From The Editor | July 29, 2020

Biosimilar Competition: Not Your Grandmother's Generics Market

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By Anna Rose Welch, Chief Editor, Biosimilar Development

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Though it has been a rough couple of months due to COVID-19, the biosimilar industry has, arguably, been experiencing a bit of a windfall. In addition to the 10th anniversary of the BPCIA, the oncology biosimilar space has blossomed with the market launch of not one or two but in some cases as high as six competitors for Roche’s blockbuster product trio. Seemingly daily, health care professionals from clinics, hospitals, and health systems around the U.S. are coming out of the woodwork boasting new biosimilar educational and implementation initiatives. However, the arrival of multiple competitors — though a potential boon for healthcare savings — has also introduced some interesting payer policy dynamics.

If you have been in this industry long enough, you’ll know that payer policy has been one of the most-often-cited challenges, especially for biosimilar products in the rheumatology and gastroenterology space. While formulary parity between biosimilars and reference products has been the primary goal for the industry to-date, there are a wide array of opinions emerging today on why this may be a challenging policy to maintain in the long-term. Indeed, while some physicians argue that prioritization of biosimilars will be the only way to garner uptake in their community, other stakeholders — for example, oncologists and wholesalers — are strong advocates for maintaining parity in the long-run. 

To better understand some of the payer dynamics taking shape in the increasingly competitive oncology space, I touched base with Biosimilar Development editorial advisory board member Kathy Oubre, COO of the Pontchartrain Cancer Center (PCC). Here, she highlights the changing dynamics she is observing on the payer front and shares the impact these can have on oncology practices and oncologists’ overall use of biosimilars.

The Impact of Payer Policy On Oncology Providers’ Biosimilar Usage, Operations

Arguably, one of the biggest challenges the industry has faced to-date has been managing market and cost savings expectations — especially in these earlier days. I daresay, if we had a nickel for each time we have heard “these products are not priced the way we anticipated they would,” we’d probably have enough money to buy a nice meal. The same goes for what we anticipated would be more clear-cut engagement from payers. In the early days of Zarxio and Basaglar, a handful of large payers took immediate action and put them on their preferred formularies. This level of urgency around biosimilar payer coverage did not continue as we got into the more complex, therapeutic products.

Up to this point, a recent survey revealed that the majority of commercial payer policies are covering biosimilars and their reference products at parity — meaning there is no preference for one or the other. However, this survey (and many of the headlines that followed its publication) showed that there still are more payers preferring reference products (33 percent) on their formulary compared to biosimilars (14 percent). In such situations, the reference product must be used prior to the patient trying a biosimilar for that product.

In a previous article, Oubre shared her thoughts on the importance of manufacturers being good stewards of average sales price (ASP) and maintaining payer parity. As she explained in that article, up to this point, manufacturers have been willing to link arms and keep prices from dropping too swiftly overall. A majority of biosimilar partners have also been establishing solid contracts with their GPO and clinic partners that prioritize open access to their biosimilar products and parity with the reference product. Careful attention to contract management between manufacturers and GPOs is critical to ensure smooth uptake in the community oncology setting, Oubre explained.

However, as she and several of her peers in community oncology have acknowledged, it is increasingly common that certain reference products are seeing more than three or four competitors entering the market. In a recent Center for Biosimilar article, oncologist Robert Rifkin shared that medication choice at the clinic is dictated by these contracts, and where there are multiple biosimilars, sites of care are required to carry all of them. Whether this remains realistic in the long-term is yet to be determined. As he pointed out, most stakeholders may be more inclined to work toward a “preferred biosimilar” model. However, that preferred product most likely would not line up with each of the regional payers — especially should they each be renegotiating and preferring different products from year to year.

While parity has been the name of the game thus far, Oubre is growing increasingly concerned by the number of payer announcements crossing her desk about changes in formularies stipulating that providers use only the reference product or one specific biosimilar. This complexity solidifies what many of us have argued in the past: biosimilar competition is not shaping up to be like that of generics competition.

“The low cost of development for generics and their resulting lower price points meant that there was less fighting for premier formulary placement,” Oubre explained. “However, in the biosimilar world, we are beginning to see payers taking a more active stance in dictating which drug a patient can receive.” Behind the scenes, this means payers have begun approaching biosimilar manufacturers and originator companies to negotiate the best possible rebate. The manufacturer that provides the largest rebate will win the preferred product slot on the formulary. “Should a biosimilar manufacturer not be willing to engage in this type of negotiation to remain at parity, they may find themselves left out of the game,” she added.

Now, it is not unusual for payers to negotiate and construct their formularies in such a way. However, Oubre said that she has not seen the same magnitude of behavior before in the oncology space. The impact of these behaviors is only amplified given the fact that biosimilars — despite their discounts — are still high-priced treatments, and this can cause several challenges on the provider side. Because practices have to accommodate the formularies of a variety of regional or national payers’ formularies, each clinic must stock all the products. When a reference product has as many as six biosimilar competitors like Herceptin does, more effort must be lavished on the administration process to ensure the wrong (i.e., non-reimbursable) product is not accidentally given to the patient. For example, at PCC, Oubre shared that popups were built into the EMR requiring the nurse to stop prior to administering a product and confirm that they are using a product that will be reimbursed by that patient’s payer.

Not only could administering the wrong product stick the clinic with the cost of that drug, exclusive payer formulary decisions challenge both GPOs and their practice clients to meet the volumes they have contracted with manufacturers. In its contract with a manufacturer, the GPO agrees to distribute and use a specific volume of each biosimilar product across all of its practices. In addition, the individual practices must also maintain a certain level of market share for each product. Should each of PCC’s four major payers all require the usage of a different biosimilar product or the reference product, the practice could find itself missing the mark on some of its contracts. This is problematic given that meeting such contracts provides additional funds for clinics to pay operational expenses — especially as drug cost margins continue decreasing over time, Oubre explained.

Oubre explained that the impact of these sole-source payer policies in the oncology setting is yet to be determined in the long-run, but she anticipates it could be a limiting factor in terms of broader biosimilar uptake.

“We believe in the science behind biosimilars and the cost savings they offer to the healthcare system, the practice, and the patient,” she concluded. “At the end of the day, we all know that financial toxicity is not going away — especially now with the COVID-19 pandemic. However, as payers continue to increase their sole-source formulary selections and designate which products we must distribute, we’re finding it more difficult to participate in the biosimilar market as we would like to.”  

Stay tuned for part 2 in which Oubre shares some of the initiatives she and other oncologists are tackling to bring greater attention and success to biosimilars.