Biosimilar benefits: A new study quantifies the cost-saving properties of innovative medications
Biosimilars could generate savings of about $116 million in New Jersey annually—including the state’s Medicaid program and patients with commercial insurance, according to a new issue brief by the Center for Medical Economics and Innovation at the Pacific Research Institute. Nationwide, those annual savings could reach $7 billion. PRI is a San Francisco-based free-market think tank.
“We broke it down so you can look at it by state total and then breakout how much is for Medicaid which is directly applicable in New Jersey,” said Wayne Winegarden, director of the Center for Medical Economics and Innovation and author of the brief.
“In New Jersey the Medicaid program could save $16.5 million a year just in the nine drug classes where a biosimilar exists from 75 percent of medicine being prescribed being a biosimilar, commercial payers in New Jersey could save $63.4 million annually.”
Biosimilars are biologic drugs that are similar to an originator biologic medication or treatment but have no meaningful difference in terms of safety or effectiveness. Biosimilars are thus different than generic medications, which are chemically identical versions of a branded medication.
Winegarden said biosimilars are innovative medications that can treat patients at lower costs. “Our research shows that as their market share increases, biosimilars can lead to billions in savings for patients, health providers, and taxpayers – while also helping to treat some very serious illnesses.”
Misguided public policies are standing in the way of the greater use of biosimilars, Winegarden said, and policymakers must make reform a priority so more patients can use biosimilars to lead healthier lives, increasing the savings.
The study PRI also found that non-policy barriers hinder the increased use of biosimilars, such as fail-first policies, which only allow patients to use a less expensive biosimilar if the more expensive biologic medication fails to work, biasing the market against biosimilars.
Sheila Frame, who heads marketing, market access and patient services for Princeton-based Sandoz US, said the company’s experience in other countries suggests that putting in place positive incentives to encourage the uptake of biosimilars is effective.
“When you are talking about barriers, the way we position it is how can we incentivize the uptake of biosimilars,” said Frame, who formerly ran the company’s biosimilars business in the U.S. and Canada.
“For example, in a policy environment, when you think about medical benefit policies, one of the things that we have suggested is to focus on zero dollar copay for patients who are going to use a biosimilar. We have also suggested that you reimburse physicians at average sales price plus 8 percent for a period of five years. In comparison to what the originator would have it would be a higher incentive for the physician and or the institution for a period to help accelerate the uptake.”
Sandoz launched the first approved biosimilar in the U.S. and currently has four U.S.-approved biosimilars including Ziextenzo (pegfilgrastim-bmez) that was cleared by the FDA on Nov. 4.
“We are attracted to the opportunity to be able to help shape not only policy in Washington, but also policy with payers in terms of opening up the opportunity for American patients to get better access and to benefit from the savings offered by biosimilars.”
“We certainly remain committed as a world leader in biosimilars and we remain committed to cracking open the U.S. marketplace because we know what kind of benefit patients get from the opportunity that biosimilars can create,” Frame said.
Another obstacle, according to Winegarden, is the “buy-and-bill” method of providers purchasing medicines and then billing the payers—either an insurance company or the government. Providers, he noted, often lose money when prescribing biosimilars over the originator biologic because reimbursements are based on the sales price of the medication plus a percentage markup.
Building in a margin
At Horizon BCBSNJ, biosimilars are covered as part of the formulary.
“We encourage their prescribing when they provide the same or improved benefit compared to biological medicines at a lower cost,” said spokesperson Thomas Vincz.
Vincz said that prescription drugs in general and specialty drugs in particular, are a major driver of health care costs and premiums.
“We collaborate with our value-based partners to incorporate biosimilars as a means to reduce those costs for our members and employer groups, and we structure reimbursement arrangements for biosimilars to also be fair and equitable to our provider partners,” Vincz said.
Medicare, Winegarden pointed out, uses the average sales price as its basis for reimbursing and statutorily marks up the ASP by 6.5 percent to give providers a margin to cover their costs. Under the federal budget sequester, it is now 4.3 percent.
In most cases, a hospital will earn more money from selling an originator biologic than a biosimilar because 6.5 percent (or 4.3 percent) of a higher cost drug means more revenue for the hospital.
“There is a little complication, because Medicare reimbursement addresses this issue [pays the percentage on the originator biologic] but it is a problem for other payers,” said Winegarden.
RWJBarnabas Health started using biosimilars several years ago with Sandoz’s product Zarzio (filgrastim) a biosimilar for Neupogen.
Robert Pellechio, vice president of corporate pharmacy at RWJBarnabas Health, said that by converting the branded product to a biosimilar the organization was able to save almost a million dollars in the first year in its drug budgets across the system.
“We have a number of different facilities in our organization—some use ASP as a reimbursement model others do not. We do have a number of 340B facilities that have a different type model of reimbursement,” said Pellechio.
The 340B Drug Pricing Program is a federal program created in 1992 that requires drug manufacturers to provide outpatient drugs to eligible health care organizations and covered entities at significantly reduced prices.
“As we take a look at these when they do go to P&T (Pharmacy and Therapeutics) for review we do take a look at the costs and the reimbursement associated and for the most part the deltas are better for the biosimilar because we are paying much less. We find that there is a benefit to a biosimilar.”
Pellechio added that the costs associated with specialty medication and complex pharmaceuticals and molecules have gone up tremendously over the past five years.
“Our feeling is that biosimilars are going to be something that really can help us control those increased costs in health care. Because they are something that physicians are getting more trained on they are feeling more comfortable with and we are continuing to work with the federal government and the FDA to get them to approve more of these quicker.”
“The hope,” said Pellechio, “is as we take some of our highest cost drugs and biosimilars are coming out for some of these that we will be able to transition to some of these therapeutically equivalent molecules and give the patients the exact same therapy at a much less cost for us and for them.
Lessons from Europe
Sandoz’s Frame said that the costs of biologics in 2017, reached $120 billion. That is what Americans were spending on biologic products, but if all approved biosimilars had been marketed at that time, Americans could have saved $4.5 billion in that year.
“What we learned from our experience with biosimilars in Europe is that more patients are able to be treated because you’ve freed up capacity in the system. We want to talk about the cost savings that can be achieved,” said Frame.
Frame said that is a big part of the value proposition—but the second part is that there are likely patients who are unable to access some of these important medications who now would be able to as biosimilar products are introduced on a broader basis.
“Based on our experience in other countries, putting in place positive incentives to encourage the uptake of biosimilars is much more effective. When you are talking about barriers, the way we position it is how can we incentivize the uptake of biosimilars.”
For example, in a policy environment, and medical benefit policies, Sandoz has suggested focusing on zero-dollar co-pay for patients who are going to use a biosimilar.
“We have also suggested that you reimburse physicians at average sales price plus eight percent for a period of five years. In comparison to what the originator would have, it would be a higher incentive for the physician and/or the institution for a period to help accelerate the uptake.”
Frame noted that the speed of penetration of biosimilars is important.
“We have also proposed giving the institutions additional star ratings so they could benefit from higher quality ratings if they adopt biosimilars early.” In the pharmacy benefit space we would propose a specific biosimilar tier, like what’s in place today for generics, to incentive patients as well. We would like to share the savings that are created by biosimilars with the institution and the physicians,” said Frame.
Frame asserted that the experience that Sandoz brings to the U.S. market would be part of the solution in terms of offering patients high quality care at a more affordable price and creating a more sustainable healthcare system for patients now and in the future.
“The benefit from a patient perspective is enormous,” Frame said.
“I think with all of the discussion right now on improving the health care system in the U.S., biosimilars seems like such an obvious opportunity and answer to what ails our system.”