The US administration has made no secret of its belief that biosimilar competition is one way to rein in rising drug prices. A proposal to allow Medicare private health plans to engage in “step therapy” for part B drugs – which could promote the use of cheaper drugs before allowing more expensive ones – is another sign that this is a major part of the strategy.
The headlines after the Centers for Medicare and Medicaid Services’ announcement focused on Regeneron’s exposure to competition for Eylea, the biggest drug spending line in part B, in the form of Lucentis or off-label Avastin. But in fact five of the top 10 drugs for part B spending face biosimilar competition in the coming years, and this latest proposal allows Medicare private plans to make the copycats preferred agents in their formularies (see table below).
Regeneron and more
The attention paid to Regeneron is a consequence of Medicare spending $2.2bn on Eylea in 2016, representing 45% of the group’s total revenues. But Roche also has a great deal to lose, with four drugs at the top end of the Medicare spending list and $3.5bn in sales potentially at risk if biosimilars are used more aggressively.
The CMS decision relates to Medicare Advantage plans, private health insurance programmes in which beneficiaries can enrol rather than receiving care through the traditional fee-for-service government plan. “Step therapy” requires patients first to try a preferred agent, often a generic, to see if it treats their condition, before progressing to a more expensive alternative.
In 2012, CMS had ruled that Advantage plans could not use step therapy as a drug utilisation management tool for physician-administered drugs reimbursed through Medicare’s part B. But CMS has now decided to withdraw this prohibition, effective January 1, 2019, and will issue new guidance on the use of step therapy.
In the case of Regeneron the implication is obvious. Avastin is often used off-label to treat wet age-related macular degeneration, and biosimilar versions of Avastin are already approved in the US, though these are not expected to hit the market until 2019.
Regeneron fell as much as 5% yesterday on the CMS announcement, but later recovered. However, other products are also in the firing line. .
|Biggest drugs in Medicare Part B|
|Brand name||Company||Generic/biosimilar competition||Total spending 2016 ($m)||Average per beneficiary spending|
|Eylea||Regeneron||US patent expires 2023||$2,209||$10,497|
|Rituxan||Roche||Truxima (Celltrion), ABP 798 (Amgen) 2018||$1,666||$23,815|
|Neulasta||Amgen||Fulphilia (Mylan) marketed||$1,376||$14,336|
|Remicade||Johnson & Johnson||Inflectra (Pfizer) marketed||$1,339||$22,925|
|Avastin||Roche||Mvasi (Amgen) 2019||$1,112||$5,360|
|Prolia||Amgen||US patent expires 2025||$1,087||$2,592|
|Lucentis||Roche||FYB203 (Formycon) 2023||$1,044||$9,814|
|Herceptin||Roche||Herzuma (Celltrion) Kanjinti (Amgen) 2018||$704||$34,000|
|Prevnar 13||Pfizer||US patent expires 2026||$669||$170|
|Source: CMS, EvaluatePharma|
Two of these, Remicade and Neulasta, already have biosimilar competition. Pfizer has complained that Johnson & Johnson has used anticompetitive contracts to suppress sales of Pfizer's Remicade biosimilar Inflectra.
Until now the inability of Advantage plans to use step therapy has likely been a barrier to biosimilars, or at least a source of confusion for front-line caregivers. Getting clear guidance from the CMS is undoubtedly helpful.
What of rebates?
There are other barriers to be overcome, not least the issue of rebates – and how these perversely make it more expensive to switch from a branded drug to a biosimilar if done on an individual basis (More change needed to make US pricing truce permanent, July 24, 2018).
The government has planned a rule change that will restrict rebates, but this might not be in place until 2020. Rebates or no, as long as branded biological makers can offer a net price that is on a par with biosimilars they could continue to win government business – and it should be pointed out that if the branded products are winning on price over biosimilars this represents a saving for Medicare.
Nevertheless, clearing out the tangle of administrative barriers to biosimilars should at least put these products on a more level playing field with their branded rivals. Allowing step therapy in Medicare Advantage plans is a bigger story than just Eylea, and should not be ignored by biopharma companies whose products are running out of patent life.