Katya Svoboda and Bob Swann, ICON05.05.20
Biosimilar uptake in the US market has, until now, stood in stark contrast to that in the EU, which has led the way in biosimilar approvals and use since 2006. There are many signs, however, that the US is on the cusp of a major shift with respect to biosimilars: competitive pricing pressure, regulatory changes, payer policies, resolution of litigation issues and growing comfort with biosimilars will finally converge to drive strong adoption.
It is important for manufacturers—both of originator products and of biosimilars—to understand the drivers behind, and barriers to, acceptance and use of biosimilars so that they can adopt appropriate commercial strategies. Without the benefit of a crystal ball, it is still possible to speculate as to how biosimilars will reshape the US market, considering the EU’s experience and the context of US market dynamics.
Playing Catch Up
To date, the European Medicines Agency (EMA) has authorized 63 biosimilars (nine of which were since withdrawn from the market) while the US Food and Drug Administration (FDA) has approved only 26. The number of approvals is trending upward in the US, however, as seen in Figure 1. Six new biosimilars have been introduced to market between November 2019 and mid-March, 2020: (Zirabev (bevacizumab), Ruxience (rituximab), Trazimera (trastuzumab), Ogivri (trastuzumab), Truxima (rituximab), and Ziextenzo (pegfilgrastim).
Figure 1: US biosimilar approvals, 2015-2019 Source: https://purplebooksearch.fda.gov/advanced-search
Notably, regulatory approvals in the US are not always followed immediately by market launches due to various patent defenses and legal wrangling, which has not delayed launches to such an extent in the EU due to the different patent landscape. Of the 26 biosimilars approved, just over half (14) have actually launched. The delayed products include biosimilars for the blockbuster monoclonal antibodies (MABs) Remicade, Enbrel, Humira, and Herceptin.1
The US pipeline of biosimilars is strong. According to GlobalData, seven biosimilars are in the pre-registration phase: one for Avastin (bevacizumab), two for Neupogen (filgrastim), three for Neulasta (pegfilgrastim), two for Lucentis (ranibizumab), and two for Rituxan (rituximab). Thus, many industry watchers have suggested that the US is at a tipping point in terms of biosimilar availability.
Yet, just as approval does not equate to availability, availability does not equate to uptake at the levels seen in the EU. The biosimilar for Janssen Biotech’s Remicade, Pfizer’s Inflectra, which was approved in 2016, only garnered seven percent of the volume share of the market two years after its US launch while, Remicade’s US revenues fell by 24 percent. By contrast, in the EU, in the two years following competition from biosimilars, Remicade’s revenues were halved, and its biosimilars captured the majority of the market volume within months.2
A Root Cause Analysis
There are fundamental differences in both the regulatory processes and the market dynamics of the US and the EU that account for much of the discrepancy in the uptake of biosimilars. Chief among these is the difference in the patent landscape, with some EU patents ending earlier and some originator companies generating more patent barriers in the US. The EU is thus several years ahead of the US with many blockbuster biologics reaching the market sooner and subject to competition from multiple biosimilars, resulting in falling prices and high biosimilar uptake.
Another huge hurdle in the US market is the FDA requirement that biosimilars prove “interchangeability” with the originator before pharmacy-level substitution is permitted. To prove interchangeability, biosimilar manufacturers must conduct multiple-switch trials to demonstrate that switching between the reference product and the biosimilar poses no greater risk than using the reference product.3
Due to safety concerns around factors such as immunogenicity, biosimilars without proven interchangeability are usually reserved for treatment-naïve patients. To date, no marketed product has been subject to switching studies, and so none is considered interchangeable. Any biosimilar product with an interchangeable designation would enjoy a competitive advantage because 1) it confers one year of market exclusivity and 2) clinicians would be more comfortable switching to biosimilars for patients who have been stable on the originator product—patients who represent two-thirds of the commercial opportunity for biosimilars.
The EMA, on the other hand, does not have a specific “interchangeable” designation for biosimilars and has deferred all decisions on interchangeability, switching, and substitution to member states. Several EU countries—The Netherlands, Finland, Germany, UK, and Italy—have allowed biosimilars to be interchanged for biologics, with certain provisions. Automatic substitution at the pharmacy is not permitted in most EU countries.4
Another significant difference is the fragmentation of the US market – compared with EU single-payer healthcare systems – and the resulting differences in acquisition practices and pricing.
In the US, the key factor affecting biosimilar uptake is payers’ perception of safety and efficacy, as well as their management practices, which are driven by pricing and manufacturer rebates. Early-entrant biosimilars have difficulty competing against the contracting and rebating power of the originator manufacturers.
In contrast, in the EU, biologics are often procured through tenders, and biosimilars often win by offering the lowest prices. Uptake is generally higher in markets that conduct national tenders using an exclusive approach—a practice that will become more common in time.
Furthermore, EU payers are actively encouraging the uptake of biosimilars by setting quotas, providing guidance, and introducing incentives for physicians to prescribe biosimilars.
A New Era in the US
There are several drivers of biosimilar uptake, with lower acquisition cost being the primary one. Others include perceived quality, safety, clinical efficacy, manufacturing reliability, payer management, reimbursement rates set by Medicare and commercial payers, out-of-pocket expenses for patients, and education of physicians and patients. Going forward, some of these “dials” will be turned, and the conditions under which biosimilars launch will be different than in the past. Let’s review what changes are afoot and how they may impact the market performance of biosimilars:
Introduction of multiple competitive products
In the short term, we can expect a blizzard of biosimilars to be introduced for the MAB blockbusters, Avastin, Herceptin, and Humira. It is clear, that although delayed by several years due to patent litigation issues, five biosimilars to Humira will hit the market in 2023, and this will be a key development to watch (see Figure 2).
Figure 2: Marketing Authorization Status of FDA-Approved MAB Biosimilars Source: https://www.fda.gov/drugs/biosimilars/biosimilar-product-information
AbbVie’s Humira is one of the world’s top selling products, so when five biosimilars were introduced in the EU, it triggered a competitive frenzy. Humira’s sales declined sharply while in some countries, adalimumab prices plummeted up to 80 percent of Humira’s price.5
This influx of multiple biosimilars for a single indication will exert downward pressure on pricing in a way that single competitors have not. Today in the US, biosimilars offer about a 20 percent discount over the price of the originator, which is insufficient to unseat originators, given their contracted discounts. Once there are three biosimilars or more for any given originator, the degree of competition will drive prices down for the biosimilars and the originator alike. While this is the case, the number of biosimilar competitors entering the market will be limited by significant barriers to entry such as high development and manufacturing costs and the need to provide commercial and marketing support biosimilar products once launched.
Certainly, biosimilars won’t be discounted to the extent that small-molecular-weight generics are, where the barriers to entry are lower. But, how low, may they go? A big factor will be the sales volumes biosimilars achieve. In the EU, payers have been able to negotiate discounts as much as 80 percent of the originator prices. Only in a few instances and select areas have originators been able to maintain their market share by offering high rebates. This degree of discounting may not be replicated in the US, because of the fragmented payer environment, but the discounts will certainly be greater than they have been to date.
Changes to “level the playing field”
Under Medicare, clinicians are reimbursed for the biologics that they purchase and administer to their patients through the buy-and-bill model. Currently, that reimbursement rate is calculated for branded products based on the average sales price (ASP) of the product plus 6 percent (due to sequestration, this is currently 4.3 percent). For biosimilars, they are reimbursed based on the ASP of the biosimilar, plus 6 percent of the ASP of the originator product. The Grassley-Wyden bill, which has passed the Senate Finance Committee at this writing, would increase reimbursement for the biosimilar to ASP plus 8 percent for five years after the biosimilar’s launch. This would create financial incentives for physicians to start new patients on the biosimilar product.
The Centers for Medicare and Medicaid Services (CMS) is proposing to allow Medicare Part D plans to add a second specialty formulary tier for “preferred, lower cost” products that could include biosimilars, starting in 2021. This would result in lower coinsurance obligations for patients, driving utilization.
Private payers are also taking steps to institute utilization management policies to promote the use of biosimilars over originators for new patients. These tactics may include creating a biosimilar tier with a more favorable cost structure for patients (lower patient cost sharing), requiring additional justification and/or requirements for use of originator brands, such as instituting step therapy, and implementing differential reimbursement for physicians to drive biosimilar use.
States, which have authority over local substitution laws, have been enacting laws to govern when biosimilars can be substituted for reference products. In a majority of states, pharmacists are permitted or even required to dispense an interchangeable biosimilar in certain situations, although no products have interchangeable status as yet, so this is not happening.6 Most require that the biosimilar be designated as interchangeable and that the switch be confirmed by the physician.
Patent defense limitations
Several originator companies have successfully erected legal barriers to prevent or delay biosimilars from launching. AbbVie, for instance, has controlled the timetable for five competitive launches to Humira—delaying them until 2023—as the biosimilar manufacturers agreed to settle and pay a license fee rather than launch “at risk” before the resolution of AbbVie’s patent infringement suits. Eventually, these strategies will run out of runway, and biosimilars will enter an altered market. In Humira’s case, the other factors discussed here will likely contribute to very rapid uptake when biosimilars launch in 2023.
Increased education
Clearly, for biosimilars to gain wider acceptance, education needs to be part of the solution. Patients typically take the advice of their physicians on the safety and efficacy of biosimilars, but clinicians have shown some reservations around biosimilars.
Since 2015, the FDA has acknowledged its role in educating healthcare professionals and patients with trustworthy, unbiased information on biosimilars. The agency’s 2018 Strategic Policy Roadmap included a comprehensive program to encourage biosimilar competition. The FDA has the advantage of being seen as neutral, but biosimilar manufacturers would also need to educate providers and patients through a variety of media, including speaker programs, educational materials, patient support programs and hub services.
The Final Analysis
There is every reason to believe that many of these conditions will occur, creating a “perfect storm” that will stimulate biosimilar adoption for treatment-naïve patients. And, any biosimilar that achieves the interchangeable designation would also attract existing patients.
We can draw several lessons from the experience of biosimilars in the EU, coupled with our knowledge of US market dynamics. First, biosimilar discounts will be steeper and net prices lower than many expect.
Second, while market dynamics are different in the US, payers will put in place processes that encourage physicians to prescribe biosimilars, and we believe biosimilars will succeed in capturing a significant share of the market. The market will, indeed, be dramatically different, and the US will at last realize the cost savings that biosimilars have promised.
References
Katya Svoboda and Bob Swann are Senior Principals in Global Pricing and Market Access at ICON. They deliver strategic market access solutions to define, capture and communicate the value of medical therapies for clients, to optimize commercial results and drive patient access. The authors also wish to thank Gene Chieh and Kristen Foote who contributed to this article. For more information visit www.ICONplc.com/access.
It is important for manufacturers—both of originator products and of biosimilars—to understand the drivers behind, and barriers to, acceptance and use of biosimilars so that they can adopt appropriate commercial strategies. Without the benefit of a crystal ball, it is still possible to speculate as to how biosimilars will reshape the US market, considering the EU’s experience and the context of US market dynamics.
Playing Catch Up
To date, the European Medicines Agency (EMA) has authorized 63 biosimilars (nine of which were since withdrawn from the market) while the US Food and Drug Administration (FDA) has approved only 26. The number of approvals is trending upward in the US, however, as seen in Figure 1. Six new biosimilars have been introduced to market between November 2019 and mid-March, 2020: (Zirabev (bevacizumab), Ruxience (rituximab), Trazimera (trastuzumab), Ogivri (trastuzumab), Truxima (rituximab), and Ziextenzo (pegfilgrastim).
Figure 1: US biosimilar approvals, 2015-2019 Source: https://purplebooksearch.fda.gov/advanced-search
Notably, regulatory approvals in the US are not always followed immediately by market launches due to various patent defenses and legal wrangling, which has not delayed launches to such an extent in the EU due to the different patent landscape. Of the 26 biosimilars approved, just over half (14) have actually launched. The delayed products include biosimilars for the blockbuster monoclonal antibodies (MABs) Remicade, Enbrel, Humira, and Herceptin.1
The US pipeline of biosimilars is strong. According to GlobalData, seven biosimilars are in the pre-registration phase: one for Avastin (bevacizumab), two for Neupogen (filgrastim), three for Neulasta (pegfilgrastim), two for Lucentis (ranibizumab), and two for Rituxan (rituximab). Thus, many industry watchers have suggested that the US is at a tipping point in terms of biosimilar availability.
Yet, just as approval does not equate to availability, availability does not equate to uptake at the levels seen in the EU. The biosimilar for Janssen Biotech’s Remicade, Pfizer’s Inflectra, which was approved in 2016, only garnered seven percent of the volume share of the market two years after its US launch while, Remicade’s US revenues fell by 24 percent. By contrast, in the EU, in the two years following competition from biosimilars, Remicade’s revenues were halved, and its biosimilars captured the majority of the market volume within months.2
A Root Cause Analysis
There are fundamental differences in both the regulatory processes and the market dynamics of the US and the EU that account for much of the discrepancy in the uptake of biosimilars. Chief among these is the difference in the patent landscape, with some EU patents ending earlier and some originator companies generating more patent barriers in the US. The EU is thus several years ahead of the US with many blockbuster biologics reaching the market sooner and subject to competition from multiple biosimilars, resulting in falling prices and high biosimilar uptake.
Another huge hurdle in the US market is the FDA requirement that biosimilars prove “interchangeability” with the originator before pharmacy-level substitution is permitted. To prove interchangeability, biosimilar manufacturers must conduct multiple-switch trials to demonstrate that switching between the reference product and the biosimilar poses no greater risk than using the reference product.3
Due to safety concerns around factors such as immunogenicity, biosimilars without proven interchangeability are usually reserved for treatment-naïve patients. To date, no marketed product has been subject to switching studies, and so none is considered interchangeable. Any biosimilar product with an interchangeable designation would enjoy a competitive advantage because 1) it confers one year of market exclusivity and 2) clinicians would be more comfortable switching to biosimilars for patients who have been stable on the originator product—patients who represent two-thirds of the commercial opportunity for biosimilars.
The EMA, on the other hand, does not have a specific “interchangeable” designation for biosimilars and has deferred all decisions on interchangeability, switching, and substitution to member states. Several EU countries—The Netherlands, Finland, Germany, UK, and Italy—have allowed biosimilars to be interchanged for biologics, with certain provisions. Automatic substitution at the pharmacy is not permitted in most EU countries.4
Another significant difference is the fragmentation of the US market – compared with EU single-payer healthcare systems – and the resulting differences in acquisition practices and pricing.
In the US, the key factor affecting biosimilar uptake is payers’ perception of safety and efficacy, as well as their management practices, which are driven by pricing and manufacturer rebates. Early-entrant biosimilars have difficulty competing against the contracting and rebating power of the originator manufacturers.
In contrast, in the EU, biologics are often procured through tenders, and biosimilars often win by offering the lowest prices. Uptake is generally higher in markets that conduct national tenders using an exclusive approach—a practice that will become more common in time.
Furthermore, EU payers are actively encouraging the uptake of biosimilars by setting quotas, providing guidance, and introducing incentives for physicians to prescribe biosimilars.
A New Era in the US
There are several drivers of biosimilar uptake, with lower acquisition cost being the primary one. Others include perceived quality, safety, clinical efficacy, manufacturing reliability, payer management, reimbursement rates set by Medicare and commercial payers, out-of-pocket expenses for patients, and education of physicians and patients. Going forward, some of these “dials” will be turned, and the conditions under which biosimilars launch will be different than in the past. Let’s review what changes are afoot and how they may impact the market performance of biosimilars:
Introduction of multiple competitive products
In the short term, we can expect a blizzard of biosimilars to be introduced for the MAB blockbusters, Avastin, Herceptin, and Humira. It is clear, that although delayed by several years due to patent litigation issues, five biosimilars to Humira will hit the market in 2023, and this will be a key development to watch (see Figure 2).
Figure 2: Marketing Authorization Status of FDA-Approved MAB Biosimilars Source: https://www.fda.gov/drugs/biosimilars/biosimilar-product-information
AbbVie’s Humira is one of the world’s top selling products, so when five biosimilars were introduced in the EU, it triggered a competitive frenzy. Humira’s sales declined sharply while in some countries, adalimumab prices plummeted up to 80 percent of Humira’s price.5
This influx of multiple biosimilars for a single indication will exert downward pressure on pricing in a way that single competitors have not. Today in the US, biosimilars offer about a 20 percent discount over the price of the originator, which is insufficient to unseat originators, given their contracted discounts. Once there are three biosimilars or more for any given originator, the degree of competition will drive prices down for the biosimilars and the originator alike. While this is the case, the number of biosimilar competitors entering the market will be limited by significant barriers to entry such as high development and manufacturing costs and the need to provide commercial and marketing support biosimilar products once launched.
Certainly, biosimilars won’t be discounted to the extent that small-molecular-weight generics are, where the barriers to entry are lower. But, how low, may they go? A big factor will be the sales volumes biosimilars achieve. In the EU, payers have been able to negotiate discounts as much as 80 percent of the originator prices. Only in a few instances and select areas have originators been able to maintain their market share by offering high rebates. This degree of discounting may not be replicated in the US, because of the fragmented payer environment, but the discounts will certainly be greater than they have been to date.
Changes to “level the playing field”
Under Medicare, clinicians are reimbursed for the biologics that they purchase and administer to their patients through the buy-and-bill model. Currently, that reimbursement rate is calculated for branded products based on the average sales price (ASP) of the product plus 6 percent (due to sequestration, this is currently 4.3 percent). For biosimilars, they are reimbursed based on the ASP of the biosimilar, plus 6 percent of the ASP of the originator product. The Grassley-Wyden bill, which has passed the Senate Finance Committee at this writing, would increase reimbursement for the biosimilar to ASP plus 8 percent for five years after the biosimilar’s launch. This would create financial incentives for physicians to start new patients on the biosimilar product.
The Centers for Medicare and Medicaid Services (CMS) is proposing to allow Medicare Part D plans to add a second specialty formulary tier for “preferred, lower cost” products that could include biosimilars, starting in 2021. This would result in lower coinsurance obligations for patients, driving utilization.
Private payers are also taking steps to institute utilization management policies to promote the use of biosimilars over originators for new patients. These tactics may include creating a biosimilar tier with a more favorable cost structure for patients (lower patient cost sharing), requiring additional justification and/or requirements for use of originator brands, such as instituting step therapy, and implementing differential reimbursement for physicians to drive biosimilar use.
States, which have authority over local substitution laws, have been enacting laws to govern when biosimilars can be substituted for reference products. In a majority of states, pharmacists are permitted or even required to dispense an interchangeable biosimilar in certain situations, although no products have interchangeable status as yet, so this is not happening.6 Most require that the biosimilar be designated as interchangeable and that the switch be confirmed by the physician.
Patent defense limitations
Several originator companies have successfully erected legal barriers to prevent or delay biosimilars from launching. AbbVie, for instance, has controlled the timetable for five competitive launches to Humira—delaying them until 2023—as the biosimilar manufacturers agreed to settle and pay a license fee rather than launch “at risk” before the resolution of AbbVie’s patent infringement suits. Eventually, these strategies will run out of runway, and biosimilars will enter an altered market. In Humira’s case, the other factors discussed here will likely contribute to very rapid uptake when biosimilars launch in 2023.
Increased education
Clearly, for biosimilars to gain wider acceptance, education needs to be part of the solution. Patients typically take the advice of their physicians on the safety and efficacy of biosimilars, but clinicians have shown some reservations around biosimilars.
Since 2015, the FDA has acknowledged its role in educating healthcare professionals and patients with trustworthy, unbiased information on biosimilars. The agency’s 2018 Strategic Policy Roadmap included a comprehensive program to encourage biosimilar competition. The FDA has the advantage of being seen as neutral, but biosimilar manufacturers would also need to educate providers and patients through a variety of media, including speaker programs, educational materials, patient support programs and hub services.
The Final Analysis
There is every reason to believe that many of these conditions will occur, creating a “perfect storm” that will stimulate biosimilar adoption for treatment-naïve patients. And, any biosimilar that achieves the interchangeable designation would also attract existing patients.
We can draw several lessons from the experience of biosimilars in the EU, coupled with our knowledge of US market dynamics. First, biosimilar discounts will be steeper and net prices lower than many expect.
Second, while market dynamics are different in the US, payers will put in place processes that encourage physicians to prescribe biosimilars, and we believe biosimilars will succeed in capturing a significant share of the market. The market will, indeed, be dramatically different, and the US will at last realize the cost savings that biosimilars have promised.
References
- Harston, Aydin, “US Biosimilar Launches Accelerate with Five Launches in Q4 2019 and early 2020,” January 27, 2020. Accessed at https://www.biosimilarsip.com/2020/01/28/u-s-biosimilar-launches-accelerate-with-five-launches-in-q4-2019-and-early-2020/
- Wesley, Tim, “Biosimilars in the US and Europe: Biosimilar Insights,” Datamonitor Healthcare, June 25, 2019.
- https://www.fda.gov/drugs/biosimilars/biosimilar-and-interchangeable-products
- Ebbers, Hans C., Schellekens, “Are we ready to close the discussioin on the interchangeability of biosimilars?” Drug Discovery Today, Vol 24, Issue 10, October 2019, Pgs. 1963-1967.
- Wesley, Tim, “Biosimilars in the US and Europe: Biosimilar Insights,” Datamonitor Healthcare, June 25, 2019.
- https://www.fda.gov/drugs/biosimilars/biosimilar-and-interchangeable-products
- https://www.mintz.com/insights-center/viewpoints/2801/2019-02-_5-states-now-have-biosimilar-substitution-laws
Katya Svoboda and Bob Swann are Senior Principals in Global Pricing and Market Access at ICON. They deliver strategic market access solutions to define, capture and communicate the value of medical therapies for clients, to optimize commercial results and drive patient access. The authors also wish to thank Gene Chieh and Kristen Foote who contributed to this article. For more information visit www.ICONplc.com/access.
