimilar and interchangeable products. We intend to update these new guidance documents regularly, to address development issues as they evolve.”
These guidance documents, created in question-and-answer format, address specific issues, some of which get to the heart of biosimilar development and access. For example, one section speaks to abuse of limited distribution systems requirements, in connection with Risk Evaluation and Mitigation Strategy (REMS) programs. These programs have been used as a way to “delay or derail access to reference product samples that biosimilar sponsors need for testing to support their applications for a biosimilar product.” Dr. Gottlieb said, “While the limited distribution programs can have a role in promoting patient safety, too many branded products are still misusing these programs as rhetorical smokescreens to hide anti-competitive behavior.”
Dr. Gottlieb said that FDA will, upon request only, “review study protocols submitted by biosimilar applicants to assess whether their protocols contain comparable safety protections to those in the REMS for the reference product they’re trying to reference.” The FDA will be willing to state in a letter to the reference manufacturer “that comparable protections exist, and that the FDA won’t consider it to be a violation of the branded drug company’s REMS to provide the biosimilar sponsor with a sufficient quantity of the reference product to perform testing necessary to support its biosimilar application.”
He also reiterated that it may be possible for biosimilar developers to obtain EU-licensed samples for use in comparative studies. Dr. Gottlieb indicated that the FDA was still evaluating this option.
New Routes of Administration for Biosimilars not Allowed
Another Q&A would put to rest the notion that a biosimilar maker can produce a new formulation or route of administration for an approved biosimilar product under the 351(k) pathway. The guidance states, “An applicant may not seek approval, in a 351(k) application or a supplement to an approved 351(k) application, for a route of administration, a dosage form, or a strength that is not the same as that of the reference product.” This would mean development of a subcutaneous form of infliximab, for example, would not be possible under the biosimilar regulatory pathway, because Remicade® is only available as an intravenous infusion.
On the Road Toward Interchangeable Insulins
One of the key provisions of the BPCIA is that insulins, growth hormones, and other agents for which reference products were not available under the FD&C Act, will be transitioned to the biologic regulatory pathway (under the Public Health Services Act) by 2020. The FDA has begun to consider just how this will occur.
Starting in March 2020, this transition will take place. “Today, we’re laying out our policy on how these products will transition from the drug pathway to the biologics pathway, and in so doing, how we intend to use this new framework to promote competition,” said Dr. Gottlieb.
Under the “Deemed to be a License” Provision of the Biologics Price Competition and Innovation Act of 2009,” the final guidance from the FDA specifies that these newly deemed biologics will be subject to the same regulations as today’s biosimilars. “Anti-evergreening provisions under the biosimilars legislation—meant to prevent sponsors from being able to game the exclusivity provisions to forestall biosimilar entry—will apply to these newly deemed products, including insulin.”
Furthermore, these agents will not gain any additional exclusivities because of the transition (they will not get any additional exclusivity). It is assumed that once they are transitioned, and if their patents have expired, biosimilar competition can begin at once. This could mean far greater pricing pressure on insulin products (not simply glargine), and potentially even interchangeable designations that can be automatically substituted at the pharmacy.
As part of this transition, Dr. Gottlieb explained, biological products that have been approved under section 505 of the FD&C Act will be removed from the FDA’s Orange Book on March 23, 2020, based on the agency’s position that these products are no longer ‘listed drugs.’ That means that a follow-on applicant won’t be able to rely upon these NDAs for approval. They have to go down the biosimilars path after the transition.”
Over the next couple of weeks, I’ll be issuing a series of posts to further analyze some of the Food and Drug Administration’s (FDA’s) new Biosimilars Action Plan.
Outside of patent litigation, the greatest barrier to biosimilar access is the current drug rebate contracts agreed to by pharmaceutical companies, health plans, and pharmacy benefit managers (PBMs). This contracting system persuades payers to maintain coverage of a heavily rebated biosimilar rather than providing access to a lower retail priced drug. Scott Gottlieb, MD, FDA Commissioner, has said that payers will need to start considering whether their rebate revenue on originator biologics are more valuable than the viability of the biosimilar industry overall. The real question is, what can the federal government do about drug rebate contracts?
Dr. Gottlieb believes that they are anticompetitive and cause higher drug prices over time; drug rebate contracts may be in direct conflict with the intent of the federal anti-kickback statues that allow them in the first place. In May, he and Health and Human Services (HHS) Secretary Azar indicated that they may ask for a review of the safe harbors provided for drug rebates.
Anti-kickback Safe Harbors and Drug Rebate Contracts
The anti-kickback statute has been in place since 1971, but these specific safe harbors, protecting drug companies from anti-kickback laws, were introduced more than 2 decades ago. The federal government provides an excellent resource for information about these safe harbors at the Federal Register website. In brief, the safe harbors define exceptions to situations where organizations are receiving “remuneration” for providing goods or services. A rebate given as an incentive to provide a drug (i.e., on formulary) or to utilize more of a product (i.e., “performance rebates”) would currently qualify for safe harbor protection.
Last week, HHS moved on this issue, filing the proposed rule “Removal of Safe Harbor Protection for Rebates to Plans or PBMs Involving Prescription Pharmaceuticals and Creation of New Safe Harbor Protection.” Although the content of the filing has not yet been released, the title and previous statements on the matter by Secretary Alex Azar, do not bode well for drug rebate contracts and payers and the PBM industry tied to them.
America’s Health Insurance Plans, a national trade group for payers, supported a study supported that disputes one of these assertions. The study, conducted by Milliman, concludes that among part D plans studied, rebates did not independently cause higher drug costs. The greatest rebates were found in drug categories with the most competition from other brands (not generics). Instead, Milliman found that the use of rebates was in direct proportion to the degree of competition in a drug category. “Over the four-year period from 2013 to 2016, brand drugs with manufacturer rebates in 2016 had higher price trends than brand drugs without rebates,” according to the report. In other words, the rebates helped mitigate the price increases.
Although a bold move by the Department of Health and Human Services, removing drug-rebate safe harbors will be tricky. It will threaten the bottom lines of the PBM industry. Rebates comprise a significant portion of their revenue. Health plans also receive a portion of that revenue; they claim that these rebates are used to hold down premium costs. In any case, plans and insurers will need to evaluate how to account for less rebate monies but perhaps lower drug prices. For these reasons, we can expect quite a pushback from these sectors should the federal government proceed.
Specialty Drugs Mostly Under the Medical Benefit
Furthermore, all biosimilars (approved and investigational) are classified as specialty drugs by their cost, storage needs, and/or route of administration. This means that they are more likely covered under the medical benefit than the pharmacy benefit. It is thus also likely that the PBM’s specialty pharmacy units or their specialty pharmacy partners will be directly affected by any biosimilar-targeted changes in the anti-kickback laws.
The Trump administration also indicated the desire to move several drugs from coverage under Medicare part B to part D. Whereas Medicare does not currently negotiate prices with pharmaceutical manufacturers, private Medicare insurers can. This may enable price negotiation under part D providers and Medicare Advantage plans. Ironically, might this be a rebate-related negotiation?
Over the next couple of weeks, I’ll be issuing a series of posts to further analyze some of the Food and Drug Administration’s (FDA’s) new Biosimilars Action Plan.
The Biosimilars Action Plan contains several important components. One of the more interesting items FDA Commissioner Scott Gottlieb mentioned in his remarks at the Brookings Institution webinar on Wednesday, July 18, involved modifying the intellectual property (IP) discussion with biosimilar approval for limited indications.
Originator drug makers have erected a so-called patent maze or patent wall over time to protect their IP and thus their marketing exclusivity as far into the future as possible. Patents can be filed for product composition, manufacturing techniques, new formulations, delivery systems, and indications. Often, the biologic products facing potential biosimilar competition have several indications. Adalimumab, for instance, is approved for use in nine unique conditions (I’ve included Crohn’s disease and pediatric Crohn’s as one disease state).
Dr. Gottlieb said that the FDA will be “updating guidance to provide additional clarity on how biosimilar manufacturers can carve out indications from their labels where a branded drug maker might still maintain some IP.” He continued, “And we’re going to describe how these indications can be efficiently added into a biosimilar label once that IP on the branded alternative has lapsed.”
This component was not spelled out in the Biosimilars Action Plan. Limited indications may indeed be an avenue to work with originator manufacturers to help reduce patent litigation that is barring patient access to biosimilars. One would assume that it would take some level of negotiation with the manufacturer of the originator. However, biosimilars with limited indications may be a hornets’ nest for reference manufacturers like AbbVie.
This gets back to the entire issue of extrapolation. From the outset, patients and providers recoiled at the notion of approving a biosimilar product for use in a disease state in which no clinical studies were done. The FDA has been pretty liberal in granting extrapolation to several or all indications for the 11 approved biosimilars. If FDA explored this option as a mechanism for getting biosimilars to the market sooner, it would be sending a new message. That is, the biosimilar drug may be expected to yield similar outcomes compared with the reference drug based on the totality of the evidence, but we’re unwilling for other reasons to give it our approval for those other indications.
Laws or regulations do not exit to prevent doctors from prescribing a biosimilar for a nonapproved indication. Furthermore, health plans and insurers have consistently reported in our own market research that they would not discourage use of a biosimilar for other indications for which only the originator biologic was approved. This assumes the biosimilar is sufficiently less expensive than the originator. As a result, drug makers like AbbVie may be very wary of the limited-indication approach to improve biosimilar access.
Still, some way must be found to break the logjam of litigation on IP. This is a specific target of Commissioner Gottlieb’s. He may take even more creative approaches.
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.
In 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.”