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Research Report

Implications of Manufacturer Contracting: A Quantitative Model to Assess Biosimilar Market Feasibility

Authored by

Michael Kuehn, RPh; Jay Galli

Affiliation

Market Access, GfK Health, New York, NY

Disclosures

The authors report no relevant financial relationships. 

Citation

J Clin Pathways. 2018;4(8):36-41. doi:10.25270/jcp.2018.10.00038
Received August 8, 2018; Accepted September 17, 2018. 

Correspondence

Michael Kuehn, Vice President, Market Access

Jay Galli, Analyst, Market Access

GfK Health

200 Liberty Street, 4th Floor

New York, NY, 10281

Phone: (646) 204-3326

Email: Michael.kuehn@gfk.com

Abstract: Eight years have passed since Congress enacted the Biologics Price Competition and Innovation Act (BPCIA) of 2010. Since then, 12 biosimilars have received approval from the Food and Drug Administration, but only 4 are available for sale and just ~4% of biologic spending in the United States is subject to marketed biosimilar competition today.1,2 This gap between the current biosimilar commercial landscape and the primary goal of the BPCIA—“balancing innovation and consumer interests” through increased biologic competition—can be attributed to a number of intertwined factors.3 In this article, we review the challenges that have affected biosimilar utilization to date and investigate key dynamics within oncology markets likely to impact uptake of biosimilars going forward using quantitative simulation models.  


In 2010 Congress enacted the Biologics Price Competition and Innovation Act (BPCIA) with the goal of providing an official regulatory approval pathway (titled 351[k]) for generic replicas of an emerging class of therapeutics known as biologics. Biologic drugs are generally large, complex molecules produced through intricate manufacturing methods, making them more difficult to characterize than traditional small molecule drugs.4 The Food and Drug Administration (FDA) has since gone on to define a biosimilar as “a biological product that is highly similar to and has no clinically meaningful differences from an existing FDA-approved reference product.”5

Only 4 biosimilars are currently available for sale in the United States, despite the FDA receiving at least 23 separate 351(k) submissions seeking approval and green-lighting 12 for commercialization (Table 1).6,7 For comparison, 43 biosimilars are available across European geographies governed by the European Medicines Agency (EMA), where a regulatory framework for biosimilars has been in place since 2005.8 Stringent FDA guidelines/protocols governing biosimilar development, as well as the bevy of intellectual property (IP) defense tactics available to US innovator manufacturers, are among the primary factors hindering biosimilar approval efforts to date.9  The 12 biosimilars approved by the FDA, as well as their marketing status as of September 1, 2018, are shown in Table 2. 

t1

 

 

 

 

 

t2There are a number of reasons why the commercial success of FDA-approved biosimilars in the United States has lagged behind that of similarly approved biosimilars in Europe. These factors have been covered thoroughly in previous publications,10-12  but 4 commonly cited reasons include: (1) physician awareness/perception, (2) innovator IP defense, (3) misaligned supply chain incentives, and (4) payer contracting. Table 3 provides recent quotes from key opinion leaders to help frame the most current discussion of these barriers. With over 60 unique biosimilar applications currently on file with the FDA, it is crucial to explore the degree to which these hurdles may be impacting the feasibility, and therefore willingness, of payers to adopt biosimilars.13  
t3

The challenges that have impacted US biosimilar utilization across immunology markets to date provide an interesting case study for oncology stakeholders given the patent expirations of rituximab (Rituxan; Genentech) in July 2018, trastuzumab (Herceptin; Genentech) in June 2019, and bevacizumab (Avastin; Genentech) in July 2020.6,14,15 These 3 cancer drugs, together, sold over $9 billion in the United States alone in 2017.16 The widespread use of contracting across immunology markets in the United States has provided innovator manufacturers an opportunity to offset the financial incentives a payer would otherwise have to adopt lower priced biosimilars. This is achieved via immediate removal of rebates embedded into existing payer contracts for the reference product. This dynamic, colloquially dubbed the “rebate trap,” leverages the chronic nature of treating immunology diseases, physician hesitation to switch patients stable on the reference product to a biosimilar, and current biosimilars lack of interchangeability designation, which would enable automatic substitution at the pharmacy. 10

We aim to contextualize one of the key dynamics impeding biosimilar utilization in the United States—manufacturer contracting—and provide additional insights into payer perceptions of biosimilars from a purely financial perspective. Specifically, we provide additional quantitative context surrounding the magnitude of the impact that rebates and payer contracting has had on the feasibility, to a payer, of replacing a reference biologic with a biosimilar using simulation models. This analysis sets the stage for a discussion on opportunities and challenges facing oncology biosimilars, accounting for key differences between immunology and oncology markets in the United States.  

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Methods

We established a range of scenarios for biosimilar list price vs market share using 2 simulated analyses, demonstrating the impact of these scenarios on a payer’s net spend. For ease of analysis, the models assumed an innovator product with a list price of $50,000 currently offering a 25% rebate. 

Feasibility Analysis

We projected the impact to a payer’s net spend based on various combinations of biosimilar market share and discounts to the reference product, assuming the innovator manufacturer “punishes” any payer that adopts a biosimilar by eliminating the 25% rebate. 

Figure 1 depicts a range of these biosimilar market scenarios and the corresponding financial feasibility to the payer; feasible scenarios are defined as those where adoption of the biosimilar reduces net spend for the payer in the drug class over the coming year. 

f1

The 2 palest shades of red represent market scenarios that are unattractive to the payer, as they would result in higher net spend for the drug class. 

Conversely, the 2 areas shaded darker red represent market scenarios that provide a financial incentive to the payer to promote biosimilar uptake, with the middle section representing an inflection point in terms of net spend.

As depicted in Figure 1, to make a switch from an innovator product to a biosimilar financially attractive for a payer over the next year, the biosimilar likely needs to:

  • Capture at least 70% market share at 20% net price delta,
  • Capture at least 40% market share at 70% net price delta, or
  • Achieve a market scenario in-between these 2 extremes.

Break-Even Analysis

Since corporate investments are made with a certain time horizon in mind, we simulated a break-even analysis of the “biosimilar adoption” decision, from a payer’s perspective. The annual saving (cost) to the payer in each year following the adoption of the biosimilar was calculated, again assuming the innovator responds by eliminating the 25% rebate. The net present value (NPV) of these expected future savings (costs) was calculated using a 5% discount rate to model the “time to break even” associated with adopting biosimilars. 

Figure 2 models the cumulative savings (costs) at NPV to the payer as they initially incur higher drug class spend from the loss of innovator rebates before shifting enough market share to the biosimilar to generate reductions in net spend. Despite the payer realizing annual savings by year 3 on an NPV basis, the payer does not break even until year 6. 

f2

Results

As shown in Figure 1, payers may be presented with a narrow range of biosimilar net price delta and market share that would lead to lower drug class net spend. And, as shown in Figure 2, even for combinations of biosimilar market share and discounts that a payer may deem feasible, it likely will take several years in practice for the initial investment to be justified from a corporate planning perspective. These exercises help contextualize the difficult strategic decisions facing payers who are interested in adopting biosimilars but who are also cognizant of their fiduciary duty to minimize drug class net spend over the near-medium term.

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Discussion

These simulations demonstrate how the current immunology market dynamics in the United States have made it particularly difficult to provide payers a compelling financial motive to promote uptake of biosimilars in lieu of innovator products. The degree to which these dynamics impact oncology markets is just beginning to be understood.  

We expect there to be a number of opportunities for oncology biosimilars that are not currently present for immunology biosimilars. For instance, the National Comprehensive Cancer Network (NCCN) adopted biosimilar versions of filgrastim as Category 1 treatments shortly after their launch, suggesting similar updates could be made once biosimilars for rituximab, trastuzumab, and bevacizumab become available.17 For comparison, influential immunology groups like the American College of Rheumatology have yet to update rheumatoid arthritis guidelines to account for the launch of biosimilar versions of Remicade, despite their availability on the market for over 2 years.18,19

However, based on the experience with immunology biosimilars, it appears highly likely that substantial challenges will persist for biosimilars targeting oncology indications. A key lesson learned from the immunology market is the degree to which payer coverage decisions precipitate downstream through the pharmaceutical supply chain. As such, if manufacturer contracting and payer management dynamics in oncology start to align with the immunology space, we would expect to see a similarly slow uptake of biosimilars. 

Finally, it will be important to closely follow current, proposed, and future legislative efforts that may alleviate any of the market dynamics negatively impacting biosimilar utilization to date. Of particular note for biosimilar manufacturers will be the ultimate outcome of ongoing regulatory discussions regarding the appropriateness of pharmaceutical rebates as a core component of US drug pricing.

Biosimilar versions of rituximab are in line to be the first oncology biosimilars prescribed in the United States, as key US Rituxan patents expired in July 2018.6 However, the exact timing of a potential biosimilar rituximab launch is still unclear since the FDA, in April 2018, issued Complete Response Letters to the 2 manufacturers furthest along in development, citing concerns over manufacturing processes, among other issues.20,21 At least one manufacturer had already resubmitted their 351(k) Biologics License Application (BLA) at time of writing, with expected launch timelines now pushed back to late 2018 at the earliest.21

Two cancer biosimilars have already been approved by the FDA, both in September 2017: Ogivri, a biosimilar of trastuzumab, and Mvasi, a biosimilar of bevacizumab.They could be eligible to launch in the United States in June 2019 and July 2020, respectively, upon the expiration of key patents on their branded counterparts.15,16 Additionally, Zarxio, a biosimilar to filgrastim (Neupogen; Amgen), is often prescribed as supportive care in cancer patients to treat episodic neutropenia and has been on the US market since 2015.7

Looking Ahead 

The commercial success of oncology biosimilars will ultimately be driven by a large number of factors. Policymakers will need to align on key questions with various oncology stakeholders on how to ensure a viable commercial market exists for targeted cancer biosimilars. Five key questions for various oncology stakeholders to watch going forward are presented in (Box 1).

b1

Given the lack of experience with biosimilars in the oncology setting, uncertainty remains in terms of how biosimilar uptake for targeted cancer treatments may compare to infliximab, which treats chronic immunology diseases, or filgrastim, a supportive care therapy for episodic neutropenia. Stark differences exist in the competitive dynamics governing immunology and oncology markets.

Conclusion

Biosimilars overcoming the financial hurdles imposed by well-established innovator products has been one of the key drivers impacting utilization to date, as evidenced in Figures 1 and 2. These simulations help contextualize the challenges biosimilar manufacturers face to provide adequate financial incentives to payers, who may utilize shorter time horizons for strategic planning initiatives.

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References

1. Food and Drug Administration (FDA). Center for Drug Evaluation and Research List of Licensed Biologic Drugs. https://www.fda.gov/downloads/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/UCM560162.pdf. Published July 2, 2018. Accessed September 17, 2018.

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6. Generics and Biosimilars Initiative (GABi). Biosimilars of rituximab. GaBi website. http://www.gabionline.net/Biosimilars/General/Biosimilars-of-rituximab. Published February 27, 2015. Updated July 20, 2018. Accessed September 17, 2018.

7. Food and Drug Administration (FDA). Biosimilar Product Information. FDA website. https://www.fda.gov/drugs/developmentapprovalprocess/howdrugsaredevelopedandapproved/approvalapplications/therapeuticbiologicapplications/biosimilars/ucm580432.htm. Published July 20, 2018. Accessed September 17, 2018.

8. European Medicines Agency (EMA). European public assessment reports. Authorised biosimilar medicines. EMA website. http://www.ema.europa.eu/ema/index.jsp?curl=pages/medicines/landing/epar_search.jsp&mid=WC0b01ac058001d124&searchTab=searchByAuthType&alreadyLoaded=true&isNewQuery=true&status=Authorised&keyword=Enter keywords&searchType=name&taxonomyPath=&treeNumber=&searchGenericType=biosimilars&genericsKeywordSearch=Submit. Accessed September 17, 2018.

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15. Generics and Biosimilars Initiative (GABi). Biosimilars of bevacizumab. GaBi website. http://www.gabionline.net/Biosimilars/General/Biosimilars-of-bevacizumab. Published June 2, 2014. Updated July 13, 2018. Accessed September 17, 2018.

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17. National Comprehensive Cancer Network (NCCN). NCCN Clinical Practice Guidelines in Oncology - Myeloid Growth Factors Version 2.2018. https://www.nccn.org/professionals/physician_gls/PDF/myeloid_growth.pdf. Published August 3, 2018. Accessed September 17, 2018.

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21. Celltrion ompletes resubmission for biosimilar candidate to FDA for review [press release]. Celltrion website. https://www.celltrion.com/en/pr/reportDetail.do?seq=486. Published May 30, 2018. Accessed September 17, 2018.

22. Sutter S. Pfizer’s Retacrit Finally Clears US FDA, But Biosimilar’s Launch Date Is Still Unclear. Pink Sheet Pharma Intelligence. https://pink.pharmaintelligence.informa.com/PS123112/Pfizers-Retacrit-Finally-Clears-US-FDA-But-Biosimilars-Launch-Date-Is-Still-Unclear. Published May 15, 2018. Accessed September 20, 2018.

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