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Biosimilar drugs may curb health care costs

But U.S. pharmaceutical firms fight sale of biosimilars

Biosimilar drugs may curb health care costs

The first biosimilar drug approved for the U.S. market has put the spotlight on how such medications could help employers with their ongoing health care cost battle, while biologic-drug makers are fighting biosimilars in court.

Biosimilars are “closely similar” to biologics, according to the U.S. Food and Drug Administration. Biologics are costly specialty drugs used to treat diseases such as cancer, rheumatoid arthritis and diabetes.

Unlike generics, which are exact, frequently chemical copies of brand-name pharmaceuticals, biosimilar medications are somewhat different than biologics because they are grown from complex, living organisms.

Though biosimilars were introduced in Europe in 2006 and have entered markets that include Canada and Australia, the FDA approved the first biosimilar drug for the United States only in March. It is Zarxio, a cancer treatment manufactured by Novartis A.G.'s Sandoz unit that is biosimilar to Neupogen, a biologic developed by Amgen Inc.

However, Amgen won a temporary injunction May 5 in U.S. District Court for the Northern District of California, blocking introduction of Zarxio.

In addition, Johnson & Johnson, Hospira Inc. and Celltrion Inc. have been involved in regulatory and legal skirmishes over a drug that is biosimilar to J&J's Remicade, which treats rheumatoid arthritis. Hospira and Celltrion market the similar Remsima in Europe.

Despite the litigation, many experts remain optimistic about the use of biosimilars.

Biosimilars “could really be a godsend for holding pharmaceutical costs in check,” said Dr. Steve Miller, St. Louis-based chief medical officer at pharmacy benefit manager Express Scripts Inc. “Otherwise, we're going to see ever-increasing (spending) for the pharmacy side of the benefit (plan), and it's not going to be sustainable.”

But John Malley, St. Louis-based national practice leader of pharmacy benefit consulting at Aon Hewitt, expects the effect of biosimilars on U.S. health care savings to be muted for a while. For “2020 and beyond, it could be significant” if the FDA approves biosimilars, he said.

The savings could be in the billions of dollars. A Rand Corp. report last November said biosimilars will reduce biologic drug spending by $44.2 billion, or 4% of the total, through 2024.

Express Scripts predicted in 2013 that $250 billion could be saved in the next decade if 11 of the biologic products whose patents expired or are about to expire come to the market as biosimilars.

While generic drugs have limited increases in pharmacy spending, now accounting for 80% of the U.S. market, biosimilars could help limit spending on biologics, Dr. Miller said.

The Rand study found biosimilars marketed in Europe cost 10% to 35% less than biologics. According to Express Scripts, there have been no known safety-related issues.

But other research indicates similar savings may not be possible in the United States. A widely cited 2007 Duke University study said high costs associated with clinical testing and manufacturing would lead to fewer biosimilars in the U.S., keeping them “relatively close in price” to branded biologics.

More recently, a Matrix Global Advisors L.L.C. study commissioned by PBM Prime Therapeutics L.L.C. concluded that “a biosimilar manufacturer would not find it worthwhile to enter the U.S. market” because of high costs and roadblocks. According to the report, only biologics with average annual sales exceeding $897.6 million would attract competition from biosimilars.

Experts say more guidance from the FDA on approval and regulations is needed. The FDA now has 52 programs related to the development of biosimilars to 15 biologics in its Biosimilar Development Program, which expedites the review process for biosimilars. It has issued three pieces of final guidance and four pieces of draft guidance on regulatory and scientific issues related to biosimilars, according to a spokeswoman.

Questions remain on regulatory obstacles surrounding clinical testing requirements, interchangeability with biologics and naming conventions.

It's necessary to ensure biosimilars are “comparative and equal in efficacy and safety” to biologics, said Mr. David Lassen, chief clinical officer at Eagan, Minnesota-based Prime Therapeutics L.L.C. Testing, however, “can be taken too far as to really blunt the successful entrance of these new agents to the market.”

Interchangeability, which designates that a biosimilar can be swapped with a biologic at the pharmacy without physician approval, will lead to more market share and lower prices, said Dr. Miller, but the FDA has yet to release guidance on the issue.

While there has been litigation against biosimilars, Fiona Scott Morton, a professor of economics at the Yale School of Management in New Haven, Connecticut, and a biosimiliar researcher, said it's not insurmountable.

“We have precedent in the United States that there are generic firms willing to go through the process of litigation to get into a lucrative market,” she said.

Ms. Morton said it remains unclear how Medicare will handle biosimilar drugs. And the Matrix Global Advisors study said the same of private insurers.

In the meantime, employers should prepare for a biosimilar industry, sources say.

Aon Hewitt's Mr. Malley said he advises employers to put placeholders in their PBM contracts “to reserve the right to negotiate separately the pricing for biosimilars.”

Additionally, Dr. Miller said employers need “to be pushing” their PBMs and health insurers “to make sure we have good ideas on how to help biosimilars be successful.”

Employers and payers “have to think long term,” he said, “because if they just take the short-term, easy route of sticking with the (biologic) ... they could end up without a vigorous biosimilar market, and in the long-run that will really hurt.”