Impact of Biosimilar Approvals on the Pharmaceutical Market

Biosimilars are an emerging area in the specialty pharmacy community and beyond. As the pharmaceutical industry continues to feel outside pressure from costly drugs, strategies to reduce health care spend are being sought.

Although biologics account for less than 1% of all dispensed prescription drugs in the United States, it accounts for one-fourth of all prescription spending. Concern surrounding high price tags of biologics continues to rise, and biosimilars offer the potential to provide patients with less costly alternatives.

Table1: some of the trials being conducted on biosimilars

In an interview with Specialty Pharmacy Times, Yogesh Soneji, a partner at Trinity Partners, discusses the future of pharmacy and the effect of biosimilar approvals.

SPT: What impact can biosimilar approvals have on the pharmaceutical marketplace?
Soneji: I think these are exciting times. It’s almost a new era for the industry in general, [with] the launch of recent biosimilars and some uncertainty around what happens in the near term. TABLE 1 lists some of the trials being conducted on biosimilars, and if successfully completed, these products may become available in the near future.

When you think about the marketplace there are so many different players. A way I think about this is there are going to be 2 camps: the brand to whom a biosimilar is being launched against and then the biosimilars themselves. The impact is going to be different depending on what side of the fence you are on.

For the branded companies that have biologics today, it’s going to be a little more uncertain in the near term of what happens, because besides the upcoming launch timing of biosimilars, they also have to have to guess what the pricing (of biosimilars) is going to be, what the biosimilars will discount their drugs at, and there is going to be some uncertainty, at least in the near term, on how to mitigate that. On the other hand, for the companies that are actually launching these biosimilars, that represents a whole world of opportunities.

SPT: How will biosimilars affect future drug prices?
Soneji: Only time will tell, but if you even see what is going on recently, you have biologics with different price points, with one in the 15% discount list price and another over 30% discounted list price. I think it’s already been mentioned that the branded players, like Remicade, have been more aggressive on contracting on their own drug and getting better contracting in order to safeguard their business in the near term. I think there is no doubt that we will see prices go down and spiral, but the question isn’t about whether they will or not. I think the question is how fast and what that path looks like. If it’s going to happen very quickly or if it’s going to happen in a steadier manner over time.

I do think in the long run, biosimilars will drive down prices. One key aspect with pricing that’s a little more complicated in the drug industry, as you might have seen, is it is not very transparent about what the price of the drug is.

We see list prices mentioned regularly in press releases about Inflectra and what their list price is compared to the list price of Remicade. But I think the key here is for us to keep an eye out for not just the list price, but what is the net price, which takes into account the rebates and discounts which can be negotiated on a payer basis, and what happens to those and what path those take. Because that is what drives decisions, especially from the payer side. Which drugs they put on formulary, which drugs they prefer to use at the end of the day, what really matters with pricing is net price that payers have to pay including contracts/rebates and discounts.

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Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 186)

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform. 

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.


How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.


Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

Cost Containment Strategies and Vendor Contracting Employers’ Top Health Plan Concerns

As health care plan utilization places second in rising medical costs, the runner-up still isn’t going unnoticed among plan sponsors.

Click to learn more

When asked to rank cost-management strategies implemented by group health plans in 2017, survey respondents to a recent survey by the Segal Group listed prescription drug cost management strategies and improved vendor contracting as plan sponsors’ main concerns. “Using specialty pharmacy management; intensifying pharmacy management programs; contracting with value-based providers; increasing financial incentives in wellness design; and adopting a high deductible health plan (HDHP),” were the top five recorded by plan sponsors.

The findings, according to the study, demonstrate how sponsors are pushing utilization by encouraging high quality, low cost providers, as well as following strategies to lower costs, including the “use of custom and limited provider networks, expansion of dedicated primary care clinics that are on or near work-sites and, for some industries, continued migration to tax advantaged health savings accounts (HSAs) and HDHPS.”

Tyrone’s comment:  Brokers, consultants and plan sponsors are better served when they roll up their sleeves and become more knowledgeable about the inner-workings of PBM services. Unfortunately, most purchasers are essentially winging it picking up secondhand information as they go hoping something sticks. A 250 question RFP doesn’t guarantee much if you can’t get important disclosure details to hold up in the contract language, for example. Education is the key to eliminating overpayments for pharmacy servicesRemember the fight is not about you or me, it’s about the patients who rely on us to make affordable and quality healthcare available to them – this very important point often gets lost during the procurement process. Success dictates you acquire knowledge far beyond the functional role of a PBM. 
   
In response to these results, Edward Kaplan, national health practice leader for Segal, suggests sponsors adopt a “three-pronged approach to the challenge of health care cost management that encompasses vendor management, plan design management and population health management.”

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Pfizer Files Lawsuit Against J&J, Claiming Anticompetitive Practices

Source: Pink Sheet Pharma Intelligence

Pfizer filed suit against Johnson & Johnson (J&J) on Wednesday for allegedly using anticompetitive practices to prevent less expensive versions of its rheumatoid arthritis (RA) drug to thrive in the budding biosimilar market.

J&J has sold the injectable biologic Remicade for nearly 2 decades, generating $4.8 billion in US sales last year alone. This injectable biologic drug is widely used to treat RA, Crohn’s disease, and other inflammatory disorders, according to the Chicago Tribune.

Pfizer’s Inflectra was the second biosimilar to receive FDA approval.

If Pfizer wins the case against J&J, it could pave a new path that would discourage brand name companies from cutting deals with insurers to limit competition in the biosimilar marketplace, according to the Chicago Tribune. However, if J&J comes out on top it could continue to fuel strategies that thwart competition, according to the article.

Tyrone’s comment:  While this is a first in the biologics industry, these types of lawsuits (generic vs brand manufacturers) are not uncommon. It’s a clear indication biosimilars are a serious threat to brand competitors and will soon come to market in mass. J&J knows the future of biotech includes biosimilars so they are delaying the inevitable in an attempt to hold on to the cash cow for as long as possible. Because cost will eventually come down as a result of these lawsuits and innovation, this is a good thing for self-funded plan sponsors – stay tuned.

“This is the first lawsuit that is challenging anti-competitive behavior in the biologics industry, and that is very important because this is the wave of the future––this is where a lot of the innovation is taking place today,” Michael Carrier, law professor at Rutgers Law School, told the Chicago Tribune. “It really is an uncharted path, in terms of what competition should look like going forward.”

Read more >>

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 185)

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform. 

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.


Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —

Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

New Hep C Pricing Model: A Game Changer for Self-Funded Employers

Click to Learn More

For as long as I can remember pharmacy benefit managers have blamed pharmaceutical manufacturers for the high cost of prescription drugs. Drugmakers do share some of the responsibility but so to do pharmacy benefit managers.

Because it essentially eliminates the PBM mark-up, AbbVie’s pricing strategy for its new Hep C drug Mavyret is disruptive to the traditional PBM revenue model. Abbvie is not going to pay a rebate and instead price it [rebate] back into the list price in the form of a significant list price discount. This move forces non-fiduciary PBMs to consider Mavyret for inclusion in their formularies even though the pricing strategy is not aligned with their own interest of needing manufacturer revenue to protect top line revenue.

The looming question is will non-fiduciary PBMs include Mavyret as a preferred drug in the HCV therapeutic class on their formularies. It is less costly and as efficacious as any other drug in the HCV class so it should be a no brainer right? Wrong. If the PBM decides to exclude or list the drug as non-preferred it’s likely because their interests aren’t aligned with those of their clients’. Let’s wait and see.

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Insurers cutting back on drug coupons amid concerns over consumer costs

With many drug prices rising, consumers often pull out coupons or discount cards from drugmakers to save money when they buy medications at pharmacies.

But some insurers, including in Illinois, are limiting how those discounts may be applied amid concerns they’re driving up health care costs for everyone. Curbing the coupons could mean more money out of consumers’ pockets in the short term, but in the long run could also help hold down drug prices and health care costs, say critics of the cards and coupons.

Ex. Drug Coupon

Blue Cross and Blue Shield of Illinois told its members with individual plans this year they can still take advantage of the discounts, but they won’t get credit toward their deductibles or out-of-pocket maximums. Cigna only allows coupons to be used for specialty drugs — medications used to treat rare or complex conditions. UnitedHealthcare and Aetna declined to comment on their policies on the discounts.

A number of experts and advocates for lower drug prices applaud any actions aimed at stemming the use of copay cards and coupons, which are available online, through the mail or from doctors.

Tyrone’s comment: I’m not one of those individuals who doesn’t like drug coupons. However, I do agree that patients should not be rewarded by having coupon amounts applied to their deductible or MOOP. Let’s keep it real, non-fiduciary PBMs and health plans don’t like coupons because typically the products with coupons available won’t pay rebates which takes away from the revenue they would have earned from those products which do pay rebates. Plan sponsors follow suit because their PBM or carrier says it’s a bad thing. If a patient is unable to start or complete specialty drug therapy, due to cost which a coupon may have alleviated, the resulting hospital bill will cost more in the long run. Is it about the patient or not? 

Typically, patients with individual and employer-based plans can use the cards or coupons to save money on their insurance copays for certain prescription medications at the pharmacy. While a coupon can reduce all or part of a patient’s copay, the insurance company still has to pay its full portion for what might be a high-priced drug — a cost that opponents of the discounts say is ultimately passed on to all consumers in the form of higher insurance premiums.

Such discounts made news last year amid outcry over the skyrocketing costs of EpiPens, sold by Mylan. As part of its response to the uproar, Mylan offered $300 savings cards to patients with nongovernment insurance to help lower their out-of-pocket costs. Mylan still faced criticism that the discounts wouldn’t help everyone as much as simply lowering the price would.

“The copay coupons are a scam by the drug companies,” said David Mitchell, president and founder of Patients for Affordable Drugs, a nonprofit that doesn’t take money from drug companies or insurers. “Effectively we wind up, all of us, paying a higher price for our health insurance because they just steered us to a more expensive drug that ultimately gets paid for by someone.”

Read more>>

Reference Pricing: “Gross” Invoice Cost for Popular Generic and Brand Prescription Drugs (Volume 184)

This document is updated weekly, but why is it important?  Healthcare marketers are aggressively pursuing new revenue streams to augment lower reimbursements provided under PPACA. Prescription drugs, particularly specialty, are key drivers in the growth strategies of PBMs, TPAs and MCOs pursuant to health care reform. 

The costs shared here are what the pharmacy actually pays; not AWP, MAC or WAC. The bottom line; payers must have access to actual acquisition costs or AAC. Apply this knowledge to hold PBMs accountable and lower plan expenditures for stakeholders.

How to Determine if Your Company [or Client] is Overpaying

Step #1:  Obtain a price list for generic prescription drugs from your broker, TPA, ASO or PBM every month.


Step #2:  In addition, request an electronic copy of all your prescription transactions (claims) for the billing cycle which coincides with the date of your price list.

Step #3:  Compare approximately 10 to 20 prescription claims against the price list to confirm contract agreement.  It’s impractical to verify all claims, but 10 is a sample size large enough to extract some good assumptions.

Step #4:  Now take it one step further. Check what your organization has paid, for prescription drugs, against our acquisition costs then determine if a problem exists. When there is a 5% or more price differential (paid versus actual cost) we consider this a problem.

Multiple price differential discoveries means that your organization or client is likely overpaying. REPEAT these steps once per month.

— Tip —
Always include a semi-annual market check in your PBM contract language. Market checks provide each payer the ability, during the contract, to determine if better pricing is available in the marketplace compared to what the client is currently receiving.

When better pricing is discovered the contract language should stipulate the client be indemnified. Do not allow the PBM to limit the market check language to a similar size client, benefit design and/or drug utilization. In this case, the market check language is effectually meaningless.

PBMs Look to the Future

Pharmacy benefits managers have evolved from claims processing to home delivery, managing formulary, specialty pharmacy, and negotiating with manufacturers.

With the ongoing backlash against them—complaints of lack of transparency and regulation, conflicts of interest created through owning specialty and mail order pharmacies, perverse incentives, and rising pharmacy costs—PBMs may decide to make some changes in how they operate.

Table 1

Susan Pilch, JD, Vice President, Policy and Regulatory Affairs for the National Community Pharmacists Association (NCPA), believes that heightened demand from employers for information about where their pharmacy dollars are going and what their contracts mean could force PBMs to come to the table and address these concerns.

But can the industry live without PBMs, she wondered. “We will always need claims processors—a valid PBM activity—but we would like to move PBMs away from their role as gatekeeper of drugs and their costs,” she said. “We need oversight to hold PBMs accountable, but it’s hard to place demands when you don’t know what PBMs are doing.”

Tyrone’s comment: A fiduciary-model PBM addresses these concerns yet spokespersons at the highest levels of organizations like NCPA aren’t sufficiently talking about it. Have they written the fiduciary model off as unattainable because behemoth PBMs say they won’t provide it? Big breakthroughs occur with persistence despite those who say it isn’t possible.

Mark Merritt, President and CEO of the Pharmaceutical Care Management Association (PCMA), predicts that PBMs will assume a more clinical focus as drugs continue to be more complex. “PBMs have been at the forefront of utilization data and, as genomics leads to more personalized medicine, we can provide claims data,” he said.

He also foresees greater collaboration with health plans as more specialty drugs enter the marketplace and with physicians who require access to data about formularies—what specifically is on them and how many are generics versus brands.

In defense of what many stakeholders call a lack of transparency on the part of PBMs, Merritt noted that as plan sponsors become more sophisticated about benefits by consulting experts, more transparency will evolve. However, he believes that transparency has always existed, but that purchasers have failed to fully take advantage of it.

Tyrone’s comment:  Did you catch that? Mark is essentially repeating what I’ve been writing about for the past seven years. Radical transparency, from PBMs, is attainable provided plan sponsors are willing to invest the time and money required to become more sophisticated and attentive purchasers.

David Lansky, PhD, President and CEO of the Pacific Business Group on Health (PBGH), questions whether PBMs will be able to prove that their performance, transparency, and effectiveness work well enough to justify their role or whether other services and structures will emerge. On the other hand, he said that PBM functions are valuable and that his members want these services at the lowest cost to provide the right medications with the least hassle.

“Ultimately, the responsibility of total cost of care should be in the hands of a care system. If they are going to manage a population, they need to manage all the necessary resources for achieving the best outcomes at a reasonable, competitive cost,” Lansky says.

“With drugs now accounting for close to 25% of total spending, it’s essential that the care system have the tools and responsibility to manage medication spending, as well as other medical services,” he continues.

“Employers need a business partner with pharmacy expertise who understands opportunities and oversees the business,” he says. “It’s a clinically complex area. No employer wants to be in the middle of deciding whether an employee should receive a certain drug.”

[Source]

PBM’s and More: In A World of Cost Plus, Is Transparency a Dirty Word?

Figure 1: TransparentRx’s definition of transparency

Peter Rousmaniere last week authored a two-part series that discussed Pharmacy Benefit Management companies (PBM’s) and their pricing practices. He revealed that there may be undisclosed profits in their traditional contract systems, with rebates and negotiated discounts not being made apparent or passed on to the client customer.

He indicated that a “transparency model PBM” might be a good choice for employers and insurers that would ultimately save them a good deal of money. No doubt he is correct; a transparent process that disclosed actual cost and manufacturer incentives would provide both savings and a better understanding of the activity.

But I find myself wondering, given the setup of our industry, if this is an issue that reaches much farther than just the PBM sector. We should ask, for others in our industry, would transparency be a dirty word? We are enveloped in the world of insurance; an ecosphere based on assumption of liability and cost transfer.

Many companies are essentially representing third parties, spending their client’s money, and taking some measure of profit in the process. Insurance companies will pass on their costs in the form of premium rate changes or experience mod factors. TPA’s can price on a transactional basis, managing claims for cost plus fees. DME providers, case management firms and more are all potentially subject to similar arrangements, often pitting cost as a basis for pricing.

In the final analysis, it is all paid by employers, and the parameters of “cost” becomes the subject of greater discussion and debate. Indeed, it is the actual cost of pharmaceutical drugs that is at the core of the PBM discussion. I am a businessman. I understand and appreciate the importance of profit.

When we sell services, it is hoped that our customers perceive value in those offerings commensurate with their investment. Profit is a good thing, indeed. However, if part of your sales approach is to convince customers that you will save them money by negotiating discounts on products and services on their behalf, the elements of actual cost, as well as your profit from the transaction, are certainly subject to scrutiny.

And that is the world where transparency could be considered the enemy. Let’s just conjecture on this a bit further. What if a TPA, working on a cost plus fee basis for an insurance carrier or employer, discovers that a PBM has not disclosed its full pricing discounts on the pharmaceuticals it pays for. It goes back and renegotiates new pricing with the PBM based on this new information.

They have a choice. Do they take the reductions and pass those savings immediately to the customer, or do they receive “volume rebates” (or some other such payment mechanism) after the fact and keep those savings, essentially splitting the previously undisclosed profits with the PBM?

I am not suggesting that has happened, but I am not suggesting it couldn’t. Either way it would be a scenario where transparency could not and would not be afforded. I would suggest, for employers looking at these engagements, that the complexity of workers’ compensation and its myriad of vendors and specialties creates ample opportunity for increased costs.

Neither Rousmaniere or myself are alleging that anything illegal is being done; rather that there is opportunity for abuse enabled by ignorance and inattention.

Tyrone’s comment: A pretty bold statement made above one I happen to support. As much blame should be placed on the shoulders of unsophisticated purchasers of PBM services as the PBMs who take advantage of their inattention. 

For many employers, these costs are ultimately passed on through premiums or other cost-share arrangements. This reality provides even less incentive to drill down and ferret out true costs in these vendor arrangements. Hence, for some in our industry, transparency may be a verboten concept that extends beyond the world of the PBM.

For those employers who engage, transparency will ultimately be the enemy of those engrossed in the world of undisclosed discounts or rebates. Any upstart competitor that promises true transparency in their pricing process could represent a real and present danger to the status quo.

By Robert Wilson