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General Business IssuesFeatured Health Business Daily Story April 14, 2010
With Biosimilar Approval Pathway a Reality, Health Plans Need to Prepare Now to Reap Savings
Reprinted from HEALTH PLAN WEEK, the industry's leading source of business, financial and regulatory news of health plans, PPOs and POS plans.
By Angela Maas, Contributing Editor (amaas@aishealth.com)
After years of failed legislation, the health reform bill signed last month finally has created an approval pathway for biosimilar drugs. Also known as follow-on biologics or follow-on protein products, these drugs represent a way to bring down health plans’ spend on biologic therapies, which can run tens and even hundreds of thousands of dollars per patient per year. Potential 10-year savings estimates vary significantly, but all range in the billions of dollars. Health plans should start keeping tabs on these drugs now so they can take advantage of them when they hit the U.S. market soon. Plans also should consider a variety of ways — including modifying existing formulary tiers — to incentivize patients and physicians to use these drugs.
The Hatch-Waxman Act enacted in 1984 — which allowed FDA to approve generic versions of brand drugs — applies only to those drugs regulated under the Federal Food Drug and Cosmetic Act. Most biologics, however, are regulated under the Public Health Service Act, so Hatch-Waxman does not allow for approval of biosimilar versions of these drugs.
Different from traditional oral therapies that are small molecules created chemically, biologic drugs are large molecules created from living cells. This means that changes in the manufacturing process or products used in the composition of a vial in which the drug is stored can change the structure — and potentially the efficacy and safety — of the drug. In addition, contend manufacturers, this means that biosimilars are not true generics but rather “similar to” a branded, or innovator, biologic.
This has stoked some concerns about the drugs, particularly their safety. But the data needed for a biosimilar application as specified in the health reform bill — analytical, animal and clinical studies — has eased those concerns. Moreover, a handful of biosimilars have been available in the European Union for about four years and have not experienced any problems.
The data-exclusivity period for branded biologics has been one of the most contentious aspects of biosimilar legislation, with past bills proposing various lengths. The health reform law grants 12 years of data exclusivity, with the potential for additional time for certain indications. But while drug manufacturers were pleased with this, other stakeholders were not.
Noting that “it’s too early to predict how biosimilar legislation will pan out in the future,” Samantha Meese, spokesperson for The Regence Group, which serves more than 2.5 million members of Blue Cross Blue Shield plans in Idaho, Oregon, Utah and Washington state, says that “our principal concerns stem from the period of exclusivity granted to the manufacturers of brand-name biologics.…A longer exclusivity period for brand manufacturers stifles innovation and limits competition, leading to significantly higher health care costs for consumers. A shorter exclusivity period would permit greater innovation and competition, provide consumers with a greater choice of safe, effective therapies, help stabilize medication costs and keep these medications affordable over the long term.”
Data Exclusivity Might Not Apply
However, the data-exclusivity period does not apply to those biologics already on the market, many of which have patents that have already expired or are set to expire soon.
Pharmacy benefit manager (PBM) Express Scripts, Inc. released a study in 2007 showing potential 10-year savings of more than $71 billion from four classes of biologics that are expected to be among the first to have biosimilar competition: interferons for multiple sclerosis, erythropoietins for anemia, growth hormones for growth failure and insulin for diabetes.
However, the Biotechnology Industry Organization, a trade group for biotech companies, disputes the cost estimates because of “significant flaws,” including calculation errors and inconsistent patent expiration assumptions.
And while the competition between a biosimilar and an innovator product is not expected to reap the deep discounts that result from competition between a generic and a traditional oral therapy, even a 20% or 30% discount — which most industry experts believe will be the case — off an expensive biologic will still be significant.
In June 2008, the Congressional Budget Office (CBO) released a cost estimate for S. 1695, a bill very similar to the current law. The report’s estimates were based on the assumption that the bill would be enacted in fiscal 2009 and biosimilars would hit the U.S. marketplace in the middle of the 2012 calendar year.
The effects that the CBO said would result from enacting S. 1695 include:
Start Planning Now
Although there are various estimates as to when these drugs will hit the U.S. marketplace, Steve Miller, M.D., senior vice president and chief medical officer in research and clinical sciences for Express Scripts, says that the PBM is “optimistic” that 2012 will be the year.
“That’s just not that far away,” he contends. His PBM is “selling business for 2011 [now], and by fall, we’ll be selling for 2012. People have to think several years ahead.”
According to Bill Sullivan, principal consultant for Specialty Pharmacy Solutions LLC, “Health plans shouldn’t approach biosimilars in any exceptional way. They should already have well-established formulary-review processes, and each drug should be reviewed on its own merit. Once approved, if there are two drugs that are considered bioequivalent, then the plan can decide where on its benefit tier each drug should reside or if one deserves to be covered at all.”
On the other hand, Genia Long, managing principal of Analysis Group, an economic consulting firm, wonders if the management tactics and tools in use today will, in fact, work with biosimilars.
“Will the tiering structures accommodate” biosimilars, she asks. Some plans are still not preferring biologic therapies within classes boasting multiple drugs, and “there are still some plans that are dealing with integrating pharmacy and medical data, which is much more challenging” than product preferencing.
Plans can use patient financial incentives to drive the use of biosimilars, contends Richard Tinsley, a partner with Putnam Associates, a pharmaceutical and biotechnology consulting firm. For example, he says, if a plan has a 20% copayment for a biologic on its fourth tier, it “could consider putting a biosimilar on the third tier so it’s $50 per month as opposed to $200.”
Miller agrees that management tools similar to ones plans are already using can be “modified for the complexity around a biosimilar. The number of patients impacted is way smaller” than traditional patient populations. For this reason, “the ability to tailor these tools to patients and physicians is much greater.”
Long says that “initially, to some degree” the process of evaluating biosimilars will be “similar to how plans evaluate a new branded product today. The difference is to figure out what’s the level of clinical studies that have been conducted and what factors are important to address” for physicians and patients. “How many incentives — positive or negative — are needed to encourage the adoption of a biosimilar?”
View the CBO’s cost estimate at www.cbo.gov/ftpdocs/94xx/doc9496/s1695.pdf.
Check out AIS’s Health Reform Week, which helps savvy business leaders in health care understand what the enormous changes mean to them ... and what they can do about it. Go to www.AISHealth.com/Products/NewsREF.html. |
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