This podcast focuses on the use of biosimilar medicines in health care and the possible cost savings when they are used in place of originator biologic medications. Our three guests on this episode discuss the marketplace for biosimilars and how legislatures are tackling the issue.
Biosimilars, a group of drugs that are similar to biologic drugs, which are medications produced using living organisms and are often used to treat complex medical conditions. Biosimilars were first introduced to the prescription drug market about a decade ago and as of March, the FDA had approved scores of products that may be used interchangeably for some of the most expensive brand-name biologic pharmaceuticals, treating conditions such as diabetes and cancer.
While biologics make up only about 2% of prescriptions, they account for as much as 46% of total drug spending in the U.S.
The three guests on this podcast all have expertise on different aspects of this topic and discuss the use of biosimilar medicines in health care and the possible cost savings when they are used in place of originator biologic medications.
Luca Maini is an economist who studies the pharmaceutical industry and is an assistant professor at Harvard Medical School. Chad Pettit is executive director of global government affairs for Amgen, a biotechnology company. Erin Glossop is a policy specialist at NCSL who follows state policies around pharmaceuticals.
Maini discussed his research into how the introduction of biosimilars into a market affects the price of brand-name biologics. Pettit explained the perspective from the biotechnology industry and how he thinks the industry will develop in the next several years. Glossop explained how some states are developing bipartisan policy around biosimilar access and efforts to find cost-savings these products might offer.
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Ed: Hello and welcome to “Our American States,” a podcast from the National Conference of State Legislatures. I’m your host, Ed Smith.
LM: Biologic products are very expensive. They may have something like 2% to 3% of prescriptions, but they are about half of all drug spending in the U.S. and that number is going up.
Ed: That was Luca Maini, an economist who studies the pharmaceutical industry. He is also an assistant professor at Harvard Medical School. He is one of my guests on this podcast along with Chad Pettit, executive director of global government affairs for Amgen, a biotechnology company and Erin Glossop, a policy specialist at NCSL who follows state policies around pharmaceuticals.
Our focus in this episode is biosimilars, a group of drugs similar to biologic drugs, which are medications produced using living organisms and are often used to treat complex medical conditions. Biosimilars were first introduced to the prescription drug market about a decade ago and as of March, the FDA had approved scores of products that may be used interchangeably for some of the most expensive brand name biologic pharmaceuticals treating conditions such as diabetes and cancer.
Maini discussed his research and how the introduction of biosimilars into a market affects the price of brand name biologics. Pettit explains the perspective from the biotechnology industry and how he thinks the industry will develop in the next several years. Glossup explained how some states are developing bipartisan policy around biosimilar access in efforts to find cost savings these products might offer.
Here is our discussion starting with Luca Maini.
Luca, welcome to the podcast.
LM: Thank you for having me. Great to be here.
Ed: I wonder to start maybe you could just tell listeners a little bit about what you do. We were just talking about this and I found it very interesting and not very common so why don’t you talk about just a little bit about that to get started.
LM: Sure. So, my name is Luca Maini. I am an economist and an assistant professor of health care policy at Harvard Medical School. I’ve been here for about 2 ½ years, but I’ve been studying the pharmaceutical market for about a decade at this point. First in graduate school and then my first position as faculty in the department of Economics at the University of North Carolina in Chapel Hill where I was for about 4 years prior to my current position. And my research studies how drug manufacturers compete against one another; how they interact with other agents in the market like pharmacy benefit managers or health insurance plans and finally the role that government regulations play in shaping prices and access to drugs.
Ed: My understanding is that you and your colleagues have looked at the economics of biosimilars, the topic of this podcast, from a few different angles. And for example, one study evaluated the patient out-of-pocket costs for several provider-administered reference products after a biosimilar was introduced to the market, and I had to look up what a reference product was so maybe you can explain that briefly to our listeners. But tell us about those findings and why you chose to focus on drugs administered in a doctor or clinician’s office.
LM: Yeah, so first of all a reference product is the original biologic drug whose molecule biosimilar is repeating and, in this study, we looked at the evolution of patient out of pocket costs so how much patients pay for these products before and after biosimilar entry. We looked at the reference product and the biosimilar versions. And we picked drugs that are administered by a physician largely because that is where most of the biosimilars are and especially at the time of this study I think insulins were the only biosimilar product that you could get through a pharmacy. That’s just where the data was. And what we found in the studies basically that there is no indication that patients were paying significantly less for these drugs after biosimilar entry. There is a little some products that cost went a little bit up; some went down; some stayed roughly the same, but not existing act. And that it is kind of a puzzle. It’s kind of a puzzle because from other research, my own, but also this is a well-known fact, well-accepted fact in this space that biosimilars are cheaper than reference biologics and a reference biologic price comes down when the biosimilar is entered. And so, I think you can interpret the conclusion of this particular study as saying that these savings don’t really seem to trickle down to patients, at least not in the context that we studied.
Ed: So, as you were saying usually there does seem to be an association between introducing the biosimilar and the price of the reference product. Did you get any sense from your research why that didn’t happen in this instance?
LM: I think to answer that question it’s useful to first understand how the price of a drug trickles down to what a patient pays at the doctor’s office. So, the price that we measure is a reflection of how much the provider, the hospital or the physician pays to buy the drug. After that, the provider then negotiates a price with your health plan and that price is what the insurer pays to the provider upon administration. That price can be sometimes significantly high especially for commercial health insurance plans. We don’t have hard data necessarily on this, but it can be like two to four times as high. And then finally depending on how generous your health plan is, you may be responsible for some fraction of that negotiated price. And so essentially there are two reasons why lower acquisition cost may not reach patients. The first is that the provider may not pass through the savings to the health plan. And the second is that the health plan may have a caution structure that limits how much of those savings in patients. For example, a health plan could be really generous and cover all the cost. And in that case, there is no change is how much a patient pays before and after. Where the savings are going, they could be pocketed by the providers to some degree or they could be taken in by your health insurance plan and those we think generally are translated into lower premiums which is also generally a bit.
Ed: Correct me if I’m wrong, but you did some additional research I believe examining how introducing a biosimilar into the market directly did influence the reference drug prices we were talking about. What did you discover there? Is it a similar sort of thing looking at this sort of chain of how the price gets set.
LM: Yes. It was a very similar analysis. … We are again looking at what happens before and after biosimilar entry. In this case we were looking more broadly at all products that were biosimilar or physician administered and those that you become in the past. And we were looking at the price of the referenced product as well as the rate at which it was covered by health plans and their volume sold. And so, in this we find relatively big effects. So, after a biosimilar competitor enters the reference brought up prices by about 20% to 30%. It doesn’t happen right away. It can take a year or 2. This spike that price got the reference brought experience in decline in the way that should be covered by health plans so they get dropped from coverage. And they also experience the work on so they lose some market share. I will say through an aspect of this paper that I think speaks to pessimism that sometimes you hear about the success of biosimilars is that if you look at what happens to small molecule reference brands when generic centered, the effects are much, much larger. And also, somewhat different. So, first of all, by and large small molecule brands don’t cut prices much in any center. Some may be surprised to hear it, but it’s absolutely true. But as a result, they use coverage much faster and much more dramatically and they experience just a massive loss in part. Essentially generics sees more molecule brand markets capture virtually the entire market share.
Ed: And explain to me and to the listeners what a small molecule brand is as opposed to another type.
LM: We’ve been talking about biologics and biosimilars. Biologics are more complicated products. I sometimes use this analogy say that a biologic is an electric tomato plant. It’s very hard to grow identical tomato plants. You can grow some tomato plants and they taste the same and they are about the equivalent. But a small molecule drug is a relatively simple molecule. They can be synthesized amicably and so it would be an equivalent of an IKEA chip. If you have instructions, you can build it and it’s exactly the same regardless of who is building it. That’s also the difference between generics and biosimilars. Genetics are identical copies. Biosimilars are equivalent but they are not exactly identical and so there is a different approval process, approval demonstration and they are treated somewhat different.
Ed: Well, that is a great analogy. Thank you for that. Let me ask you a little bit about the future. Biosimilars have been around for I guess about a decade. What do you see happening in the next decade particularly in this area of the economics of them if you will.
LM: So, it is a really interesting question. I think the evidence has been that over time since the introduction of biosimilar roughly 10 years ago, biosimilars that have arrived on the market in later years have seen increased adoption and it generated higher savings. And I expect that trend to continue essentially. I would also like to acknowledge that the outlook is not universally rosy because I feel the many stakeholders’ frustration by, I think it's caused by what they see as relatively slow improvements in this update rate. And you know the root cause of this frustration is that biologic products are very expensive. They may have something like 2% to 3% of prescriptions, but they are about half of all drug spending in the U.S. And that number is going up and has been going up for a while. And until very recently until biosimilars showed up, the biologic product essentially had a lifetime monopoly because it wasn’t possible to create a generic copy. And so, when biosimilars were first introduced, the hope was that they would come in and achieve what generics have, right, near full market penetration., price cut by orders of magnitude and that hasn’t happened yet. And to be honest, it may never happen. There are structural obstacles that biosimilars face that generics just don’t face.
First of all, as we discussed earlier, biosimilars are not generic. They are not identical and so it’s possible that we will never get to the place where there is a universal acceptance that biosimilar version of a biologic referenced biologic is saving. I certainly hope that we will get there because the clinical evidence so far suggests that they are indeed equivalent. The second and important obstacle is that biosimilars are more expensive to develop and produce. They are more complicated and because of that, we are just never going to see as much entry as we see merchandise. When a product is more costly to develop, there is just not as many that are going to be produced. And then finally there is still some issues in the way that biosimilars are skewered meaning the way that the government and private insurance companies pay for them. They make it a little bit more difficult for biosimilars to gain market penetration and I just want to point two out. One is that for physician administered drugs, Medicare reimburses providers with a formula that is basically how much it costs for the provider to buy the product plus a small markup. And for currently for the records biosimilar, the markup is the same, but the cost is based on the specific product’s cost. And reference biologics are more expensive, effectively Medicare is paying more for reference biologics than for biosimilars. Whereas for generic drugs, Medicare pays exactly the same regardless of whether the physician is administering the brand or its equivalent generic and because brands are way more expensive, physicians have a strong incentive to use generics and that incentive is just not there with biosimilars yet. And then the second is for drugs you pick up at a retail prescription pharmacy, the main issue is we’re going to change ability. Ordinary drugs are automatically interchangeable with the reference brand and what that means is that the pharmacist can give you either the brand or any generic version and generally they don’t even have to tell you that they are doing the substitution. And in fact, you might not even realize that the substitution has happened. Biosimilars are not automatically interchangeable and there are a few that are, but they are only interchangeable with the reference product and not with each other, for example. And so that makes it difficult for the pharmacist to like kind of real aggressive price shopping that they can do with generics where they just need to stop at one version and it be the cheapest version. These series of barriers I think are things that one needs to think about and they need to workout when thinking about what is going to happen over the next decade or so for biosimilars.
Ed: So, I wonder if you have as we close here any other thoughts about the policy process and what legislators might think about in this area.
LM: So, I’ll just follow on the answer that I gave you earlier with that couple of specific examples so first for physical administered drugs. Any policy that would push the word setting the same reimbursement vice or a reference biologic any biosimilars would be very helpful in promoting biosimilar adoption. Obviously, the biggest fear here is Medicare which is a federal program. But Medicaid also pays for these drugs and this is a place where I think states could play a bigger role. And then in terms of the interchangeability requirement again there is a federal component with the FDA. States can play a role, too. The laws that regulate what pharmacies can give in terms of giving out a prescription for a biosimilar rather than the referenced product are governed by states. I think all states have automatic substitution laws in place that allow pharmacists to replace a referenced product with its interchangeable biosimilar, but there are there is some variation there in things like the burden that is placed on the pharmacist to inform the provider or the patient that a substitution has been made and a few other requirements. Giving out information to providers and patients is not bad per say, but it is just the kind of thing that adds a burden on the pharmacy making them a little less likely to want to substitute and it was like they generally contribute to this idea that these 2 products the reference and the biosimilar are not the same. That’s why the pharmacist is informing you whereas it is mostly a regulatory requirement.
Ed: Well, I think that’s very helpful and I appreciate you taking the time to fill us in on this. I just learned an awful lot more about this topic and appreciate it. Thank you. Take care.
LM: Thank you, Ed. It was a pleasure to meet you.
Ed: Thanks Luca. We are going to take a short break and come back with my discussion with Chad Pettit.
Ed: Chad, welcome to the podcast.
CP: Thank you, Ed.
Ed: Thanks so much for coming on the podcast. Maybe you can start with kind of giving us a notion of what your role is at Amgen and also tell us about the basics of biosimilars. How they are being used in patient care. What sort of conditions they treat. That sort of thing.
CP: Absolutely. So, my name is Chad Pettit. I’m the executive director of global government affairs at Amgen. I’ve been with Amgen for 25 years now. I’ve worked across the U.S. and Europe and global markets primarily focused on market access and commercial strategy. The last 10 years I’ve been launching our biosimilars business. I recently moved over to government affairs. My current role is focused on conversations around the critical role biosimilars are playing in the health care system in terms of creating sustainability and advocating for policy solutions that support a sustainable marketplace with biosimilars.
Ed: So, tell us a little bit more about biosimilars and how they are being used.
CP: Yeah, you know biosimilars and just to step back on that you know Amgen really comes biosimilars with a unique perspective. We just hit our 45-year mark as a company. One of those companies that kicked off the biotechnology industry in medicines for patients and we are also deeply invested in biosimilars. We are one of the leading companies 2 billion dollars invested so far. Portfolio of 11 products. We are treating oncology, hematology, chronic inflammatory disease and really harnessing our expertise in the best of biology, the best of technology to deliver these types of medicines.
Ed: You’ve been involved with this for 10 years. As you said 2015 was sort of the kickoff of it. How has the market for biosimilars changed? How has the landscape changed over that period of time?
CP: Yeah, it’s a good question. At a high level, the marketplace is really well established now and we’ve we are definitely at a place where we’ve demonstrated proof of concept. You’ve got significant therapies that have done very well. And just to talk about biosimilars overall and where they are going, there’s more than 60 that have been approved so far. There’s 40 that have launched and the FDA’s biosimilar development program has a109 active programs which to me indicates there is a lot more coming. There is a lot more that we will see.
Ed: So, our audience for this podcast of course is legislators, legislative staff, others interested in the state policy. And can you talk a little bit about how this relates to them? What’s their role and what should they understand about biosimilars?
CP: Yeah, it’s a great question, Ed. You know I think there’s two important things with biosimilars as you are thinking about this from a policy perspective. The first one is the success of the biosimilars marketplace is a function of the robust regulatory standards that the FDA established for this marketplace and that had been really a key to the success that we’ve seen the last 10 years. When you think about the regulatory standard, the FDA currently has a regulatory pathway and all the authority they need to ensure that there’s clinically meaningful differences and that they are doing what they are supposed to do. And we recognize that there have been calls and various proposals to streamline the regulatory framework at both the federal level and the state level by removing the FDA’s ability to use its scientific expertise to access biosimilar and interchangeability which is another designation. But if you look at how the marketplace is working out, there’s no evidence that either the current biosimilar standard or the interchangeability standard is a barrier to access.
Just to talk a little bit about the interchangeability standard, under federal law, there is an interchangeable by a similar is a biosimilar product that the FDA has determined meets additional criteria so that it can be substituted for its brand reference product at the pharmacy counter with no intervention from the physician prescriber. They are not safer or more effective than biosimilars. There are just additional criteria that demonstrates that a pharmacy can substitute them safely. And the FDA currently has all the authority that they need in terms of determining what type of study or what type of evidence is needed to demonstrate that these products can be interchanged at the pharmacy. And so, from a policy perspective what we don’t want is we don’t want Congress in some way to remove the authority from the FDA to determine that. For me as I look forward, the biosimilars that have launched so far have been monoclonal antibodies and I think we’ve demonstrated success with that class of medicines.
If you look into the future, you’ve got new technologies that are coming. Antibody drug contiguous, biospecific t-cell engagers. We want the FDA to retain the authority and have the choice the ability to determine what studies are needed for interchangeability. So, we we’re of the belief that the current regulatory standard is robust. It is sufficient. The FDA has the authority they need and from my perspective having worked on the commercial side, that’s what is creating the confidence that we are seeing with physicians and with patients as we move into new classes of medicines; new therapeutic areas. As we launch biosimilar for example into ophthalmology or the recent launch into rare disease is really a foundation for why they’ve been so successful.
Let me get to the second piece. The second piece is there is a regulatory standard and then there is having a marketplace that ensures competition on a leveled playing field. And we’ve seen that in the Medicare Part B the side of the business which has been the majority of biosimilars and that’s been really a foundation for the success there. Like I mentioned, the part D side, the pharmacy benefits side, it’s been more challenging and that’s because of the structure of the system with PBMs. PBM system rewards higher list prices over lower cost products which makes it difficult for biosimilars to come into the market. From a policy perspective, we really urge policymakers to continue to focus on PBM reform making the system more transparent.
Ed: Well, I think most of our listeners know a PBM is a pharmacy benefit manager, but I’ll throw that out there just for the small group that might not know that. Let me ask you this. These drugs have been out there for a decade. What’s the next decade look like. You alluded to some of that, but what do you see in the next 10 years or so?
CP: Yeah, you know as I said the marketplace with biosimilars is really well established at this point. It is growing. We are very optimistic you know over the next 10 years you are going to see more products in more therapeutic areas which means that new prescriber’s specialties will start to see biosimilars. If you look at some of the published reports out there it’s you know biosimilars are really driving savings across the health care system. There’s one report that estimates that there will be $181 billion in savings by 2027, which is not that far from now. And so, from Amgen’s perspective, we are excited about the future for biosimilars. We are continuing to prioritize biosimilar education especially with new categories in therapeutic areas for patients and for physicians. We are also trying to support the sustainable biosimilar policies that we’ve talked about here in terms of allowing for competition on a level playing field. And then working with regulatory authorities to and policymakers to ensure that the FDA has the authority that they need for the future of technologies that are coming and working to bring our own biosimilar candidates to patients in the U.S. you know subject to approval by the FDA.
Ed: Well Chad, thanks so much for giving us the perspective from Amgen and from the industry and I really appreciate your time. Take care.
CP: Ed, thank you.
Ed: I’ll be right back after this with Erin Glossop to talk about how legislatures are handling the biosimilars issue.
Erin, welcome to the podcast.
EG: Thank you very much for having me.
Ed: So, Erin, we’ve already heard from a couple of experts mainly in how the biosimilars operate in the marketplace and we wanted to turn to you to get a little bit more idea about the role of the state legislators in the biosimilars market. Maybe you can bring us up to speed on what the legislative landscape is particularly in terms of addressing the substitution of biosimilars for biologics and how these laws vary around the states.
EG: Sure. So right now, there are 70 biosimilars that have received FDA approval for marketing in the U.S., but not all of these are considered interchangeable. When a biosimilar is considered interchangeable, that means the pharmacy may substitute that biosimilar for its biologic counterpart without first getting the approval of the prescriber. And to get this designation, biosimilar manufacturers have to conduct some additional studies and meet certain criteria from the FDA. All 50 states DC and Puerto Rico have laws addressing the substitution of biosimilars. From 2013 to 2014, 8 states enacted the country’s first substitution laws. That was Delaware, Florida, Indiana, Massachusetts, North Dakota, Oregon, Utah and Virginia. States enacted another wave of substitution laws between 2015 and 2017 with 28 more passing legislation. More recently in 2021, North Dakota updated its biosimilar substitution law adding some additional patient and provider notification requirements. New York passed assembly bill 8519 that same year which made their temporary code allowing substitution of biosimilars permanent. And Oklahoma also passed senate bill 4 in 2021 which permitted substitution of biosimilars under certain circumstances.
These laws vary from state to state, but generally states require biosimilars to have received that interchangeability designation from the FDA before they can be substituted at the pharmacy. States can also address if prescribers are able to prevent substitution by noting that on the prescription as well as how and when a prescriber and patient are notified about that substitution.
Ed: I wonder if you can talk a little bit about using biosimilars to address rising drug prices since biologics are such a big piece of it.
EG: Yeah, so last year Maine passed Senate Bill 907. This requires health insurance companies to include biosimilars that meet certain criteria on their formularies which are a list of drugs covered by health insurance plan. This legislation also requires that the biosimilar has to be available on the formulary with a lower out of pocket cost to a consumer than the brand drug. And just last month Tennessee passed House Bill 1198. This aims to eliminate barriers to accessing biosimilars in a couple of different ways. Currently Tennessee operates a program that provides a prescription drug benefit to certain uninsured individuals. This bill allows that program to implement some cost saving measures when it comes to pharmaceutical services including mandating the use of biosimilars and it also requires the TennCare, which is the state Medicaid’s program, pharmacy advisory committee as it’s making its recommendations for drugs to be included on the state’s preferred drug list to consider biosimilars.
Ed: So, Erin, of course we are in the middle of a new legislative session started many of them in January; some are still ongoing. What are you seeing in terms of biosimilar legislation around the country?
EG: So, more states are looking at requirements for biosimilar placement on formularies. This year Colorado passed legislation that would prohibit pharmacy benefit managers also known as PBMs from designing formularies to favor biologics over therapeutically equivalent biosimilars unless that biologic has a lower list price and provides a lower out of pocket cost for the patient. Minnesota also has legislation pending with Senate Bill 1876 to require a PBM or health insurer to immediately include an FDA approved biosimilar on a formulary and this bill would also require them to structure the formulary in a way that gives preference to the brand name biologic or the equivalent biosimilar whichever has that lower out of pocket cost.
Other states are looking at increasing access to specific types of biosimilars. The Oklahoma house passed legislation at the end of March that would give the state department of health the authority to work with non-profits to obtain fast action biosimilar insulin at certain price caps. And states continue to consider to modifying their substitution laws. New Hampshire has legislation pending that would allow substitution with biosimilars that the FDA has determined don’t require that interchangeability study to be considered therapeutically equivalent. This bill would also prohibit pharmacists from substituting with a biosimilar if a patient tells them that they don’t want their drug to be substituted. And Washington is also considering changes to its substitution law with senate bill 5594 which would just modify the ways in which prescribers can prevent pharmacists from substituting biosimilars for biologics.
Ed: Well great, Erin. Thanks for walking us through that and this has been a very interesting topic and I think one probably a lot of the people in our audience are not that familiar with so. Thanks for taking the time to fill us in. Take care.
EG: Thank you.
Ed: I’ve been talking with Luca Maini, Chad Pettit and Erin Glossop about biosimilar drugs and the role they play in the prescription drug market. Thanks for listening.
You can check out all the podcasts from the National Conference of State Legislatures by searching for NCSL podcasts wherever you get your podcasts. This podcast “Our American States” dives into some of the most challenging public policy issues facing legislators. On “Across the Aisle” host Kelley Griffin tells stories of bipartisanship. Also check out our special series “Building Democracy” on the history of legislatures.