From The Editor | December 1, 2017

Biosimilars Face New Destiny Under Medicare Part B Revision

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By Anna Rose Welch, Editor, Biosimilar Development
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Biosimilar industry

In the biosimilar industry thus far, we’ve rarely seen our diverse groups of stakeholders united over the same regulatory and reimbursement policies. In fact, I’d go so far as to say an event in which the wide variety of biosimilar stakeholders is aligned can be equated to the sighting of a rare eclipse or comet. But in recent weeks, we observed one of these miraculous occurrences.

Following a comment period during which biosimilar manufacturers, trade organizations, payers, patient advocacy groups, and congressmen expressed concerns about CMS’ Medicare Part B policy, the agency announced a big change. Starting in 2018, CMS will heed calls to change the policy. The previous (and, until 2018, existing) policy required all biosimilars for a reference product to share the same billing code, or J-code, a policy which stakeholders almost unanimously agreed would deter manufacturers, and, in turn, decrease market competition and patient access. However, starting in 2018, CMS will assign individual J-codes to each biosimilar, a move expected to encourage more investment in the biosimilar space and bolster uptake.

As Michael Werner, senior policy advisor for The Biosimilars Forum, described in an interview, “This policy change is a real boon for the biosimilars sector. There are many pieces to the biosimilars market, including a clear regulatory pathway and an educational strategy — both of which the FDA has been working tirelessly to establish. Now, having a reimbursement policy that is aligned with the FDA pathway and pharmacovigilance efforts is good news for all stakeholders and the healthcare system as a whole.”  

What Manufacturers & Patients Stood To Lose From The Existing Policy

A number of articles have addressed the change and how it could impact biosimilars. It’s important to note, of course, that these predictions are still hypothetical. After all, there are only three biosimilars on the market, and only two currently share the same J-code — Inflectra and Renflexis. (Now that the policy has been revised, CMS has announced these two infliximab products will be given their own J-codes — likely halfway through 2018.) Though the industry is still waiting on official guidance on how CMS plans to roll out this policy, many of the responses have been positive.

One of my favorite responses thus far came from Mylan’s head of global biologics commercial, Chrys Kokino, who, at a recent industry conference, said this policy change puts manufacturers “in control of [their] own destiny.” This rings true on several levels — especially if we think about the pricing leniency the new policy could provide for companies that might come third, fourth, or fifth to the market.

As we all know, biosimilars are not cheap to develop, and once they’re launched on the market they require top-notch patient assistance programs. As such, there has been great pressure for companies to be one of the first to market so they’re guaranteed larger market share that will help recoup development costs. But grouping all biosimilars for a reference product into the same J-code could mean companies — especially later arrivals — would face the pressures of competitive pricing as soon as they hit the market.

Take, for instance, the following scenario: Let’s say there are several filgrastim biosimilars on the market, including Zarxio. A new competitor enters the market at $2,000 a month, which ultimately forces $3,000-a-month Zarxio (and any other more expensive players) down to a lower price. Not only does this place pressure on marketed biosimilars to bring their prices down, but it also means newcomers to market will need to launch at lower and lower prices to be competitive. And what’s perhaps even more disheartening is the fact that the reference product, Neupogen, which is protected by its own J-code, would not be impacted at all by this competition (in the Part B space).

Now, it’s true the U.S. biosimilar market hasn’t seen an influx of market launches and competition, due to patent challenge delays. We have not seen multiple biosimilar products sharing the same J-codes (outside of Inflectra and Renflexis) and there have not, as of yet, been steep price cuts — though Renflexis’ 35 percent discount was a good start. But, as Werner pointed out, this policy was reminiscent of others in the past that encouraged race-to-the-bottom pricing and led drug makers to exit the market. In the end, were manufacturers to leave the market, there would be fewer products and higher prices overall.

It’s also important to note that manufacturers aren’t the only ones that stood to lose under the existing policy: patients would, as well. At the Biosimilar Council’s 2017 Leading on Biosimilars event, Andrea Miller, head of global biologics operations for Mylan, pointed out that a biosimilar price doesn’t just reflect the cost of development. It also accounts for the services being provided to patients on that drug. “These services are critical for successful patient use,” she argued. “We hear patients and physicians calling for these patient assistance programs.”

But as more stress is placed on the price of biosimilars, which includes these patient programs, there could be a company that chooses to launch its biosimilar without a full complement of these services in the future. This would not only lower the price of that biosimilar, but, under the existing Part B policy, this move would pressure all competitors sharing the same J-code to do the same. As such, we cannot overlook the role patient services also plays in the cost, development, and commercialization of a biosimilar.

Why This Change Bodes Well For Biosimilars

Following CMS’ announcement, Bernstein biotech analyst Ronny Gal told RAPS the change in policy certainly gives biosimilar makers “more room” to avoid lowering prices — reinforcing Kokino’s point that, moving forward, biosimilar makers can be more in charge of their destiny.

Though the revised policy may mean biosimilar prices will be higher than they would be under consolidated J-codes in the short-term, Werner pointed out individual biosimilar J-codes will promote greater savings in the long-term. For instance, in the agency’s call for comments, CMS asked for any relevant materials that may demonstrate the impact of its existing policy. Several commenters pointed to an industry estimate supplied by The Biosimilars Forum, which revealed the existing policy would lead to $50 billion in savings over the next 10 years. But it also determined that giving biosimilars individual J-codes would increase these savings by $15 billion and would lead to 65 percent uptake in the next decade (compared to 35 percent uptake with blended J-codes). “In the long term, having more market entrants is going to drive prices down,” Werner added.

And Werner expects this will not only help companies currently investing in biosimilar development, but it will also be a beacon for other companies to enter into the biosimilar business — and hopefully launch them in the U.S.

“This policy was a big barrier that made many manufacturers question whether the U.S. was going to be a hospitable market,” he described. But now, thanks to CMS’ new policy, “I think you’re going to see that companies with biosimilars in their pipeline will continue to develop these products,” he said. “It’ll also be interesting to see, over the next couple of years who the players are in the biosimilar market and what they become. If we have this conversation two or three years from now, we’re probably going to be talking about business models and companies we hadn’t even thought of before.”

Apart from manufacturers, patients and physicians can also stand behind this policy change for a few key reasons. Obviously, the more manufacturers making biosimilars, the more medication choices patients have in the long-run. This move also protects the much-needed patient assistant programs from any manufacturers that may choose, dangerously, to pare down on these services to save costs and provide higher discounts. This change also simplifies the reimbursement process for physicians. For instance, physicians could’ve found that, thanks to bundled J-codes, a new, low-price biosimilar could’ve entered and undercut the market, in turn lowering the physicians’ expected reimbursement rate.

Overall, Werner likened the burgeoning U.S. biosimilar industry to the construction of a house. This change to Medicare Part B is “just one more piece of the frame put in place.” As was discussed earlier, the FDA has worked to establish a biosimilar regulatory pathway, and, in recent weeks, announced the launch of its educational initiative. These are two key components promoting the success of this market. As such, Werner pointed out he was happy to see the new Part B policy better aligns itself with the established U.S. regulatory policies.

A common criticism of the existing policy was that it treated biosimilars as if they were generic drugs. This ultimately goes against the FDA’s policy efforts and manufacturers’ educational strategies, all of which emphasize that biosimilars are not generics.

Though it’s impossible to compare the idiosyncratic reimbursement schemes throughout Europe to that of the U.S. healthcare system, Werner argued we can still take a valuable lesson away from the EU when it comes to establishing our own policies. In the end, it all comes down to alignment.

“What we’ve seen in other places, like Europe, is that, generally, when you have payment policies that align with regulatory policies, which are aligned with a solid understanding of what biosimilars are, we see markets starting to develop,” he described.