Use of Biosimilars The Sleeping Giant of

Savings on Biologic Specialty Drugs

Information Provided by:Jeffco EDC

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Use of Biosimilars - The Sleeping Giant of Savings on Biologic Specialty Drugs By Nancy Littleford in partnership with the Jefferson County Economic Development Corporation

Executive Summary The increase in the number of drug innovations is at an all-time high, with an unprecedented 59 new novel drug approvals in 20181. With the advent of newer and harder-to-manufacture drugs comes an increase in the cost. The average price of specialty drugs has increased by 55% from 2013 to 20163. Overall a recent Pacific Institute noted that the cost of developing a new medicine in the United States can be as much as $2.9 billion and require 10 to 15 years to bring to market.2

The specialty drug class, called “biologicals or biologics” are used to treat incurable chronic diseases such as diabetes, psoriasis, bowel diseases, severe arthritis, MS, kidney disease and cancer. These complex molecules are more difficult to develop, identify and replicate.

“Biologics currently account for 36% of total U.S. drug spending despite comprising less than 2% of total prescriptions7.”

There are what would be considered “generics” in this class of medications, they are called biosimilars. Biosimilars are a copy of a biologic and utilization of biosimilars offers significant money savings for plan sponsors and their employees. According to the same Pacific Institute study, “the current use of biosimilars saves the national health care system $253.8 million annually relative to an “all originator biologics” scenario. More promising, biosimilars could generate significantly more annual savings. Annual total health care savings of $2.5 billion, $4.8 billion, and $7.2 billion are possible, if their market share grew to 25 percent, 50 percent, or 75 percent of the market, respectively”.13

This level of actual and potential savings represents what can be thought of as ‘sleeping giant’ of savings in the health care system. In Colorado, the current market share of biosimilars in the commercial market is $2.66 million, if that increased to a 25% market share it would be $22.49 million and a 50% market share would total $43.05 million. The potential cost savings to plan sponsors would be $19.83 million and $40.39 million, respectively3.

For the public health care market, an uptake in biosimilars could also free up millions of dollars for policymakers other spending priorities. The Pacific Institute study estimated that Colorado Medicaid could save up to $20.9 million if it were to increase the use of biosimilars.

Just this month (July, 2020) U.S. Senators John Cornyn (R-Texas) and Michael Bennet (D-Colorado) announced a rare bipartisan initiative in a new bill: Increasing Access to Biosimilars Act. Designed to save patients out of pocket costs and our healthcare system billions of dollars, the proposed legislation gives the Department of Health and Human Services the ability to address the high cost of prescription drugs by promoting competition,

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increase access to biosimilar medications, and encourage physicians to prescribe biosimilars with lower out-of-pocket costs. This action by the two senators is a major step forward in recognizing the value of encouraging greater development and adoption of biosimilar medicines.

The purpose of this report is to provide employers, policymakers, business leaders and the general public a broader understanding of the benefits the state would derive through greater adoption and use of biosimilars.

Specialty Drugs In the National Business Group on Health’s 2020 Health Care Plan Design and Plan Design Survey of large employers, the results show that employers are estimating an increase in overall health care spending by a median of 6%, a 5% increase if they adopt cost-saving measures1. The survey reveals health care costs per employee per year of $9,451.00, an increase of $301 per employee from 2018, see Figure 1.

Figure 1 National Business Group on Health. 2020 Large Employers’ Health Care Strategy and Plan Design Survey. August 2019

The Report goes on to uncover the areas that are of particular concern to large employers. One priority is managing high-cost specialty drugs, especially new ones with a large price tag, such as Zolgensma, that treats spinal muscular atrophy in children, with a cost of $2.1 million for one injection.

In the graph below, Figure 2, the National Business Group on Health members ranked the tactics that they plan to initiate in their benefit plan design to manage the seemingly unlimited increase in cost for specialty medications. Evident in the high placement of tactics is the importance being placed on advancing the use of biosimilar drugs.

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Figure 2 National Business Group on Health. 2020 Large Employers’ Health Care Strategy and Plan Design Survey. August 2019

One significant piece of the drug spend problem is the growing number of highly-complex specialty drugs getting introduced into the market every year4. With the advent of newer and harder-to-manufacture drugs comes an increase in the cost. The average price of specialty drugs has increased by 55% from 2013 to 2016, see figure 35.

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Figure 3

Biologicals The specialty drug class, called “biologicals” are used to treat incurable chronic diseases such as psoriasis, bowel diseases, severe arthritis, MS, kidney disease and cancer. They are delivered via infusion (IV) at a provider’s office or at a hospital. These lifesaving and life-changing medications have greatly improved the lives of the people with these conditions, offering them the chance to manage a severe disease with a better quality of life. Like the diseases they treat, which are incurable, the use of biologicals does not end after one treatment, they are used for the duration of the patient’s life. If the cost of to develop, obtain approval for and market these medications is extraordinarily high, then the year-after-year cost for patients and their employer-funded insurance plans will rise accordingly.

Biologicals are expensive due to their complicated manufacturing process called “biotechnology”. Biotechnology involves using a “living system, such as a microorganism, plant cell, or animal cell, and are often more difficult to characterize than small molecule drugs6” in its production. These complex molecules are more difficult to develop, identify and replicate.

Biologicals or “biologics” are different than the conventional medications that have been around for decades. Conventional medications are small-molecule drugs, made from chemical substances that can be more easily developed, manufactured, identified and replicated. This means that biologics because of their complex nature may cost an average of 22 more times than a conventional medication7. The cost for research and development

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of a biological drug is high and the FDA has set up the approval for drug manufacturing that allows for U.S. drug companies to recoup that capital investment in the research and development of new medications. The development of a new drug can take 10-15 years at a cost of up to $2.9 Billion2.

For those self-funded employers who are diligently working to save their company and their employees money on healthcare spend by introducing new and innovative ways to cut costs, there is no easy solution to curtailing the cost of specialty drugs that seem to get more expensive every year, see figure 48. In the graph, you can see that Express Scripts, a pharmacy benefit manager, reports a dramatic 57% increase in specialty brand drugs (the green line) from 2014 to 2018.

Figure 4 Advancing Health Through Innovation: 2019 New Drug Therapy Approvals” Center for Drug Evaluation and Research

“Biologics currently account for 36% of total U.S. drug spending despite comprising less than 2% of total prescriptions.”9 For plan sponsors and patients using this class of medications, the cost is high. Drug spend is the highest for the top 10 most expensive chronic diseases, and 6 of those top ten conditions are treated with complex biological medications6.

The increase in the number of drug innovations is at an all-time high, with an unprecedented 59 new novel drug approvals in 2018, see Figure 510.

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Figure 5

Source: Center for Drug Evaluation and Research, Food and Drug Administration

Biosimilars – Generic Biologics? Plan sponsors understand that the use of generic drugs saves their plan and their employees money. Currently, 89% of all prescriptions are for generic drugs and are typically 85% cheaper than their brand name equivalents2, but the equivalent to generics within the biologics classification is different. The difference is due to how the medications are made. As stated previously, conventional chemical drugs are formulated using small, simple molecules, which makes them fairly easy to replicate. Biologics are medications made from proteins that are living organisms, such as bacteria, yeasts, micro-organisms, plant or animal cells using a highly complex manufacturing process. This makes the process of developing a generic equivalent more difficult4.

There are what would be considered “generics” in this class of medications, they are called biosimilars. Biosimilars are biological products that are highly similar to and have no clinically meaningful differences from existing, FDA-approved reference biologics. Biosimilars go through a rigorous FDA review process including analytical, animal and clinical studies. Biosimilars are not identical to the originator biologic because it is not possible to define the exact composition of the originator biologic. Originator or parent biologics themselves aren’t exact copies either. It is possible, however, to get close enough that the purity, efficacy and safety of the biosimilar is the same as the originator4.

NUMBER OF NOVEL DRUGS APPROVED BY THE FDA BY CALENDAR YEAR, 2010 - 2019

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Biosimilars - Approval through the FDA As of April 30, 2020, there are currently 28 FDA-approved biosimilars, of which 16 are being marketed in the U.S., but only 7 are commercially available11. (By comparison, Europe has approved the use of more than 40 biosimilars.) For a biosimilar to get that approval, they undergo rigorous testing following the FDA’s regulatory guidelines for drug development. The graphic below, see figure 712, illustrates how the originator biologic goes through the FDA approval process, the longest process for the originator is the clinical studies, but the reverse is true of the biosimilar. The most arduous part of the approval process for the biosimilar is in the analytical testing, to prove its similarity to the originator biologic9.

Figure 7 (Source: Author)

As part of the Affordable Care Act, Congress passed the Biologics Price Competition and Innovation Act in 2010. The objective of the Act is to decrease the amount of time that it takes for a manufacturer to bring a biosimilar to market and grant greater access to lower cost biologicals by generating competition in the market. As a result, biosimilar manufacturers do not have to conduct as many lengthy and expensive clinical trials. The idea behind the Act is that once a biosimilar enters the market, it will force the manufacturer of the originator biologic to lower their prices in response, to stay competitive, which is happens when conventional generics are developed. The Act is an effort to speed up the process of introducing the lower-cost drug and drive market prices down more quickly. A biosimilar, however, must still pass the rigorous requirements of the FDA13.

For a biosimilar to get FDA approval, it must:

• Be administered by injection or infusion (same “mechanism of action” as the originator) • Have the same potency and purity as the originator • Be shown to have the same efficacy and safety in patients

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Advanced technology is used to assess those requirements and compare characteristics, to test purity, chemical composition and bioactivity. Differences in inactive components (i.e. stabilizers, buffers) are acceptable and such differences are also seen in batch to batch comparisons of the originator biologic as well. Like the originator, biosimilars are manufactured in FDA-licensed facilities and tracked to ensure safety out in the market4.

With continued strain on our health care system from the coronavirus pandemic, the introduction of a bi-partisan bill, Increasing Access to Biosimilars Act, would create cost-savings for both the U.S. government and taxpayers. The proposed legislation is sponsored by Senators John Cornyn (R-Texas) and Michael Bennet (D-Colorado) and directs the Department of Health and Human Services to create a shared savings demonstration program for biosimilar drugs in the Medicare program, which will help increase competition and expand access to biosimilars. Additionally, it will encourage physicians to prescribe less-expensive biosimilars in order to lower out-of-pocket costs to seniors.

According to researcher Alex Brill, increasing biologic drug competition with a shared savings payment model for lower-cost biosimilars “offers not only the potential for significant savings to Medicare and patients, but also valuable assistance to the burgeoning biosimilars market.” Administered through the Centers for Medicare & Medicaid Innovation Center (CMMI), a shared savings model would adjust the reimbursement structure to encourage physicians to use lower-cost biosimilars, thus bringing savings to Medicare and taxpayers.

Barriers to the Use of Biosimilars Patent Protections When a pharmaceutical company with a brand medication, either conventional or biologic, learns that another manufacturer is developing a generic or biosimilar to their drug, they can use a tactic designed to protect their patent and dis-incentivize a competitor to delay or not launch a biosimilar altogether. For large, publicly held drug manufacturers, this practice derives from factors related to recouping initial capital investment in the portfolio of drugs in development at any given time, and the need to stay competitive in delivering shareholder value. While some analysts describe certain patent protection strategies as ‘anti-competitive’ the need to extend marginal profit on the life-cycle of a drug is often critical to ensuring a reliable flow of investment capital. Among the strategies are offerings to a competitor in exchange for its delay or failure to launch the product at all (10). According to a study done by the Federal Trade Commission, “these anticompetitive deals cost consumers and taxpayers $35 billion in higher drug costs every year14.” The pharmaceutical industry is vigorously pursuing modernizing and updating bioscience patent laws.

Rebates and Formularies

Many self-funded employers are familiar with drug rebates and often make a pharmacy plan purchasing decision based on the amount of rebates that are guaranteed by the Pharmacy Benefit Manager (PBM). The role of the PBM is to negotiate rebates and discounts so that insurers and plan sponsors pay less for the drug. As part of their revenue, in addition to administrative fees, the PBM retains some of the rebate or a portion of the discount. Pharmaceutical companies offer rebates and discounts so that they can get their drug on a PBMs formulary or even as a “preferred” drug. If, for example, a drug manufacturer offers a 70% rebate on an

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originator biologic and the same discount exists for the biosimilar, the rebate for the more expensive drug is going to be higher than for the less expensive biosimilar. In this instance, the PBM and the plan sponsor make more money on the rebate by encouraging the use of the higher-cost biologic.

Fail First/Step-Therapy

In a Pacific Research Institute report15, the authors outline the ways that insurers and PBMs can dissuade the use of biosimilars by installing fail first or step-therapy policies. In general practice, step-therapy is used to increase the use of generics. If the patient tries the generic without success, only then can they switch to the more expensive brand-name. With regard to biosimilars, however, it works in reverse. Essentially, a patient would need to fail on the originator biologic first, before they can switch to the lower-cost biosimilar.

A How-To on Increasing the Use of Biosimilars in Your Plan

In Colorado, the current market share of biosimilars in the commercial market is $2.66 million, if that increased to a 25% market share it would be $22.49 million and a 50% market share would total $43.05 million. The potential cost savings to plan sponsors is $19.83 million and $40.39 million, respectively, see calculations in Figure 62.

Figure 6 Winegarden, Wayne. (2019 October). The Biosimilar Opportunity: A State Breakdown. The Pacific Research Institute.

An employer/plan sponsor’s first line of defense is knowledge. Once a plan sponsor is educated about biosimilars, they can start asking questions. The first place to start is with your broker/consultant, often the gatekeeper of the ins and outs of the terms and conditions of an organization’s health plan and PBM contract.

Ask your broker/consultant for:

• Data and reports on the use of biologics, originators and biosimilars on your plan. • What are the top 10 health conditions and the top 10 drug spend for your employee population? • How was your PBM contract purchased? Was it based solely on rebates and discounts or are there

other factors about the program that offer incentives for the lowest-cost drug spend, medication compliance and chronic condition management?

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• Find out if there are any restrictions on your health plan or PBM regarding biosimilar use, and at the very least, are they covered?

• Is your PBM requiring a step-therapy, fail-first or other prior authorization for biosimilar use? • Look at your benefit plan design and build in incentives for biosimilar usage – i.e., lower copays, $0 co-

insurance, etc. • Can you contract directly with infusion providers, like offering the Average Sales Price plus 10%, above

the allowed Medicare plus 6%?

Work with your broker/consultant on more creative, out-of-the-box ideas to look at how to use your plan to drive biosimilar use.

Educate your employee population on biologics and biosimilar use. Give them the knowledge they need to talk to their physician about the biosimilar alternative. A webinar or lunch and learn on the topic, or information pushed out to your intranet are good ways to inform your population. If you have in-house health coaches, or an outsourced patient navigation/care coordination program, make sure that they are talking to biologic users about biosimilars. If you have an on-site clinic or a direct primary care vendor, be sure you understand their position on biosimilar use and encourage them to offer that alternative to your employees.

Data from a large public employer in Colorado illustrates a compelling case for biosimilar use when an Integrated Delivery Network (IDN), like Kaiser Permanente, is the only health plan. As an IDN, Kaiser will always choose the lower-cost biosimilar, since the medication is purchased by them, administered at their facilities, and their doctors don’t make any additional revenue off of the drug16.

It’s easy to take this data and substitute the cost of the originator biologic to see what the potential spending would have been had this plan not had a high biosimilar utilization to treat those chronic conditions.

Employers/plan sponsors have a yet untapped and maybe unknown power to negotiate in the healthcare marketplace. Their employees leave the four walls of their business to seek out healthcare when they need it and when they are insured by the employer, it’s like they have an unlimited credit card that they swipe all over town for those services. It behooves employers to know what the access, quality and affordability is of the healthcare that their employees are receiving, after all, they are the ones getting the bill.

Key Takeaways • Increased adoption of biosimilars is one of many powerful, real-world, market-based strategies for

lowering health care costs in Colorado that employers can support.

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• The state’s biosimilar policies and strategies can be enhanced in fairly simple ways to generate over $120 million annually in what employers pay for prescription medicines.

• Employers have the power to drive change and lower costs in their sponsored health care plans by leveraging knowledge and advocating for policy changes.

• Meaningful, fair and sustainable reductions in the cost of health care DO NOT HAVE TO ENTAIL COMPLICATED GOVERNMENT INTERVENTION. Rather state government can be a catalyst and agent for changes that save the entire system millions.

Endnotes

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1. National Business Group on Health. 2020 Large Employers’ Health Care Strategy and Plan Design Survey. August 2019. Available at: https://www.businessgrouphealth.org/benchmarking/survey-reports/2020-report/

2. Winegarden, Wayne. (2019 October). The Biosimilar Opportunity: A State Breakdown. The Pacific Research Institute. (5-12).

3. IQVIA’s Medicine Use and Spending Report. https://healthsystemtracker.org/chart-collection/recent-forecasted-trends-prescription-drug-spend/#item-percent-growth-in-per-capita-spending-by-drug-type.

4. https://www.fda.gov/files/drugs/published/Biological-Product-Definitions.pdf 5. https://www.biosimilarsresourcecenter.org/faq/what-are-biologics/ 6. https://www.express-scripts.com/corporate/drug-trend-report. 7. Brill, Alex. (2019, July). Retrieved from

https://healthaffairs.org/do/10.1377/hblog20190701.349559/full/. 8. (2020) “Advancing Health Through Innovation: 2019 New Drug Therapy Approvals” Center for Drug

Evaluation and Research; https://www.fda.gov/media/134493/download.pdf. 9. https://biosimilarsrr.com/us-biosimilar-filings/ 10. Author (PowerPoint). 11. https://www.dpc.senate.gov/healthreformbill/healthbill70.pdf 12. https://www.ftc.gov/news-events/media-resources/mergers-competition/pay-delay. 13. Winegarden, Wayne. (2018 June). Impediments to a Stronger Biosimilars Market: An Infliximab Case

Study. The Pacific Research Institute. (6-7). 14. Welch, Anna Rose. (2020, February). Biosimilar Development. Employers Aim to Transform Biosimilar,

Biologics Reimbursement.