What Biosimilar Companies Should Think About A 70 % Discount

By Anna Rose Welch, Editorial & Community Director, Advancing RNA

In his presentation at two recent biosimilar conferences, Edric Engert, managing director of Abraxeolus Consulting (formerly of Teva), argued that the biosimilar industry should not be afraid of progressing to a more generic model. The movement of the market toward lower-priced biosimilars and more streamlined development processes in the future can be a positive development for biosimilar companies — but only if they plan adequately.

After his presentation, I took the opportunity to talk more with Engert about his background — both in and outside of biosimilars. (As a violinist, I was particularly excited to learn about his background as a Julliard-trained clarinetist.) Engert was forthright with his opinions on where the biosimilar market is heading, how we can promote greater uptake within the U.S., and just how “genericized” the market can and will potentially become.  

Anna Rose Welch: What tools will companies need to employ to build familiarity with biosimilars?

Edric Engert: From a timing perspective, right now, biosimilars are being treated almost entirely as branded drugs in the U.S. We saw that with the first products, like Sandoz’s Zarxio and Teva’s first quasi-biosimilar, Granix. Our specialty salesforce and the medical affairs teams were going around sharing the scientific underpinnings of biosimilars and spreading the word, which was necessary to have Granix gain and enjoy any level of uptake. The type of resources that we’ll need to build up the biosimilar market will mimic what we’ve seen in specialty pharma. But what you do with those resources might end up being quite different, because biosimilars are not new molecules with novel mechanisms of actions, per se.

Welch: Biosimilars’ success abroad has relied on policies and reimbursement procedures implemented by regulatory authorities. What kind of policies can be implemented or already exist that could impact uptake in the U.S. healthcare market?  

Engert:  I think we’ll see healthcare providers rely on some of the tactics that have been used in the past. For instance, tiered copay structures could make the biosimilar the preferred treatment — especially if the biosimilar is placed in tier one and the originator product is taken off the formulary. Health plans have a three-tiered copay structure. The tier in which a medicine is placed depends on its price. For example, a medicine placed in tier one would have, for instance, a $5 copay; for a tier-two drug, the patient might pay a $10 copay, while a tier-three drug will cost them $25. Patients are responsible for paying the full price for any drug that isn’t placed in tier 1, 2, or 3. Generics are automatically put in tier one, while the preferred branded product is put into tier two, as long as the payer is able to negotiate significant rebates with the manufacturers.  

There’s also prior authorization (PA). This is very widespread throughout the commercial population and the Medicaid population. Should a patient need to take a treatment that isn’t covered by the health plan, the physician has to fill out a form and send it to the pharmacy for approval to distribute the product. But the impact of PA depends on the amount of time required to complete the necessary forms. There are some health plans I’ve seen that employ a short, half-page document requiring a signature, which take a few minutes to complete. But I’ve also seen PAs that are four to five pages long that involve filling out a patient’s healthcare history and prescription list, among other details. This eats up a lot of the physician’s time and can be an automatic kill-switch to pushing for the drug. Health Plans could employ such a PA for any novel biologic where a biosimilar is available.

Welch: I’ve heard that, at some point, the industry should expect to see 70 to 75 percent discounts on biosimilars. Do you believe this day will come, and do you have any concerns about this large of a discount?

Engert: I don’t believe the notion of 70 to 75 percent discounts is altogether disruptive or catastrophic — especially because you used the phrase ‘at some point.’ This doesn’t translate to this year or next year. I absolutely agree discounts this large could happen in the U.S.; it’s just a question of when. Frankly, I expect some products will have discounts that are even steeper than 70 or 75 percent. This will all depend on the product, the level of adoption, the number of players, as well as the channel through which the product is actually being provided.

Welch: Do you expect the market will actually be sustainable with these discounts?

Engert: Say, for a moment, that we’re ten years into the biosimilar market. We understand that, given the complexity of the molecule, the key to solving and answering whether a molecule is a biosimilar is driven by the analytical methods that we used initially in characterizing the molecule. Once you’ve mastered the analytical methods to demonstrate true similarity, you don’t even have to do Phase 3 clinical trials against the same indications that the originator product did, hypothetically speaking. As such, you’ve just wiped anywhere from $40 million to $100 million off of the development costs, depending on the complexity of the product and the clinical trial design.

I’d also say that, if adoption rates are high enough, a company won’t have to turn to its specialty medicines group and build up its salesforce to create hype about biosimilars. Instead, biosimilars are likely being substituted, and a company will be relying on a handful of people who manage the relationships with payers, group purchasing organizations (GPOs), wholesalers, and retail chains. Your sales and marketing costs decrease substantially.

Welch: What is your biggest concern right now about the market?

Engert: Imagine a biosimilar company today. It can’t demonstrate totality of the evidence based solely on characterization and analytical methods. They have to go through the Phase 3 clinical trials. If that product happens to be entering the market just when there’s a flood of competition and biosimilars have been accepted based on characterization and analytical methods, suddenly a company is facing the 80 percent price compression on a product where they had to spend greater resources on development, sales, and marketing. It’s that middle space that makes me nervous. The pure specialty-play and the pure generic worlds don’t make me nervous. What concerns me is if you’re spending all the money as if the biosimilar is a specialty play and then suddenly the market flips generic on you. Once the market flips to generic, a company will be fine if it can set itself up for that. But there are some products and companies that could, unfortunately, get caught in between.