Biosimilars and Healthcare Reform

As the next chapter in our series on the implications of healthcare reform for healthcare manufacturers, we will look at biosimilars and bioequivalent drugs. 

As an approach for reducing the cost of care, healthcare reform defined an approval pathway for biosimilars.  Biotechnology drugs will have market exclusivity for 12 years after the branded biotech drug is approved by the Food and Drug Administration.  The subject product would be biosimilar to the reference product if it “is highly similar to the reference product notwithstanding minor differences in clinically inactive components” and if “there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product.” Such a determination by the FDA would substitute for a demonstration of the subject product’s efficacy, which would have been established by the reference product.

Biosimilar is different from bioequivalent.  The biosimilar drug’s sponsor can submit information that the FDA would evaluate to determine whether the subject product is “interchangeable” with the reference product (i.e., that the subject product “can be expected to produce the same clinical result as the reference product” and that, “for a biological product that is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch”).  Because current analytical technology is insufficient to establish that two biologics are molecularly identical, interchangeability would have to be established through clinical trials; accordingly.

The biosimilar product also will enjoy a period of market exclusivity that ranges from 12 to 42 months depending on the nature of any patent infringement litigation against the first biosimilar.  That is, the FDA would be prohibited from determining that a second product is interchangeable with the same reference product until the earlier of:

(a) one year after the date on which the first interchangeable biologic was commercially marketed;

(b) 18 months after the date on which any patent infringement litigation against the first interchangeable biologic’s sponsor is dismissed or resolved by final court decision;

(c) 42 months after the date on which the first interchangeable biologic’s application was approved, if the applicant was sued for patent infringement; or

(d) 18 months after the date on which the first interchangeable biologic’s application was approved, if the applicant was not sued for patent infringement.

The reimbursement amount for any biosimilar product would equal the weighted Average Sales Price (“ASP”) of all package sizes of the biosimilar within the applicable billing code, plus 6 percent of the weighted ASP of all package sizes of the reference product within the applicable billing code. Assuming that the weighted ASP for the reference product is higher than that of the biosimilar, the 6% of this relatively higher value provides physicians with an incentive to administer biosimilars instead of reference products.

It is not currently clear how interchangeable and non-interchangeable biosimilars would be treated under “generic substitution” requirements imposed by health plans and governed by state pharmacy laws. For example, would health plans utilize their formularies or implement other utilization management techniques to encourage the dispensing of all biosimilars, or only of interchangeable biosimilars (to the extent otherwise permitted by law)? Generally, when the first generic version of a prescription drug enters the market, the innovator drug may be excluded from coverage under a pharmaceutical benefit entirely. This may not be the case, however, for reference biologics or, at least, for reference biologics with no interchangeable alternative.

Implications for Drug Manufacturers

Defining a pathway to approve biosimilar drugs has a number of implications for the manufacturers of reference products.  On the positive side, a 12-year period of marketing protection defines the outer reaches of the reference product’s lifecycle.  It provides time for drug companies to plan for and address the launch of biosimilars.  It also leads to barriers to entry for biosimilars.

Defining the lifecycle of a branded biotechnology drug could exert upward pricing pressure compared to the current market.  The manufacturer of the branded biotech drugs will need to generate a sufficient return on investment in a shorter timeframe than available today during first 12 years.

Once the branded biotechnology drug’s exclusivity has eclipsed, a single biosimilar will be on the market for 12 to 42 months.  This could lead to downward pricing pressure for branded biotech drugs after 12 years due to generic competition.  As with generic small-molecule drugs, the first biosimilar drug will exert limited downward pricing pressure.  The more significant pricing pressure will occur once multiple biosimilars are on the market.

The question arises as to whether physicians will support a biosimilar drug that has not demonstrated bioequivalency via clinical studies.  Also, how much use of the biosimilar out of clinical studies will be required to convince prescribers that the biosimilar delivers the same outcomes as the reference product?  These questions could extended the lifecycle of the reference biotechnology drug and protect it against downward pricing pressure.

On the flip side of the coin, will the manufacturer of the branded biotechnology drug need to demonstrate clinical and economic superiority to biosimilars to support marketing after the 12-year period of marketing protection lapses?  If yes, there will be a need for the manufacturer of the branded biotechnology drug to conduct comparative outcomes research compared to the biosimilar or bioequivalent drug.

Of course, there is one overriding question about biosimilars and bioequivalents, above and beyond the definition of an approval pathway.  Will the difficulty with developing biosimilars limit the impact of these aspects of PPACA?

 If you don’t have a crystal ball, be patient.  Time will yield the answers to these questions.

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