richard mortimer · 2017-05-09 · zarxio q4 2016 (22%) zarxio q4 2016 (84%) combined 0% 10% 20%...

Richard MortimerManaging Principal

Analysis Group, Inc.

1

• Economic evidence on typical generic entry and associated litigation

• Biologic drug characteristics and emerging biosimilar entry/litigation

• Economic considerations of biosimilar entry

• Nascent biosimilar entry experience

2

Average generic share

now reaches 88% within a year

3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12

Month Post First-Generic Entry0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12

Month Post First-Generic Entry

Early 2000s

Early/Mid 2010s

Modified from: Grabowski, Long, Mortimer, Boyo, “Updated Trends in US Brand-Name and Generic Drug Competition,” Journal of Medical Economics, 2016.

Based on: IMS Institute, “Price Declines after Branded Medicines Lose Exclusivity in the U.S.” January 2016.

Average generic-to-brand price ratio

now falls to 20% within a year

Early 2000s

Early/Mid 2010s

47%

94%

0%

25%

50%

75%

100%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Sh

are

of

Dru

gs

wit

h G

en

eri

c E

ntr

y

an

d P

ate

nt

Ch

all

en

ge

Year of First Generic Entry


Drugs with annual brand sales over $250 million in the year before generic entry

4

“Traditional” Drugs Biologics

FDA approval NDA, ANDA BLA

Size (MW) Small (<1000 daltons) Large (>10,000 daltons)

Source Chemical synthesis Cultures of living cells

Form Generally oral solids Often injected or infused

Reimbursement Pharmacy benefit Often medical benefit

Example

Lipitor (hypercholesterolemia) Herceptin (breast cancer)

HerceptinMW = 185,000

LipitorMW = 559 5

Source (sales): PMLive.com* Lantus is a biologic drug, but received FDA approval through an NDA rather than a BLA.

13.0 12.4

10.2

9.18.2

7.46.8 6.7 6.7 6.6

0

2

4

6

8

10

12

14

20

14

World

wid

e S

ale

s

($ b

illio

n U

S)

6

Product Biosimilar BiosimilarApproval

BiosimilarLaunch

Patent Litigation

Neupogen (Amgen) Zarxio (Sandoz) 3/15 9/15 Y

Lantus* (Sanofi) Basaglar (Lilly) 12/15 12/16 Y

Remicade (Janssen) Inflectra (Hospira) 3/16 11/16 Y

Enbrel (Amgen) Erelzi (Sandoz) 8/16 — Y

Humira (AbbVie) Amjevita (Amgen) 9/16 — Y

Rituxan (Roche) FDA review — — Y

Avastin (Roche) FDA review — — Y

Herceptin (Roche) FDA review — — Y

Neulasta (Amgen) FDA review — — Y

Epogen (Amgen) FDA review — — Y

7

Limited biosimilar entry

Modest share and price discounts

Similarities to branded competition

Economic issues in biosimilar litigation will need to address the unique economic considerations

• Higher development costs

• Greater complexity

• Typically physician administered

• No automatic substitution

• Physician reimbursement incentives (e.g., Part B)

• Biosimilar development by historically brand manufacturers

• Marketing and branding of biosimilars

8

0

200,000

400,000

600,000

800,000

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

2012 2013 2014 2015 2016

Units

Source: Symphony Health Data

Neupogen:

prefilled syringes

Neupogen:

vials

Granix:

prefilled syringes

Zarxio:

prefilled syringes

Granix entry Zarxio entry

9

Zarxio Q4 2016 (22%)

Zarxio Q4 2016 (84%)

Combined

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12


Granix Q4 2016 (24%)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12



Based on: IMS Institute, “Price Declines after Branded Medicines Lose Exclusivity in the U.S.” January 2016.

Generic/Biosimilar Share Generic/Biosimilar-to-Brand Price Ratio

Typical Small

Molecule Drug Granix Q4 2016 (81%)

10

FDA guidance on interchangeability

Reimbursement policies / Medicare Part B

Physician and payor responses

Biosimilar strategies

11

Insert date

Biosimilar Payment Across CMS

©2017 LEAVITT PARTNERS 13

Coding can dramatically impact reimbursement. Three (3) frameworks to consider for biologics and biosimilar coding:

(1) Separate HCPCS codes for reference and all biosimilars(2) Separate codes for each reference product and a shared code for all biosimilars of the same reference

Wyden has publicly supported this as a way to drive competition among biosimilars

(3) Shared volume-weighted code for reference, interchangeable biosimilars and all other biosimilars

MedPAC ProposalPotential cost savings is driven by the use of lower cost biosimilarsRequires Statutory Change

Coding and Proposed Coding Consolidation


Unique Modifiers

• For approved biosimilars, CMS has assigned temporary Q codes• Under the current coding structure, CMS requires the use of

modifiers for biosimilars sharing a code in order to distinguish among products made by various manufacturers


Part B Payment, MPFS

• A designation of interchangeability does not impact payment• Under Part B, Beneficiaries are responsible for 20% of the cost of Part B

drugs• The statute sets payment at ASP of the biosimilar + 6% of the ASP of the

reference product • Under CMS’ coding rule, ASPs of the biosimilars under a shared code

would be blended (volume weighted), then the +6% of the reference product’s ASP would be added

• Where ASP is not yet available, CMS pays WAC+6%• The 6% is of the biosimilar product, not the reference product• MedPAC recommends reduction in this payment to WAC+3%


Part B Payment, OPPS

• Specified Covered Outpatient Drugs (SCODs) (drugs that cost more than the $195 packaging threshold for 2016) are paid at ASP+6%

• Drugs that cost less than the SCOD threshold fall into the Ambulatory Payment Classification (APC) –they are bundled into the underlying procedure payment

• CMS has also determined that the first-approved biosimilar of a reference product is eligible for pass-through payment


Part D Formulary Rules

• CMS evaluates formulary change requests for biosimilars on an individual basis, determining if they meet requirements of formulary review and approval process as set forth in the FDA approved label and statutory compendia

• Reference and biosimilar products will not be considered as different drugs for the purposes of satisfying the two distinct drug requirement for each of the submitted categories and classes

• Biosimilars may be added to plan formularies at any time as a formulary enhancement• A change involving the addition of the biosimilar and removal of the

reference product is generally considered a non-maintenance change


Part D: Inconsistent Characterization

LIS Program• While LIS beneficiaries pay lower maximum copayments for generic

drugs and preferred multi-source drugs, Biosimilars do not meet the CMS definition of a generic drug or the definition of multiple source drug. Thus, LIS-eligible individuals pay the higher maximum co-pay for biosimilars.

CGDP• Conversely, biosimilars are excluded as covered Part D drugs under the

Coverage Gap Discount Program which applies to “innovator” drugs only (i.e. drugs approved under an NDA or a BLA). As a result, biosimilar manufacturers are not required to offer price discounts (50% of the negotiated price) to beneficiaries in the coverage gap.


Medicaid Drug Rebate Program

The rebates that manufacturers must pay for each unit of a drug are based on whether the drug is single or multi-source:

• Innovator drugs: 23.1% of the AMP • Non-innovator drugs: 13% of AMP• Under the Medicaid rebate program definition, biosimilar

biologic products fall within the definition of single source drugs—and must pay a rebate of 23.1%


Least Costly Alternative (LCA)

• The idea behind the LCA is to set the payment amount for all drugs in a therapeutic class at the cost of the lowest-cost therapeutically equivalent product

• Clinical appropriateness of switching drugs may complicate the designation of “therapeutically equivalent”—particularly for biosimilars

• LCA drives greater cost-savings than consolidated coding because it is not uptake dependent (does not rely on the physician prescribing the lower-cost drug) and does not blend the ASP of all biosimilars (raising the average cost with higher priced-innovator drugs)

Smart on Value

www.leavittpartners.com

richard mortimer · 2017-05-09 · zarxio q4 2016 (22%) zarxio q4 2016 (84%) combined 0% 10% 20%...

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