US Biosimilars In 2016: Partnering And Payers

With little precedence in the industry, biosimilar development is wrought with unknowns. At five years post-launch of the FDA Biosimilar 351(k) pathway, the US has only approved one biosimilar, Sandoz's Zarxio (filgrastim-sndz), a relatively simple biologic expressed in bacterial cells. However, regardless of this uncertainty, biosimilar developers can still prepare for this changing market by carefully establishing key partnerships and fully characterizing the reimbursement space.

Partner, And Partner Early

A primary observation of 72 US biosimilars showed that partnerships for US biosimilars were predominantly initiated during US preclinical development (56%), which confirms the advantage of early partnerships. This is not to mention the 19% of partnerships that were initiated prior to the start of development in the US (Exhibit 1)

Exhibit 1: Deal Event Phase Of US Biosimilars

Source: BioMedTracker

By partnering at the discovery phase, large cap companies focus their resources on clinical trials and marketing, while small cap and foreign companies focus on the discovery of biosimilars, thereby leveraging each company’s individual strengths. To cite a common example, Baxter International formed a global partnership with small cap Momenta Pharmaceuticals in December 2011 to develop a range of follow-on biologics. Momenta’s self-proclaimed strength in biosimilar and reference product characterization may have proven useful to Baxter, who has had little to no prior involvement in biosimilar development. Baxter is therefore able to participate in the biosimilar market without diverting resources to biosimilar discovery. In parallel, Momenta gains the financial backing of a large cap company to carrying its compounds through clinical trials.

Focusing on core competencies has also become a common theme with foreign partnerships. In its 2013 partnership with South Korea-based Samsung Bioepis, Merck & Co. Inc. purely sought the commercialization rights of biosimilars. With the exception of MK-1293, a Merck compound, Samsung Bioepis is responsible for preclinical and clinical development, process development and manufacturing, clinical trials and regulatory registration. Merck’s partnership with Samsung Bioepis makes strategic sense because the Korean biosimilar pathway precedes that of the US. In this partnership, Merck relinquishes all developmental aspects to Samsung Bioepis, a more experienced biosimilar developer. Samsung Bioepis is likely familiar with the nuances of discovery, manufacturing, clinical trial designs, etc. This partnership puts Merck ahead of the curve in the newly established US biosimilars market, and as a whole, these foreign partnerships have proven to be successful.

Of the seven biosimilar partnerships that began prior to US development, all have progressed to Phase III or an approval filing to the FDA. Not only can ex-US data build a stronger case for approval, but US companies can also utilize the experience of emerging market companies that are more familiar with biosimilar development.

The rate of partnerships during Phase III development (3%) is consistent with the rate of 8% for traditional biologics. Late stage partnerships are often priced at a premium since it is a lower risk investment. This result reaffirms the incentive to partner for early phase biosimilars, which is when one receives the greatest value for one’s investment.

Another implication to be drawn from these early partnerships is that companies are confident in the approval of biosimilars. After all, biosimilars are not truly novel like blockbuster biologics, and patient populations are well defined by the brand. To reiterate, 56% of biosimilar partnerships began during preclinical development. This compares to a rate of 42% for traditional biologics. The difference demonstrates that the standard biologic are a risker investment (or less likely to be approved) because a greater proportion of partnerships occur during later phases of development. For standard biologics, additional data from later Phase I or Phase II clinical trials are necessary to signal the success of the drug to potential partners. In contrast, biosimilar partnerships occur in early phases of development, even when little information is available.

In summary, regardless of one’s experience with biosimilar development, companies seeking a stake in the biosimilar market can do so through partnering. We anticipate a growing demand for these types of partnerships for big pharma. In concert with this belief is the continuing emergence of the pure-play biosimilar developers like Momenta and Samsung Bioepis.

Presented below are the partnering statistics facing companies entering the biosimilar market.

Exhibit 2: Will You Partner?

Source: BioMedTracker

Reimbursement Considerations

On the payer side, one-on-one interviews with reimbursement experts and industry research have revealed that payers are highly receptive to the introduction of biosimilars. The question that remains is: Which biologic product will payers reimburse?

Payers anticipate price and rebate discussions from the biosimilar developer for formulary inclusion and from the brand to maintain formulary access. A drug formulary consists of a list of medications that the payer is willing to reimburse. The use of closed formularies, or limited lists, has been especially effective in shifting market share to generics. By completely removing the branded drug from drug formularies, payers were able to control access to expensive branded drugs at the prescribing level. Providers had no choice but to prescribe generics because patients would otherwise have to pay full price for a branded drug. The present situation differs in that biosimilar products are not as competitive on price.

Due to its higher price, payers do not have a clear incentive to restrict use of the brand as they have done in the past. The branded biologic is presently expected to remain on formulary with the possible inclusion of a biosimilar. Keep in mind that payers may choose to entirely exclude a biosimilar with closed formularies if it does not present ideal price discounts. Changes to a formulary, like the inclusion of biosimilar, still translates to disruption for patients. However, as prescribing biosimilars becomes more common place, we expect payers to use more aggressive measures like taking the brand off formulary. This would of course vary by indication, especially in disease areas where patients are more reliant on public insurance. Per a reimbursement Key Opinion Leader (KOL), the current breakdown of the closed formularies is roughly 70% for public and 30% for private payers.

In addition to competing on price at face value, biosimilar producers must also factor in brand rebates. Rebates are typically a percentage of the drug price that is returned to the payer for maintaining that drug on formulary. Rebates essentially add a second layer of price competition between the biosimilar and the brand. In order for a biosimilar to be considered for reimbursement, or formulary addition, it must also offer competitive rebates or be priced low enough to dip below brand rebates. One KOL interview suggested that price reduction of at least 20%, including rebates, would be required to make the formulary disruption worthwhile.

Upon agreement, payers are prepared to use formulary management tools like tiering, step-therapy, and prior authorization to encourage the uptake of biosimilars. Though there is an emphasis on price, major players like pharmacy benefit managers will still be conducting internal analysis on the efficacy and safety of the biosimilar versus the brand. FDA approval does not necessarily ensure payer confidence in biosimilar substitution of the tried and true brand.

Payers are looking to biosimilars as an answer to the rising cost of rare disease treatments, and their limited access. According to a KOL interviewee: “Within the world of specialty pharmacy and orphan, the cost of [specialty] products are $2,000 to $5,000 a month. In orphan disease, these costs are $15,000 to $100,000. These patients need lot of hands-on services, lots of education, so those are the type of things we are discussing right now, how do we make sure that these patients are well taken care of.”

Though the biosimilar market is still at its early stages, it’s clear in its direction to bring down the rising costs of drugs. What payers also see in its intention is that the introduction of biosimilars will greatly increase patient access to medication that is currently being distributed only by a handful of suppliers.

This article is just a small section of BioMedTracker's Biosimilars Special Report. For more information and data please contact [email protected].