Payers Want Deep Discounts To Make Biosimilars Worth Their While

US payers are expecting biosimilar manufacturers to offer significant discounts versus the originator price – as much as 40%-50% lower – to make covering knockoffs worth their while, and believe patients will vote with their pocketbooks, incentivized by low copays.

Four drugs have been approved through the dedicated biosimilars pathway in the US – Sandoz Pharmaceuticals Corp.'s Zarxio (filgrastim-sndz) in March 2015, Pfizer Inc./Celltrion Inc.'s Inflecta (infliximab-dyyb) in April 2016, Sandoz's Erelzi (etanercept-szzs) in August 2016 and Amgen Inc.'s Amjevita (adalimumab-atto) in September 2016. Amjevita and Erelzi have not launched yet, as they are entangled in patent litigation. (Also see "Biosimilars: Sandoz Pegfilgrastim Review, Amgen Adalimumab Launch Extended To 2018" - Pink Sheet, 29 Oct, 2016.)

Two other products were cleared through the agency's 505(b)(2) follow on pathway – Novartis AG's Omnitrope (somatatropin) in May 2006 Boehringer Ingelheim GMBH/Eli Lilly & Co.Basaglar (insulin glargine) in March 2015. While not approved as biosimilars, these two products could be considered as a proxy for a biosimilar of the reference products, Pfizer Inc.'s Genotropin and Sanofi's Lantus, respectively.

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 policies, notes the Datamonitor Healthcare report Biosimilars Market Access in the US, published on March 13.

"It is widely anticipated that biosimilars will be priced at a discount of between 20% and 30% relative to the originator product," Datamonitor analyst Amanda Micklus said in the report.

However, in some cases the discount will be closer to 40%, with the level of discount likely to vary depending on the product class, she added.

One US payer interviewed for the report noted that price discount quotes for biologic copies have been "all over the place" – from 15% to 40%. [Editor's note: Datamonitor Healthcare's Biosimilars Market Access in the US report, available here, includes original research with anonymized key opinion leaders.]

"I think it will depend on the difficulty of manufacturing, the molecule, the level of competition for the biosimilars. But I think mid-20% range is probably a reasonable range for a discount," the payer said.

It is reasonable to expect that discounts will rise, through contracting rather than list price, over time as more competing biologic copies launch – similar to multi-source generics, though not to the same level.

The price discounts biosimilars manufacturers will have to offer through contracting are likely to vary depending on the disease. A 10%-15% discount is unlikely to cut it in diabetes because it would likely be matched by the manufacturer of the originator product, whereas 40%-50% would be harder to compete with.

"I think we are looking at that 40% as the magic number for any biosimilar, because if it is 10%–15% less, then the branded company just increases their discount, and it does not make a difference," one payer said.

Another payer told Datamonitor that expectation for supportive medications – white and red blood cell stimulants like filgrastim – is a discount in the 40% range, adding: "I think the [tumor necrosis factors (TNFs)] could eventually get very competitive and also in the 30%-40% range. I think those will probably be the most competitive."

Sandoz' Zarxio launched in September 2015 at a discount of 15% relative to Amgen Inc.'s Neupogen (filgrastim), but "this discount will be largely theoretical as Sandoz will need to offer deeper discounts in order to convince payers to change their policies and to compete with the discounts Amgen is likely to respond with," the Datamonitor report notes.

Pfizer/Celltrion's Inflectra launched at a 15% discount to Johnson & Johnson's originator product Remicade (infliximab).

"But Johnson & Johnson has stated that Remicade itself has a 30% discount after rebates are included. In cases like these, the biosimilar would need to have an even larger discount to effectively compete," Micklus noted.

As one payer said, if the pricing of biosimilars is not aggressive enough, "we will just stay with the brands… that is an automatic for us."

The launch of Lilly/Boehringer's Basaglar, the copy of Lantus, "will also provide an interesting test case for how discounts relative to the reference brand will play out," the report states.

Basaglar launched at a discount of 15% to 28% off the price of competing insulins but "in cases where Basaglar becomes the preferred brand over Lantus on the formulary, the discounts could be even steeper," according to the report. (Also see "UnitedHealthcare Prefers Basaglar Biosimilar At Lantus' Expense" - Scrip, 22 Sep, 2016.)

One payer recounted: "Well [Basaglar’s contracting terms] have got to be aggressive. I told the product manager he needed to be 50% below WAC [wholesale acquisition cost] … if they are giving me 15% off of WAC without a contract and let us say they give me 30% [on Lantus] … I do not need Basaglar. It is not likely I am going to get 50% off from Lantus, but I could, so if they give me 50% off that is going to be such a discount that I cannot avoid it, I would have to take it and then we would really aggressively try to move that market."

Focus On New Starts

Datamonitor interviews suggest that payers are cognizant about avoiding disruptions in patient care where possible and appear to be leaning more toward driving use of biosimilars in treatment-naïve patients as opposed to switching them from branded drugs to biosimilars, to maintain continuity of care. Concerns about maintaining continuity of care are also likely to steer them toward biosimilar manufacturers in Western countries as opposed to emerging markets, to avoid any supply problems.

"There are two ways that the originator company can approach it; they can just ignore it and hope that they will get as much revenue as they can on whatever they can get, or they can actively compete and try to match discounts, which will make it easier for plans as it means that we do not have to deal with the disruption to our members and our patients. They could offer further discounts if we do not do a substitution with the biosimilar," one US payer told Datamonitor.

"We would be likely to stay with the branded company if they were competitive. We would not have to move anything," said another.

In cases where payers are happy with the discounts offered by biosimilar companies, a range of strategies may be used to steer use away from branded drugs, including formulary placement, step-therapy requirements and prior authorization.

Another important way they plan to drive use of biosimilars is by offering lower out-of-pocket costs – such as coinsurance and co-payments – compared to branded drugs to enrollees, incentivizing patients to "vote with their pocketbooks."

"Payers interviewed by Datamonitor Healthcare indicated that they will position biosimilars as preferred agents on their formularies. This means biosimilars will be included on a lower tier of the formularies compared to the brands with a lower co-pay. Co-pays can be a useful tool when driving lower-cost drug use. It is hoped that since the lower-cost products are associated with a lower level of co-payment, patients will be financially incentivized to take biosimilars, saving themselves, and the health plan, money in the process," the report says.

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.

Sandoz, for example, offered the One Source Co-Pay Program with Zarxio, it notes.