US Biosimilar Uptake Challenges and the Quest for Cost-Savings

Key insights

• There was considerable excitement when biosimilar legislation was passed as part of the Affordable Care Act, hoping that biosimilars could reduce spending and overall healthcare costs. However, this hasn't materialized today due to structural and market forces within the healthcare system, which tend to preclude the realization of perceived healthcare cost-savings into reality.
• Even though a few biosimilars have been approved, their adoption in the US market is rather anemic due to intellectual property challenges, pricing and contracting, payer controls, and incentives not being fully aligned to enable doctors and patients to utilize the biosimilars. Physician and patient awareness of these biosimilars continue to increase despite the lack of transparency and a broader understanding of healthcare economics.
• Biosimilars must compete effectively with innovator biologic manufacturers on price, physician experiences, payer access, and patient access and support—some of these biosimilars have started capturing share as the market dynamics are becoming more favorable.
• Biosimilars will ultimately capture a significant share of the US biologics market. Having said that, the path to a successful biosimilar adoption will continue to be challenging in these early stages as significant investments are required to show similarity and interchangeability to maximize their potential

Regulatory pathway for biosimilars

The Biologics Price Competition and Innovation Act (BPCIA) of 2009 laid the foundation for biosimilar development. The FDA rates biosimilars in the following categories: (a) not similar, (b) similar, (c) highly similar, or (d) highly similar with fingerprint-like similarity – all concerning the reference drug. Only drugs judged to be "highly similar" are considered for approval.If a product is deemed to be "similar," further studies may be required to establish "high similarity."

• Interchangeability: The designation of "interchangeable" by the FDA requires that the biosimilar meet additional therapeutic equivalency criteria.With this designation, patients can switch to the new biosimilar medication without any risk of adverse effects or decreased efficacy. Furthermore, pharmacies could substitute the new biosimilar for the reference product without consulting the prescribing physician. As of yet, the FDA has not approved any of the biosimilars designated as being interchangeable.
• Data Extrapolation Across Indications: Data extrapolation to multiple indications for biosimilars is essential to reducing development costs. Usually, new drugs generate clinical data for each condition; however, for a biosimilar, having the reference product's clinical data and showing high similarity to the reference product allows the extension of the treatment options to all indications. The FDA has established a similar openness to extrapolation of indications for biosimilars.

Even though an innovative reference biologic may have 12 years of exclusivity, manufacturers can start a biosimilar product application process as early as four years from the date of approval of the reference product. This approach gives the biosimilar sponsor time to carry out the necessary studies while the reference product is still under patent protection. If the FDA approves the new biosimilar as "interchangeable" with the reference product, it will receive 12 months of exclusivity over other biosimilars approved in that period for the same indication.

Biosimilar market today

To date, the FDA and EMA have approved several biosimilars. The biologic market will be a $100b+ opportunity in the US alone as several leading biologics will lose exclusivity within the upcoming decade. Even if biosimilars capture a modest market share, it will translate to tens of billions in cost savings for the healthcare system over the next ten years.

One of the most active therapeutic areas for biosimilars is immunology – more than 50 biosimilars such as Adalimumab, Infliximab, Etanercept, and Rituximab have been approved in various markets worldwide. The market penetration of these biosimilars varies across regions due to multiple factors such as regulatory pathways, market access, and adoption.As Figure 1 below shows, the situation is different in the US as we are in the early stages of biosimilar sector evolution compared to 5EU and Japan.

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The economics of these biosimilars are supposed to be attractive as long as there is health competition. In the public health systems, where tender offers are prevalent, some of these biosimilars could face significant economic challenges, and their viability will become an issue if they can't compete and capture sufficient market share if the winner takes all. The cost savings from biosimilars may not be as high as those seen with small-molecule generics (~80 to 90%) until multiple biosimilars enter each class. Interchangeability designation could further increase biosimilar uptake driven by automatic substitution laws.

Biosimilar value proposition

To maximize the commercial potential, the value proposition for adopting biosimilars must resonate with payers, providers, and patients. The lower cost of a biosimilar, relative to the reference biologic, is only one facet of a biosimilar's value proposition. For instance, patients and physicians want to know about the biosimilar's efficacy and safety parameters and how these might compare to the reference drug. Patients may wish to learn more about any available support services provided for the biosimilar, and physicians may inquire about post-marketing studies or ongoing pharmacovigilance monitoring data. Thus, it is essential to communicate the value proposition to address different stakeholders' needs.

Payers must understand the long-term value of biosimilars

Payers tend to take a short-term approach to coverage and reimbursement decisions. The market access for biosimilars is contingent on factors such as the reference price of the innovative biologic, degree of competition, contracting dynamics, and product support. The first biosimilar often commands a premium price, which erodes as other biosimilars enter. The first biosimilar with exclusivity tends to capture and retain a disproportionate market share. However, as multiple biosimilars enter a therapeutic class, payers may view them as commodity products similar to how they view generics today.

Today, the market access challenges faced by biosimilars are more nuanced.For example, aggressive contracting and volume-based rebates/discounts offered by biologic manufacturers make biosimilars relatively less attractive in some cases. The volume/rebate relationship often favors branded biologics given their high utilization levels. For example, a heavily used biologic would be able to offer a much higher rebate to make it attractive for payers. Lack of interchangeability/indication extrapolation status is forcing them to non-preferred status today in some cases, but it could change in the future. In Europe, mandates exist in some cases to put all new patients on biosimilars. Quota systems also force physicians to move patients from current biologic treatments to biosimilars. Payers within public health systems have been in the drivers' seat and can drive biosimilar uptake faster as in Europe.

Physicians must gain more experience and confidence in biosimilars

Innovator biologics have extensive efficacy and safety data generated from multiple clinical trials and real-world evidence.This wealth of data inherently generates confidence in physicians and their perceptions of biologic utilization. When it comes to a biosimilar, physicians must decide whether or not and how best, even initially, to raise the option with a patient. This decision depends on several factors such as the therapeutic area, disease state, patient condition, current patient treatments, insurance, and the physician-patient dynamic. For example, physicians may be more willing to start a new patient on a biosimilar rather than switching a current patient to a biosimilar.Physicians are generally concerned about switching stable patients to other therapies – this decision gets further complicated since it's difficult for physicians to ascertain the potential impact of switching on a patient's immune system.

Although physician decisions are often intertwined by payer coverage, physicians must understand the value of a biosimilar product, including economic benefits. Physicians tend to have strong preferences when it comes to devising patient treatment strategies. So biosimilar companies want to make sure physicians do not limit biosimilar usage because of a lack of understanding of value. Some helpful steps to take in this regard are as follows:

• Increase physician awareness around the value of biosimilars to (a) feel more comfortable in putting new patients on biosimilars, (b) switch appropriate patients to biosimilars, and (c) provide assurance with monitoring tools to track clinical effectiveness and compliance
• Help physicians understand the cost implications as biosimilars could (a) reduce the overall healthcare costs for the system and (b) out-of-pocket burden for patients
• Develop evidence to seek interchangeability to increase utilization and reduce the barriers to biosimilar adoption

Physicians in Europe, who have become more aware of biosimilars' benefits, tend to be much more comfortable prescribing them. Local governments also offer performance incentives for physician offices to adapt biosimilars faster. A parallel situation could emerge in the US, with integrated delivery networks aggressively advocating for biosimilars to realize cost savings.

Patient awareness of biosimilars must increase significantly

Biosimilar companies must offer similar experience and support to patients that innovator biologics currently do via their experiential support programs. Questions often remain in a patient's mind about whether there are differences in the biosimilar, which might carry undue risk to them. In general, patients would be reluctant to switch to a different product that (a) is not the same product as the drug they are currently taking, (b) does not offer the same quality of support (e.g., patient assistance programs), and (c) an unknown brand, since they may not be fully aware of what to expect.However, if educated properly, patients may approach biosimilar value objectively and realize the benefits, including less out-of-pocket costs.Some action steps that biosimilar companies could take in this regard include:

• Increase patient awareness of biosimilars and their clinical and economic value
• Help patients understand how to alleviate their out-of-pocket cost burden
• Support patients with programs to ensure better optimal access and compliance

Summary

Biosimilars' commercial success is contingent on a complex maze of factors ranging from IP / regulatory challenges to market access. Biosimilar manufacturers must pay close attention to the below adoption barriers as they prepare to commercialize in the current environment.

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Strategic planning efforts must focus on capitalizing the market opportunity in the near-term while paying close attention to competitive threats. We suggest biosimilar manufacturers pay close attention to the following areas to increase stakeholder confidence further.

• Interchangeability designation for broader utilization of the product
• Quality assurance and avoiding any pitfalls are critical to building stakeholder trust
• Programs to capture real-world evidence to increase confidence further
• Support services to increase patient access and ensure compliance.
• Product enhancements (e.g., new delivery devices) for further differentiation

The biosimilar sector is in its early stages of evolution and will expand significantly in the coming decade. Given the fragmented nature of our healthcare system and the lack of incentives to force stakeholders to support biosimilars, it will continue to be challenging for the broader adoption of biosimilars in the near term.

Subbarao Jayanthi, Managing Partner, RxC International