In the JournalsPerspective

Biosimilar competition in U.S. limited by accumulative regulatory failures

Despite the expedited pathway for biosimilars enacted by the Biologics Price Competition and Innovation Act of 2009, the development of competition in the U.S. biologics market has been slower than expected due to several regulatory issues, according to a new perspective piece published in the New England Journal of Medicine.

However, many of these problems can be remedied so that important cost-savings can be realized, according to the author, Richard G. Frank, PhD, from the Department of Health Care Policy at Harvard Medical School.

“The BPCI was designed to promote competition in the markets for biologic products,” he told Healio Gastroenterology and Liver Disease. “Regulatory and payment policies that follow on the legislation should not forget that fundamental purpose, and better balance safety and competitive concerns that have been the case to date.”

The expected increases in competition for biosimilars — biologics that are highly similar to approved originator products, with no clinically meaningful differences — were based on the results of the biosimilar pathway in Europe, as well estimates from the Congressional Budget Office and private analysts, according to the article. “Unfortunately, the results to date are disappointing,” Frank wrote.

Just seven biosimilars were recently available in the U.S. market, whereas 14 were available in Europe after a similar amount of time since a pathway was created there. Additionally, while U.S. spending on biologics reached $105.5 billion in 2016 (and continues to grow by about 10% per year), just 3%, or about $3.2 billion, was subject to competition from biosimilars.

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Biosimilars are biologics that are highly similar to approved originator products, with no clinically meaningful differences.
Source: Shutterstock.com

Several accumulative factors likely contribute to the slow development of competition in this market, according to Frank.

FDA naming, interchangeability regulations

Because biologics are more complex than small molecule drugs, physicians are less comfortable prescribing biosimilars than they are generics, “especially given that regulations create the impression that a biosimilar may not be all that similar to its originator,” Frank wrote.

The FDA biosimilar naming convention, for instance, creates the impression that there may be important clinical differences between products, thus undermining competition in the market. He suggested that alternative naming and tracking methods, like the use of trade names, may improve matters.

Additionally, a lack of clear FDA guidance on interchangeability — which would allow pharmacists to substitute a biosimilar without involving the physician who prescribed the biologic — has also stifled price competition, Frank argued. Unlike in Europe and Australia, where interchangeability criteria are less stringent, there are currently no interchangeable products available in the U.S.

“Interchangeability can promote strong price competition, as evidenced by competition between brand-name and generic small-molecule products,” Frank wrote.

Medicare payment arrangements

Payment arrangements in public insurance programs are also deterring competition in the biologics market, according to Frank. Medicare Part B, for instance, which spends about $16 billion per year on biologics, reimburses physicians with the average selling price of a biosimilar plus 6% of the cost of the reference product, based on the idea that leveling payments will prevent physicians from being incentivized to prescribe the more expensive reference product.

However, Frank argued that because physicians are less familiar with biosimilars, and the economic rewards to prescribing them are basically the same, “this payment system does not promote prescribing that will reduce prices.” A better approach, as recommended by the Medicare Payment Advisory Commission, would be to consolidate the reference product and its biosimilars under a single billing code, which would average their prices together so that physicians who choose a lower-priced product within the group could receive a higher net payment, he wrote.

Secrecy in manufacturing

Finally, Frank argued that secrecy about manufacturing processes deters biosimilar competition. Because biologics are too complex to be reverse engineered like small-molecule generics are, their manufacturers rely on secrecy in addition to patent protection and exclusivity to preserve their market power, which slows development of biosimilars after their patents expire.

“Although a number of these factors may separately have modest effects, together they are additive and most likely contribute to the slow development of competition in the biologics market,” he concluded. “Competition creates the potential for considerable savings — but if the impediments continue, important savings will probably be left on the table.” – by Adam Leitenberger

Disclosures: Frank reports no relevant financial disclosures.

Despite the expedited pathway for biosimilars enacted by the Biologics Price Competition and Innovation Act of 2009, the development of competition in the U.S. biologics market has been slower than expected due to several regulatory issues, according to a new perspective piece published in the New England Journal of Medicine.

However, many of these problems can be remedied so that important cost-savings can be realized, according to the author, Richard G. Frank, PhD, from the Department of Health Care Policy at Harvard Medical School.

“The BPCI was designed to promote competition in the markets for biologic products,” he told Healio Gastroenterology and Liver Disease. “Regulatory and payment policies that follow on the legislation should not forget that fundamental purpose, and better balance safety and competitive concerns that have been the case to date.”

The expected increases in competition for biosimilars — biologics that are highly similar to approved originator products, with no clinically meaningful differences — were based on the results of the biosimilar pathway in Europe, as well estimates from the Congressional Budget Office and private analysts, according to the article. “Unfortunately, the results to date are disappointing,” Frank wrote.

Just seven biosimilars were recently available in the U.S. market, whereas 14 were available in Europe after a similar amount of time since a pathway was created there. Additionally, while U.S. spending on biologics reached $105.5 billion in 2016 (and continues to grow by about 10% per year), just 3%, or about $3.2 billion, was subject to competition from biosimilars.

#
Biosimilars are biologics that are highly similar to approved originator products, with no clinically meaningful differences.
Source: Shutterstock.com

Several accumulative factors likely contribute to the slow development of competition in this market, according to Frank.

FDA naming, interchangeability regulations

Because biologics are more complex than small molecule drugs, physicians are less comfortable prescribing biosimilars than they are generics, “especially given that regulations create the impression that a biosimilar may not be all that similar to its originator,” Frank wrote.

The FDA biosimilar naming convention, for instance, creates the impression that there may be important clinical differences between products, thus undermining competition in the market. He suggested that alternative naming and tracking methods, like the use of trade names, may improve matters.

Additionally, a lack of clear FDA guidance on interchangeability — which would allow pharmacists to substitute a biosimilar without involving the physician who prescribed the biologic — has also stifled price competition, Frank argued. Unlike in Europe and Australia, where interchangeability criteria are less stringent, there are currently no interchangeable products available in the U.S.

“Interchangeability can promote strong price competition, as evidenced by competition between brand-name and generic small-molecule products,” Frank wrote.

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Medicare payment arrangements

Payment arrangements in public insurance programs are also deterring competition in the biologics market, according to Frank. Medicare Part B, for instance, which spends about $16 billion per year on biologics, reimburses physicians with the average selling price of a biosimilar plus 6% of the cost of the reference product, based on the idea that leveling payments will prevent physicians from being incentivized to prescribe the more expensive reference product.

However, Frank argued that because physicians are less familiar with biosimilars, and the economic rewards to prescribing them are basically the same, “this payment system does not promote prescribing that will reduce prices.” A better approach, as recommended by the Medicare Payment Advisory Commission, would be to consolidate the reference product and its biosimilars under a single billing code, which would average their prices together so that physicians who choose a lower-priced product within the group could receive a higher net payment, he wrote.

Secrecy in manufacturing

Finally, Frank argued that secrecy about manufacturing processes deters biosimilar competition. Because biologics are too complex to be reverse engineered like small-molecule generics are, their manufacturers rely on secrecy in addition to patent protection and exclusivity to preserve their market power, which slows development of biosimilars after their patents expire.

“Although a number of these factors may separately have modest effects, together they are additive and most likely contribute to the slow development of competition in the biologics market,” he concluded. “Competition creates the potential for considerable savings — but if the impediments continue, important savings will probably be left on the table.” – by Adam Leitenberger

Disclosures: Frank reports no relevant financial disclosures.

    Perspective
    Stephen B. Hanauer

    Stephen B. Hanauer

    Despite the absence of an “interchangeability” designation by the FDA, interchangeability is happening de facto via third party designation of preferred products. We are starting to see this with second biosimilars for the same agent (eg, infliximab), when the first biosimilar has, for example, a 15% discount and a second biosimilar becomes available at a 30% discount. The insurance company will migrate to the less costly biosimilar and, essentially, substitute the second for the first biosimilar; even in the absence of an interchangeability designation.

    • Stephen B. Hanauer, MD
    • Professor of Medicine Northwestern University Feinberg School of Medicine Medical Director, Digestive Health Center Northwestern Medicine

    Disclosures: Hanauer reports financial relationships with AbbVie, Actavis, Amgen, Arena, Astra Zeneca, Baxter, Boehringer Ingelheim, Bristol-Myers Squibb, Catabasis, Celltrion, Cubist, Ferring, Genentech, Entera Health, GlaxoSmithKline, Hospira, Janssen, Lilly, Novartis, Novo Nordisk and Pfizer.

    See more from Biosimilars in the United States: Current Status and Future Implications