The biggest challenge plan sponsors face today with their pharmacy benefit is managing the growth of specialty drug spending and the potential for unexpected, large claims that can break your budget. After the government created the first pathway for biosimilar approvals in 2010 with the Biologics Price Competition and Innovation Act, some believed biosimilars would help provide solutions to mitigate the cost and risk associated with specialty drugs. So, over a decade later, why hasn’t this happened?
The first biosimilar drug was approved in 2015, and only 33 more have been approved – a little more than half of which have made it to market. While uptake has been slow, the expiration of patent protection for Humira in 2023 and several other blockbuster specialty drugs over the next three years may speed up the growth of biosimilars. To help you better understand biosimilars and their role in the market, let’s take a closer look at the factors that have caused their slow uptake, the market dynamics that could accelerate their growth, and most importantly, their potential impact on your employer-sponsored plan.
What Are Biosimilars?
Biosimilars are biological drugs that basically mimic another biological drug (known as the reference or originator drug) that the Food and Drug Administration (FDA) has already approved. For biosimilars to gain approval, they must be as safe as, work as well as, and work in the same way as the reference drug.
Biosimilars may be either interchangeable or non-interchangeable. Interchangeable products may be substituted for the reference product without the prescriber getting involved, while non-interchangeable products require the patient to obtain a new prescription written specifically for the biosimilar. To gain interchangeable status, the drug manufacturer must conduct studies to confirm that the products demonstrate identical efficacy when patients switch between the originator and the biosimilar.
Only two biosimilars have been designated as interchangeable by the FDA to date, which is one reason biosimilars haven’t had more uptake. Once a patient is on a reference drug and is stable and achieving a favorable clinical outcome, prescribers are hesitant to switch them to a non-interchangeable biosimilar. Here are a few other reasons biosimilars have been slow to gain adoption:
- Reference drugs have strong patent protection: Originator manufacturers have sought patent protection enforcement and have filed numerous lawsuits.
- Biosimilars are complex and costly: Biological products consist of large, complex molecules and are difficult to develop and maintain quality control. Development may take 5-9 years and cost more than $100 million.
- Big Pharma flexes its muscles: Brand-name companies have threatened to remove rebates on the products they provide unless biosimilars are excluded.
- Biosimilars don’t earn rebates: Pricing for the originator drug, including rebates, can be better than the biosimilar, which does not earn any rebates. As such, PBMs have been slow to put biosimilars on their formularies.
Room for Growth
Reasons aside, the patent expiration of several large blockbuster specialty drugs could create an incentive for developing and introducing more biosimilars. As specialty drugs like Humira, Stelara, Cosentyx, and Revlimid lose patent protection over the next several years, it becomes increasingly financially viable for drug manufacturers to bring profitable biosimilars to market. Take the case of Humira, the number one drug (and specialty drug) with over $20 billion in worldwide sales in 2021. While Humira doesn’t lose patent protection until next year, at least 10 biosimilars have already been approved or are pending approval, including one that’s interchangeable.
AbbVie, the maker of Humira, is preparing for the loss of patent protection and has already been working on switching patients from Humira to Skyrizi. This newer AbbVie product treats many of the same conditions and will retain its patent protection for years to come. In addition, we expect that Humira will consider several other tactics to maintain its market share in 2023 and beyond, including lowering its price, increasing rebates, or even producing its own biosimilar. Regardless of the exact tactics it chooses to employ, AbbVie will certainly be aggressive in trying to maintain its market share, revenues, and profits.
As a plan sponsor, it’s important to be mindful of how the PBMs handle biosimilars on their formularies. In some cases, a new biosimilar could be less expensive than the reference drug. However, there will likely be instances where the reference drug price, including rebates, is less costly than the biosimilar. Ultimately, the introduction of new biosimilars for blockbuster specialty reference drugs should have a favorable impact on competition and will hopefully lead to lower net prices and savings for your plan. While this would be a positive outcome for plan sponsors, we need to see how things play out in 2023 and beyond.