Wider Use of Biosimilars Promise Significant Savings for VA

by U.S. Medicine

November 13, 2016

Only One Product Currently on Formulary

By Annette M. Boyle

CHICAGO—Even as biologics offer new options for patients suffering from a wide range of diseases today, their steep prices pose a significant challenge to healthcare system budgets. Biosimilars, closely related but not-quite-generic versions of biologics, provide a way to offer these therapies to more patients at a significantly lower cost, an advantage embraced by the VA.

“As more biosimilars hit the market and competition comes in, they will reduce costs,” explained Joseph Canzolina, RPh, deputy chief consultant for the VA’s Pharmacy Benefits Management.

Biologics are clearly emerging as a leading treatment for a number of diseases including arthritis, cancer, diabetes, ulcerative colitis, Crohn’s disease and psoriasis, among others. Leading drugs in this class include adalimumab for autoimmune diseases and bevacizumab and rituximab for cancer.

Making biologic (or large molecule) medicines requires programming cell lines to produce a particular therapeutic substance, a much more complex undertaking than manufacturing traditional chemically synthesized, small molecule drugs. And their costs reflect the challenges inherent in production of these agents.

The impact on budgets has been substantial. The RAND Corp. reports that annual spending on biologics has risen three times faster than spending on other drugs.

Biosimilars promise to offer similar effectiveness for a fraction of the cost. The Food and Drug Administration so far has approved only three biosimilar agents, which share the name of their reference drug, plus a four-character suffix. The currently approved biosimilars are infliximab-dyyb used for rheumatoid arthritis, psoriasis and Crohn’s and colitis; entanercept-szzs, which treats various forms of arthritis, spondylitis and psoriasis; and filgrastim-sndz, which boosts white blood cell production and fights infection in cancer patients.

Click to Enlarge.

Click to Enlarge.

So far, the VA formulary includes only filgrastim-sndz.

About 20 biosimilar drugs have been approved for use in Europe, and more than 150 are in development, according to market research firm GBI Research. Recent reports disagree on the how much those new agents will save the U.S. healthcare system, but the numbers are large, between $44 billion and $250 billion over the next decade.

Canzolina said he favors the more moderate estimates. Because of the significant difference in the production process, he suggests that biosimilars will significantly reduce the system’s costs compared to their reference drugs, but not as much as healthcare organizations usually see when a generic comes on the market. “We don’t think these will be like small molecule generics, where a $2 per pill price erodes to 25 cents,” said Canzolina.

“Large molecule biologics are much more difficult to make. Where small molecules drugs can be made in a chemistry lab and are easier to replicate, biologics require investment of a lot more money to develop the follow-on biosimilars,” he added. “They’re almost brand-name drugs themselves.”

Still, the savings could be substantial. “Everything you read says that managed care is expecting to save 20% when biosimilars come in. We expect more of a discount at the VA and do negotiate a better price,” Canzolina told U.S. Medicine.

The list price for filgrastim-sndz is 15% less than its reference drug. The VA’s discount pushes the drug’s price “substantially lower than just a 20% reduction,” he noted.

The high price of biologics has certain similarities to the high price of hepatitis C drugs, but they lack one notable advantage, according to Canzolina. “They are certainly not like the hepatitis C therapies where we cure 98% of patients and treat them for a specific period of time. These drugs don’t cure the disease.” For autoimmune diseases such as Crohn’s and colitis, the biologics could be used for many years, with the total impact on the cost to the treat the disease still unknown.

In addition to significant negotiating power as the largest healthcare system in the country, the VA has another tool that will enable it to take full advantage of the lower prices of biosimilars—its formulary.

Filgrastim-sndz is a preferred drug on the formulary, which means the biosimilar will be the default choice for prescribers rather than its reference biologic.

“At the VA, you can get any approved drug by putting in a nonformulary request, but you have to make a clinical case that the patient needs a drug not on the formulary. It’s not enough to have a provider preference,” Canzolina said.

That formulary restriction puts the VA in a better position to control costs than other healthcare systems, he added.

Because of the challenges in replicating biosimilars from live cell lines, none of the biosimilars approved to date has been granted “interchangeability” status by the FDA. While additional guidance is expected, the FDA has yet to fully define what interchangeability means in the context of biologics.

So far, 23 states and Puerto Rico have authorized pharmacists to substitute interchangeable biosimilars for biologics when they come on the market. The position on non-interchangeable biosimilars is murkier, with some states requiring specific authorization for substitutions, rather than enabling them to be treated like small-molecule generics.

“In states that do not allow substitution, a pharmacist would have to call the provider for any therapeutic interchange,” said Canzolino. “Automatic substitution would not take place.”

At the VA, in contrast, the provider would need to provide documentation that the reference drug is needed for clear clinical reasons for the patient to be prescribed the non-formulary biosimilar.

While only one biosimilar is currently on the VA formulary, others will be treated as any other drug as they gain approval and come on the market, Canzolino said. They will go through the VA’s formulary review process with a monograph produced by experts and presented to the national formulary committee which will discuss the evidence and decide whether to place on the formulary and determine whether it will be a preferred drug.


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