This publication expands on the series of posts published earlier on this blog.   It reports on a seminar intended to encourage further thought about the distinguishing characteristics of the market for biosimilars and the implications of these for potential savings.

Economists and regulatory experts from the US and Europe were invited to describe their research and offer their perspectives about what can be expected in the near- and medium-term.  The publication includes updated insights that take account of changes since the seminar and add additional analyses of potential market impact.

Download Mattison, N., Mestre-Ferrandiz, J. and Towse, A.  eds (2010) Biosimilars: How much entry and price competition will result? London: Office of Health Economics.

This is the eighth and last in our series of posts based on the OHE seminar and summarises the remarks of Alexis Ahlstrom of Avalere Health.

Since the seminar, the US has passed the Biologics Price Competition and Innovation Act of 2009, a subtitle of the Patient Protection and Affordable Care Act that was signed into law in March 2010.  Briefly stated, the law provides for an abbreviated approval process for biosimilars, a 12-year data exclusivity period, and FDA determination of ‘interchangeablility’. Passage of the law removes the issue of the length of the period of exclusivity, but does not remove uncertainty about the impact of biosimilars on the market.  Savings will not be realised immediately.  The FDA first must develop a regulatory framework to implement the provisions of the law, a process likely to take up to three years.  Moreover, FDA is expected to be cautious in reviewing the first biosimilars, meaning that review time could take two years or so.  Thus, savings are not likely to appear at all until 2015.

Debates preceding passage of the law included estimates of potential savings, performed by the analytical offices of Congress (CBO) and the President (OMB).  Avalere health created its own model to project savings from the availability of biosimilars. It assumes that market share of biosimilars will depend on four factors: FDA judgement about interchangeability, payer treatment, physician prescribing behaviour and consumer demand, and pricing.

With respect to interchangeability, market share will grow more slowly even in the face of lower prices if the FDA judges a biosimilar not to be fully interchangeable.  Omnitrope, a biosimilar human growth hormone approved in mid-2006, has gained only 2% market share despite being priced 25% below the market.

Avalere found that payers are not pushing physicians to prescribe cheaper therapeutic alternative human growth hormone or rheumatoid arthritis products.  In addition, a key driver of market penetration for small-molecule generics, the pharmacist, will have far less impact on biologics, both because of current laws in each state that govern substitution by pharmacists and because only about a third of biologics are provided through pharmacies.

Information on physician prescribing behaviour and consumer demand for biologics is very limited.  Acceptance of small-molecule generics is high in the US, but it is not at all certain that this will carry over to biosimilars unless and until positive experiences increase comfort levels.

Good data also are scare about the probable pricing of biosimilars. The Avalere model relied on research by Prof Grabowski, as did CBO’s estimates.

CBO and OMB analyses estimated the impact of biosimilar availability will be slight in terms of total health care spending — less than one-half of 1% of total health care costs in the US.  Avalere’s estimates are that savings will not begin to be realised until 2015.  What is even less certain, of course, is the ultimate impact of biosimilars not only on costs, but on the incentives for innovation.

Alexis Ahlstrom was a Director at Avalere Health at the time of the conference; she now is at the US Department of Health and Human Services.

Publication now available for download: Mattison, N., Mestre-Ferrandiz, J. and Towse, A.  eds (2010) Biosimilars: How much entry and price competition will result? London: Office of Health Economics.

Prof Adrian Towse

This is the fourth on our series of posts based on the OHE seminar and summarises the remarks of Prof Adrian Towse and Dr Jorge Mestre-Ferrandiz.

Describing and/or forecasting the market for biosimilars must first recognize that these products are not identical, i.e., not ‘biogenerics.’ This affects both the time required for effective market penetration and constrains what payers can reasonably do to realise savings.  Perhaps most importantly, biosimilars may raise concerns among prescribers, payers and consumers about the extent of interchangeability with the originator product and among competing biosimilars.  Safety is highlighted as a concern more often than efficacy.

According to Towse and Mestre-Ferrandiz, the centrality of safety concerns dictates the collection of post-launch ‘Patient Safety Year’ (PSY) data. Payers, biosimilars manufacturers and regulators all stand to benefit.  Assuming that the PSY data show interchangeability for particular products, clinicians should be more willing to prescribe biosimilars in those therapeutic areas within two to three years after introduction, they estimate.  Marketing penetration, expected to be below 5% of market share initially, then should begin to rise as competition is based more on price.

The OHE findings on price trajectories and price discounting strategies vary from other models  by starting with transaction price, not list price, and recognising the critical role of PSY data.  In particular, the OHE model (1) predicts less rapid erosion of price in the short term and (2) suggests lower prices than some other models in the medium term because PSY data can both help simplify the regulatory process for subsequent entrants and reduce prescriber hesitancy.

The absence of PSY data that support interchangeability will affect pricing decisions. Until they are available, deep discounting by biosimilar manufacturers will not necessarily speed market penetration.  For originators, lowering price to preserve market share could slow biosimilar market penetration and, so, the collection of PSY data on the biosimilar.

Payers’ options also are constrained, both by the lack of PSY data and by the fact that much of the market is hospital based.  Uncertainty about differences makes it unwise to encourage pharmacy substitution immediately on biosimlar entry; this would affect only a small portion of biologics use anyhow.  Uncertainty about safety also complicates direct price intervention, through reference pricing, for example, because physicians still may be hesitant about using the biosimilar.  Direct price intervention in such a tentative market is likely to discourage entry in any case by reducing potential profits.  In short, Towse and Mestre-Ferrandiz ague, it is not possible to jump start a biosimilars market by forcing down prices or imposing substitutability.

The best option for payers and governments is a ‘market support’ policy that includes the infrastructure investment needed for both monitoring outcomes and collecting PSY and other pharmacovigilance data.  Collecting high quality data can both minimise adverse events by better defining any safety risks and help demonstrate the value for money offered by biosimilars.

Prof Towse is Director of the OHE and Dr Mestre-Ferrandiz is Senior Economist at the OHE.

Publication now available for download: Mattison, N., Mestre-Ferrandiz, J. and Towse, A.  eds (2010) Biosimilars: How much entry and price competition will result? London: Office of Health Economics.

Download a comprehensive explanation of the OHE model here.