Clinician and Managed Care Insights on Biosimilars for Inflammatory Diseases - Episode 8

Variables Affecting Cost for Biosimilars

Peter L. Salgo, MD: Why don’t we just morph, right here, into some of these marketing considerations? We’ve been dancing around it for a while. What are the pricing differentials between the biosimilars and the regular drugs? I don’t mean to use the word “regular,” but the original drugs. What is the limit to cost savings here? How much cheaper are these biosimilars to start with?

Cole Wilson, PharmD: Savings with traditional drugs, as we talked about, are typically somewhere in the range of 75% to 85%. You see that cost reduction of about 70% in the first 24 months, on average, with traditional drugs. As we look at biosimilars, we’re seeing, in those that are coming to market, between a 15% to 30% reduction in cost. Is that going to be enough to drive prescribing habits?

Peter L. Salgo, MD: Fifteen percent, 20%, 30%. Thirty percent is a lot, and 15% is a lot less than the discount you would get, today, going from a small molecule drug original to a small molecule drug generic. Why? Why is there this problem?

Vibeke Strand, MD: I think a lot of it has to do with the contracting and, not to mention, the fact that even the originator reference product manufacturer is going to be deeply discounting their product (depending on what their whole portfolio is for that particular managed care organization). So we have what’s happened with the biosimilar to infliximab in Canada—where in one place, it’s less than half the cost of the originator product. In another (Quebec, for instance), the 2 of them are actually the same price (both the originator and the biosimilar). And that has to do, a lot, with how these contracts have been worked out. We can expect the same kind of variability, even in the US.

Peter L. Salgo, MD: You started off by saying, “We don’t know, and it’s confusing.” I’m beginning to get the picture. It is confusing. What I keep hearing about biosimilars is the FDA (Food and Drug Administration) approval process is a lot more expensive for a biosimilar than it is for a generic. Is it?

Vibeke Strand, MD: Yes, it is a lot more expensive, but it’s a lot cheaper than what was done for the reference product, where you had to do 1 or 2 randomized controlled trials for every indication. Now you’ve got, essentially, 1 large indication study for extrapolation across all the other approved indications.

Peter L. Salgo, MD: The reference drug did all the heavy lifting, right?

Gary R. Lichtenstein, MD: It cost about $1.5 billion—$1.2 billion is the number that has been bantered about for an originator to get approval. It’s substantially less for the biosimilars, and it’s also a more costly manufacturing process to make a biologic than a small molecule, in general.

Peter L. Salgo, MD: It’s more money to make the drug, but there’s been $1.5 billion already invested by the reference drug manufacturer to get all of the basic studies done. And I don’t mean to disparage the biosimilars, but they’re kind of riding piggyback on all that. They’re saving a lot of money. Why only 15% less or 20% less? Why?

Allan Gibofsky, MD: I’m not sure we’re the ones who are able to answer that question, and I think you’re putting your finger on the cause of some of our disease with what is actually turning out to be the case.

Vibeke Strand, MD: On the other side of it is that the reference product manufacturers have made a lot of money on these products because they’ve been expensive and they’ve been reimbursed, etcetera. Why wouldn’t they have the incentive to deeply discount to match the biosimilar?

Peter L. Salgo, MD: So the implication is not that the biosimilars are too expensive but that the reference drugs are now coming down to reality—that the difference is because the reference drugs are getting cheaper?

Vibeke Strand, MD: Or that both of them are coming toward reality.

Allan Gibofsky, MD: Well, competition is what’s driving them. Since you have different forms of the same molecule (biosimilar forms), we have 3 infliximabs now. Clearly, the choice is going to be, in part, driven by the competition and the pricing.

Cole Wilson, PharmD: And the FDA will actually say that it takes 10 products, in a competitive market, before you see the max of the savings benefit.

Gary R. Lichtenstein, MD: And one thing to remember is that the companies that have manufactured the originators have a research and development (R&D) budget. The R&D budget material comes from products that are profitable, and it goes to other products. This is very important for the future development of products. But perhaps that could be shaved down somewhat.

Peter L. Salgo, MD: I thought I heard, in the midst of this discussion, that in Europe, in the European Union (EU), there was a better price saving on these biosimilars than there is here in this country. How does the EU do it and we don’t?

Gary R. Lichtenstein, MD: About 30% is the general number that the EU has had when you look at biosimilars. It’s at the upper end of what we perceive will be likely in the United States. They have a different system, completely. They have a budget that’s allocated to an institution, if you would, through the EMEA (Europe, the Middle East, and Africa), who has said that these are cost-effective. And cost-effectiveness is very important. And that institution gets a budget. When they use that budget up, they’re done. They can spend no more money. So, they’re very cost conscious internally. The Germans, for example, if you look at them, are graded based on what they do. They’re told how they’re doing with biosimilars—each, individually. And the rate of use of biosimilars is something which is cost savings to their government.

Allan Gibofsky, MD: One other thing—they’re predominantly single-payer systems. When you bid for what you’re going to sell the drug at, you’re capturing, if you get the bid accepted, 100% of the market. You can always afford to lower your price in return for the volume, which you may not be able to do where you’re just fighting for a small amount.

Cole Wilson, PharmD: There’s also 10 years of experience in biosimilars in the European market. I think a lot of the providers are a lot more comfortable with their use.

Peter L. Salgo, MD: They get a lot more use. Is that what you’re saying?

Cole Wilson, PharmD: That’s right.

Allan Gibofsky, MD: Yes.

Peter L. Salgo, MD: There’s some volume just in the terms of prescriptions that are prescribed.