Part B to Part D and Other Questions: How CMS’s Plans Could Affect Biosimilars

For 2019, the Trump administration has proposed transferring some products reimbursed by Medicare part B to part D coverage. Additionally, it will allow Medicare Advantage firms, which manage a small but significant percentage of Medicare beneficiaries’ care, to negotiate prices and utilize some pharmacy benefit tools to control costs.

Some of these tactics are a bit late to the party, as commercial insurers and health plans have been employing them for years. To the extent that an injectable treatment can be managed through the pharmacy benefit rather than the medical benefit, the drug can be easily subjected to prior authorization, step therapy, quantity limits, and other tools routinely used.

part b to part d coverageFor the few available biologics and their corresponding biosimilars, these infusions are covered in general on the medical benefit today. Infliximab, filgrastim, and pegfilgrastim are still subject widely to buy-and-bill scenarios. Yet, Neulasta® (pegfilgrastim) is already covered under a medical specialty benefit (fifth tier) for beneficiaries of two sample Medicare Advantage plans (HumanaChoice and Aetna Medicare Choice). In both of these plans, Neulasta is subject to prior authorization requirements. UnitedHealthcare covers it under the medical benefit, generally under its highest copayment or cost sharing tier. In contrast, Zarxio® is on the preferred or second tier for United’s Advantage 3-tier and Small Group plans, also under the medical benefit.

These agents, administered via office- or clinic-based infusions, may also be available through specific distribution channels, like specialty pharmacy. In contrast, self-administered agents like adalimumab may be distributed to patients through specialty pharmacies only, which are part of the managed care machinery.

Insulin is still considered a “transitional drug.” Like adalimumab, it is self-administered. However, it is already covered by Medicare under the part D benefit, at least when used outside of an insulin pump. Therefore, part D providers, like commercial plans, have preferred and nonpreferred insulin products, negotiate for pricing, and may use other pharmacy benefit tools.

The Administration has not yet announced which drugs it will from part B to part D. It is unlikely though that the Centers for Medicare and Medicaid Services will jump beyond the experience of commercial plans and insurers. Until other biosimilars are made available for prescription, the latest CMS attempt to control costs may not directly affect biosimilar manufacturers.

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.

Trump’s Ire at Pharma Industry Pricing: An Opening for Biosimilars?

Every day of the newborn Trump Administration, sets of executive orders are issued and bunches of meetings with business icons are held. The tweets, orders, and conferences produce the same uniform message—disruption. This is probably good and bad for the health care industry. Certainly, in the short term, this is bad for patients. The pharmaceutical industry and health care delivery systems could benefit from some disruptive influence. However, the unintended consequences of these rapid-fire actions will be, as President Donald Trump might say, “huge.” Certainly, it will take time for the implications on patient care of each attempt at change to be fully felt, much less assessed.Image result for Trump

The pharmaceutical industry has been the most recent focus of President Trump’s actions. The first salvo was his pronouncement that the pharma industry has been “getting away with murder” with regard to the pricing of their drugs. If this is truly a concern for the administration, then biosimilar manufacturers should be heartened to believe that ways to get their agents to the market sooner would be a focus. On the other hand, if the approach is more punitive towards those demonstrating little regard for affordability, then it would seem unlikely to be truly beneficial to biosimilar makers.

He also repeated a complaint to these executives that as a result of the high costs of these agents, he will have Medicare negotiate drug prices directly with the companies, taking advantage of its considerable leverage. This call has been made by others during the Obama Administration, but the drug industry had successfully detoured the discussions though its powerful lobbying efforts. Today, the confluence of other events, such as the highly contentious price escalations by Valeant and Mylan, widely publicized price increases for drugs like insulin and biologics, and Trump’s tweets, has convinced some in the pharmaceutical industry to heed this call, lining up to pledge limits in price increases.

Taking on the role of a business-friendly chief executive, the President announced at a meeting of industry leaders that he intends to slash most of existing Food and Drug Administration (FDA) regulations that apply to the industry and cut staff, yet bringing drugs to the market more rapidly. At the White House conference on January 31, he told leaders from Celgene, Johnson & Johnson, Merck, Novartis, and the trade group PhRMA that “we’re also going to be streamlining the process, so that from your standpoint, when you have a drug you can actually get it approved, instead of waiting for many, many years.”

However, the regulatory aspect of the discussions is confusing, because President Trump has also called for faster drug approvals by the FDA, while also streamlining the department. Beyond the time needed for FDA to conduct its full drug evaluations to ensure safety and efficacy, the agency is continually under pressure to quicken the rate of approvals, with limited staff to do so. In fact, I heard one industry consultant quip that with the present pharmaceutical pipeline, “it could take a century or more to approve all of these products at FDA’s current pace.” This staff is funded through PDUFA legislation. Yet, the President’s Administration has also called for a hiring freeze among federal agencies. Does this include the FDA? If so, it seems that hopes for speeding the process would have to rest on streamlining the evaluation process itself, which would likely face a good deal of public, health provider, and academic resistance.

Finally, President Trump warned that more than three-quarters of FDA regulations will be slashed. No one can be sure which regulations he was alluding to at this time, but it does sound as if the pharmaceutical industry will be the beneficiary. However, these pronouncements do sound like promises that cannot be practically fulfilled or well considered.

The FDA exists for consumer protection, not for the enrichment of the pharmaceutical industry. Regulation is necessary in private health markets (as for any private market), for the sake of patients, the health economy, and population health improvement. Shareholders need regulatory protection, as well, just not from the FDA.