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Biosimilars Continue To Exhibit Market Failure

From their inception, biosimilars in the U.S. have faced headwinds. Uptake has been limited. In 2018, the U.S. spent $126 billion on biologics, less than 2% of which was on biosimilars, according to IQVIA.

Legal disputes regarding originator biologic patents have impeded launches of biosimilars, some of which are stuck in patent purgatory for years following regulatory approval. Scott Gottlieb, the former FDA commissioner, has blamed sluggish uptake in part on originator companies obtaining successive patents to extend their monopolies.


There is also continued lack of physician familiarity with and trust in biosimilars. As a result, doctors have been hesitant to switch patients to biosimilars. In May of this year, the Food and Drug Administration (FDA) released final guidance on therapeutic interchangeability between originator biologics and biosimilars. But, thus far, however, no sponsor has established therapeutic interchangeability. This creates a barrier to physician switching of therapeutics and pharmacist substitution.

While the above-mentioned barriers to biosimilar uptake are significant, distorted payer incentives may be the highest hurdle to overcome. One of them, for example, is originator manufacturers giving substantial rebates to certain payers that cover the originator biologics but exclude competing biosimilars.


In addition, more than 40% of payers have no policies in place for mandatory conversion to a biosimilar and have not instituted differential cost-sharing to drive biosimilar adoption. In spite of qualitative differences between large and small molecules, one would have expected formulary management of biosimilars to have mirrored to some degree the lower cost-share tiering that has taken place with small molecule generics.

The distorted payer incentives for Remicade (infliximab) and biosimilar infliximab products illustrate some of the key challenges facing biosimilars.


On the basis of an analysis of 2017 formularies, Bernstein analyst Ronny Gal said that “nearly half the market blocked or step-edited biosimilars.” And, this included treatment-naive patients as well as those already on the originator biologic. Gal concluded that “biosimilars made very few inroads in formularies which control the product choice for the vast majority of patients.”

And things haven’t changed as of this year, as 60% of payers prefer Remicade over biosimilars, a preference often expressed in terms of step edits for biosimilars. Only 5% of payers placed biosimilars in preferred tiers over Remicade.


This is the reverse of what one would expect. Certainly, small molecule generics don’t get step-edited.

The 2017 Magellan Rx Management Medical Pharmacy Trend Report included analysis of five biologics - Remicade, Neulasta, Herceptin, Rituxan, Avastin – that account for the highest shares of commercial medical benefit drug spending. In 2017, these five products collectively comprised approximately 33% of commercial medical benefit drug spending. Biosimilars have been approved for all five products. One would think that substantial cost savings could be achieved with use of biosimilars, even with modest discounting. Yet, they’ve barely had any impact. Biosimilars have only been launched for two of the five reference products; Remicade and Neulasta. And, the market share percentage for the marketed biosimilars has struggled to get out of single-digit territory.


The barriers mentioned above impede market entry and clinical adoption, which in turn reduces expected product revenues for new entrants. In recent years, several companies have abandoned some or all of their biosimilar programs.

Analysts are saying the future for biosimilars may be in doubt. This would mean that the originator tactics have worked. The makers of originator biologics have fought tooth and nail to block biosimilars, with patent litigation, rebates to insurers, and exclusion contracts.


A number of experts have argued in favor of post-exclusivity price regulations in lieu of the use of biosimilars.

It’s not time to give up on biosimilars, however. It would appear that a persistent problem in the U.S. is that conditions conducive to a competitive market haven’t been established. Generally, a competitive market in biologics and biosimilars just hasn’t happened on its own.


In Europe, there is significantly less litigation, more transparency in pricing, and healthcare systems have strongly favored biosimilars, in some cases with single tenders in exchange for steep discounts. Contrary to what some have said, biosimilars in Europe have fared much better than in the U.S.

This has partly to do with the fact that biosimilars had a head start in Europe, as a biosimilars pathway was enacted in 2006. Currently, over 45 have been launched with discounts of up to 70% for biosimilar infliximab products in Norway and biosimilar filgrastim products in the U.K. By contrast, the FDA has only approved 24 biosimilars. And, merely 11 have been launched, usually at 15% to 35% below the originator’s price. Such discounts are easily matched by originator biologic makers’ rebates.


The National Health Service in the U.K. has recently procured a biosimilar adalimumab at approximately an 80% discount, which may save $400 million in a single tender.

Unlike the FDA, the European Medicines Agency has not formally produced guidance on therapeutic interchangeability. Yet, health systems in individual European jurisdictions have taken it upon themselves to turn the tide in favor of biosimilars by putting forth policies recommending physician and pharmacist switches to biosimilars. To illustrate, in 2015, the Dutch national healthcare authority released a positive recommendation on therapeutic switching, which was adopted by all prescribing and reimbursement authorities. Health authorities in Germany, Norway, and France also encourage use of biosimilars for treatment-naive patients as well as switching of patients already undergoing treatment with a reference biologic.


In the U.S. perhaps lessons can be drawn from the insulin market, which will soon be regulated as biologics and biosimilars. The follow-on insulin Basaglar (glargine) is not technically “therapeutically interchangeable,” meaning pharmacies can’t automatically substitute it for for the brand Lantus. Yet, researchers examining Medicaid fee-for-service and managed care plans showed a remarkable shift from Lantus to Basaglar, among other insulin products.

Between 2008 and 2014, the brand-name Lantus accounted for approximately 80% of all reimbursed long-acting insulin. After new follow-on products were introduced, the market share for Lantus decreased to 42%, and Basaglar’s increased to 34%.


Slashing of the price of Humalog earlier this year, as well as last week’s announced 44% price cut of the follow-on insulin product Admelog, demonstrate a market dynamic missing thus far in most of the biologics and biosimilars markets.

Illustration for article titled Biosimilars Continue To Exhibit Market Failure

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