With increasing specialty drug costs, pharmacy benefit managers,
health plans and industry experts often tout the use of biosimilars
as a strategy to lower cost. In 2013, Express Scripts projected $250 billion dollars in savings from biosimilars.¹ The Trump Administration’s Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs calls on increasing the access and utilization of biosimilars as a solution. With the biosimilars on the market today, are plan sponsors realizing any of the savings promised with biosimilars?
The Case of Remicade
Remicade and its two biosimilar versions (Inflectra and Renflexis)
are FDA-approved and all three products are actively marketed and available for sale in pharmacies. All three are also primarily covered under the medical benefit, as opposed to the pharmacy benefit, owing to their method of administration (IV infusion).
In the months leading up to Inflectra’s marketing launch (the first
of the two biosimilars to be marketed) in November 2016, Janssen locked up Remicade with long-term, exclusive contracts with hospitals, physicians and infusion centers. Most of those Remicade contracts likely still have time remaining on them until they expire. Thus, when Inflectra launched (and Renflexis followed in July 2017), few providers were free to consider them as alternatives to Remicade because of those previously negotiated contract encumbrances.
The average cost of Remicade per patient per infusion is $5,000–6,000, but can vary depending on several factors. Today, the list price of Renflexis is approximately 40% below the list price of Remicade, which means that, even without a rebate, Renflexis likely costs less than Remicade net of any off-setting rebate.
The problem is that the long-term Remicade contracts that we mentioned earlier (contracts that sounded too good to ignore at the time they were signed) likely prohibit the use of either Inflectra and/or Renflexis for one more year, if not longer. One analyst estimates that Remicade will still have a 90% market share of the Remicade/Inflectra/Renflexis market basket as of the end of 2018.²
Issues Raised by the Remicade Case
- If you aren’t capturing rebates on medical claims, make changes to contract language to get them. They exist, they are material and they will only grow in materiality. You are leaving money on the table without this key component being in place.
- There is no need to cover all products (i.e. the reference product with all biosimilar versions). Cover only the one product with the lowest net cost and exclude all others. You will need mechanisms in place to limit coverage to one product. The biosimilar designation ensures that patient needs will continue to be met regardless of which product is covered.
- If you have a Remicade contract, assess its terms—particularly its remaining duration and any exclusivity provisions. If you are free to consider alternatives now, do so. We will be happy to assist in this review. If you are locked in with Remicade, begin negotiating new terms with all the products competing.
Lessons Learned from the Remicade Case
- Avoid entering into long-term contracts with reference product manufacturers as biosimilar launches loom. Wait at least six months following the launch of a biosimilar competitor to engage in any contracts in the relevant category.
- Avoid granting reference products long-term exclusivity as biosimilar launches loom because, as the Remicade example illustrates, pricing can change materially with each new biosimilar product that is launched.
- Ensure that pharmacy and medical benefit coverage and contracting strategies are in alignment and do not work at cross-purposes.
Current Opportunities: Additional Actions to Take Now
- Neupogen now has two approved biosimilar competitors, Zarxio and Nivestym, however, Nivestym is not yet being marketed. Zarxio is currently about 17% lower in list price than Neupogen, while pricing for Nivestym has yet to be announced. All three products may be utilized under both the pharmacy and medical benefits. Determine which product has the lowest net cost and, if able, cover it and exclude the other two from your formulary. If you are unable to change your formulary’s composition, ask your PBM about limiting coverage to the lower cost benefit, either pharmacy or medical.
- Neulasta now has one biosimilar competitor, Fulphila, that recently launched. Fulphila is about 30% lower in list price. Both products may be utilized under both the pharmacy and medical benefits. Determine which product has the lower net cost and, if able, cover it and exclude the other from your formulary. If you are unable to change your formulary’s composition, ask your PBM about limiting coverage to the lower cost benefit, either pharmacy or medical.
- Epogen and Procrit now have one biosimilar competitor, Retacrit. Retacrit is about 57% lower in list price than Procrit and about 33% lower in list price than Epogen. All three products may be utilized under both the pharmacy and medical benefits. Determine which product has the lowest net cost and, if able, cover it and exclude the other two from your formulary. If you are unable to change your formulary’s composition, ask your PBM about limiting coverage to the lower cost benefit, either pharmacy or medical.
Additional Future Opportunities (Pending Resolution of Legal Impediments)
Often, there may be a significant lag time between FDA approval and the actual marketing launch of biosimilar products. This lag (due primarily to legal challenges surrounding the underlying reference product patents and the FDA-mandated mutual exchange of information between reference product and biosimilar manufacturers) works in favor of reference product manufacturers’ profit and contracting interests.
For example, it is known that six to seven years will elapse between the approvals of two biosimilar forms of Humira and their marketing launch, and three to thirteen years between the approval of a biosimilar form of Enbrel and its launch. Both Avastin and Herceptin also have FDA-approved biosimilar versions whose respective marketing dates are currently uncertain.
Considering this uncertainty, constant vigilance of the biosimilar approval and marketing launch landscape is the only certain prescription for your success. Count on Lockton Dunning Benefits’ Excelsior Solutions practice to maintain the required market vigilance on your behalf and to alert you when the opportunity to act arrives.
² Status of U.S. Biosimilar Approvals and Pending Applications, McDonnell Boehnen Hulbert & Berghoff LLP, June 29,2018.
Bob has more than 30 years of diverse experience in the pharmacy industry. Over the course of his career, Bob has led clinical and PBM operations teams in successfully managing more than $4 billion in annual drug spend. This was also while limiting per-member-per-year spending growth to levels that have simultaneously drawn industry acclaim and consistently high levels of member and payer satisfaction.