From The Editor | April 30, 2018

Economics And The Clinic: What Biosimilar Manufacturers Must Consider

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By Anna Rose Welch, Editor, Biosimilar Development
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In past articles, I’ve touched upon how biosimilars are used in hospitals as well as how they could one day be integrated into pharmacies. But I’ve spent very little time living in the community clinic space. It seems everywhere I turn, there are new settings in which biosimilars can and eventually will be used, and each has its own set of concerns, needs, and economic dynamics. Thanks to a presentation given by two McKesson Specialty Health experts at the CBI Biosimilars Summit, I became privy to three barriers affecting biosimilars specifically in community rheumatology and oncology clinics. Omar Hafez, VP of multisource products and analytics, and Pete Perron, SVP and general manager, provider services, walked us through what they’ve termed the clinical, operational, and economic barriers. And in a previous article, I discussed the clinical and operational barriers filgrastim and infliximab biosimilars have been facing thus far in clinics.

But I felt due to their complexity, the economic barriers were more than deserving of their own article, especially given the challenges companies have faced to date with payers, reimbursement policies, and pricing pressures. As an editor, I’ve never been close to the intricacies of the buy-and-bill realm (shocking, I know). But thanks to their presentation at the CBI conference, I became privy to the importance of working closely with a stakeholder that generally stays on the periphery of biosimilar-uptake-related conversations: group purchasing organizations (GPOs). These organizations are responsible for negotiating drug supply and discounts with manufacturers on behalf of clinics, hospitals, and other healthcare organizations.

According to Perron, it’s critical that biosimilar manufacturers spend time crafting their contracts with GPOs, as these stakeholders have a more complete understanding of the needs of the different clinical networks and providers. “Gaining provider access to engage in education is getting harder and harder,” said Perron. “You have to work with your GPO partners to find the best ways to get access to the different networks, practices, and physicians.”

In the second of this two-part article, Hafez and Perron discuss how to approach the complex financial landscape in the clinic and help incentivize clinics to use biosimilars.

The Value Of The GPO In Community Clinic Contracting

In order to best understand some of the economic barriers — or challenges — facing biosimilars in the clinic, it’s important to unpack how economics are approached within the clinical setting. In the buy-and-bill world, a physician orders, stocks, and administers treatments to patients in the clinic, then files for reimbursement. According to Hafez and Perron, oncologists are particularly aware of both cost and cost recovery when considering treatments. They know how much a product costs and how much they will be reimbursed for that product.

As Perron pointed out, “Practices have razor-thin margins and need to be profitable. I know it’s difficult to think about practices from a margin perspective, but they are businesses.” Clinics that don’t run an efficient business risk having to sell or close. As such, there’s a lot at stake in a clinic from the financial perspective.

To date, many of the articles I’ve written have focused on negotiations with commercial payers. Once a drug is ready for market launch, the manufacturer focuses on securing the appropriate price point to get their biosimilar on payer formularies. That negotiation either will (or won’t) be strong enough to fit the payer’s overarching strategy and lead them to prefer one product and/or exclude others.

But physicians in a clinic have their own economic considerations that may not align with that of the payer. Generally, clinics fall into two categories when considering the economics of a treatment. Some clinics focus more closely on cost and how that will impact the value-based care model. Other clinics are more concerned with cost-recovery. Physicians in oncology clinics in particular are savvy in carrying out their own analysis of the numbers to ensure they’ll arrive at the appropriate level of cost recovery — and those numbers will be the benchmarks for the clinic in determining whether they use one product or another.

As such, one CBI audience member aptly pointed out, getting the biosimilar on a payer’s formulary isn’t necessarily going to be the end-game for a manufacturer — at least not when meeting a clinic’s needs. A manufacturer must consider both the provider’s and payer’s strategies and where to place its own contract.

For instance, when entering a competitive market where the innovator is likely contracting with GPOs/clinics, it would behoove a biosimilar company to also contract with a GPO and usher their medicines into the clinics. Not only does the GPO provide a company with access to physicians to educate and bolster physician engagement on the clinical side, but in many cases they handle the financial and business aspects of a clinic. Therefore, they can be a valuable tool for the biosimilar company when it comes to shaping a biosimilar’s economic profile to appeal to a clinic’s needs.

Similarly, in contracting with a GPO, a biosimilar company also has a hand in ensuring the longevity of the community clinic channel. As I mentioned earlier, clinics risk being sold off or shut down altogether if they don’t make financial ends meet. This would be detrimental for patient access to necessary medicines — not to mention it would limit the number of channels a biosimilar company could enter. “Contracting with a GPO will ensure not only that the biosimilar remains competitive, but it will also provide greater access and cost savings in the community clinics setting,” said Perron. “This, in turn, translates to greater sustainability and longevity to these channels.”

One of the most important things a biosimilar company should consider when entering the clinic is how it can make selecting the biosimilar more comfortable for a practice once the physicians have overcome the clinical and operational barriers. Hafez and Perron stressed approaching GPOs — and, in turn, clinics — with the long-term view of a biosimilar’s economics. Practices are particularly keen on forging a contract with manufacturers that will help all parties keep up with changing market dynamics. For instance, quarterly changes to the average sales price (ASP) regularly impact the amount a physician is reimbursed. Similarly, as a new drug enters the market, the path to reimbursement becomes longer for physicians because the drug does not have an established J-code.

This is especially relevant today, as we are in a golden age for innovative treatments. Immunotherapy and, more recently CAR-T therapies, pose exciting new opportunities for physicians and patients. But as the treatment space evolves, the financial concerns at community clinics also increase. “Physicians in the buy-and-bill space are now laying out their own money for immunotherapies and the new CAR-T therapies in the hopes they’ll be reimbursed appropriately,” Perron said.

As such, it becomes clear just how valuable an opportunity biosimilars are for the community clinic space. Not only can contracting with these clinics increase the access to and use of biosimilars in the chronic disease space, but they also provide the leeway to help fund some of the costly newer drugs hitting the market in the buy-and-bill space.