A Payer’s Preference for Biosimilars, Interchangeability, and Incentivizing Providers to Use Biosimilars

In the last few weeks, we’ve seen a hail of biosimilars-related news, some of which significant, more having limited impact.

Building upon the success of its infliximab biosimilar uptake, Magellan Rx Management announced June 4 that it will extend its medical pharmacy program to the new oncology biosimilars (i.e., rituximab, trastuzumab, and bevacizumab) when launched. Magellan Rx had announced that its program saved 34% when it shifted utilization to infliximab biosimilars. This action was announced after UnitedHealthcare decided that it would prefer the reference biologic agents rather than the biosimilars starting in July, which caused much reaction.

In early May, the Food and Drug Administration (finally!) released its final guidance on interchangeability. Although there were no surprises in this document, it does lay out a definitive path for gaining an interchangeable designation. Other than Boehringer Ingelheim’s intention to seek the label for Cytelzo®, no other biosimilar manufacturer has publicly stated interchangeability as a goal. Boehringer cannot launch its biosimilar adalimumab, regardless of its interchangeability status until June 2023, so the strategic importance may be longer term. Switching biosimilars (for a reference product or for another biosimilar, with or without this designation) may be a more pressing question.

The Biosimilars Forum has launched an educational campaign on how aligning incentives in Medicare part B can save billions of dollars through the enhanced use of biosimilars. The industry group’s proposal includes using a shared savings model in which providers can receive savings bonuses when using lower-cost biosimilars. In addition, it is lobbying to increase provider reimbursement for prescribing biosimilars. This would be in the form of a greater percentage add-on rate in addition to the average sales price (ASP) paid for the therapy. These two actions could offset the current reimbursement disincentive, where providers bill higher amounts for prescribing higher cost (and likely higher rebate) drugs, currently at ASP + 6%. The organizations also call on the Center for Medicare and Medicaid Services to reduce patient out-of-pocket costs when a Part B biosimilar is used.

The Association of Affordable Medicines has also been focused on the issue of biosimilars in Part B medications, as well as on the potential implications of the US–Mexico–Canada Agreement. Passage of the agreement (still awaiting ratification on Capitol Hill) could have the unintended consequence of extending exclusivity for reference biologics; all other federal regulatory efforts are moving towards cutting delays in access to lower-cost biologics. The trade agreement therefore negatively affects the biosimilar industry, which frankly, cannot survive additional barriers erected in its path. The Association is hoping that harmonizing Mexico’s, Canada’s, and America’s biologic exclusivity period can be modified before the treaty is ratified.

Implications of UnitedHealthcare’s Preference of Remicade and Neulasta to Their Biosimilars

In a significant coverage move, UnitedHealthcare (UHC) has signaled that its commercial and Medicaid medical policies on infliximab and pegfilgrastim have changed direction in favor of the reference drugs.

UnitedHealthcare and biosimilars

Effective July 1, 2019, approximately 22.5 million commercial and 6 million Medicaid UHC members will not be able to access these biosimilars without trying the reference agents first (virtually eliminating biosimilar use). Both infliximab and pegfilgrastim are covered generally under the medical benefit as office-based infusions, and preferring Remicade® and Neulasta® (including OnPro®).

This move is important for a few reasons. First, it reverses UHC’s previous position, which preferred the biosimilars over the two originator products.

Second, it promotes a prior authorization practice that makes little sense—since the biosimilar and reference products are expected to work in the same way and produce similar outcomes, why would a patient who fails Remicade then be given Renflexis® instead of a different biologic medicine like adalimumab, ustekinumab, or others?

Third, it implies that both manufacturers have further reduced the net cost of these drugs to UHC and its customers, undercutting the current deals offered by the biosimilar manufacturers. If accurate, this is a positive development in that infliximab and pegfilgrastim prices are continuing to come down due to competition. It would also indicate that Amgen, maker of the pegfilgrastim originator Neulasta, is beginning to defend its prefilled syringe market more aggressively. This is significant, because Amgen had been more focused on defending the marketshare of its on-body injector (Onpro), which is dominant. Alternatively, Amgen may be bundling its filgrastim and pegfilgrastim products more effectively. Coherus and Mylan had previously announced pricing that would be one-third less than the list price of Neulasta. Coherus had specifically indicated that it would be seeking targeted deals with payers to ensure at least parity position for its prefilled syringe product Udenyca®. It did not, however, mention UHC as one of those payers.

Fourth, this move puts a further dent into the sustainability of the US biosimilar market. Obviously, preferring the originators will make access to their biosimilars considerably more expensive for patients. It can only promote greater price cuts by the competing brands and thus reduce profit margins for the biosimilar manufacturers. In the US, biosimilar makers need a little encouragement to stay in the market, as very few have had positive experiences to date (e.g., Pfizer, Boehringer Ingelheim, Momenta, Apobiologix to name a few).

No one denies the benefits of the increased competition meaning a halt to price increases and significantly lower net costs, but those benefits need to be extended across other biologic categories. Without a viable biosimilar industry, access to lower-cost biologics can only happen through price controls.

Is It About the Rebates, Net Costs, or Both?

It sounds a bit absurd, but we shouldn’t be surprised at this point: Health plans may not be satisfied if pharma companies simply dropped their drugs’ retail prices. They still want their drug rebates on top of this, says one well-known industry analyst. The pharmaceutical industry is stunned, because its members believed that the net price was the only thing that really mattered (or so they were told). It seems that payers’ addiction to rebates is even tougher to kick than originally thought.

Drug rebates
Ronny Gal

Ronny Gal, an analyst from Sanford Bernstein, told Fierce Pharma  on February 11 that UnitedHealthcare will be seeking “equivalent” rebates on medications, regardless of whether a company drops its price. According to the article, UHC executives confirmed the statement. Their logic isn’t completely crazy, but it is problematic. The rebates, plans have argued, help minimize consumer premium increases.

Let’s assume that this is the case: larger plans would lose millions of dollars in revenue if their 20% rebate, for example, were exchanged for simply a 20% decrease in wholesale acquisition cost (WAC). If the plan is truly using this revenue to subsidize higher medical costs, then members’ premiums would have to rise a commensurate amount.

Well, that just puts the pharmaceutical companies (and even biosimilar makers) in a difficult position. If drug A costs $600 per month, and to comply with the federal government’s efforts (and those of some pharmacy benefit managers [PBMs]) to lower medication prices, they drop their price to $400 per month. Don’t scoff, the makers of the PCSK9 hypercholesterolemia drugs just cut their WAC by 60%. Similarly, makers of hepatitis C virus treatments whacked their WACs by significant amounts in 2018. Assume the manufacturer of drug A was giving the PBM a 20% (or $120 per month per prescription) rebate to maintain co-preferred position, and the PBM shared half that rebate with the health plan ($60 per month per prescription). Now, let’s also assume that the pharmaceutical company refuses to add a rebate on top of this amount. Who will make up the difference, if the health plan insists upon it? The PBM? Don’t bet on it.

For biosimilar manufacturers, this lower price plus rebate scenario can be very discouraging. If you agree that a biosimilar maker can only gain access if it maintains a 25%+ discount to the reference drug manufacturer’s WAC, then the prospect of an additional rebate puts further price reduction pressure on their profitability. That could bolster the argument that pharma should steer clear of the biosimilar marketplace.

We always understood that from a payer standpoint, net cost was the primary objective. We were told many times that although it didn’t matter as much how the number was arrived at, the health plans preferred lower WAC as opposed to higher rebates. Now, we’re not so sure whether the rebate trap hasn’t ensnared those health plan executives.

Biosimilar Step Therapy for Medicare Part B: Does This Make Sense?

The Centers for Medicare and Medicaid Services (CMS) has decided drugs covered under Medicare part B may be subject to step therapy, if so desired by Medicare Advantage plans. UnitedHealthcare has become the first to publicly implement step therapy policies for these drugs. However, biosimilar step therapy is not the typical utilization management tool that industry executives are used to seeing.

biosimilar step therapyTraditional step therapy or step edits for prior authorization policies are typically used to require the use of an effective, low-cost drug class before trying a more-expensive treatment. For example, a plan might have a step in place before a patient can receive Humira®, such as requiring documented failure on other disease-modifying anti-rheumatic drugs, like azathioprine or methotrexate. This makes very good sense when supported by practice guidelines or treatment pathways, based on solid supportive evidence.

For biosimilar manufacturers, the perspective on the revised CMS policy, seems to imply trying the biosimilar before receiving the branded originator product. This biosimilar step therapy would make very little sense. A doctor would not be practicing evidence-based medicine if he or she prescribed Remicade® to a patient after failure of Renflexis®. There is no evidence to show that the biosimilar will work in a patient who did not receive adequate clinical benefit from the reference product (and vice versa). Similarly, there is no information to show that a patient who has an adverse effect while taking Remicade will not have that adverse effect after injecting with Renflexis (or vice versa). In other words, after failing one, a new mechanism of action should be tried, not a product with a very similar structure. This may be a different argument, if a subcutaneous form of infliximab was introduced, and this might be reason to step the infusible form through this drug.

In United’s announcement, they are clearly seeking to increase biosimilar utilization, as designated preferred part B agents, at the expense of Remicade use, the nonpreferred agent. Therefore, it may make more sense that new patients will have to use a biosimilar before being prescribed the reference product. Step therapy in this case is almost an aside.

Ironically, the Department of Health and Human Services has also expressed its desire to move part B agents like self-administered injectables to part D. This may not apply to infliximab, as it is given as an in-office infusion. Should this be the case, plans will have many pharmacy tools at their disposal beyond biosimilar step therapy.

In other biosimilar news…Fresenius Kabi has signed an agreement with Abbvie to delay its adalimumab biosimilar market entry in the US until 2023. The manufacturer is currently trying to secure European approval for the product. A 351(k) application has not yet been filed by Fresenius in the US.