“You can’t have your cake—or in this case, your rebates—and a vibrant market for biosimilar competition too,” said FDA Commissioner Scott Gottlieb, MD.
In a speech delivered this morning at America’s Health Insurance Plans (AHIP) National Health Policy Conference, Scott Gottlieb, MD, Commissioner of the FDA, said that biologics and biosimilars are “an area where I have some of my most significant concerns about the long-term impact of the pricing and rebating mischief,” and warned that “the rigged payment scheme might quite literally scare competition out of the market altogether. I fear that’s already happening.”
While Gottlieb noted that, as of January 2018, 60 biosimilars were enrolled in the FDA’s biosimilar development program—and the agency has received meeting requests to discuss biosimilars for 27 distinct reference biologics—“the economics of development are currently unstable; and the pipeline of biosimilar products that we hope for could be dramatically affected by the weakening of market incentives to bring these products to patients.”
Gottlieb called into question pharmacy benefit managers (PBMs), wholesalers, and pharmacies, saying that market concentration of among these businesses (3 PBMs control more than 66% of the market, the top 3 wholesalers more than 80%, and the top 5 pharmacies more than 50%) may be inhibiting competition. “Too often, we see situations where consolidated firms—the PBMs, the distributors, and the drug stores—team up with [payers]. They use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers,” said Gottlieb.
These practices that inhibit competition drive up costs and effectively penalize patients with high out-of-pocket costs “where the primary purpose is to help subsidize rebates paid to a long list of supply chain intermediaries.”
Although Gottlieb acknowledged that steep co-pays for patients who need expensive drugs may help bring down average insurance premiums, “sick people aren’t supposed to be subsidizing the healthy.” Emphasizing the fact that lower-cost generic drugs often have low or no co-pays for patients and can help reduce cost burdens and increase treatment adherence, Gottlieb said that “we’re living in a world where financial toxicity is a real concern for patients. And every member of the drug supply chain needs to take responsibility for addressing it.”
Gottlieb also pointed a finger at the lengthy patent litigation practices that he says may be delaying the marketing of 6 approved but unlaunched biosimilars in the United States, and he raised the specter of “pay for delay” tactics (whereby the developer of a follow-on product may agree with an innovator product sponsor not to launch an approved follow-on until after an exclusivity period expires in exchange for monetary payment).
“The crux of these pay for delay schemes are also taking root in the biologics market,” explained Gottlieb, adding that, “Except this time, in these biosimilar pacts, the tactics are dressed in the guise of rebates and contracting provisions between manufacturers and PBMs that discourage biosimilar market entry.”
Ultimately, payers will have to decide whether they want to continue to benefit from rebates and contracting and the short-term profits that they provide or to invest in a system that works better for all stakeholders. “You can’t have your cake—or in this case, your rebates—and a vibrant market for biosimilar competition too,” he said.