Raising the Biosimilar Banner

At the National Health Policy Conference for America’s Health Insurance Plans, FDA Commissioner Scott Gottlieb described how “pernicious” rebating and contracting schemes in the US healthcare system are discouraging biosimilar development. Although explaining that the FDA “doesn’t – and shouldn’t” regulate drug prices, he explained that helping to ensure access to medicine is a vital part of the agency’s role. Here are some key quotes taken from his speech (1).

Why the US needs biosimilars

• “Biosimilars not only present opportunities for significant cost savings, they can dramatically expand patient access to therapies. One 2017 study from QuintilesIMS – done at the request of the European Commission – found that competition from the introduction of  biosimilars in the EU dramatically increased patient access. In fact, the report noted that ‘all products in these therapy areas…are contributing to [increased] patient access’ as prices fall.”

The problem

• “Too often, we see situations where consolidated firms – the PBMs [Pharmacy Benefit Managers], the distributors, and the drug stores – team up with payors. 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.”
• “We’ve approved nine biosimilars, and five in 2017… only three are currently marketed.”
• “When biosimilars launch, their initial discount is typically on the order of 15% or 20%. And unless the plan can switch all their patients over to the biosimilar, the cost of the lost rebates on the patients who remain on the original biologic won’t be offset by value of the discount on the biosimilar, and the smaller number of patients who are started on it.”
• “PBMs have a significant financial incentive to limit the uptake of biosimilars to continue the flow of large rebate payments. And health plans have a big disincentive to switch to the biosimilar, and lose the incumbent rebates paid on the innovator biologic.”
• “Once biosimilar makers see that the system is rigged against them, what’s the incentive for a biosimilar maker to pour money into future investments to develop these lower cost alternatives? The rigged payment scheme might quite literally scare competition out of the market altogether.”

How do we improve the market for biosimilars?

• “I’ve been on the record as advocating companies move away from rebate based contracts.  I think they actively harm patients in high deductible health plans, or patients who are forced to utilize products on non-preferred tiers. They can find themselves paying coinsurance based on a list price that no insurer pays. In fact, in some cases, a non-insured cash pay patient would pay less – this is certainly not the purpose of having insurance.”
• “United Healthcare, one of the nation’s largest insurers, announced that it would pass along full drug rebates to more than 7 million people in its fully insured plans starting next year. This is a potentially disruptive step… I hope that others in the industry consider disrupting the current model.”
• “The FDA will do its part by laying out an efficient path for showing how biosimilar products can demonstrate interchangeability with their branded counterparts.”
• “Payors can also lead the way in formulary design by making biosimilars the default option for newly diagnosed patients… [and] by doing more to educate clinicians about the safety and value of biosimilars, to encourage appropriate adoption.”