Tracking the price of existing biologics when drugs enter the market

KEYWORDS:

• Biologics
• biosimilars
• cost
• drugs
• market

1. Introduction

The price of biological medications is a major topic in the conversation concerning rising prescription costs. Even though biologic treatments represent only 2% of all United States prescriptions, they comprise 37% of net drug spending [1]. These medications often are the most efficacious treatments for chronic disease, and patients not receiving biologics may be considered under-treated [2]. For patients to have better access to them, prices need to decrease. While the rapidly expanding market for biologics should create competition to lower medication cost, a recent report demonstrated that entry of newer drugs increased annual treatment costs of existing medications.

2. The market of biologics

2.1. The effect of emerging innovator biologics

The effects of new tumor necrosis factor (TNF)-inhibitors on the price of existing TNF inhibitors were tested with data from Medicare Part D [3]. The wholesale acquisition costs of the existing TNF inhibitors increased after the market entry of new competitors. The annual treatment costs with existing TNF inhibitors increased by 144% from April 2009 to December 2016 after new drug entry, compared to a 34% expected increase without new drugs entering the market. Medicare spending increased, while the out-of-pocket costs remained relatively constant. The authors hypothesized that the insurance payers may be willing to pay slightly more for existing TNF inhibitors after the market entry of newer more expensive agents [3].

2.2. The effect of emerging biosimilars

As the patents for biological agents approach expiration, biosimilars are now emerging. Biosimilars should help drive down the cost of biologic medications already approved by the Food and Drug Administration (FDA) [4]. Biosimilars are governed by the Biologics Price Competition and Innovation Act (BPCIA), which creates abbreviated approval pathways for drugs that are either highly similar or interchangeable with the original biologic [5]. Approved biosimilars can be approved for the same indications and conditions previously approved for the reference product [6]. Will biosimilars lead to a decrease in cost of biologic medications?

Although the BPCIA intended for biosimilars to increase competition and decrease the price of biologics, biosimilars have not had an impact on the U.S. market originally expected. Biosimilar entry into the US market has been slow and minimally effective at lowering prices. In cases where biosimilars are on the market, competition has been limited with only slight reductions in the price of branded biologics. When a biosimilar version of infliximab entered the market in 2016, it was listed at a 15% discount versus branded infliximab [7]. The entry of a biosimilar to filgrastim flattened the branded product’s price trajectory, and the branded product still retains the largest share of the filgrastim market [8]. A third filgrastim biosimilar entered the market in October 2018, but its market impact is not yet well characterized.

Long-term projections of the price reductions and savings biosimilars will generate are uncertain. In the United States, biosimilars are priced at 20–30% less than the branded product, with a US 10-year projected savings of $54 billion from 2017 to 2026 [9,10]. In Europe, biosimilars are priced on average about 30% less than the reference product, but differences exist in biosimilar policies, leading to variations in uptake of biosimilars and divergences in savings all over Europe [11]. Furthermore, outlier pricing overshadows the barriers biosimilars face when introduced to the market. In Norway, a biosimilar for infliximab was originally offered at 39% less than the branded price. Ultimately, it was offered at 72% less than the branded price in hopes of increasing uptake of the biosimilar [12].

2.3. Barriers to biosimilar competition

Competition-based price reductions require competitors to have easy access to market entry. But biosimilars take between seven and eight years to develop, cost between $100 million and $250 million, and require human trials [3,13]. In contrast, the typical generic drug takes firms 1–3 years, $1–$5 million, and no human clinical trials [13]. Due to the large cost, dominant pharmaceutical companies form alliances to share the intrinsic risk [4]. This decreases the ability for start-ups to develop biosimilars for the market, thereby further decreasing competition.

Even once approved, biosimilars face more barriers to adoption. These barriers may be poor policy choices, concerns about product substitutability, or the perceptions of physicians seeing biosimilars as less safe and less effective [14]. Dominant companies may also create alliances with insurance companies to ensure that their branded product is first in the formulary. Pharmaceutical companies may offer rebates on their drugs and partner with insurance companies to create contracts that exclude competing biosimilars or place a preference on the drug company’s brand-name biologic.

3. Expert opinion

One explanation for the modest effect biosimilars has had on the price of the biologic market are the barriers they encounter coming to market. The cost, time, and uncertainty result in only a trickle rather than a wave of competition. Many have posed the question whether there needs to be a foundational reform concerning biosimilar entry to the market [8,11,13,15–17].

Additionally, an inherent problem in the current United States healthcare system is that prices are extremely variable based on location, individual benefits within insurance policies, and availability of rebates offered by a given insurance company. The large variability also makes it challenging to study and track drug prices and the effect that releasing new medications has on the current drug prices. Post-marketing surveillance is needed not only to determine the efficacy and safety of emerging medications but also to track the effect on the financial market so that patients can have the best access to biologic medications. Currently, there are efforts to require manufacturers to be more transparent regarding drug prices [18].

For biosimilars to impact the price of branded biologics, the current market needs to change. Potential interventions include a policy to improve biosimilar entry and adoption, better physician education about prescribing biosimilars, and more transparency about prescription pricing. It would be unfortunate if the BPCIA was to have little effect in the long run because biosimilars were never able to truly compete against branded biologics.

Declaration of interest

SR Feldman has received research, speaking and/or consulting support from a variety of companies including Galderma, GSK/Stiefel, Almirall, Leo Pharma, Boehringer Ingelheim, Mylan, Celgene, Pfizer, Valeant, Abbvie, Samsung, Janssen, Lilly, Menlo, Merck, Novartis, Regeneron, Sanofi, Novan, Qurient, National Biological Corporation, Caremark, Advance Medical, Sun Pharma, Suncare Research, Informa, UpToDate and National Psoriasis Foundation. He is a founder and majority owner of www.DrScore.com and founder and part owner of Causa Research, a company dedicated to enhancing patients’ adherence to treatment. The authors have no other relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript apart from those disclosed.

Reviewer Disclosures

Peer reviewers on this manuscript have no relevant financial or other relationships to disclose.