Medicare Advisory Commission Calls for Major Medicare Changes, More Risk for Plans

Major changes may be in the works for Medicare Part D, should the recommendations of the nonpartisan Medicare Payment Advisory Commission (MedPAC) be accepted.

A report from MedPAC released on June 15th, recommended that, to sustain fiscal sustainability of the Part D Program, beneficiary, insurer, and Medicare shares of the payment should be restructured. One of the main objectives seems to be shielding the beneficiary from extremely high cost sharing over time: Today, even after they exceed the catastrophic cost threshold of the coverage gap or “donut hole,” they are liable for 5% of drug costs. For some specialty medications, this could be well over $5,000 beyond what they had already spent on the deductible ($360) and 25% cost sharing (up to $3,310) and the coverage gap ($4,850 cumulatively). MedPAC recommends capping a Medicare recipient’s cost sharing for Part D drugs at about $4,850. They estimate that some seniors will be on the hook for more than $1,000 above what they presently pay if they reach the coverage gap, because of restructured cost sharing within the donut hole. Patients with low-income subsidies would pay less.

According to the report, “Medicare’s overall subsidy of basic Part D benefits would remain unchanged at 74.5%, but plan sponsors would receive more of that subsidy through capitated payments rather than open-ended reinsurance payments.” To compensate for the average reduced beneficiary contribution, MedPAC proposes that insurers pick up the slack—currently,  Medicare pays for 80% of catastrophic coverage; MedPAC wants to gradually scale that back to only 20%, with insurers covering the remainder. 

This means that insurers will be at greater risk, and their costs will rise, with 3 principal implications: (1) much tougher negotiations with pharmaceutical companies on high-priced medications, (2) higher member premiums, and (3) tighter formulary restrictions (more drug exclusions and greater utilization of utilization management tools). Of note, MedPAC recommends that health plans have more flexibility in using standard utilization management tools to control drug costs.

Furthermore, MedPAC offers greater incentives (i.e., lower cost sharing) for recipients who use generic drugs. This may be applicable to future Part D–covered biosimilars as well.

Although the move is not aimed at saving short-term money, MedPAC believes that its recommendations could save the program as much as $10 billion over 5 years. They noted that spending for Medicare Part D jumped by 60% over an 8-year period ending in 2014 ($73 billion). This is largely the result of the rapid influx of specialty drugs (e.g., hepatitis C agents) and price increases in generic and branded drugs in many categories.

The Commission’s recommendations stop well short of the calls from the Presidential candidates for Medicare to negotiate drug prices directly with manufacturers. 

To better understand the implications of these possible changes to the Medicare payer market, contact us today at stan.mehr@smhealthcom.com. 

Do We Need the Interchangeable Designation for Biosimilars?

I think the question of whether a biosimilar is “interchangeable” to a reference or innovator product can be answered with a mixture of science and faith. That may sound like a classic contradiction, but hear me out on this. The nature of biologic agents prohibits FDA from applying the AB-type ratings to biosimilars that it uses to describe bioequivalent generic drugs. However, from a practical standpoint, does it really matter? Let’s look at this from the perspective of the FDA and that of the clinician.

The FDA defines interchangeable products as being:

“biosimilar to an FDA-approved reference product, and can be expected to produce the same clinical result as the reference product in any given patient. An interchangeable product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product.

“In addition, for a biological product that is administered more than once to an individual, the risk in terms of safety or efficacy of alternating or switching between the biological product and the reference product will not be greater than the risk of using the reference product without alternating or switching.

“An application for an interchangeable biological product also must include data or information to show that the proposed interchangeable biological product is expected to produce the same clinical result as the reference product in any given patient. In addition, for a product that will be administered more than once to an individual (as many biological products are), the application must include information that demonstrates that the risk in terms of safety or diminished effectiveness of alternating or switching between use of the proposed interchangeable product and the reference product is not greater than the risk of using the reference product without alternating or switching.”

The need for scientific studies characterizing the pharmacokinetic and pharmacodynamic profiles of the new agent and clinical studies to determine the biosimilarity of the product to the reference product is unquestioned. That said, what the FDA is basically saying in their definition, is that the manufacturer must conduct additional “switching” studies to prove that patient outcomes will be roughly the same after the patient is taken off a reference product and given the biosimilar and vice versa, and this must apply to any patient, not just a patient with an isolated indication. That's the science.

Here's the faith: If the FDA grants extrapolation to the biosimilar for the full set of indications, as it did for Celltrion’s Inflectra® version of infliximab, then it believes that patient outcomes will be roughly the same for any of these patients (despite the absence of large-scale clinical studies in some extrapolated indications). Interchangeability is then further defined by whether the switching studies have been done in all possible indications. Celltrion’s switching studies were limited to rheumatoid arthritis and inflammatory bowel disease (not psoriasis, psoriatic arthritis).

FDA takes it one step further, to define an interchangeable product as one not needing permission by a clinician in order for it to be substituted for the reference product by the pharmacy. That last bit is still a work in progress, as states grapple with passing legislation that allow pharmacists (community or specialty pharmacy–based) the authority to substitute biosimilars without needing a clinician’s permission.

From the physician’s standpoint, must prescribers have faith that Inflectra is interchangeable at the point of prescribing, based on FDA's ruling? It certainly can be prescribed for any new patient for whom Remicade® can be prescribed, assuming the health plan or insurer covers the medication in the first place. If a patient is already receiving Remicade therapy, can it be switched for the biosimilar if the clinician and patient care to do that (i.e., for cost reasons)? There is no stipulation that it cannot. If the switch is made, does that mean that this particular physician believes that the drug is interchangeable? This is merely semantics.

For all practical purposes, the answer is yes. Celltrion’s product has been used in Europe and elsewhere for many years in doctor’s offices for all of these indications, without untowards differences in outcomes.

Whereas the approving a drug to be biosimilar to another is extremely complicated, but I don’t think the interchangeability question is. The FDA feels the need to justify a level of certainty reflected by an AB-type rating given to conventional generic drugs, but this cannot be achieved in biologics. It then seems like a matter of faith: If FDA is willing to extrapolate the indications, they believe the therapeutic outcomes will be equivalent, even for diseases for which the biosimilar was not directly tested.

As we continue to await FDA’s long-delayed guidance on how it will designate the interchangeability of biosimilars, there seems to be little practical difference between expected equivalent outcomes in untested indications and the anticipated benefits of interchangeability.

Market Access, Sales Training, and the Mock P&T

Stanton R. Mehr, President, SM Health Communications LLC

stan.mehr@smhealthcom.com

www.smhealthcom.com

Over the past few years, I’ve espoused the need for and virtues of the mock Pharmacy & Therapeutics (P&T) Committee. One of our clients pointed out that I’ve neglected an extremely important benefit of conducting a mock P&T Committee. It is one that yields dividends in an area that cannot be overemphasized.

How many of your account managers, and even National Accounts executives, have sat in on a real P&T Committee? I’ll bet hardly any, as pharmaceutical companies are pretty much persona non grata when it comes to an actual, live formulary decision making for health plans and insurers. Some internal and third-party sales education programs try to give trainees exposure to the concept, but it is nearly impossible to get first-hand views of a P&T Committee in action.

Beyond obtaining a coverage decision on your product or that of your competitor, a rock solid mock P&T Committee will also provide a video record (in the form of a live feed or postmeeting DVD) of the entire proceedings. Most often, the people viewing the Committee meeting are product directors, market access managers, and brand executives. That’s great, but when the Committee members discuss a product’s shortcomings and benefits, wouldn’t that be exactly what the sales team needs to hear? What would be the value of learning the key drawbacks of a competitors product from the experienced members of a P&T Committee? What would be the value of packaging those comments, with the account team's strategy for addressing the same issues that will be brought up in the field?

When we talk about our P&T Insight™ program to potential clients, realizing this opportunity often gets their attention. Although we don’t consider it the key deliverable of the mock P&T Committee, it is a very attractive component, which complements sales training efforts, including launch activities.

For more information on this important benefit of our program and on P&T Insight™ in general, please contact me at stan.mehr@smhealthcom.com.  

SM Health Communications provides writing, consulting, and innovative market research services for the payer markets. Its proprietary P&T Insight™ virtual P&T Committee program is the leading mock P&T Committee product in the field. We’ve participated in many market research projects involving biosimilar development and launch, from the point of view of the biosimilar and the innovator drug manufacturer. For more information, please visit www.smhealthcom.com or contact Stanton R. Mehr, President, at stan.mehr@smhealthcom.com.

Biosimilars, Coverage Decision Making, and Getting the Answers You Need

Stanton R. Mehr, President, SM Health Communications LLC

stan.mehr@smhealthcom.com

www.smhealthcom.com

As I’ve written in past columns, the fact of the matter is, a biosimilar won’t receive de facto preferred positioning on a health plan or insurer’s formulary. Over the past few years, we’ve come to realize that so many issues are in play, and many opposing factors that can relegate a new biosimilar agent to nonpreferred status or to put it at the head of the line in tier 2.

“It all depends…” is an answer that will have the most experienced pharmaceutical executives rolling their eyes. But in biosimilar product launches, marketing, and access, there are simply too many variables in a new market in which little real payer experience exists.

For example, let’s say Product X is a new biosimilar TNF inhibitor, and let’s assume for the sake of argument all the patent, exclusivity, and approval challenges have been worked out. The FDA did not designate the agent to be interchangeable to the reference product.

• Did FDA grant the biosimilar the full slate of indications (i.e., extrapolation)?
• What was the reference drug’s manufacturer reaction to the new product entering the market—did they cut net prices for their own product? Is the price of Product X now 20% lower than the new price of the reference product or maybe even par with it?
• Are prescribers comfortable starting their newly diagnosed patients on Product X, or will they still prefer the reference product?
• If the reference product fails to yield a satisfactory outcome, should Product X be tried next?
• What about Medicare Part D or Part B coding and reimbursement?
•  Will the payer institute a separate biosimilar tier and will Product X be on it?
•  Will patient assistance programs make it easy to afford and access Product X?

The answers to these imperative questions will affect launch expectations as well as opportunities for gaining acceptance and marketshare. It is plain that blanket answers will be of limited use, as each health plan and insurer will set different priorities and react in different ways to a new biosimilar situation.

Market research, and mock P&T programs in particular, such as P&T Insight™, can go a long way towards identifying the biosimilar opportunities and challenges that exist in several types of commercial and public plans. Contact us today to discuss how we can help untangle the answers to all of these questions. This will help inform your U.S. market access, pricing, and marketing strategies to ensure that outcomes meet sales expectations.

SM Health Communications provides writing, consulting, and innovative market research services for the payer markets. Its proprietary P&T Insight™ virtual P&T Committee program is the leading mock P&T Committee product in the field. We’ve participated in many market research projects involving biosimilar development and launch, from the point of view of the biosimilar and the innovator drug manufacturer. For more information, please visit www.smhealthcom.com or contact Stanton R. Mehr, President, at stan.mehr@smhealthcom.com.

Biosimilar Launches: Ready, Set, Not-so-Fast!

Stanton R. Mehr, President, SM Health Communications LLC

stan.mehr@smhealthcom.com

www.smhealthcom.com

I’ve written as recently as this past January on the impending FDA decision to approve Sandoz’s version of filgrastim (brand name, Zarzio). By March, FDA had approved the agent, but Sandoz was unable to launch until September 3 because of legal action by Amgen that claimed Sandoz did not adhere to the specific, somewhat tortuous pathway that a biosimilar manufacturer has to follow to demonstrate that that their agent has not violated the patent of the innovator’s manufacturer. This pathway, promulgated by legislation, includes the ability for the innovator’s manufacturer to respond in kind to steps taken by the biosimilar company, all of which must be done within a certain time table. Here’s a piece that I wrote for the Health Payer Council (www.healthpayercouncil.com) a few months ago that more fully explained this situation, which is frustrating payers’ desire to start saving some money on specialty drugs.

We are on the cusp of the long-awaited new era in biologic treatment, the introduction of biosimilars to the armamentarium. They are estimated to save the health care system tens of billions of dollars over the course of a decade, and should start saving dollars to some extent (through better contracting with the innovator product, discounted pricing from the biosimilar manufacturer, or both) the moment the initial launch takes place. However, a scenario familiar to all payers may yet unfold that can significantly slow the pace of biosimilar introductions.

Challenges to product patents have a long and infamous history in the US pharmaceutical industry. They have been the cause of delayed generic introductions and accusations of manufacturer collusion, and the source of relentless bad press for the pharmaceutical industry. Yet, they work. They delay the loss of millions of dollars in revenue for brand manufacturers, and can postpone by years the launch of more cost-effective agents. Therefore, patent challenges to biosimilars were inevitable, and there are other legal challenges as well.

The Biologics Price Competition and Innovation Act of 2009, a subsection of the Affordable Care Act, not only directed FDA to set up the 351(k) pathway for biosimilars but also set up a framework for working through biosimilar patent disputes. Although similar to the statutory regulations contained in the Hatch–Waxman Act to address conflicts over patents for branded products by generic drug manufacturers, there are complex differences. According to one analysis of the Act.¹ “The filing of a biosimilar application under the Biologics Act constitutes an act of ‘infringement’ sufficient to allow the maker of the innovative product to bring an action against the follow-on applicant in federal district court, but a series of patent exchanges must occur between the parties before any such suit is initiated.”

The first step in this complicated process is that the biosimilar manufacturer supply a copy of its application to the innovator company within 20 days of application acceptance. Then within 60 days, the innovator must send the biosimilar manufacturer a list of patents it believes would be infringed by the new agent. At this point, the originator’s manufacturer is compelled to list which, if any, of these patents it may be willing to license to the biosimilar’s manufacturer. Within another 60 days, the prospective biosimilar manufacturer is directed to detail for each patent on the list their factual and legal support for why it believes that the patent is not valid, unenforceable, or will not be infringed or a statement that the applicant does not intend to begin commercial marketing of the biological product before the official patent expiration date. Within yet another 60 days, the originator’s manufacturer must refute these arguments.¹ Each of these steps in general represent opportunities for noncompliance and ongoing litigation.^2,3

Sandoz, which gained the FDA nod for its biosimilar version of filgrastim (Zarzio) on March 6, has been battling Amgen over its US patent.⁴ Amgen’s product patent for filgrastim (Neupogen) expired in 2013. However, biosimilar manufacturing is more complex and more variable than that of conventional generic products. US patent law (unlike European patent law) stipulates that Sandoz must reveal its manufacturing process to Amgen so that the latter can better determine whether its patents have been violated. Sandoz, however, has not complied.

In May, a U.S. Court of Appeals overturned a March 19 ruling by Judge Richard Seeborg, from the San Francisco federal court, disallowing the launch of Zarxio until an appeal by Amgen is heard. Judge Seeborg had ruled that the “patent dance” outlined above was not mandatory but optional. Amgen appealed, arguing further that Zarxio would cause “irreparable price erosion” to Neupogen. However, this win can cost Amgen plenty down the line. In the event that Amgen ultimately loses its appeal, it must post a bond to reimburse Sandoz for each day of lost sales revenue from Zarxio.⁵  As lawsuits and motions are fired back and forth across the biosimilar battlefield, this sets up precedents for other legal actions involving biosimilars, explains legal experts.^3,5 (The appeals court later ruled on July 22 that provision of the biosimilar application to the originator company within 20 days of filing was indeed optional, clearing the way for a launch after September 2.)

In an unrelated case, Sandoz filed suit to have Amgen’s patent for etanercept invalidated, even before Sandoz filed a biosimilar application. In this instance, the judge threw out the case because Sandoz had not yet filed the application and thus had no standing under the Act. (Sandoz subsequently filed for FDA review on October 2, and it is unclear whether the company will refile its suit).

Celltrion filed a 351(k) biosimilar application for its own form of infliximab (Remsima) in 2014, but the patent for Johnson & Johnson’s pioneer product Remicade was not set to expire until 2018 in the US (it expired in 2014 in Europe, where Remsima is available currently). In February, the US Patent and Trademark Office rejected the 2018 patent expiration, however, and Celltrion has said that if FDA approval is received, it will launch this year.^6,7 A statement from J&J claimed that it will "pursue all available appeals" to protect its patent through the 2018 expiration date.⁷

Another aspect of legal challenges to biosimilars will involve their use in combination therapies. As the patent expiration approaches for some biologics, their manufacturers have sought to expand their market by pairing their product with another agent or conjugate. Can the approved biosimilar component be substituted and paired with the combination agent, and will the outcomes be the same? 

This issue may be tested legally for biosimilars, particularly for oncology agents like trastuzumab.⁸

This is a very slow learning process for payers who are hoping to see biosimilar savings or at least innovator company discounts, but finding it difficult to predict when this vision may be realized.

SM Health Communications provides writing, consulting, and innovative market research services for the payer markets. Its proprietary P&T Insight™ virtual P&T Committee program is the leading mock P&T Committee product in the field. We’ve participated in many market research projects involving biosimilar development and launch, from the point of view of the biosimilar and the innovator drug manufacturer. For more information, please visit www.smhealthcom.com or contact Stanton R. Mehr, President, at stan.mehr@smhealthcom.com.

References

1. The Biologics Price Competition and Innovation Act of 2009. (http://fdaregulatory.net/index.php/fda-regulatory-articles/buiologics). FDA Regulatory.Net 2013. Accessed June 19, 2015.

2. Stotland Weiswasser E, Gauger M. Biosimilar patent disputes: an update of the last 6 months. Law 360 March 31, 2015 (http://www.law360.com/articles/637389/print?section=appellate). Accessed June 15, 2015.

3. Rosenthal M. Biosimilars arena still littered with litigation. Specialty Pharmacy Continuum June 4, 2015. (http://www.specialtypharmacycontinuum.com/ViewArticle.aspx?d=Web%2BExclusives&d_id=530&i=June%202015&i_id=1199&a_id=32622). Accessed June 20, 2015.

4. Ledford H. First biosimilar drug set to enter US market. Nature January 13, 2015 (http://www.nature.com/news/first-biosimilar-drug-set-to-enter-us-market-1.16709). Accessed June 16, 2015.

5. McDermid R. Court blocks Novartis AG (NVS)'s recently approved "biosimilar" form of Amgen (AMGN)'s Neupogen. Biospace.com May 8, 2015 (http://www.biospace.com/news_story.aspx?StoryID=376077). Accessed June 19, 2015.

6. Staton T. Celltrion revs up Remicade biosim for U.S. rollout this year. Fierce Pharma April 1, 2015 (http://www.fiercepharma.com/story/celltrion-revs-remicade-biosim-us-rollout-year/2015-04-01). Accessed June 16, 2015.

7. Johnson & Johnson announces Patent and Trademark Office action related to Remicade (press release). PR Newswire February 18, 2015 (http://www.prnewswire.com/news-releases/johnson--johnson-announces-patent-and-trademark-office-action-related-to-remicade-300035468.htm). Accessed June 15, 2015.

8. Nelson KM, Gallagher GC. Biosimilars lining up to compete with Herceptin: opportunity knocks. Expert Opin Ther Patents. 2014;24(11):1149-1153.

Pharmaceutical Pricing: Real Value vs. Revenue Forecasting

Stanton R. Mehr, President, SM Health Communications LLC

stan.mehr@smhealthcom.com

www.smhealthcom.com

The pharmaceutical industry sometimes forgets how payers calculate the value of their products. Payers do not view value solely through the lenses of clinical efficacy, safety, and utility.

In the prelaunch phase, before drug pricing is set, payers are often given a wide range of figures, either by company reps or in market research studies, as an FYI, instead of asking the payers what approximate price would make financial sense based on the product’s apparent value. It seems an obvious question, but it does happen, and too often. This leaves payers (and most other stakeholders) with the impression that the price is an actuarial business decision: let’s pick a price point that maximizes revenue. This doesn’t mean the price is indefensible, but it does imply there is no transparency or clinically based logic to the pricing.

This was clearly the impression Gilead left with the launch of Sovaldi, generating tremendous animosity in the face of drug launch that should have been triumphant. This public relations debacle was a nightmare on several levels: the ink was not only aimed at the public and providers, but the payers as well. Everyone, including corporate employers, felt blindsided by the initial $84,000 price tag of treatment. Few doctors, health plans, or hepatitis C patients would give Gilead the opportunity to make its case that this represented real value versus the price of a liver transplant.

As it turned out, Gilead’s concept of real value was reconsidered under threats from major PBMs to exclude coverage, in favor of AbbVie’s competitor product.

Also a little more than a year ago, doctors from Memorial Sloan Kettering Cancer Center in New York decried the high cost of oncology drugs, and called on the industry for price transparency. The same question is being raised over many oncology drugs, including the $150,000 cost of Revlimid, which produce much more incremental benefits.

This week, another article appeared in the New York Times addressing the high price of other oncology medications. Also this week, the first of a new class of hypercholesterolemia drugs, the PCSK9 inhibitors, will be approved by the Food and Drug Administration, for use in patient populations that could theoretically bust the pharmaceutical bank. It’s announced pricing was above the estimates payers had been anticipating. I would not be surprised if we heard a renewed, vigorous call for Medicare to be given the power to negotiate drug prices.

For the pharmaceutical company like Gilead, if the price of a liver transplant is $300,000, isn’t a Sovaldi price tag of $84,000 a bargain in comparison? Well, no, said the payers, in unison. Interestingly, Gilead did achieve one goal though: Even with heavy discounting demanded by payers, Sovaldi is challenging for the number 1 spot in terms of pharmaceutical sales revenue.

Too many specialty drugs today and in the pipeline tomorrow carry price tags that do not align with their claimed value. Biopharmaceutical companies should expend considerably more time and effort incorporating payers’ assumptions and opinions on the value of new medications before setting price, or at least really gauge their reaction to proposed pricing well before launch. This will result in at least some degree of price acceptance at launch or at least the impression that the company cares about the payer perspective.

In a value-based health system, this will matter a great deal. 

Questions: 

(1) Does your prelaunch market research allow for payer consideration of potential price points? 

(2) Is the goal of the market research to validate the company's concept of drug value or to gather data on what coverage decision makers think?

SM Health Communications provides writing, consulting, and innovative market research services for the payer markets. Its proprietary P&T Insight™ virtual P&T Committee program is the leading mock P&T Committee product in the field. We’ve participated in many market research projects involving biosimilar development and launch, from the point of view of the biosimilar and the innovator drug manufacturer. For more information, please visit www.smhealthcom.com or contact Stanton R. Mehr, President, at stan.mehr@smhealthcom.com.

Which Types of Questions Cannot be Answered by Payer Market Research?

Stanton R. Mehr, President, SM Health Communications LLC

stan.mehr@smhealthcom.com

www.smhealthcom.com

This question frequently comes up in discussions of projects that are already underway. In the process of creating the survey tool, research sponsors want the most direct, unambiguous response they can get to their critical questions. 

In the vast majority of instances, it is possible to meet this need based not only on how the question is asked but on which format is chosen. For example, in-depth telephone interviews have the ability to both clarify and confuse: having the ability to “drill down” into an answer helps to clarify, but the interviewee may raise personal conflicting perspectives in a long and winding response. Multiple choice survey questions can also restrict variance in response, as long as the choices are worded well and account for all possible responses.

There are, however, some research questions that really cannot be answered by payers. We cannot expect a medical director to recall individual patients who have a particular condition who are being treated in a certain way, unless they happened to review an identical case just the other day. Asking them to provide information that may violate HIPAA would of course be prohibited. Questions regarding strategic directions of a plan or payer may be proprietary or as is often the case, needs to be targeted to a C-suite level survey sample.

In many cases, payer responses to a particular question will vary considerably, based on plan type, geographic location, and often by whether they serve a commercial (or even individual, exchange, or small/large groups), Medicare, or Medicaid populations. For these projects, it is often possible to lay out unambiguous responses for each payer segment, if the research sample is sufficiently large.

I’ve found that nearly all market research questions are answerable. Removing ambiguity in those responses (involving estimating probabilities and cautious interpretation of results) is a subject for future discussion. This can be best answered through the use of one of several format choices: in-depth telephone surveys, Web-based surveys, the use of on-line communities, or employing scenario-based research, like mock P&T Committees.