Tuesday, September 10, 2019

We Shouldn’t Give Up on Biosimilars—And Here Are the Data to Prove it

An interesting spat about biosimilars has emerged between two prominent policy-oriented physicians.

Dr. Peter Bach of Memorial Sloan Kettering and Mark Trusheim of MIT argues that we should “throw in the towel” on biosimilars and begin regulating drug prices.

On the other side, Dr. Scott Gottlieb, a former FDA commissioner, argues that we shouldn’t give up on biosimilars, but instead make structural and legislative changes that would increase competition.

To inform the debate, I share below the latest data on biosimilar adoption. As you will see, adoption rates for the most recently launched products—biosimilars of Neulasta and Epogen—are growing quickly, and prices are declining. These products are penetrating the market much faster than the biosimilars of Remicade did. Substitution rates for the upcoming wave of oncology biosimilars will likely penetrate even faster.

That’s why I concur with Dr. Gottlieb: Regulating prices at this stage of the market’s development is premature. This strategy may save some money in the short run, but it risks destroying a market that is finally beginning to fulfill its promise.

READ THESE FIRST

Here are the two most relevant opinion pieces on the biosimilar debate. As always, I encourage you to read the articles for yourself.
BIOSIMILARS IN 2019

The FDA has approved 23 biosimilars:
  • Six of the approved biosimilars are patient-administered products covered primarily by a patient’s pharmacy benefit. All are biosimilars of either AbbVie's Humira or Amgen's Enbrel. Patent litigation and settlements have prevented these biosimilars from launching in the United States.
  • Seventeen of the 23 approved biosimilars are provider-administered products covered primarily under a patient’s medical benefit. Many of these products have launched in the U.S. market, though legal challenges by the manufacturers of biological reference products have delayed the launch of some biosimilars.
The chart below shows the unit market share for biosimilars of four provider-administered biologics. Biosimilars of Neupogen now hold a majority of the market, while Remicade biosimilars have barely penetrated. Biosimilar adoption rates for the two newest categories—shown as the orange and green lines below—are spiking upwards.

[Click to Enlarge]

Here are some observations on these varying patterns:
  • Neupogen. Zarxio, a biosimilar version of Amgen’s Neupogen, was launched in September 2015. By mid-2019, Zarxio and Granix had captured almost two-thirds of the unit market share in the filgrastim category. What’s more, the Average Sales Prices (ASP) for the biosimilars are 30% to 40% below Neupogen’s ASP. The innovator’s share has fallen to 36%. These overall averages disguise very high adoption at some hospitals and clinics. For example, Kaiser Permanente reports that its Zarxio substitution rate is 95%.
  • Remicade. Inflectra, a biosimilar version of Johnson & Johnson’s Remicade, was launched in October 2016. Inflectra is marketed by Pfizer. Renflexis, a second biosimilar of Remicade, was launched in July 2017. Renflexis is marketed by Merck. The ASPs for the biosimilars are 20% to 25% lower than Remicade’s ASP. However, the combined market share for the two biosimilars was less than 10% of the market as of mid-2019.

    This slow adoption of Remicade biosimilars illustrates the influence of payer and provider decisions. Ronny Gal at the investment bank Sanford C. Bernstein & Co., found that for 2019, 79% of commercial lives were in plans that preferred Remicade over its biosimilars. Johnson & Johnson has offered discounts and rebates to retain Remicade’s share. Remicade’s quarterly net revenues have declined by 35% from the third quarter of 2016 to the second quarter of 2019, despite the drug’s having retained 90% of the category’s market share,.
Biosimilars in the two newest categories show much greater use and steeper adoption curves:
  • Neulasta. The two biosimilars of Neulasta—Fulphila and Udenyca—had 20% market share in June 2019, which was one year after the first product’s launch. Unlike the Remicade market, the Neulasta commercial market is much less restricted. For 2019, only 6% of commercial lives were in plans that preferred Neulasta over its biosimilars. Most had comparable formulary placement among the three products, leaving the choice of product to providers.
  • Epogen. The biosimilar Retacrit, marketed by Pfizer, launched at a 33% list price discount to Epogen, the reference product marketed by Amgen. The biosimilar’s market share was 24% as of June 2019, about eight months after launch.
I expect that the coming wave of biosimilars will penetrate the market even more quickly than the two products highlighted above. The next major biosimilar launches will challenge Genentech’s Herceptin and Avastin oncology products. The FDA has already approved five biosimilars for Herceptin and two for Avastin. For example, UnitedHealthcare has already announced that it will prefer the biosimilars of Herceptin and Avastin marketed by Amgen.

FIXING THE MARKET

Regardless of this progress, the biosimilar market is not currently structured to drive the fastest adoption or the lower prices.

Consider the warped incentives of the buy-and-bill system. ASP is a flawed measure of the actual net prices that manufacturers receive. That’s because ASPs exclude 340B Drug Pricing Program discounts and Medicaid rebates. As I showed in Latest Data Show That Hospitals Are Still Specialty Drug Profiteers, the 340B program allows hospitals to earn thousands of dollars more than the drug’s manufacturer does. This slows the adoption of biosimilars. Ronny Gal at Bernstein found that many hospitals do not even have biosimilars on their internal chargemaster lists, which suggests that the products are not available for physician use.

And though rebate reform for the Medicare Part D program stalled, the fundamental distortions of the rebate system remain. As Dr. Gottieb wrote: “If a health plan were to adopt a biosimilar, it might void its rebate contracts for biologic drugs and lose payments. Rebates take years to get in place and a new entrant may be hard pressed to offer insurers a similar deal.”

Physician preferences are slowing biosimilars, too. The 2019 Genentech Oncology Trend report shows that physicians are becoming somewhat more comfortable with biosimilars. However, the report also shows that a majority (61%) of oncology physicians still prefer not to use biosimilars, use them only for supportive care, or prefer not to switch patients.

This just a sampling of the factors slowing adoption. I'll provide more details on biosimilars and the buy-and-bill market in our forthcoming 2019-20 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors

Biosimilar adoption and pricing can and should be addressed by regulatory and legislative changes that would alter incentives for providers, physicians, and payers. Giving up now would be ludicrously premature.

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