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Quantifying the Value of BiosimilarsValue assessment frameworks (VAFs) are emerging in the United States (US) marketplace and gaining increased attention by public and private insurers as a way to control rising healthcare costs. Biosimilars offer a unique opportunity with an increased focus on value, as they represent a new class of biologics with the potential to reduce costs and increase access to necessary therapies. This white paper discusses the concepts of VAFs and how the value and benefits of biosimilars should be quantified for key stakeholders, including patients, providers, and payers. By introducing the observation that the potential of lower cost-share to patients could improve adherence, thus improving outcomes, we provide context for how biosimilars can be evaluated fully against their reference products. We also discuss legislative and regulatory actions taken by the federal government that have removed barriers that could have prevented biosimilars from delivering their greatest benefits.

Authored by Xcenda L.L.C. on behalf of the Biosimilars Forum.

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Biosimilars are biological products approved by the Food and Drug Administration (FDA) because they are highly similar to an already FDA-approved biological product (ie, reference product). Biosimilars have been shown to have no clinically meaningful differences from the reference product.1 Compared to traditional generics, which are manufactured via relatively simple chemical synthesis, biosimilars are more complex because their composition requires the incorporation of biological sources.

Licensure of a biosimilar follows an abbreviated regulatory pathway created by the Affordable Care Act (ACA) through the Biologics Price Competition and Innovation Act of 2009 (BPCIA).2 Before the passage of the BPCIA, there was no legal outlet for manufacturers to market a biosimilar product; instead, manufacturers had to develop an original biologic by way of the FDA’s Biologic License Application (BLA), with the concomitant $2.6-billion-dollar-plus development cost over 10+ years for any new product.3 The BPCIA pathway has the potential to reduce this investment; a June 2009 study by the Federal Trade Commission suggested that development of a biosimilar would likely take 8 to 10 years and cost between $100 and $200 million.4 Despite this abbreviated alternative, the cost and time investment to develop a biosimilar is still significantly higher than small-molecule generics, which typically take 3 to 5 years and cost between $1 and $5 million.

Benefits of BiosimilarsBiologics have slowed the progression of several debilitating diseases in therapeutic areas with limited treatment options, allowing patients access to life-changing medicines that help manage potentially crippling diseases. With their lower costs, biosimilars could improve access for even more patients, thus improving more lives. All key stakeholders, including patients, prescribers, and payers, could benefit from the discounted price and competition that will naturally develop between the reference biologic and the biosimilar market entrants.

While biosimilars will be more expensive than traditional generic drugs relative to their reference/brand products, the discounts are still significant. The first 2 biosimilars on the US market (for different reference products), ZARXIO® (filgrastim-sndz) and INFLECTRA® (infliximab-dyyb), entered the market at a 15% list price discount compared to their reference products (NEUPOGEN® [filgrastim] and REMICADE® [infliximab],

Biosimilars Medicines Overview

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respectively).a,5,6 However, the introduction of RENFLEXIS™ (infliximab-abda), a rival biosimilar to INFLECTRA, at a 35% discount resulted in the manufacturer increasing INFLECTRA’s discount to 35%.7

The expected lower price of biosimilars comes at a critical time as the US continues to seek measures to control rising healthcare costs. In 2016, health spending accounted for nearly 18% of the nation’s gross domestic product, reaching $3.3 trillion ($10,350 per American).8 Prescription drugs accounted for 10% of health spending, increasing 1.3% to $328.6 billion with spending on biologics and other specialty drugs reaching $105.5 billion. Biologics and other specialty drugs make up the most rapidly growing segment of prescription drug spending.9 This growth is expected to continue, so efforts to constrain spending are welcomed by patients, insurers, physicians, and employers, as well as local, state, and federal governments—especially if quality remains the same.

In addition to being discounted from the reference products, biosimilars could reduce financial barriers currently preventing patients from accessing or continuing care with expensive biologics. The lower price of biosimilars should translate to lower copayments for patients, improving access to appropriate treatment and facilitating adherence. These are keys to improving outcomes and overall health of the patient, as well as the population as a whole (Figure 1).

Figure 1. Potential of Biosimilars to Improve Patient Outcomes10

CHALLENGE RESULT

Cost-savings from biosimilars

Patients receive treatment earlier in therapy

Treatment reserved for later in therapy

Additional budget available forunderserved therapy areas

Budgets for certain therapyareas inadequate

More patients have access to medicineTreatment reserved for onlymost severe patients

Additional budget available for innovative therapies

Innovative therapiesprohibitively expensive

POTENTIALLY IMPROVEDPATIENT OUTCOMES

a Published discounts are typically starting points for negotiating between manufacturers and health plans, with actual discounts frequently being much greater.

President Donald Trump’s administration has prioritized the development and approval of biosimilars. The Blueprint to Lower Drug Prices and Reduce Out-of-Pocket Costs, released in May 2018, aims to lower drug list prices and lower patients’ out-of-pocket (OOP) costs while maintaining incentives for innovation.11 The blueprint includes a solicitation of comments to improve biosimilar development, approval, education, and access, in which the administration is interested in, among other areas, suggestions to accomplish the following:

• Reduce the development costs for biosimilar and interchangeable products• Develop resources for healthcare professionals and patients to promote understanding of biosimilars• Determine how state pharmacy practice acts could advance the utilization of biosimilars

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The US healthcare system is moving inexorably away from fee-for-service (FFS) and toward value-based payment approaches. This shift is driven by a number of interrelated factors, including rising costs of care, FFS payment incentivizing the overutilization of services, and ever-growing expenditures not reflecting the quality of care provided.

The federal government has been instrumental in leading the shift away from FFS. The Obama administration pursued ambitious targets for value-based payment, and succeeded in tying quality or value to 85% of Medicare FFS payments, as well as incorporating alternative payment models in 30% of Medicare payments well ahead of schedule.12,13

The Trump administration is not tying its adoption of value-based payments to the Obama administration’s goals, but it is still committed to moving Medicare from FFS to value-based payments. In March 2018, Health and Human Services (HHS) Secretary Alex Azar and Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma gave speeches that emphasized that the Trump Administration would be fostering competition in healthcare markets, “so that patients, and the American people, may receive better value for our investment in healthcare.”14,15 Secretary Azar emphasized that value is not accurately determined by arbitrary authorities or central planners; rather, it is best determined by a marketplace of many players.

Value-based payment and delivery models preferred by CMS and commercial payers could benefit from the availability of biosimilars. By definition, value is increased whenever an intervention decreases costs and/or improves quality (Figure 2).

Quantifying the Value of Biosimilars in an Evolving Healthcare Environment

Figure 2. The Value Equation Is Straightforward: Improve Quality and/or Decrease Costs

VALUE =Quality

Cost

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Assuming biosimilars are less expensive than reference products, the denominator of the value equation shrinks, thus increasing value. Additionally, by deeming biosimilars safe and effective, the FDA has determined that they have the same clinical effect as their reference product; at the very least, the quality stays the same. However, given the potential to improve access to care and facilitate adherence, biosimilars may improve outcomes, thus increasing quality and, consequently, overall value.

Current Value Assessment Frameworks (VAFs)Due to increasing price sensitivity and perceived healthcare budget constraints in the US, VAFs to assess the value of healthcare interventions have become prominent over the past several years. A majority of these emerged in response to the increasing costs of oncology therapies, beginning with the introduction of the original American Society of Clinical Oncology (ASCO) Value Framework in 2015.16 Within 5 months, the Memorial Sloan Kettering Cancer Center (MSKCC) DrugAbacus was released, the Institute for Clinical and Economic Review (ICER) was awarded a research grant by the Laura and John Arnold Foundation, and the National Comprehensive Care Network (NCCN) launched the NCCN Evidence Blocks™ (Table 1).17-20

ASCO, MSKCC, and NCCN’s initiatives focus on oncology, whereas ICER’s scope is to evaluate the relative value of treatment options across a broad range of therapeutic areas. Each of these VAFs are intended for use by 1 or more specific stakeholder (eg, payers, physicians) and incorporate stakeholder-specific considerations when defining the elements that reflect value and the overall perspective represented in the resulting evidence. In response to the lack of focus on the patient, Avalere/Faster Cures released their Patient-Perspective Value Framework (PPVF), which encompasses key aspects of care and value from the patient perspective.21 Because of these nuances, it is imperative that those attempting to define value understand the specificity of each individual VAF to ensure appropriate use and incorporation in healthcare decision making.

Incorporating the Patient Perspective in VAFs: A Key Element for BiosimilarsIn 2015, ICER made major headlines when it released its evaluation of cholesterol-lowering proprotein convertase subtilisin/kexin type 9 (PCSK9) inhibitors, concluding that these drugs were “markedly overpriced.”22 With an appraisal process that involves formal opportunities for public comment throughout each topic evaluation, ICER has received critical input on individual evaluations and has continued to refine and evolve its approach and methodology.

In July 2016, ICER issued a formal call for input to its VAF, which resulted in an astounding 300+ pages of critical feedback from over 50 groups representing a broad range of stakeholders, including, among others, patient groups, clinicians, and manufacturers.23,24 Stakeholder feedback ranged from technical to theoretical and included aspects such as consideration of a broader evidence base (ie, real-world evidence), improved transparency in ICER’s methods and processes, and consideration as to whether the quality-adjusted life- year is the most appropriate metric for US decision makers.25

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Foremost among the criticisms of the ICER VAF was concern that it did not address sufficiently the patient engagement and patient influence domains. The patient perspective will be crucial to assessing the value of biosimilar products, which could transcend cost savings. In a report on targeted immune modulators for rheumatoid arthritis, key stakeholders noted that there are still important aspects of biosimilars that ICER may have failed to recognize: “ICER should carefully consider the process used to evaluate and make decisions regarding biosimilar medications once they are on the market so the patient experience can be fully evaluated.”26 This recognition underscores the importance of the patient experience, which is only beginning to be explicitly taken into account in the current value frameworks.

ICER incorporated the feedback it received and released the final updated methodology for 2017–2019 at the end of June 2017.27 Early in 2019, ICER is expected to initiate a similar process to review and update their methodology. As part of the 2017–2019 methodology, driven by public comment, ICER introduced specific exceptions and adaptations to their standard assessment framework, reflecting unique challenges presented when evaluating specific populations (eg, rare diseases) and certain types of interventions. These adaptations continue to evolve and become more refined, but also provided the foundation to move beyond limitations of the framework as it relates to measuring value in select populations. To date, 1 such adaptation has been released for assessing value of treatments for ultra-rare diseases.28 A similar approach is being considered for tests, devices, and delivery systems. For biosimilars adapting the standard assessment method to provide specific context for inclusion to inform decision makers, may be an effective option for assessing their value. To date, ICER has not included biosimilars in relevant evaluations such as ICER’s recent update on targeted immunomodulator therapies for moderate-to-severe plaque psoriasis.29

Efforts by independent groups, such as the National Pharmaceutical Council (NPC) and the Personalized Medicine Coalition (PMC), to guide patient-centered value assessments will continue to evolve alongside ICER’s and others’ VAFs throughout 2018 and beyond.

ICER and other framework developers will undoubtedly continue to improve their VAFs to better reflect the patient perspective; however, it is unlikely that any single framework will meet the needs and interests of all stakeholders.

Avalere/Faster Cures responded to this omission of the patient experience in recent VAFs by engaging a broad group of 23 stakeholder representatives from patient groups, industry, payers, policymakers, and research organizations to inform and direct development of the PPVF. The draft methodology was completed and posted for public comment and input in November 2016. Version 1.0 was released in May 2017.21

Fundamental to the PPVF methodology is a multidimensional approach, with 3 to 4 prespecified criteria to define each of the 5 domains, which include 3 core domains (patient-centered outcomes; patient and family financial considerations; quality and applicability of evidence) within the broader context of patient preferences, constructed on a foundation of usability and transparency. The intent is to define an adaptable framework that can be applied across applications and for different stakeholder needs. In particular, PPVF Version 1.0 is intended for use in shared decision making between patients and providers (ie, individual-level application), with future versions planned for application to existing frameworks (eg, those previously noted), support for public healthcare programs, and condition-specific public analyses (ie, population-level decision making).

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Table 1. Overview of Current VAFs

GENERAL CONDITION-SPECIFICFramework ICER Reports Avalere/Faster Cures PPVF MSKCC

DrugAbacus*ASCO Value Framework

NCCN Evidence Blocks™

Perspective Payer, policymaker Patient, physician Payer, policymaker Physician, patient Physician, patient

Value Measures

Efficacy; harms; quality of evidence; additional benefits/harm; contextual considerations

Domains†

• Patient preferences• Patient-centered outcomes• Patient and family financial

considerations• Quality and applicability of

evidence• Usability and transparency

Life-year gain; toxicity; novelty; development cost; rarity; burden; unmet need; prognosis

Clinical benefit; toxicity; bonus points (for survival, palliation, quality of life); costs

Efficacy; safety; quality of evidence; consistency of evidence; affordability

Costs Total treatment costs and cost offsets

• Financial trade-offs• Medical OOP costs• Non-medical costs• Future costs of care

Drug costs only Drug and supportive care drug costs

Total treatment costs

Framework Output

Adequacy of comparative clinical effectiveness“yes / no”; care value low, intermediate, or high

Flexible output based on intended audience and application of the framework (eg, individual vs population level)

Abacus value-based drug price

Net health benefit score and drug costs

Scores on a scale of 1–5 for each of the 5 value measures

Transparency of Methods Moderate Moderate to high Low High Low

Availability of Analyses Low TBD Moderate High Low

User-friendliness Low Moderate High High High

* MSKCC DrugAbacus is a tool of the Drug Pricing Lab (DPL) based at MSKCC.† The PPVF consists of 5 domains described by the following criteria: patient preferences (values, needs, goals and expectations, financial trade-offs); patient-centered

outcomes (quality of life, complexity of regimen, efficacy and effectiveness, side effects and complications); patient and family financial considerations (medical OOP costs, non-medical costs, future costs of care); quality and applicability of evidence (quality of evidence, consistency of evidence, differences in treatment effect); and usability and transparency (transparent approach, meaningful information, accessible format, usefulness).

Key: ASCO – American Society of Clinical Oncology; MSKCC – Memorial Sloan Kettering Cancer Center; NCCN – National Comprehensive Cancer Network; OOP – out-of-pocket; PPVF – Patient-Perspective Value Framework.

Recognizing the increasing importance of measuring and communicating the value of pharmaceuticals, and a need for discussion on the wide-range of methodological approaches to value assessment among the currently available value frameworks, in 2016 International Society for Pharmacoeconomics and Outcomes Research (ISPOR) initiated a task force to review relevant perspectives and appropriate approaches and methods to support the definition and use of high-quality value frameworks in the US. Among the findings published in early 2018, the task force highlighted the criticality of considering the patient perspective in VAFs, and the need to consider multiple value elements when expanding the view of what constitutes “value” in healthcare.30-33

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It is important to note that while the VAFs described are among the most current and prominent at this time, they have emerged from a broader context of quality and value developed over decades (Figure 3).

Figure 3. The Progression From the Quality Era to Value-based Health Era

Affordable Care Act/PCORI

2000s 1990s

QUALITY ERA VALUE ERA

AHRQ

Oregon MedicaidExperimentNCQA

NICE

AMCP Dossier

Drug EffectivenessReview Project

IOM: Crossing theQuality Chasm

ISPOR

IOM: Best Care at Lower Cost

MSKCC DrugAbacusASCO Value FrameworkICER Evidence ReportsNCCN Evidence BlocksMACRA

Revised ICER FrameworkPPVF Version 1.0

RENFLEXIS® Approved Apr 2017; Launched Jul 2017CYLTEZO® Approved Aug 2017; Not launchedMVASI® Approved Sep 2017; Not launchedOGIVRI™ Approved Dec 2017; Not launchedIXIFI® Approved Dec 2017; Not launched

ZARXIO® Approved Mar 2015; Launched Sep 2015

NPC Guiding PracticesNHC Patient-centered Value RubricISPOR Initiative on VAFsPPVF Draft Value Framework

INFLECTRA® Approved Apr 2016; Launched Nov 2016ERELZI® Approved Aug 2016; Not launchedAMJEVITA™ Approved Sep 2016; Not launched

1990

1989 1995

1999 2001 2012 2016 2018

2000 2003 2010 2015 2017

ISPOR Special Task Force on VAFs Summary ReportsASCO Statement: Biosimilars in Oncology34

2010s

RETACRIT® Approved May 2018; Not launched

Key: AMCP – Academy of Managed Care Pharmacy; ASCO – American Society of Clinical Oncology; ICER – Institute for Clinical and Economic Review; IOM – Institute of Medicine; ISPOR – International Society for Pharmacoeconomics and Outcomes Research; MACRA – Medicare Access and CHIP Reauthorization Act of 2015; MSKCC – Memorial Sloan Kettering Cancer Center; NCQA – National Committee for Quality Assurance; NHC – National Health Council; NICE – National Institute for Health and Care Excellence; NPC – National Pharmaceutical Council; PCORI – Patient-Centered Outcomes Research Institute; PPVF – Patient-Perspective Value Framework; VAF – value assessment framework.

How to Quantify the Value of BiosimilarsHow can the value of biosimilars be quantified? One straightforward approach would be calculating cost savings generated by substituting a biosimilar in place of a reference product. However, to incorporate the full breadth of value, second-order methods should be used to demonstrate how biosimilars could provide value beyond cost alone. A more affordable product implies a greater ability for a patient to remain on a treatment regimen. This improved adherence, in turn, may lead to measurable, improved outcomes.

In the simplest of terms, the ideal VAF for biosimilars should reflect the benefits and factors associated with the patient, payer, manufacturer, and regulatory environment as described by INC Research35 and include elements currently used in the MSKCC DrugAbacus, ASCO Value Framework, NCCN Evidence Blocks™, ICER Reports, and Avalere/Faster Cures PPVF (Figure 4).

The primary limitation of the MSKCC DrugAbacus, ASCO Value Framework, and NCCN Evidence Blocks™ is that they are specifically focused on oncology products, thereby limiting the applicability to other conditions (Table 2). Nevertheless, the MSKCC DrugAbacus offers an example of how a value framework can account for certain characteristics (such as development costs, unmet need, and burden of disease) critical to improving population health that are not captured in other VAFs. The ASCO and NCCN constructs go beyond looking only at drug acquisition costs (a limitation of the DrugAbacus for use with biosimilars) and account for total treatment costs, stopping short of accounting for cost offsets. Each of these elements should be considered when evaluating biosimilar products.

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Figure 4. Elements of Valuing Biosimilar Products

Lower drug acquisition costs

• Biosimilars are priced lower than reference products; biosimilars could also affect pricing for the reference product

• Lower prices may improve patient access to therapies• Challenge: Patient copays may be equal to, or higher than, branded copays

if payers do not design policies to encourage utilization• Challenge: Higher rebates for reference products may discourage plans from

promoting biosimilars

Potential cost offsets associated with

improved adherence

• Poor adherence (for any reason) results in patients attaining suboptimal treatment benefits

• Improving adherence may lead to better health outcomes and cost offsets

Earlier treatment initiation for serious,

often chronic, conditions

• Patients who have timely access to effective therapy may avoid disease complications or morbidity

• The result may be decreased resource utilization and improved health outcomes

Patient experience • Improving patient access to care and decreasing the burden associated with financial concerns may have a significant impact on patient outcomes overall

Development and innovation

• A VAF that considers lower development costs for biosimilars may quantify resources that may be diverted to support further innovation

• Increased use of biosimilars may lead to greater opportunity to increase access to other innovative therapies and/or leave more budget for innovative therapies

• Increased competition among biosimilar products may lead to lower prices for the originator(s)

Currently, no single VAF incorporates all elements for valuing biosimilar products relative to their reference products. Each framework considers multiple dimensions of value and weights each dimension by stakeholder of interest and may not be sufficient to adequately value the biosimilars marketplace.

Additionally, while patient-reported outcomes are systematically considered, they could play an important role in valuing biosimilars. Considering the patient perspective may provide an anchor for presentation of value in cost savings to the patient in the form of OOP costs, increased choice of treatments, or access to the biologic class, or to treatments previously out of reach due to costs.

Key: VAF – value assessment framework.

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Table 2. Applicability of Current VAFs for Valuing Biosimilars

GENERAL CONDITION-SPECIFIC

Framework ICER Reports Avalere/Faster Cures PPVF MSKCC DrugAbacus*

ASCO Value Framework

NCCN Evidence Blocks™

Perspective Payer, policymaker Patient, physician Payer, policymaker Physician, patient Physician, patient

Value Measures

Efficacy; harms; quality of evidence; additional benefits/harm; contextual considerations

Domains†

• Patient preferences• Patient-centered outcomes• Patient and family financial

considerations• Quality and applicability of evidence• Usability and transparency

Life-year gain; toxicity; novelty; development cost; rarity; burden; unmet need; prognosis

Clinical benefit; toxicity; bonus points (for survival, palliation, quality of life); costs

Efficacy; safety; quality of evidence; consistency of evidence; affordability

Costs Total treatment costs and cost offsets

• Financial trade-offs• Medical out-of-pocket costs• Non-medical costs• Future costs of care

Drug costs only Drug and supportive care drugs

Total treatment costs

Pros • Cost offsets are taken into account

• Proposed method for revisions accounts for patient copays,

• discounts, and rebates• Nominally takes into

account societal value of access to therapy

• Flexible for multiple applications• Intended to support shared decision

making• Patient preferences and patient-

centered outcomes are core domains of value

• Patient OOP, non-medical, and future costs of care are explicitly accounted for

Captures value associated with development, novelty, unmet need, and burden

• Cost comparison includes drugs and supportive care

• Patient perspective

• Affordability is a specific element of value

• Patient perspective

Cons • Limited patient perspective

• Does not take into account relative development costs

• Limited payer/decision-maker perspective, since current version does not account for this; however, future versions are planned for application to existing value frameworks, support for public healthcare programs, and condition-specific public analysis

• Flexibility could lead to inconsistent application of framework and reporting of outcomes

• Oncology only• Willingness to pay

for life-year gained is a significant driver of value

• Drug costs only

• Oncology only• Primary measures

are clinical efficacy and toxicity, which are assumed equivalent for biosimilars and reference products

Oncology only

Overall Assessment

• Promising framework for valuing biosimilars; revised methodology still in development

• Details of valuation may vary from one evidence evaluation to the next, thereby introducing uncertainty in how framework may be applied to biosimilars

• The value construct and its underlying domains are inclusive of key patient- focused value elements including efficacy, effectiveness, safety, and complications

• The PPVF is promising for valuing biosimilar products

Limited benefit for valuing biosimilars

Limited benefit for valuing biosimilars

Limited benefit for valuing biosimilars

* MSKCC DrugAbacus is a tool of the Drug Pricing Lab (DPL) based at MSKCC.† The PPVF consists of 5 domains described by the following criteria: patient preferences (values, needs, goals and expectations, financial trade-offs); patient-centered outcomes

(quality of life, complexity of regimen, efficacy and effectiveness, side effects and complications); patient and family financial considerations (medical OOP costs, non-medical costs, future costs of care); quality and applicability of evidence (quality of evidence, consistency of evidence, differences in treatment effect); and usability and transparency (transparent approach, meaningful information, accessible format, usefulness).

Key: ASCO – American Society of Clinical Oncology; MSKCC – Memorial Sloan Kettering Cancer Center; NCCN – National Comprehensive Cancer Network; OOP – out-of-pocket; PPVF – Patient-Perspective Value Framework.

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While the emergence of VAFs could theoretically provide opportunities to more appropriately quantify and educate stakeholders on the value of biosimilars, their reimbursement will have a sizable impact on the development of this market and the ultimate availability of these cost-saving therapies. Congress and CMS have implemented policy changes that removed major barriers to biosimilar adoption in Medicare Part B (effective January 1, 2018) and Part D (effective January 1, 2019). However, the CMS classification of biosimilars in Medicaid still presents an obstacle and could affect the availability of these products and patient OOP expenditures throughout the US healthcare system.

CMS Has Removed Barriers to Biosimilar Reimbursement, but Challenges Remain

Medicare Part B Payment Policy

As of January 2018, CMS will assign each biosimilar a unique HCPCS code, and its ASP will not be combined with other biosimilars’ ASPs.36 This is a change from the previous controversial billing and coding policy that grouped biosimilars with a common reference product in the same HCPCS code.37

The new coding and billing policy has alleviated concerns that grouping biosimilars in the same HCPCS code would lead to a pricing “death spiral” and, therefore, dampen interest in developing biosimilars.

Effective April 1, 2018, the 2 US marketed biosimilars previously sharing a billing code have their own HCPCS codes.

Medicare Part D Classification

CMS changed several Part D policies, effective January 2019, which could improve patient access to biosimilars. Until they are implemented, however, the existing policies could increase patient OOP costs for biosimilars and reduce the cost-saving potential of these products.

Coverage Gap Discount: • Current policy through 2018: Manufacturers provide a 50% discount to patients on brand-name drugs

dispensed in the coverage gap; this discount plus the beneficiary’s OOP payments count toward true out-of-pocket (TrOOP) costs. Once the beneficiary reaches the annual TrOOP threshold ($5,000 in 2018), they enter the catastrophic phase with dramatically lower copayments. Biosimilars do not count as branded products in the coverage gap; therefore, patients using these products will be required to pay in full for prescriptions during this time.a

• New policy effective January 1, 2019: Pharmaceutical manufacturers will be contributing 70% of the total cost of brand-name drugs while patients are in the donut hole.38 Biosimilar manufacturers will join brand-name pharmaceutical manufacturers in contributing 70% to patients’ donut-hole expenses, which will count toward the TrOOP threshold.

Low-income Subsidy (LIS) Program• Current policy through 2018: The LIS Program considers biosimilars a brand. Because of this

classification, LIS enrollees are required pay the brand copayment for biosimilars ($3.70 or $8.25, depending on their level of assistance) and not the generic copayment ($1.20 or $3.30), even after entering the catastrophic coverage threshold.

• New policy effective January 1, 2019: CMS established a lower maximum copay for biosimilars that is equivalent to the lower copay required for generic and preferred multiple-source drugs.39 As a result, biosimilars will qualify for lower maximum copayments for non-LIS Part D enrollees in the catastrophic portion of the benefit and for LIS eligible individuals in any phase of the benefit applicable to all other Part D drugs.

a The Coverage Gap Discount Program also does not apply to generic drugs.

Medicaid

In a notice to participating drug manufacturers, CMS’ Center for Medicaid and CHIP Services provided guidance to states on the classification of biosimilars for rebate purposes. The notice reiterated that biosimilars fall within the definition of single-source (“brand”) drugs in the Medicaid Drug Rebate Program. Because biosimilars are considered to be single-source products, they are subject to the same higher innovator rebate, best-price reporting, and inflation penalty rebate calculations as their reference products, diminishing their advantages.

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Table 3. Differing Classification of Biosimilars as Brand or Generic, by Government Program

PROGRAM CLASSIFIED AS BRAND CLASSIFIED AS GENERIC

Medicare Part B ● ○Medicare Part D: Coverage Gap Discount Program ● ○Medicare Part D: LIS Program ○ ●Medicaid ●

Additionally, providers and patients may be anxious or uncertain about using a biosimilar product since it is a new class of biopharmaceutical and will require education to encourage uptake of these products.

The federal government has already suggested that states educate physicians and pharmacists about biosimilars to maximize their cost-saving potential; however, to our current knowledge, these efforts are not yet underway.40

Effective Jan. 1, 2018

Effective Jan. 1, 2018

Effective Jan. 1, 2018

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While biologics have provided treatment options to many patients with severe conditions, the availability of these products has been accompanied with an increase in costs of care, often limiting the number of patients who could benefit from treatment. Biosimilars have the potential to introduce price competition into the biologics marketplace, which includes some of the higher-cost specialty products available for patients to date. This would not only reduce costs for patients currently receiving the treatments but could also reach patients who have been deterred from biologics due to the expense.

The US healthcare system has been undergoing a major shift in recent years by moving away from the traditional FFS model toward an approach that seeks and rewards value. By lowering costs and/or improving quality, the introduction of the biosimilars approval pathway was tailor-made to increase value, and healthcare policies should be enacted to reflect that benefit. Despite this abbreviated licensure process, appropriate coverage and reimbursement policy for these products will be critical for biosimilars to be sustainable.

The dynamic nature of the current value assessment environment offers many opportunities to align the beneficial value elements of biosimilars with current or future frameworks. It is essential that the valuation of biosimilars reflects these elements; this is critical to ensuring access to these products and should be considered by payers, patients, and providers in determining the utilization of these products.

Considerations for the Future Valuation of Biosimilars

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References

1. FDA. Biosimilars: More treatment choices and innovation. https://www.fda.gov/ForConsumers/ConsumerUpdates/ucm436399.htm. Updated October 23, 2017. Accessed June 11, 2018.

2. ACA §7002. Approval pathway for biosimilar biological products. https://www.fda.gov/downloads/drugs/ucm216146.pdf. Accessed June 11, 2018.

3. DiMasi JA, Grabowski HG, Hansen RW. Innovation in the pharmaceutical industry: New estimates of R&D costs. J Health Econ. 2016 May;47:20-33.

4. Federal Trade Commission. Emerging healthcare issues: follow-on biologic drug competition. June 2009. https://www.ftc.gov/reports/emerging-health-care-issues-follow-biologic-drug-competition-federal-trade-commission-report. Accessed June 11, 2018.

5. Reuters. Novartis launches first U.S. ‘biosimilar’ drug at 15 percent discount. September 3, 2015. https://www.reuters.com/article/us-novartis-drug-idUSKCN0R30C220150903. Accessed March 1, 2017.

6. Pfizer. Pfizer announces the U.S. availability of biosimilar INFLECTRA® (infliximab-dyyb). October 17, 2016. http://www.pfizer.com/news/press-release/press-release-detail/pfizer_announces_the_u_s_availability_of_biosimilar_inflectra_infliximab_dyyb. Accessed June 11, 2018.

7. Stanton D. Discount dancers: Pfizer’s infliximab matching Merck’s new biosimilar rival. BioPharma-Reporter. July 26, 2017. https://www.biopharma-reporter.com/Article/2017/07/26/Pfizer-cuts-biosimilar-price-to-match-Merck-s-new-infliximab-rival. Accessed June 11, 2018.

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9. Gierer G. 6 Policy changes to reduce drug costs through a robust biosimilars market. AHIP. February 22, 2018. https://www.ahip.org/6-policy-changes-to-reduce-drug-costs-through-a-robust-biosimilars-market/. Accessed June 11, 2018.

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12. Burwell SM. Setting value-based payment goals — HHS efforts to improve U.S. healthcare. N Engl J Med. March 5, 2015. 2015;372:897-899. https://www.nejm.org/doi/full/10.1056/NEJMp1500445. Accessed June 11, 2018.

13. HHS. HHS reaches goal of tying 30 percent of Medicare payments to quality ahead of schedule. March 3, 2016. http://wayback.archive-it.org/3926/20170128195431/https:/www.hhs.gov/about/news/2016/03/03/hhs-reaches-goal-tying-30-percent-medicare-payments-quality-ahead-schedule.html. Accessed June 11, 2018.

14. HHS. Secretary Alex M. Azar II Remarks on value-based transformation to the Federation of American Hospitals. March 5, 2018. https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/remarks-on-value-based-transformation-to-the-federation-of-american-hospitals.html. Accessed June 11, 2018.

15. Center for Medicare & Medicaid Services. Remarks by CMS administrator Seema Verma at the HIMSS18 Conference. March 5, 2018. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-03-06-2.html. Accessed June 11, 2018.

16. Schnipper LE, Davidson NE, Wollins DS, et al. American Society of Clinical Oncology statement: a conceptual framework to assess the value of cancer treatment options. J Clin Oncol. 2015;33(23):2563-2577.

17. Memorial Sloan Kettering Cancer Center. Drug pricing lab. https://drugpricinglab.org/. Accessed June 11, 2018.

18. Laura and John Arnold Foundation. ICER launches new drug assessment program with $5.2 million award from the Laura and John Arnold Foundation. July 21, 2015. http://www.arnoldfoundation.org/icer-launches-new-drug-assessment-program-with-5-2-million-award-%20from-the-laura-and-john-arnold-foundation/. Accessed June 11, 2018.

19. Laura and John Arnold Foundation. ICER announces new $13.9 million grant from the Laura and John Arnold Foundation. October 31, 2017. https://icer-review.org/announcements/ljaf-2017/. Accessed June 11, 2018.

20. NCCN. NCCN unveils Evidence Blocks for CML and multiple myeloma. October 16, 2015. https://www.nccn.org/about/news/newsinfo.aspx?NewsID=546. Accessed June 11, 2017.

21. Avalere / Faster Cures. Patient-Perspective Value Framework (PPVF) draft methodology. November 2016. https://www.fastercures.org/assets/Uploads/PPVF-Version-1.0-Methodology-Report-Final.pdf Accessed June 11, 2018.

22. Institute for Clinical and Economic Review. PCSK9 inhibitors for treatment of high cholesterol: effectiveness, value, and value-based price benchmarks. November 24, 2015. https://icer-review.org/wp- content/uploads/2016/01/Final-Report-for-Posting-11-24-15-1.pdf. Accessed June 11, 2018.

23. ICER. ICER opens national call for proposed improvements to its value assessment framework. July 14, 2016. https://icer-review.org/announcements/improvements-value-framework/. Accessed June 11, 2018.

24. ICER. Comments received on ICER’s value assessment framework. http://icer-review.org/wp-content/uploads/2016/10/ICER_Comments_on_VAF_100316.pdf. Accessed June 11, 2018.

25. ICER. Institute for Clinical and Economic Review posts revised value assessment framework for public comment. February 1, 2017. https://icer-review.org/announcements/vaf-revision-public-comment/. Accessed June 11, 2017.

15

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