Richard G. Frank, PhD, and Meaghan Rose Smith discuss a recent white paper on the regulatory and anticompetitive impediments to biosimilar market entry and the hope for biosimilar savings.
The Center for Biosimilars® (CfB): I'm Tony Hagen, senior editor for The Center for Biosimilars®. In a recent white paper, Richard G. Frank, PhD, of the Department of Health Care Policy at Harvard Medical School, and other authors wrote about the access problems faced by biosimilars in the United States market and how certain frictions are preventing these agents from getting to market. But they also found that as more biosimilars enter the marketplace, the prices for biologics are definitely coming down by significant increments. We spoke to Dr Richard G. Frank and Meaghan Rose Smith, the executive director of the Biosimilars Forum, which is a trade group for biosimilars manufacturers.
So, to start off with you, Dr Frank, you have written that originator biologics each have cumulative sales of $40 billion and been on the market for 17 years on average. What does this say about competition in the biologics sphere and the prices that Americans are paying for their medicine?
Frank: Well, I think that because the regulatory structure of governing biologics is different than it is for small molecules, the way that we've promoted competition and the small molecule side doesn't translate directly. What I think has happened as a consequence is 2 things. There are legitimate reasons why the regulatory differences exist but what's happened is, (1) they've been a little bit sticky in terms of adapting to the biosimilar world, and (2) there has been industry behavior aimed at protecting exclusivity protections, both in terms of the regulatory context but also in the patent context that has gotten in the way of biosimilars being able to relatively frictionlessly enter the market.
CfB:Meaghan, do you have any thoughts there?
Smith: Sure, I think that's all correct. Biosimilars are different than generics and there is a different regulatory structure, but the cost savings that they provide can be as important when you look at the increase in drug spending. That's all coming from the originator biologics, so making sure that we're able to access the cost savings from biosimilars is really going to be important. As Dr Frank's paper showed, when there's more competition, there's more savings. So, it's very critical that we find a way to increase that competition.
CfB:Dr Frank, can you explain some of the policy actions that are hindering biosimilar acceptance? You've referred to interchangeability, drug naming conventions, and CMS policy on separate codes and prices.
Frank: Yeah, there's also patent policy that matters here. I think there's antitrust issues here that are potentially at play as well. I could just go down the list for you.
CfB:OK, do you want to hit some of the highlights you feel the strongest contenders should not be?
Frank:Well, the easier ones are, for example, changing the naming conventions. I think that would be helpful. We don't know exactly how helpful, but I think they would move the ball a step toward both doctors and patients not exaggerating differences between biosimilars and the originators. I think the development of a better process and a better understanding of how to get to interchangeability will be very important because that concept of interchangeability is what has really driven the success of the Hatch-Waxman Act in achieving the savings that (generics) have achieved. So, I think there is probably a lot more that could be done to advance the potential for interchangeability. Third, on the antitrust side, this is not a settled law yet, but I think we need to really understand bundled contracts and how they can be used to get in the way of entry and demand for biosimilars. Those would be my top 3 right now.
CfB:Okay. Meaghan, did you want to chime in there?
Smith: Sure. Particularly on interchangeability, that's going to be more of an issue potentially in a few years in the [Medicare] Part D space. That's an area where I think misinformation has led to some confusion, where that's not necessary in Part B for physicians to be making the switch to a biosimilar. Physicians always have the freedom to prescribe whatever drug they believe is appropriate for their patients. But that difference has led to confusion and I think some have taken advantage of that. And I know the FDA and FTC have been working together to try and fight some of that misinformation and some of these anticompetitive practices that have really held back biosimilars getting to patients. And in terms of policies, in addition to what you've mentioned, the Forum has really pushed toward right sizing those incentives that we think are currently backwards and making sure that particularly when a physician feels that a switch may be necessary, they have the proper incentives or have no incentive holding them back from doing that.
Frank: If you don't mind, I'd like to sort of tie this into…how you build confidence in physicians when they prescribe [biosimilars]. And while I think that Meaghan was completely right that interchangeability is going to be especially important on the Part D side. On the [Medicare] Part B side, it's important potentially because the data that I'm examining right now show that take-up is driven heavily by the arrival of new patients—this reluctance to switch. I think that if there was interchangeability designated, that would give a great deal of confidence to physicians that they could switch safely. For that reason, even though the primary benefit is this long-term Part D type of benefit, there would be a significant short-term impact because of that extra confidence.
CfB:Let me jump in there with a question on interchangeability. So far, we have no interchangeable biosimilars. Meaghan, have you heard much scuttlebutt in the Biosimilars Forum about the prospects for an application or a modified application for an interchangeable biosimilar in the near future?
Smith: I would look at some of the markets outside the United States to watch closely what's happening there. So, number 1, I'm not aware of any potential interchangeable designation coming in the United States. That's point number 1. And then point number 2 is that [interchangeability] could also be another potential anticompetitive loophole or blockade from an originator brand that they put in front of other competitive products.
CfB:Do you mean that they come up with ways to demonstrate, perhaps in a courtroom setting, that a biosimilar does not qualify on a parallel scale with an originator product?
Smith: I was talking more about if they were then to develop an interchangeable biosimilar of their own.
CfB:Dr Frank, in your study, you mentioned that with few market entrants, the price decreases that many have hoped for from biosimilars are really quite modest, maybe on the order of 5% increments. Can you explain that a little bit and perhaps give us your thoughts on which way you think this is going?
Frank: Just to clarify, we presented a range of estimates: 5% of the low side and 10% of the high side. So, it's somewhere between 5% and 10% for every extra biosimilar comes in. We evaluated that, too. So, if you go from 2 to 3, you get somewhere between the 5% and 10% reduction price. If you go from 2 to 4, you get somewhere between 10% and 20%. I think those are modest by small molecule standards and generics. But, in a sense, you have a line of argument that also says that there's no hope here and that what you want is a public utility regulation model. I think what our results suggest is that it's probably premature to give up on the market. In fact, there are indications that from these early adventures, in a sense, that there are some meaningful reductions in prices, as you crank up competition.
CfB:Meaghan, do you have any thoughts on that? Are we seeing meaningful decreases from the biosimilar sector?
Smith: "Early adventures" in Biosimilarland? I do think it's still an emerging market. When you compare it to where we were, in the generic landscape, 11 years after the Hatch-Waxman Act and we're at the 11th anniversary of the ACA [Affordable Care Act] and the BPCIA [Biologics Price Competition and Innovation Act], it's still a young, emerging market. Number 1, there's clear room to grow and [there are] things we need to do to enhance that growth. There should be more competition and there should be more market share for biosimilars. Patients should have more access. So, this is not where we want it to be, but there are signs that are in the [white] paper that competition is lowering prices, even for patients who are on the originator brand biologic therapy. More competition equals more price reductions. We don't want just 1 biosimilar competing against the reference biologic. We want lots of biosimilars out there competing and giving patients options and bringing down prices.
Frank: Yeah, I think the historical point that Meaghan made is really important because if you think about the Hatch-Waxman Act, there were modest effects early on. But the really big ones that we think about, the ones that save trillions of dollars, really didn't start until the mid- to late-1990s. I think about 1997 to 1999 as being like banner years where you saw huge impacts. It's really at that point that things took off and we're not there yet in terms of biosimilars. And biosimilars, just science wise and regulatory wise, are just harder [to make]. And so, I think that, again, it's premature. The other thing that I think is very important, another point that Meaghan made was that unlike small molecules, what you see is pretty big input originator price responses to entry by biosimilars. Whereas, in fact, you saw the opposite generally in the small molecule space, which is where they raised the prices rather than lowered the prices.
CfB:We've heard recently that there's this concern that the originator companies anticipate the arrival of biosimilars by increasing their prices. So, years before a biosimilar actually steps into the market, an originator has begun increasing its price, sometimes by dramatic steps. AbbVie's Humira [adalimumab] is a strong example, with 7%, 8%, and 9% annual increases. This sets the bar higher. When a biosimilar steps in the market, it can offer a discount, but that discount has much more leeway to come in at a higher level than [the biosimilar company] may have anticipated before. Do you have thoughts on this phenomenon?
Frank: Well, I'm not sure I buy the story entirely because if you look at lots and lots of drugs where there is no biosimilar threat at all, you see pretty significant price increases. In fact, that's one of the targets of public policy, is that the price increases are going up without any new information about efficacy or any big change in market conditions, including inflation, to justify them. So, I'm not sure I buy it even though I think the point you're making about creating more room for biosimilars to enter profitably is probably the case.
Smith: I know there are a number of lower cost biosimilar products planned for entry to compete with Humira, and that's the number 1 selling biologic and there have been a number of games to delay entry of those biosimilar products. Along with what Richard was saying, I can't say if the reason for the price increases was because of planned biosimilar competition or for other reasons but I think it does point to the severe need for competition to lower those prices.
CfB:It'll be very interesting to see what happens in 2023. We have at least 6 adalimumab biosimilars coming onto the market. Whereas, up until now, we've seen biosimilars come in 1 at a time. So, what happens to the pricing levels at that point will be very, very interesting to see.
Smith: Sure, and as we've talked about with the number of products and increased competition, that will be really interesting.
CfB:Contracts and rebate practices are identified as an issue in the report. Biosimilar companies also rely on these practices. Meaghan, could you comment on this aspect of marketing and the heavy reliance on these deals to acquire market share?
Smith: Sure. So, I know this is something that the FDA has pointed out as a potential anticompetitive practice. The FDA and [Federal Trade Commission] have held a workshop on it as an issue. There are some anticompetitive practices that are blocking patient access to some lower cost products. Some of these practices we've talked about needing to fix like fail first [step therapy], which doesn't necessarily make sense. You have to fail first on the reference product before you can have the biosimilar and it's clear that, just from a patient perspective, it's not going to work. That's certainly something that we're taking a look at.
CfB:Dr Frank, how about you?
Frank: I think the issue here is using a portfolio of rebates as leverage for exclusionary practices is a key thing. What Meaghan pointed to is an exclusionary practice, which is these fail first policies, which, in a sense, take the concept of fail first and stand it on its head. Typically, the reason we had fail first was to get people to adopt generics quicker, and only if they failed on the generic would they get to the brand drug. This does the opposite and serves essentially to exclude use of biosimilars. The economics are starting to be worked out on this. The antitrust law has not yet been sorted out on this, but I think that is coming. There are cases, including the one around Remicade [infliximab], where this is a fundamental issue. I think we're going to see some clarification on the antitrust law and the antitrust economics over the next couple of years as these things are sorted out.
CfB:Now, Remicade is an example of a reference product where you've seen the least decline in prices yet.
Frank: Although, if you see the picture in our report, it's actually accelerated recently. What's interesting is that most of the decline in price has come because the originator dropped its price because they've held on to a very large share of the market. So, even at the end of that, they're still holding I think north of 90% of the market, which cushions their price declines a little bit because they do hang on to things and the prices are still at a pretty high level.
Smith: Yes, and that's the case where the biosimilar has ended up benefiting patients due to decreasing the costs for patients overall. One of the biosimilars launched at a 35% lower price than Remicade and still the market share is quite low, as you pointed out.
CfB:What's to account for that lack of movement in the originator price, and the change in market share do you think, Meaghan.
Smith: So, I think there are a couple issues that we talked about. One is some of the contracting practices that are an issue. There's also an issue with provider behavior for different disease states that Richard referred to where a lot of the biosimilar uptake is taken up by new patients. If you look at some of the differences between the oncology products and the oncology disease state, compared with some of the other reference products where providers and patients are managing a chronic condition, patients are on an oncology product for a shorter time. So, physicians are not battling the switch issue like they are with a Remicade product. That's why for some of these more chronic diseases, the provider incentives are so critical. Where biosimilars are having more success, it's because physicians are, frankly, having an easier time prescribing the biosimilar because there's less resistance.
CfB:What are your key takeaways from the report and the current landscape for biosimilars? Meaghan, would you like to go first?
Smith: Sure. Thank you, Tony. I think this was another piece of evidence and another analysis that shows how biosimilar competition can benefit patients with decreasing prices and lowering health care costs and that more competition equals increased health care savings. That's an area where we're going to be focused on trying to increase health care savings and lowering health care costs with more competition.
Frank: I think this study contributes to the conversation that's going on about how much potential there is for competition in this market. Second of all, to the extent that the experience with biosimilars is different from that of [generics and the] Hatch-Waxman Act, which is, in a sense, the model for the BPCIA, what [potentially] accounts for that? I think the evidence that we've put together, so far, is (1) there's potential here for the market and we have to give it some time to evolve along the lines that Meaghan pointed out. The second thing is that there are clearly impediments to entry. Even after you've met all the standards for approval, there are still impediments to even getting into the market. I think those need to be addressed in regulation and potentially other competitive practices on the payer and antitrust side. I think those are, in a sense, where we think the state of play is right now.