Comparing the Economics of Biosimilars and Generics

The first set of presentations on day 2 of the ACI 10th Summit on Biosimilars on Tuesday in New York City reviewed the economics of biosimilar drugs and considerations for access, pricing, and reimbursement.

The agenda, featuring 2 patent attorneys and an economist, was one of the few during the meeting that did not focus exclusively on legal issues.

Drawing on lessons and comparisons he made of the biosimilar markets in Europe and the United States, Ha Kung Wong, JD, a partner at Venable LLP and an editorial board member of The Center for Biosimilars^®, gave the audience a few take-home points that illustrate what stakeholders should consider in this space.

Europe and the United States are very different, given Europe’s mandatory list price discounts in some countries, tenders, and direct government involvement in various decisions. Europe also had at least a decade’s head start over the United States in launching a biosimilar market. However, in the United States, payers could still “make an offer,” as Wong put it, to incentivize use of biosimilars.

Second, more education for both physicians and payers, as is the case in Europe, can also increase uptake here.

Third, Wong said, more time with biosimilars will lead to greater physician comfort in prescribing these drugs. Experience and comfort among physicians in prescribing biosimilars are shown to increase uptake, he said.

Lastly, Wong warned about avoiding a “a race to the bottom” in terms of pricing that would eliminate competition.

David Blackburn, PhD, managing director and head of NERA’s Life Sciences Industry Group, NERA Economic Consulting, compared and contrasted small molecule generics and biosimilars. Generic drugs under Hatch Waxman are the analogy most often made when attempting to illustrate biosimilars, although there are some key differences.

For one thing, Blackburn noted, small-molecule generic drugs are relatively inexpensive to launch; according to a report from Pfizer, it may take $1 million to $2 million over 2 years to launch a generic.

Meanwhile, biosimilar launches cost more than $100 million and take 5 to 9 years, he said. In addition, a reference product biologic has 12 years of exclusivity after launch, as opposed to 5 to 8 years for a small molecule drug.

While a generic has a 180-day exclusivity period if it is first to file an application, there is no parallel with biologics and biosimilars, Blackburn said.

Most importantly, he noted, every state either requires or allows automatic substitution for generics at the pharmacy level, while the same does not apply to biosimilars, and the FDA only released its final guidance on interchangeable biosimilars this spring.

Erosion in the generic market is quick and sustained anasd prices fall, but the same is not true for biosimilars, he said. Even for generics, prices generally do not fall in the first 6 months.

Blackburn noted that Boehringer Ingelheim is pursuing an interchangeable biosimilar for adalimumab (referencing Humira), “But I’m just not sure what will happen on pricing if it’s the only one out there,” he said.

In addition, manufacturers still have to convince doctors to prescribe biosimilars and payers to cover them. Blackburn recalled backpedaling by BlueCross BlueShield last year when it said it would switch patients from Remicade to Inflectra, only retract the idea a month later. In the generics market, it is typically the branded product that is dropped from formularies.

Lastly, Evan Diamond, JD, a partner with King & Spalding LLP, discussed reimbursement policies impacting the biosimilar market and the unique situation that they are in given that they are generally administered by providers in a medical setting under a buy-and-bill system, which also involves rebates between drugmakers and pharmacy benefit managers (PBMs).

HHS wants to end rebates and hopes that the practice spreads to commercial plans as well. Besides placing blame with PBMs, former commissioner Scott Gottlieb, MD, also cited reluctant physicians and payers for the slow uptake of biosimilars.

Last year, more payers did begin to start making a shift to biosimilars, Diamond said, such as Magellan RX Management focusing on the biosimilar Inflectra.