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Executive Summary


Interviews with US payers suggest that at first they are more likely to focus on promoting biosimilars in treatment-naïve patients, as opposed to switching those on branded drugs, according to a new Datamonitor report.


US payers have a number of mechanisms in their policy toolbox that they can use to steer drug use toward the wave of biosimilars coming on the market – most importantly, prior authorization and requiring that patients try a biologic copy before a branded drug.

As the US has trailed behind Europe in developing a system for approving biologic copies, not to mention lawsuits that have delayed rollouts, biosimilars pricing strategy is still unfolding and payers are still developing their management policies, notes the Datamonitor Healthcare report Biosimilars Market Access in the US, published in March. Four drugs have been approved through the dedicated biosimilars 351(k) pathway in the US within the last two years – Sandoz Pharmaceuticals Corp.'s Zarxio (filgrastim-sndz), Pfizer Inc./Celltrion Inc.'s Inflectra (infliximab-dyyb), Sandoz's Erelzi (etanercept-szzs) and Amgen Inc.'s Amjevita (adalimumab-atto). Of these, Amjevita and Erelzi have not launched yet, due to patent litigation. (Also see "Biosimilars: Sandoz Pegfilgrastim Review, Amgen Adalimumab Launch Extended To 2018" - Pink Sheet, 28 Oct, 2016.)

Two drugs have been cleared through the agency's 505(b)(2) follow on pathway – Novartis AG'sOmnitrope (somatatropin) in May 2006 and Boehringer Ingelheim GMBH/Eli Lilly & Co.'s Basaglar (insulin glargine) in March 2015. These are considered copy biologics that act as a proxy for biosimilars of reference products.

US payers generally expect discounts of from 20% to 30% on biosimilars, but for some diseases, such as diabetes, they will be looking for higher discounts, more in the 40% to 50% range, Datamonitor interviews suggest.

There is the chance, which payers will welcome, that manufacturers of originator products could match or beat biosimilar discounts, thereby ensuring lower prices with no disruption in care for prescribers and patients.

Furthermore, even with discounts, biosimilar use will need to be managed, most likely through prior authorization requirements. One US payer told Datamonitor that "30% off a drug that costs $4,000 a month is not much of a bargain. I mean it is cheaper but you are still dealing with a drug that costs $2,000–$3,000 a month. I think anything that is in excess of a $1,000 a month has the potential to be a targeted product."

[Editor's note: Datamonitor Healthcare's Biosimilars Market Access in the US report, available here, includes original research with anonymized key opinion leaders.]

Payers have a range of strategies that can be used to manage biosimilars, particularly those covered through the pharmacy benefit, which typically means oral drugs dispensed at pharmacies, as opposed to the medical benefit, which generally applies to infused or intravenously delivered therapies.

Options include prior authorization, "step edit" requirements, preferred placement on formularies, higher reimbursement for biosimilars to prescribers and lower out-of-pocket charges for patients.

The type of tools used differs depending on the indication. Datamonitor noted in the report that prior authorization is rarely used for insulins but is almost always used for growth hormones and oncology products. Quantity limits are more common with growth hormones, and for multiple sclerosis and rheumatoid arthritis drugs than in diabetes and oncology.

The focus initially for biosimilars will be driving use in treatment-naïve patients, but switching from reference products may follow.

"Despite the cost-benefit that biosimilars provide, there is reluctance from some to move patients from an originator product if they are stable and responding to treatment. Some payers and physicians are therefore anticipating that biosimilars will mainly be used in biologic-naïve patients or in those who require a switch in therapy due to side effects or lack of efficacy," the report noted.

Author Amanda Micklus said that "step edits" will be very important, meaning payers will require a treatment-naïve patient, especially one who hasn't used a branded biologic, to first use a biosimilar. Formularies are structured in tiers, the lowest being the least expensive in terms of cost sharing and the highest including specialty products (see box).

"I am not going to make people switch once they are stable enough on the innovator brand. New starts will probably have to start with a biosimilar if they are less expensive, and equally effective and safe," one US payer commented.

Interestingly, however, Micklus points out that with the first biosimilar launched – Sandoz' Zarxio – prior authorization did not require a step through the biosimilar prior to moving to the reference product, Amgen Inc.'s Neupogen (filgrastim).

"I think this may be an exception rather than the rule, since this was the first biosimilar launched and payer strategies will evolve. Many payers have indicated that they will require step-throughs, especially for treatment-naive patients," she said in an interview.

One payer commented that for Inflectra, the only anti-TNF currently available as a biosimilar in the US, require all new patients to try infliximab first before other agents, but that it would not convert any active patients. Johnson & Johnson's reference infliximab product Remicade is given by infusion whereas competing anti-TNFs AbbVie Inc.'s Humira (adalimumab) and Amgen's Enbrel (etanercept) are given subcutaneously, and this difference in administration discourages switching. Also, leading payers have negotiated attractive rebates for Enbrel and Humira that have more value than savings that could be gained from biosimilar infliximab.

"However, once biosimilar versions of Enbrel and Humira emerge, the situation could change drastically as these drugs are already used in high volumes," the Datamonitor report noted.

While in general, sentiment currently leans toward focusing biosimilars on treatment-naïve patients, some payers say they will require a switch from a branded similar for all patients, according to the report.

"I think we are going to have to aggressively drive the biosimilar. No grandfathering; everybody has to switch or we are not going to see anything happen," one said, for example.

Muscling In The Market

Early launches show payers' willingness in some cases to use muscle in terms of formulary exclusion as a means of encouraging use of biosimilars. For example, CVS Health Corp. and United Healthcare Services Inc. decided to exclude Sanofi's Lantus (insulin glargine) in favor of Basaglar from commercial formularies in 2017. (Also see "Rise Of The Biosimilar Formulary: CVS Excludes Lantus, Neupogen For 2017" - Pink Sheet, 2 Aug, 2016.) (Also see "UnitedHealthcare Prefers Basaglar Biosimilar At Lantus' Expense" - Scrip, 22 Sep, 2016.)

Express Scripts Holding Co. includes both Lantus and Basaglar on its national formulary for 2017, but the company has said it is working on benefit designs to spur use of biosimilars, for example through lower out-of-pocket costs for patients. (Also see "Express Scripts Diabetes Program Caps Drug Costs, Targets Adherence" - Pink Sheet, 31 Aug, 2016.)

Preferred placement means biosimilars will be included on a lower tier of the formularies and with a lower co-pay compared to the branded drugs, which incentivizes patients to voluntarily choose a copy over the innovator.

Manufacturers typically offer co-pay coupons, as well as other assistance, to shield patients from costs of new drugs, which presents a challenge for payers in driving use by lowering these costs.

"The discount biosimilars offer and the co-pay incentive payers put in place will be critical in ensuring that patients still have a financial incentive to switch, even when co-pay coupons are available. Alternatively, biosimilars manufacturers may also consider offering co-pay coupons to entice patients to switch onto their products," the report suggests.

Datamonitor believes that payers may also create new tiers in formularies – beyond the three or four now in use – to drive use of biosimilars.

"A drug tends to be placed in Tier 3 or Tier 4 if it is new and not fully proven to be safe or effective, or if there is a similar drug on a lower tier that is seen to deliver the same benefit at a lower cost. As more biosimilars enter the US market, payers may decide to have two specialty tiers: one for biosimilars and potentially other preferred specialty brands, and another with a higher co-pay for nonpreferred specialty drugs," Micklus said in the report.

Tugging At Physician's Purse-strings

Datamonitor expects commercial payers will also offer reimbursement incentives to physicians for prescribing biosimilars over branded biologics. These are likely to be in line with the reimbursement approach to biosimilars established for Medicare Part B, which covers infused or IV drugs.

Medicare pays for Part B drugs at a drug’s average sales price (ASP) plus 6% to cover physician costs and under the law, biosimilars are to be reimbursed at ASP plus 6% of the ASP of the innovator drug (rather than the lower biosimilar price) to remove any disincentive to prescribe them.

Nevertheless, when it comes to Medicare reimbursement, a number of issues have yet to be resolved including coding, which has important ramifications. (Also see "Part B Reference Pricing Faces 'Clinical' As Well As 'Political' Obstacles" - Pink Sheet, 18 Apr, 2016.)

"Given the relative infancy of the US biosimilars market, no definitive policies have been implemented yet," the Datamonitor report noted.

 

 
Payers' Utilization Management Tools That Could Be Applied To Biosimilars

 

Utilization management tool

Description

Likely to be used for biosimilars?

Applicable for drugs reimbursed through medical or pharmacy benefit?

 

Prior authorization

Requirement that the prescribing physician obtains approval from the health plan to prescribe a specific medication. Without this prior approval, the health plan may not provide coverage for, or pay for the medication.

Yes

Yes, both

Tiered formulary position and copayment

 

Products will be placed on different tiers depending on the level of reimbursement that the healthcare plan is willing to pay. Copayment is the proportion of the cost that patients will have to bear.

 

Yes – biosimilars will be placed in a more favorable formulary position than the originator with a lower co-payment level.

Pharmacy benefit only

Preferred products

 

The preferred drugs list – or formulary – is a list of the products that are routinely covered by the plan.

 

Yes – biosimilars will be the preferred product compared to the originator with a lower copayment level.

 

Yes, both

Step-edits

 

Health plan guidelines require that cheaper alternatives are used first in initial lines of therapy before the more expensive biologics are introduced.

 

Yes – patients will be required to fail on a biosimilar before they can be treated with its branded equivalent or other biologic brands.

Yes, both

Formulary exclusion or switching off the J code

 

Health plans may decide not to cover the originator biologic.

 

Not initially, but likely as confidence improves and if the biosimilars are discounted well below the reference products.

 

Formulary exclusions for drugs in the pharmacy benefit, J code switch off for medical benefit drugs.

Buy-and-bill reimbursement incentives

 

Health plans may give physicians higher absolute reimbursement or higher reimbursement margin for medicines reimbursed through buy-and-bill mechanism for medicines administered in physicians’ offices (medical benefit).

 

Yes – the BPCI* Act stipulates that Medicare must reimburse biosimilars at ASP* (biosimilar) plus 6% ASP (reference product) vs 106% ASP (reference product) reimbursement for the reference brand. This gives physicians a higher margin for using the biosimilar.

 

Medical benefit only

Clinical pathways

Clinical pathways are currently used in oncology. They are evidence-based guidelines that prioritize treatments for specific patient populations based on efficacy, safety, and price (in that order of importance). When coupled with payer incentives for using on-pathway treatment, they drive the use of the most cost-effective treatment, provided it has the best efficacy and safety results for the relevant patient.

 

Yes

Medical benefit only initially for oncology drugs but potential to expand to pharmacy benefit in other indications (e.g. rheumatoid arthritis).

 

*ASP = average sales price; BPCI = Biologics Price Competition and Innovation. Source: Biosimilars Market Access in the US, Datamonitor Healthcare, March 13, 2017

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