Part 1: Wayne Winegarden, PhD, on How Employers Can Better Manage Their Formularies

September 15, 2020

Wayne Winegarden, PhD, senior fellow in business and economics at the Pacific Research Institute (PRI) and director of PRI’s Center for Medical Economics and Innovation, discussed where the biosimilar market is heading and how employers can incentivize biosimilar utilization.

The Center for Biosimilars® (CfB): Hello, I'm Matthew Gavidia. Today on the MJH Life Sciences Medical World News, The Center for Biosimilars® is pleased to welcome Wayne Winegarden, PhD, a senior fellow in business and economics at the Pacific Research Institute (PRI), as well as director of PRI's Center for Medical Economics and Innovation. Can you just introduce yourself and tell us a little bit about your work?

Winegarden: Oh, absolutely. Good morning or good afternoon, everyone. My name is Wayne Winegarden. As Matthew just said, I'm a senior fellow and director for Center for Medical Economics and Innovation at the Pacific Research Institute. Part of what we try to pursue at PRI, with respect to our health care research, is discuss how free market reforms can improve both the quality of care as well as reduce the cost of care. So, basically, we want to get that productivity that we see in other parts of the economy working in the health care sector. And at the Center, one of the things we focus on particularly is pharmaceutical products and medical devices. Right now, there's a lot of attention and there's specific issues, like [those that concern] biosimilars, that are unique to the pharmaceutical market and that's what we tried to emphasize when we're doing our research at the Center.

CfB: To start us off, specialty drug prices continue to climb but has there been a slowdown in the rate of that climb and what might be causing this?

Winegarden: Yes, especially in the spend. And a lot of that is that we're beginning to see biosimilar competition stand up. For a while we were having a very difficult time getting that foothold in the market. We're still not anywhere close to where we could be or should be. But we are beginning to see the biosimilar market stand out, and that's beginning to have an impact, and over time, hopefully, we'll see more of that.

CfB: What are your thoughts on the constant price increases of drugs like Lantus [insulin glargine]?

Winegarden: For drugs like Lantus, or really, across the market, we're seeing prices rise when you don't have effective competition. But we need to be careful when we talk about prices rising, because the market is so complex.

Often when we're looking at prices, what we're looking at is the wholesale acquisition costs, or the gross price, which isn't the price systemically. It is the price that the patients' costs are based on, and that's part of the issue with the drug affordability problem that we have, but it's not actually based on the systemic price.

So, there are really 2 things that we need to look at: One is why that price is going up because, especially in specialty drugs, prices are rising too quickly. But also, we need to be very careful when we talk about prices. Here, we're talking about the relevant market price, and often when we talk about drugs that's not what we're talking about.

CfB: What's your take on the strength of the biosimilar market in the United States? Are there examples of success and are we poised for greater uptake?

Winegarden: Yes, and yes. The greatest example of success is Zarxio, which has a majority of the [filgrastim] market. But even the infliximab market, where we've seen the biosimilar competitors drive down the cost of the originator product [Remicade], from a consumer perspective, is a success. Obviously, that raises issues in terms of sustainability of competition, which we need to be very careful about, and we need policies that support long-term durable competition, which is a different issue altogether.

We are definitely seeing some successes and we certainly are poised for more. I think the education about biosimilars is getting out there. People are recognizing them. And we also have some very important biosimilars in the pipeline that, hopefully, will be in the market soon. And they could make a very, very big difference in terms of the costs.

CfB: How about biosimilar uptake during COVID-19 [coronavirus disease 2019]? What do you think we're going to findwhen the dust settles?

Winegarden: With COVID-19, obviously, the biggest issue in terms of public health in drug is going to be the vaccine. And so that's a little bit outside of the scope in terms of biosimilars.

Especially because of all the stress that COVID has placed on the health care system, it actually accentuates the need to get [the biosimilar] market up and running and get a much larger [market] share. I mean if generics are 90% of the market for small molecules, we need to get close to that share with the biosimilars to help bring down the cost because of all the stresses COVID has put on [the industry].

Obviously, [COVID has put stress] across the economy, but it has targeted the health care system. And so, [biosimilars] could help promote greater affordability and improve people's health and, especially, adherence because when we have greater adherence, we have greater health outcomes. All of that is amplified because of the current environment that we're in. So, in that sense, it heightens the need for us to get this market up and running faster.

CfB: What are your thoughts on the power of large employers to shift their employees toward biosimilars such as Disney and Costco have done, and do you see this trend gaining significant momentum?

Winegarden: I definitely see it gaining steam. We've seen it in the numbers that we've been tracking the amount of savings we're getting from biosimilars. In the latest numbers that we've run, we're up to $1.8 billion. That was from a few hundred million just a couple of years ago. So, we're seeing much greater usage, greater market share, and the savings are going up. Obviously, the potential is 10 times that, if not more. So, there's a lot more to be gained but we are seeing that [growth] and the power within the large employers. Absolutely.

If we look at the way the health insurance markets are today, they're driven by the employers. Now, we can have a whole debate about whether that should or shouldn't be the case, but that is the reality today. And so, as large employers switch, you really have that double effect of one; they're moving a large population toward more-affordable drugs—that is a beneficial impact—but [you also have] the secondary impacts of news stories that come from it and the awareness that those drive other large, as well as smaller, payers towards embracing biosimilars. So, that kind of double impact--the good and the excellent and up—is very important. And so, absolutely, we are seeing a positive data trend. It's very meaningful. And hopefully we'll continue to see more of that.

CfB: Can you talk about “fail first” or step therapy as a means of getting biosimilars into play?

Winegarden: Oh, absolutely. Fail first is actually working in reverse when it comes to the biologics market. If we go to the small molecule market, typically, if you fail first when using a generic then, you can get the [reference product]. But basically, you're encouraging the use of the lower-cost product first and then, move to the more expensive product. We have the exact reverse in biologics and that's not the way it should work. It should be that you fail first on the biosimilar and then, you move to the reference biologic.

But there's also another issue, which is that if you're failing on the originator, the odds of the biosimilar and vice versa, if you fail on the biosimilar, there are a lot of issues regarding the efficacy for that individual patient. I try to stay away from medical issues that are outside of economics and outside of where my expertise is. But you need to also be careful from that angle, where you're not really giving the biosimilar a chance, because if the efficacy is not showing [for the originator], it's not [going to] show [for the biosimilar]. So, you have those concerns as well. One of the most important reforms we need to make to accelerate the use of biosimilars is to address that fail first issue.

CfB: Are there any potential strategies for getting payers to steer clear of rebate incentives and put lowest cost biosimilars on formulary?

Winegarden: There are all sorts of strategies that can be done. One of the things I think is important is to create a separate formulary tier for biosimilars. And you can have certain types of criteria in terms of price discounts relative to originator price or anything you want to have in order to for a product to qualify for it. But in order to share the savings--and that's a big part of the solution is just the savings that the biosimilars offer—the patients, the payer, and practitioners have to benefit. And if we don't get everybody's incentives aligned to have the patient using the biosimilar, then something along that chain isn't going to work well.

So, you want a separate formulary tier where the biosimilar has lower co-pays, coinsurance, costs to the patient, or you can have higher reimbursement rates for the provider, so they have the incentive to use it. The payer should be saving money. That should be an incentive. You can also give them incentives along the star ratings for Medicare. So, you can give them a boost in the Medicare market. We need to get all of these types of shared savings or shared benefit going so that the systemic benefit, which comes from a lower cost product, is shared by everyone and everyone has the incentive to save that money. They’re all incredibly important reforms that we need and would encourage greater biosimilar use. Obviously, any payer can adopt those changes among themselves, work with their PBM [pharmacy benefit manager] to make and demand those changes. Customers, especially the large customers including payers and employers, need to start demanding better service out of their PBMs to ensure that they're getting the pricing and the value they deserve.

Part 2 of this interview will be available Thursday, September 17


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