Download Biosimilars. To encourage competition, the health care law directs

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Health Policy Brief
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Biosimilars. To encourage competition, the
health care law directs the FDA to develop an
accelerated approval pathway for follow-on
versions of original biologic products.
what’s the issue?
The Affordable Care Act includes several provisions—collectively referred to as the Biologics Price Competition and Innovation Act
(BPCIA)—which are designed to encourage
competition in the market for biologic drugs.
The term biologic refers to any therapeutic
product derived from a biological source, including vaccines, antitoxins, blood products,
proteins, and monoclonal antibodies. These
drugs account for a substantial and an increasing share of the pharmaceutical market and a
growing share of health systems costs.
A key provision of the BPCIA authorizes
the Food and Drug Administration (FDA) to
develop an accelerated approval pathway for
what are known as “biosimilar” products.
Biosimilars are subsequent versions of an
original biologic product that have the same
mechanism of action in the body and are used
for the same clinical indication but are not
identical to the original product (variously
referred to as the reference, pioneer, or innovator product).
©2013 Project HOPE–
The People-to-People
Health Foundation Inc.
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Because of the high cost of biologics, interest in developing an accelerated biosimilar approval process is high for patients, third-party
payers, and some in the biopharmaceutical industry looking to contain costs.
In February 2012 the FDA released draft
guidance on this accelerated approval proc­
ess, but to, date no biosimilar products have
been reviewed or licensed in the United States.
Numerous scientific, legal, and regulatory issues remain unresolved, and it is not yet clear
how the biosimilar market will develop, nor if
it will lead to substantially lower drug prices
or better access to biologic drugs.
what’s the background?
Although they vary widely in terms of their
molecular components and characteristics,
biologics are typically larger and more structurally complex than traditional drugs (also
known as “small-molecule” drugs).
Small changes in the manufacturing proc­
ess can lead to variations in the final product,
which can in turn affect safety and clinical
effectiveness. Even biologics produced in the
same manufacturing facility will have some
variation between lots.
Thus, establishing “biosimilarity” to a reference product requires more preclinical and
clinical testing than is usually necessary for
generic small-molecule drugs, most of which
can be chemically synthesized using well-­
established processes that produce consistent
results.
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“To date, no
biosimilar
products have
been reviewed or
licensed in the
United States.”
84%
Generic drugs
By 2012 generic drugs accounted
for 84 percent of all US
prescriptions.
b i o si m i l a r s
These differences—in combination with the
fact that biologics are driven by relatively new
science—are part of the reason that biologics
are not regulated in the same way as smallmolecule drugs and that biosimilars are not
regulated the same way as small-molecule
generics.
Since the Drug Price Competition and Patent Term Restoration Act of 1984 (also known
as the Hatch-Waxman Act), generic versions
of small-molecule drugs approved under the
Food, Drug, and Cosmetic Act can undergo
an accelerated review known as an Abbreviated New Drug Application. In this process,
the generic sponsor must demonstrate that
its product is “bioequivalent”—that is, essentially identical—to the original drug. Usually
this can be established on the basis of pharmacodynamic testing, and no additional clinical
trials are required.
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care Part B’s total drug budget. Thus, there is
substantial interest in promoting market competition through an accelerated biosimilar approval pathway.
Several analyses have attempted to model
the price effects and potential savings of biosimilar competition, with estimates of price
discounts ranging from 10 percent to 51 percent of reference product prices.
An analysis conducted by the Congressional Budget Office estimated that competition
from biosimilars would reduce drug spending
by roughly $25 billion over 10 years, saving
the federal government nearly $6 billion.
Regardless, savings are likely to be less substantial than in the generic small-molecule
market. Biologics are substantially more expensive to develop, manufacture, and monitor, and the technical know-how and testing
required to bring a biosimilar to market would
be greater than for a typical generic, even under an accelerated approval process.
The 1984 law also established a range of additional incentives to encourage generic drug
competition after the end of the brand-name
drug’s market exclusivity. Health insurance
companies and other third-party payers have
The European Medicines Agency has had an
since made generic substitution and tiered approval pathway for biosimilars since 2005.
drug pricing a central part of their cost-­ In an October 2013 Health Affairs article, Fransavings strategy.
cis Megerlin and colleagues write that early
evidence from Europe suggests that biosimiGeneric drugs generally cost 30–80 percent lars may be able to gain substantial market
of the brand-name product. By 2012 generic share over time.
drugs accounted for 84 percent of all US prescriptions and had saved consumers an estiAlthough only 14 biosimilars are currently
mated $1 trillion since 2002 alone.
approved in the European Union, total sales
during 2009–10 were estimated at $200 milHatch-Waxman is generally considered to lion. The average price discount on these
be the legislative foundation of the modern products is about 25 percent, and by 2020 the
generic drug industry. However, it did not ap- overall cost savings in the European Union are
ply to biologics, so there was no pathway for projected to total $16–$43 billion.
biosimilar development for the US market.
However, the degree of biosimilar market
The global biologics market has also ex- penetration varies substantially across the
panded rapidly over the past decade. In 2011 European Union, owing to differences in payspending on biologics grew 7 percent (com- er systems and policies, laws related to drug
pared to just 1.2 percent growth in the tradi- substitution, and the overall size of the getional pharmaceutical market), and by 2016 nerics market within each country. Similarly,
the total market is projected to be $200–$210 US federal and state regulatory, pricing, and
billion.
reimbursement policies will play a key role in
determining future cost savings.
Biologics are also among the most expensive drugs on the market, with average costs
what’s in the law?
about 22 times that of nonbiologic drugs. An
annual course of the breast-cancer biologic As part of the new regulatory review process,
trastuzumab (Herceptin), for example, can the BPCIA authorizes the FDA to establish
cost up to $50,000.
two levels of biosimilarity. At the first level,
the products must be “highly similar,” such
In 2010, spending on the top seven biologics that “there are no clinically meaningful difalone represented about 43 percent of Medi- ferences between the biological product and
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“The global
biologics
market has also
expanded rapidly
over the past
decade.”
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b i o si m i l a r s
the reference product in terms of…safety,
purity, and potency.” At the second and more
stringent level, the two biologics are judged
to be similar enough to be considered interchangeable, to the extent that the biosimilar
may be automatically substituted without the
intervention of the prescriber.
The legislation also includes a range of market incentives for both pioneer biologic and
biosimilar product development. For example,
pioneer biologics are granted 12 years of market exclusivity, plus an additional 6 months
for drugs approved for pediatric use.
During this period, the FDA may not approve a biosimilar application that relies on
that pioneer biologic’s clinical trial data. By
contrast, small-molecule drugs that are new
chemical entities receive five years of data
exclusivity.
As an incentive to biosimilar development,
the BPCIA grants one year of exclusivity to the
first product deemed interchangeable with its
reference product, which will prevent the FDA
from approving any other biosimilar version
of that biologic for treatment of the same condition during that time.
The BPCIA also contains provisions designed to prevent “evergreening” by patent
holders, which is the practice of prolonging
market exclusivity by patenting peripheral
features of the product or making marginal
improvements to a drug, and sets any future
reimbursement for biosimilars under Medicare Part B at the sum of the average selling
price for that biosimilar, plus 6 percent of the
average selling price for the original biologic.
The law also introduces a patent dispute resolution process that differs in several important respects from the one established under
Hatch-Waxman. Under Hatch-Waxman, a generic drug manufacturer pursuing accelerated
approval must certify in its application that
its product will not infringe on any existing
patents, either because the relevant patents
are expired or because they are invalid. The
original patent holder can respond by suing to
gain a 30-month stay on the generic’s application. But if the brand-name company loses its
suit, the generic company receives 180 days of
market exclusivity following FDA approval.
For biosimilars, the process established
under the BPCIA would work differently. The
biosimilar sponsor must disclose information
about its product to the relevant patent holder.
The original patent holder must then provide
the biosimilar sponsor with a list of the patents that may be infringed. The two companies are then expected to negotiate which
patents will and will not be litigated within
a statutorily defined time frame. Subsequent
litigation must be filed within 30 days, and no
exclusivity provisions are granted to either
side.
what’s the debate?
A number of issues remain in the implementation of the BPCIA. The 12-year period of exclusivity has been a source of much debate, both
prior to the approval of the Affordable Care
Act and in the years since its passage.
The Obama administration has proposed
reducing it to seven years on a few occasions,
most recently in its fiscal year 2014 budget
proposal. However, this kind of change would
require legislative action. Given the current
political climate, it is unlikely that the exclusivity period will be reduced in the near term.
The BPCIA’s patent dispute process has also
attracted criticism, particularly regarding the
potential for patent holders to use tactics, such
as “reverse payment” settlements, which are
sometimes employed in Hatch-Waxman patent disputes.
In these settlements, a generic company
pursuing an Abbreviated New Drug Application receives payment from the patent holder
in exchange for delaying market entry, and
therefore potential competition. It’s called a
reverse payment because payments for patent
licenses typically flow from licensee to patent
holder.
However, unlike with Hatch-Waxman patent
disputes, the BPCIA does not require companies to report such settlements to the Federal
Trade Commission (FTC). A recent Supreme
Court ruling determined that Hatch-Waxman
settlements involving reverse payments may
be subject to antitrust litigation by the FTC.
This ruling may influence the legal analysis of any future BPCIA patent disputes and
may also affect industry decisions to pursue
the biosimilar pathway—as the possibility of
an FTC suit creates additional legal uncertainty for both pioneer and follow-on biologics
manufacturers.
Finally, although the FDA issued draft Guidance for Industry in February 2012, several
h e a lt h p o l ic y b r i e f
200million
$
Although only 14 biosimilars
are currently approved in the
European Union, total sales
between 2009 and 2010 were
estimated at $200 million.
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b i o si m i l a r s
key aspects of the biosimilar regulatory framework remain undefined. For example, the
guidance does not provide product-specific
standards for the amount and type of clinical
trials that will be required to demonstrate biosimilarity. Those determinations will be made
instead on a case-by-case basis, and sponsors
are expected to meet frequently with the FDA
to negotiate these issues.
are drafting, are considering, or have already
voted on legislation related to biosimilar substitution—prompted by substantial lobbying
efforts by the biotechnology industry. Most
new laws would require that pharmacists notify physicians within a defined time frame
when a substitution has been made, and that
they retain a record of this substitution for a
certain number of years.
The FDA also did not release guidance on
the standards for interchangeability, which
likely carry the most substantial implications
for potential cost savings. Generic small-­
molecule drug substitution can be done by a
pharmacist without prescriber intervention
and is the key mechanism underlying widespread generic uptake. If a biosimilar cannot
be deemed interchangeable with its reference
drug, then it will require intense marketing
campaigns to encourage its prescription, entailing further costs to the manufacturer.
Supporters argue that these requirements
will ensure better safety monitoring, while
opponents maintain that they are an unnecessary barrier to substitution. To this point,
such bills have passed in only five states; three
include sunset provisions and are likely to expire before the first biosimilar is approved by
the FDA, and one has yet to be signed into law.
However, interchangeability is a substantially higher bar than biosimilarity. Although
establishing a safe and workable interchangeability standard for some newer and more
complex biologics may not be possible at this
time, interchangeability should be possible for
older, well-characterized molecules. Biosimilar manufacturers need clear statements from
the FDA regarding which products, and under
which circumstances, interchangeability will
be permitted.
It is also unclear whether interchangeable
biosimilars will be entitled to the same official
(that is, nontrademarked) name as their reference product, which will impact the extent to
which these products will be substituted for
their reference product.
Brand-name companies have argued that
biosimilars should have unique names, which
will make it easier to track those products and
identify adverse events. Biosimilar manufacturers and pharmacist associations counter
that unique names would be an unnecessary
barrier to automatic substitution, creating
confusion and possibly leading to duplicative
prescribing of highly similar products.
In the meantime, the debate has already
shifted to the states, which govern laws related to pharmaceutical substitution. In anticipation of FDA standards on biosimilar
interchangeability, more than twenty states
what’s next?
The greater the expense in developing and
marketing a biosimilar, the less likely it is
that a substantial number of companies will
be willing or able to pursue it, at least in the
short term. Uncertainty over the regulatory
requirements adds to this reluctance. Indeed,
some potential biosimilar manufacturers have
given up on the BPCIA biosimilar pathway and
are instead pursuing their products under
original Biologics Licensing Applications.
However, several major drug companies
have invested heavily in biosimilar development over the past few years, with substantial
success in Europe, yet the US pharmaceutical
market is still the largest in the world. Although the time line is unclear, biosimilars
will eventually enter the market.
As they do, payers will need to make decisions regarding criteria for adding biosimilars
to formularies or preferred drug lists—as well
as how they will define their pharmaceutical
benefit plans and pricing structures. Even in
the absence of interchangeable status, private
and public insurers may employ a range of policy strategies to encourage either the prescribing of biosimilars or their substitution for the
biologics that preceded them.
These developments will take time, and
their cost-saving benefits are likely years
away. However, the potential is clear. The FDA
will need to continue developing and refining
its guidance to manufacturers if it wants to
maximize that potential. n
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About Health Policy Briefs
Written by
Elizabeth Richardson
Research Associate
Urban Institute
Editorial review by
Aaron S. Kesselheim
Assistant Professor of Medicine
Director, Program On Regulation,
Therapeutics, And Law (PORTAL)
Harvard Medical School
Brigham and Women’s Hospital
Jordan Paradise
Associate Professor of Law
Seton Hall University School of Law
Jonathan Bor
Senior Editor
Health Affairs
Rob Lott
Deputy Editor
Health Affairs
Health Policy Briefs are produced under
a partnership of Health Affairs and the
Robert Wood Johnson Foundation.
Cite as:
“Health Policy Brief: Biosimilars,” Health
Affairs, October 10, 2013.
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resources
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the Follow-on Biologics Approval Process,” George
Washington Law Review 81, no. 4 (2013): 1–36.
Federal Trade Commission, “Emerging Health Care
Issues: Follow-on Biologic Drug Competition,” June
2009.
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