This week's blog is by Tomas Croisier and James Forsyth, a partner and director in our life sciences consulting practice, respectively. It was first featured in a blog post on the US Center of Health Solutions site, and explores the impact of biosimilars may have on the treatment of oncology, particularly in the US.1
Last autumn, the US's Food and Drug Administration (FDA) approved the first biosimilar to treat multiple types of cancer. While biosimilars have tremendous potential, there also is a good bit of uncertainty around them, particularly in oncology where biologics can have a predominant role in treatment.
February was National Cancer Prevention Month, which gave us a nice opportunity to explore the role biosimilars could play in preventing and treating cancer.2 Many biologics will lose patent protection in the US relatively soon, signalling the start of what some in the industry have dubbed, the "biologics patent cliff."
While 2018 is expected to be a big year for biosimilars in the US, a number of important issues likely need to be resolved. These issues are related and many fall under one broad question: How will biosimilars impact patient treatment and outcomes, particularly in oncology?
We should explore the following topics to better understand the role biosimilars might play in cancer treatment:
- Treatment: How will payers and/or providers incorporate biosimilars into treatment pathways? And will biosimilars become a first-line treatment in oncology? Theoretically, physicians and payers might be more willing to use biosimilars in the second or first lines of treatment if they cost less than biologics. In the US however, oncology treatment has traditionally been guided by clinical data first, with cost as a secondary consideration. We don't anticipate price will cause a significant change in treatment patterns as a result—particularly if the originator product is already established.
- Innovation: Biosimilars could help push innovation forward in oncology. At least on paper, greater adoption of biosimilars in oncology could free up resources in the health care system. At this point, however, it is unclear whether health systems and health care providers would use any savings to adopt next-generation oncology treatments, or if biosimilars would be used to reduce overall health care spending. The Biologics Price Competition and Innovation Act, which was enacted in 2010, sought to simplify the licensing process for biosimilars. The intent of the law was to bend the cost curve and take costs out of the system, not to spur innovation.
- Pricing and reimbursement: How low might prices go, and how quickly? There are a lot of numbers being tossed around when it comes to the savings that biosimilars could generate. In Europe, costs for biosimilars are anywhere from 20 percent to 65 percent lower than biologics depending on the specific therapeutic area and country. The US Centers for Medicare and Medicaid Services (CMS) has guidelines for biosimilar reimbursement for Medicare, but many of the rules are not easily understood, which could hinder wider adoption. Under the rules, providers will receive identical reimbursement whether a biologic or biosimilar is prescribed.3 This means there is no financial incentive (or disincentive) for physicians to use lower-priced biosimilars.
- Uptake: What sort of uptake can we expect for biosimilars in the US market? Uptake has varied widely—by product and therapeutic area—in European countries. At some point, biosimilars will probably overtake originator products, just as generics did in the drug market. However, the speed of this conversion remains one of the great uncertainties. Oncology in particular poses greater uncertainty than other therapeutic areas due to the number of extrapolated indications associated with some of the biosimilar products.4 Health plans could institute quotas/episodic payments to encourage physicians to use the less costly biosimilars before other biologics. In this scenario, there would be a fixed reimbursement regardless of the patient's course of treatment. Physicians, however, tend to be cautious about prescribing biosimilars. Those who are comfortable prescribing biologics might not want to switch a patient to a biosimilar until there is more experience with it.
- Safety: How will regulators approach biosimilars? They are still in their infancy in the US, and there is still speculation about their future. While regulators are working to streamline the approval process to get biosimilars to market more quickly, the regulatory pathway is still being defined and details are limited.
- Go-to-market: What will be the most successful way to take biosimilars to market? The European Union (EU) is where biosimilars are playing out first, and they have been on the market for about a decade. The launch of biosimilars follows the introduction of innovative drugs and generic drugs. Will the go-to-market model in the US lean more toward innovative drugs or generic drugs? Neither model has consistently proven successful in the EU.
- Originator's response: There is broad agreement that biosimilars will compete primarily on price, though it is unclear how low those prices will go. The originator manufacturer might choose to maintain the original product premium while risking market share to the new biosimilar. Or, originator manufacturers could choose to reduce the price of their original product to parallel the biosimilar price. It might then ask customers why they would consider a biosimilar when they can have the original biologic for the same price.
Biosimilars could alter the oncology
Most countries are trying to reduce public spending and improve patient health. Will biosimilars be a part of this strategy? As we reflect on National Cancer Prevention Month, it is clear that biosimilars can have the potential to reshape oncology treatment but clearly significant uncertainty remains.
Stay tuned: We intend to explore and clarify some of this uncertainty in upcoming blogs over the coming months.
3 Once the average sales price is established, Medicare payments will likely combine the biosimilar's average sales price (ASP) with a surcharge of between 4-to-6 percent of the reference product. For a biologic with a $1,000 ASP, Medicare would pay $1,060 if the surcharge is 6 percent. That would result in a $60 margin and a 6 percent margin rate. If the ASP of this biologic's biosimilar is $800, reimbursement will be at $860 ($800 + [$1000 × 6%]). This still translates to a $60 margin, but a margin rate of 7.5%.
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