Note: This is an unedited transcript. For direct quotes, please see video at http://allh.us/7ypk+
SARAH DASH: You are all such a wonderful group of people. You quiet down right when — right when we’re supposed to start. I don’t have to do anything. Good morning. Thank you so much to all of you for joining us here today to learn more about the basics of biosimilars. And I think in some ways it’s a little bit of misnomer, because there’s like nothing basic about this issue. But we’re going to try to walk you through it.
My name is Sarah Dash, I am the President and CEO of the Alliance for Health Policy. And for those you who may not be familiar with the Alliance, we are a non-partisan organization that really is mission focused on advancing knowledge and understanding of health policy issues. So we are here to serve as a resource for the policy makers and the policy making community. We do not have any legislative or regulatory agenda of our own. We simply want to serve as a forum to share the information. So those of you who do work on these issues can have the best information possible at your fingertips.
So a couple of quick notes: We’re really delighted and I’m going to — we’re going to kick off the program in a minute, but this event is on the record, and we will also be live tweeting during today’s event, so you can join us with a hashtag #allhealthlive. And just a couple of quick notes about the topic today. So biologic drugs — and our panelists are going to get into this a little bit — but biologic drugs, which are developed from living cells and organisms, are many ways kind of the cutting edge of science today, and they can stimulate the body to combat debilitating diseases like cancer, rheumatoid arthritis, multiple sclerosis, and others. And what we’re here to talk about today is the relationship between these biologics and the development and sale of biosimilars, which are drugs that are designed to share the structure and functionality of innovator biologics and how those relate to patient treatment, patient access, and to healthcare costs.
So I’m not going to say too much more, because these guys are the experts. But before we get started, I do want to thank Johnson & Johnson for making today’s briefing possible. And I’m going to invite Scott White to make a few brief remarks. Scott is the Company Chairman of North America and Pharmaceuticals at J&J, to make a couple remarks. Thank you, Scott.
SCOTT WHITE: Thank you, Sarah, and special thanks to the Alliance for Health Policy. So good morning, everyone. As Sarah mentioned, I’m Scott White, I’m the — I lead the Janssen Pharmaceutical Companies for Johnson & Johnson in the U.S. I’m really pleased to see so many people interested in learning more about these highly complex medicines that we are going to discuss today, called biologics. Biologics are a critically important class of medicines that can transform lives of patients battling progressive, irreversibly damaging and often life-threatening diseases, including cancer, chronic disease, autoimmune diseases and infectious diseases.
At Johnson & Johnson, we’ve been working on the discovery and development of biologics for more than 30 years. And with the rest of our colleagues in the industry, we like to believe we’ve come a long way in providing important treatments. Today, biologics are being used to treat millions of patients around the world. Finding the right treatment and becoming stable in that treatment can be a long and arduous journey for any of these patients.
Biosimilars are near copies of biologic medicines, have the potential to increase competition, and bring down cost, which is why Janssen has long supported a patient-focused and science based regulatory framework for biosimilars. Biosimilars are not generics. And like all new biologic medicines, new biosimilars need to earn the trust of patients and physicians in order for uptake to happen. This will require, in a large part, robust standards for biosimilars and interchangeable products, as well as evaluation of biosimilar to biosimilar switching.
As I turn over the floor, there are three things I would like to leave with the folks in this room and online: The first is their confidence. Confidence rooted in evidence will support the uptake of biosimilars. Second is that competition is working. We have a highly competitive market and framework in the United States. We do see where biosimilars have launched, prices are falling, and the third thing is that policies should be available to maintain a level playing field between biosimilar products, as well as between biosimilars and their reference products.
So with that, Sarah, thank you very much, and thanks again to the Alliance for Health Policy, and we’re really looking forward to having a great discussion. Thanks.
SARAH DASH: Thanks a lot, Scott. Okay, so I’m going to go ahead and introduce our panel. Each of these panelists has really important and different perspectives on this topic. For those you, if you want, there are a couple of seats up here, up front, and over there if you want to go ahead and make yourself comfortable. Buckle up.
All right, joining us today, we have Dr. Sameer Awsare, who is an Associate Executive Director for the Permanente Medical Group. He is in charge of Pharmacy, Adult and Family Medicine, Mental Health, Risk Adjusted Coding, Revenue Cycle, Outside Medical Service, Pain Management and the Opioid Initiative. So quite a few things in his portfolio. Dr. Awsare joined the Permanente Medical Group in 1993 and he received his bachelor’s degree in biology, and his MD from UC Irvine. And he’s a Fellow of the American College of Physicians.
Next, we’re going to hear from Jeremy Sharp who is a Senior Vice President at Waxman Strategies. Jeremy has policy experience in both the executive and legislative branches of the federal government. Most recently in government he served as deputy commissioner for policy planning, legislation and analysis at the U.S. Food and Drug Administration, FDA. Before working there, Jeremy served as Legislative Director for Senator Christopher J. Dodd. Senator Chris Dodd; as a professional staff member on the Senate Health Committee — Subcommittee on Children and Families. So welcome, Jeremy.
We will then hear from Adam Fein, who is the Chief Executive Officer of the Drug Channels Institute. Dr. Fein has delivered educational programs across the country to more than 55,000 executives across a wide range of industries, and he — every talk is customized to meet their specific needs of their audience, and so he works with a number of folks across the industry, and he’s going to talk to us today about some of the market regulation and dynamics and payment issues associated with biosimilars and biologics.
And then we’re delighted to be joined today by Anna Hyde who is Vice President of Advocacy and Access at the Arthritis Foundation. She oversees both the federal and state legislative program in addition to grassroots engagement. Prior to joining the Arthritic Foundation in 2014, Anna was the Senior Manager for Federal Affairs at the American Congress of Obstetrician and Gynecologists, where she managed a numerous portfolio of health policy issues, and began her health policy career right here on the Hill as a Congressional Fellow for the Energy and Commerce Committee.
So with that, I’m delighted to turn it over to Dr. Awsare to start our panel. You all have slides in your packets and they will be broadcast up here. Dr. Awsare, go ahead.
- SAMEER AWSARE: [mic is off] Well, good morning everybody. [inaudible] internal medicine [inaudible] in addition to doing some of those other things on the side. So I work at Kaiser Permanente, which hopefully you are familiar with, one of the largest integrated delivery systems in the United States, taking care of almost 12 million patients across the United States and the District of Columbia, [inaudible] by Union Station.
So it’s a pleasure to be here today. And I’m going to talk a little bit about biosimilars. And I think it was already mentioned that biosimilars are a little bit different than generic drugs. Because generics are exactly the same ingredient as the brand name drugs. And the dosage is the same, the way it’s administered is the same, the safety is the same, and the performance characteristics are exactly the same. So patients are now quite familiar with generics and feel pretty comfortable taking those.
Biosimilars, on the other hand, are actually made from living organisms. Sometimes it’s [inaudible] from rats, sometimes from humans, sometimes from mice, et cetera. So they are not exactly the identical agent as generics are. And so there can be some variation in the biologic, but when research is done, there’s actually no clinical, meaningful difference. So in a way they are like a generic, but they are not exactly like a generic. So that’s important for you to see. And you can see a little depiction there that generic drugs are small molecules, versus these biologic molecules are large.
So I think I wanted to focus you on really what problem are we trying to solve in this country. And what you see up there is data from the Kaiser Family Foundation, which is not actually related to Kaiser Permanente, but one out of four people in the United States actually have a difficult time affording their medicine. And it’s all of them — biosimilars and just regular kinds of medicines as well. And today, prescription drug prices account for almost 16 percent of what people are spending on their healthcare. So definitely an issue, and if you follow any of the polls, 75 percent of Americans are really worried about the cost of affording their medication.
So the Rand Institute did a study very recently and they discussed that if we really had an uptake of biosimilars like we’re having in Europe and other parts of the world, we could have a potential reduction of almost $54 billion in healthcare spending, and definitely want to make sure we can have that. For us as a integrated delivery system, it’s the same money that we get from our purchasers and we have to decide, are we going to spend it on drugs, build a new hospital, get the next MRI machine, lower the cost of insurance for our members. So it’s really important if one piece of the pie is starting to take more and more of that money that we get, and we really have to figure out how to take care of our patients.
And the New York Times — and I’m not knocking Humira, it’s a — but they had an article on Humira recently that price goes up every five months. And if you actually look over the last 2.6 years, the price went up 64 percent. I’m sure the manufacturing cost did not keep going up through all of those times. So definitely is a concern for an integrated delivery system. A concern for my patients who actually have co-pays and have to pay for these medications.
So this slide was made in December and my colleague Jeremy just pointed out to me that there’s now 17 biosimilars approved in the United States, and currently only three of them are available for patient use. You might say, well what the heck is happening? Well, a lot of it is actually tied up in patent litigation. So I just listed a few of them. Many of the pharmaceutical companies are litigating and that has held off a launch of many of the biosimilars that are available in the rest of the world. Sometimes there is a phenomenon called Pay for Delay. So you might have heard about a particular pharmaceutical company telling a different one to hold off bringing a product to market and I think there is a — I won’t mention the name, you can just Google it and you will find it. But they call it a licensing issue, or whatever they want to call it, and I think John mentioned that perhaps we ought to be looking at how the laws are made in this nation and whether that is a good thing for our patients.
So here is the EU, and maybe they’ve got three more biosimilars, I’m not sure. But they actually have 53 of these approved already. But they did get a head start on us. They started getting these biosimilars out perhaps a decade ago, and their laws were a little different and so they definitely have had many more biosimilars. So there is 15 products with 53 biosimilars. Again, a little bit ahead of us. They have a lot of data on safety use, et cetera, compared to what we have here in the United States.
So what has that done? So if you take a look at that slide, the cost of biosimilars in Portugal went down 66 percent. And there you see a whole bunch of different countries from Europe, where you actually see that the entrance of biosimilars has increased competition and actually lowered the price. But the graph on the right is really the most interesting one, because as the prices went down, patients were actually able to afford it. So when people needed these drugs, and the prices were reasonable, they are actually able to take their therapy. And as many — if you know — a third of patients don’t actually listen to things we tell them. And I’ve had patients who could not afford their drug and were taking it every other day, and got sick and got admitted to the hospital, and finally when you try to find out what happened? We have them on the right therapy, they’ll say, my goodness, you know, doc, I didn’t tell you. I couldn’t afford my medicine. I wasn’t taking it like I was supposed to take it. We have to get them financial assistance, and they did well. So again, it’s not just competition and lowering the price, it’s actually getting our patients what they need at a price that they can afford.
So here’s what’s important to physicians like me and in Kaiser Permanente and the rest of the country: There’s a lot of misinformation about biosimilars because they are not like generics — identical compounds. So people often wonder: Is this effective? Is it just as safe? Is the presentation the same? And I’m seeing a patient who is well controlled on their medication — I have to talk to them about a biosimilar and they are going to go — are you sure Doc? Do you want me to switch this medication? I’ve been doing well for a few years. Why do you want me to switch? And again, sometimes there are differences in patient convenience. As you see a lot of the patents on biosimilars — on biologics are gone, and biosimilars are coming out, and now they are actually changing the formulation just a little bit. Maybe it doesn’t have citrate or maybe instead of taking it, you know, two times a month, you now have to take it once a month. And guess what? The next biosimilar is 20 years away. So we are changing the convenience factor a little bit, and if I was the patient, I would definitely want that convenience. But the price is going to be tremendously higher.
So those are the sorts of questions that I think patients have as well, and I’m going to hold off on that, because Anna is going to give you a lot of information on the patient perspective. But this is kind of what’s on the physician’s minds when they have to think about whether they should switch to a biosimilar.
So I want to give you an example of Zarxio, which we use for neutropenia. Neutropenia is when your immune system is suppressed after chemotherapy. And when the first biologic came out — this is the biologic — biosimilar for Neupogen. We were faced with whether we should use this in Kaiser Permanente, and as usual, you know, my doc said, well the research is from Europe. I said, so? Is there any American research? All right, now we have research from America. Well, how does it work in our patients? I said, all right, why don’t we try it in some of the new patients who have not been on it, and see what happens. So we actually did our own little study. And when we used Zarxio compared to Neupogen, we actually found that there was less neutropenia with the biosimilar. Maybe it was a bio better, but it wasn’t statistically significant. And that actually convinced our physicians. And then we went to Pharmacy Contracting and we said, you know what? These two things are equivalent and the safety is the same, and the patients do really well. Can you go get a good contract? And I believe the makers of Neupogen said, no way. And we said, all right, we’ll move the entire market share if you don’t work with us. And actually, they didn’t believe us, but here is what happened then. Today, almost 98 percent of the product that we use in Kaiser Permanente is Zarxio and Neupogen is almost gone.
And similarly we had a new biosimilar that came out last year, which is Inflectra, which is for Remicade. And you might be shocked to that our market share according to Pfizer to last year was 80 percent compared to the national market share of 2.3, and I checked this year, Jeremy. We are down to 50 percent, which means we are making progress in this country and other people are actually adopting biosimilars. But again, it requires a lot of education on behalf of our physicians, on behalf of our patients. And again, Remicade has many different indications. Our rheumatologist said, yep, no problem, European studies are good, we can switch. Not a problem. Our dermatologist said, yeah, we can do that too. Our gastroenterologists weren’t as sure, and they said, well, you know, it’s complicated, even Remicade doesn’t work all of the time and if my patient is stable, am I going to switch? And it took a little bit of effort.
But as you can see, these numbers have now improved, and again, we have significant cost savings, which we can then use to build another office building like the one they have next to Union Station, or actually afford the next CAR T therapy, or the four million dollar drug that Novartis is trying to bring out. So often this actually just allows us to have access for our patients. The next best thing. Which is a good thing.
So I think the U.S. biosimilars market is at a critical juncture and even though the uptake is improving, it definitely has not materialized like it has in Europe. We definitely lag in the number of products we have. We actually have not seen the price reductions as high as you see in Portugal. It’s definitely not 66 percent. And there may be several reasons for it. Definitely physicians not being educated about how well they work. Patients not understanding how they work. PBMs maybe not putting it on there. Maybe some Pay for Delay going on. And this is in spite of these drugs having really good efficacy and safety. So that definitely is something we hopefully can talk about here today, and perhaps you all have some questions as well. And then as you mentioned, John, definitely there ought to be some policies looking at what can make this work a little better for our nation. Our patients are depending on it. So with that, I’m going to hand it back to you.
SARAH DASH: Thank you so much, Dr. Awsare. I once heard it said that making a generic was kind of like making a chocolate chip cookie, like a Nestle Toll House cookie, and making a biologic is more like making a souffle. So I don’t know if you would agree with that conception, but these are certainly more complicated drugs and complicated diseases. Is that — ?
- SAMEER AWSARE: They absolutely are much more complicated than a generic, which is an identical substance. You are absolutely right.
SARAH DASH: Thank you. All right, Jeremy Sharp, bring us into the FDA world.
JEREMY SHARP: Good morning, thank you all for being here and thanks for having me here, Sarah. My name is Jeremy Sharp, I’m a Senior Vice President of Waxman Strategies, as Sarah said. Waxman Strategies is a public Affairs consulting firm here in D.C., we work with a variety of clients on issues that were near and dear to our chairman’s heart — Henry Waxman, former Member of Congress. And one of those issues we get to work on is drug pricing and how various policies affect that, and we enjoy that. We enjoy getting to work on that very much. We’d love to be able to help solve some of the problems so that we don’t have to work on it anymore, but that’s probably a little ideologist.
Today what I have been asked to speak to you all about is both the regulatory regime that FDA works on, and some of the history legislatively and regulatorily. And basically how is FDA thinking about biosimilars and to a lesser extent, interchangeables. So just because the audience ranges from people who clearly know more than I do about this issue, to people who are just starting out in this, I wanted to start with a few of the basics. FDA, or actually the U.S. Government has been regulating biologic and drugs for more than 100 years in various forms. Some of that regulation isn’t anything like what we would recognize today. The modern regime dates back to the middle of the last century, roughly, with some significant modifications, mainly in 1997. And then a few other pieces along the way. The components of FDA regulation are largely bucketed into pre-market review of applications, which is the requirement that companies submit large scale clinical trials in three different phases to FDA. They do the clinical trials in three phases, they submit them all at once to FDA. And for FDA to evaluate those clinical trials to see if they demonstrate safety and efficacy and the balances of risk and benefit for those products. And that’s a long standing standard that FDA has used to evaluate medical products in this country. We’ll get into why that is important, in a second. FDA regulates labeling, what the company and what the drug label can say about the product. What it can do, what it’s risks are, what it’s safety is. This is a critical part of FDA’s ability to regulate products, and importantly FDA also has rules about what companies are allowed to say that is not on the label. And that is also just as critical. This is not an issue that has become as hot with biosimilars yet, but there is some subfactors in there that will matter. Manufacturing; FDA always makes sure the manufacturing of the product is up to snuff and safe. That’s particularly important with biologics and biosimilars. And then of course post-market surveillance and adverse event reporting. Once it’s on the market, we find out it doesn’t work the way the clinical trials show; is it safe, is it effective? What are the risks that we didn’t understand when we first looked at this product?
FDA’s regulation of biosimilars, as I said, dates back — sorry, biologics — dates back a ways, but their regulation of biosimilars really can be dated back to about 2006 when — after the European Union, EMA, approved a growth hormone biosimilar. A company took FDA to court to get them to approve Omnitrope. At first, FDA was not prepared to do that, but the Federal Court made them do that, and they used the 505(b)(2) pathway, which is a complicated new drug application pathway that existed in the law at the time to approve Omnitrope. However, FDA said at the time, this is not a pathway for approving biosimilars and we do not have the legal authority to do that, and we don’t have the structural way to make that happen. So that kicked off — or I should say it accelerated a Congressional debate about whether or not, and how to give FDA that authority. And for about four years, that debate raged. There were a number of bills introduced by members ranging from my boss, Chairman Waxman, to Chuck Schumer, to Ted Kennedy, to Jude Greg in the Senate. Orrin Hatch was involved with Senator Kennedy; to try to find compromises. And Congress debated things about what should these be called? Should they be generic biologic, should they be following biologic, should they be biosimilars, interchangeables? Some of the terminology that we now accept today wasn’t necessarily what was going to happen.
And there were debates about how much exclusivity a product should have. How long a biologic should — a reference product, a brand name biologic, should have on the market without competition. And there were questions about what standards should be set in law. Some of the standards range from just comparability to much more robust measures of therapeutic equivalents or therapeutic matching. Finally, in 2010, the Affordable Care Act was passed and as part of that legislation the Biologic Price Competition And Innovation Act was included. And this laid out what is the current mechanism by which FDA regulates biosimilars and interchangeables. And we are now in this period that started in 2010 of FDA implementing that law.
A key piece for people to understand about this, Sameer touched on this, but biosimilars are not generics. They are not identical. And the statute lays out for FDA a standard for biosimilars. It must be highly similar with no clinically meaningful differences from the reference product. And that’s in terms of safety, purity and potency. That means it doesn’t have to be exactly the same. But there needs to be evidence that FDA looks at and considers to make sure that it basically works the same way and has the same impact on the human body generally speaking. Interchangeable standard is a higher standard. An interchangeable biosimilar can be expected to produce the same clinical results in any given patient as the reference product. And the sponsor may also need to demonstrate that if you switch between the reference product and to the interchangeable and back, that there will be no greater risk to that switch or being on the interchangeable then there would have been if you had remained on the reference product. This gets at what Sameer was talking about in terms of establishing some of the confidence in the provider groups and the patients.
So how does FDA think about this? FDA is very committed to making sure this program works, that the biosimilars are available, that we have a high degree of confidence in them, and they think about it in a few different ways: One is they want to make sure that as any product that is approved by the FDA — biosimilar, interchangeable, or biologic, there is a high degree of confidence in he patient community, the provider community, and the payer community that that product is safe and effective, and worth covering, worth taking, worth prescribing for your patient. This relates to the next bullet here: Immunogenicity. I should clarify; I’m not a scientist, I’m not a doctor, I’m not a lawyer and I’m not an economist. So there are many ways in which I was an odd duck when I was at FDA. So everything I’ve learned about this product, I’ve learned from the scientists, doctors, economists and lawyers at FDA about how this works. Immunogenicity is one of the words they taught me, which is: With these kind of products, one of the major clinical concerns is that slight changes in the chemical structure of a biologic can have more profound effects on the human body than is expected from the slightness of that change. And — and of particular concern is, does a biosimilar cause an immunoresponse in the human body that either causes a safety issue for the patient involved, or at the very least, undermines the effectiveness of that product. And so FDA wants to be confident that the biosimilars and interchangeables that are approved are not at greater risk on that front.
The third major point I would talk about here is pharmacovigilance. Because of this complexity, because of this new space that we’re in, where they are going to be — actually, let me talk about the approval process for biosimilars before I talk about this. Essentially with a regular drug, you have to submit clinical trials, you’ve done them in three phases. Those clinical trials have to demonstrate safety and efficacy. That is not the standard for biosimilars. You need to have the standard on the page before, which means that a product sponsor submits applications that are made up of analytical studies, functional assays, and then some clinical data that they have developed, but not nearly in the quantity or volume that was done for a new drug application or a biological license agreement. And so FDA is essentially getting a lot less data when they are looking at biosimilars, and that’s what makes it cheaper for a company to do, in theory. The risk there is that they may not get all the information that they would have wanted, or that they are used to getting for a product of this complexity. So a high importance for FDA is pharmacovigilance, the ability to track these products once they are on the market, see how they are working, see what adverse events are happening, and how that traces back to either a biosimilar product, or it’s biologic reference product. And that’s some of what’s driving some of FDA’s decisions on guidance’s and policies that they have made. FDA has made a lot of progress in this time. I think many people would say, oh my gosh, it’s very slow. Having been inside of FDA, I feel like FDA has gotten quite a bit done, and it’s a lot harder to get these things done than we expect. Since it’s an [inaudible], at least by my count, FDA has approved 17 biosimilars, matching nine different reference products. They have 65 enrollees in their biosimilar product develop program. And this is a program by which a company enrolls and engages with FDA, trying to develop its clinical data assembly program, so that they are doing the right work ahead of time before they are submitting to FDA.
A number of reference products are already — had meetings with FDA, and then there have been a bunch of guidance’s. My count was 11 roughly. There are more to come. Commissioner Gottlieb has made a major priority of trying to improve FDA on this matter. He launched in the summer of last year the biosimilar action plan, which laid out in four categories some of the things he wants to do. Generally speaking — I will let you read the slide, but generally speaking some of the things that he has talked about doing, is trying to make sure that FDA is giving more clarity to companies about what FDA expects. Is trying to give more tools to companies for them to develop the data that FDA will expect. And then more communications with the outside world about how this is going to work. The least fleshed out part of his plan is reducing gaming of this. We talked about patents and Pay for Delay. His plan lays out an intention to work with the Federal Trade Commission and to address some REMs issues that also exist in the generic space. These are issues that I expect he will be putting more flesh on the bones of later, but they haven’t been laid out quite as much as some of the other matters.
Some of the questions that I think policymakers may want to think about as they’re considering this. As they are trying to create a stronger biosimilar market is: What are the actual biggest obstacles to biosimilars coming to market? Is it the regulatory standards by which the product gets approved — reviewed and approved? Is it the ligation that happens after approval? Is it the reimbursement that happens at the back end? Is there a market there for companies to decide they are going to invest in? People on this panel will be better equipped to speak to those answers than I will in some cases, but I think that’s a major threshold question all policymakers should be thinking about before they dive into answers.
Some of the questions that relates to the regulatory question is: Has FDA gotten this right? Are they assessing the risk correctly here? Are they creating these right standards? Are they addressing the correct uncertainties in scientific matter? I personally tend to defer to them in these matters, but it is worth asking these questions. A question I didn’t put on here, which I’ll end with, is whether or not the exclusivity period is the correct length of exclusivity period, and whether or not other policies were considering, such as the new trade agreement, will have a positive or negative impact on that. Are things the policymakers need to be thinking about that won’t be right in front of them some of the time. So with that, I think that wraps up my presentation. I will let Adam take over.
SARAH DASH: Thank you. And Jeremy, that was a Tour de Force, but before we turn it over to Adam real quick, just to ask you — you talked about the difference between — or the legal difference between a biosimilar and an interchangeable, and some of the scientific difference. Has any interchangeable product been approved or thought about yet?
JEREMY SHARP: No, no, I don’t believe any interchangeables have been approved. FDA is not — I have not heard FDA identify that have received any interchangeables, and I don’t know how many times companies have engaged with FDA on interchangeables. Because of confidentiality issues, FDA can’t always be transparent about that, and it often depends on the companies involved, saying we have done these things. They do have some — well, they have numbers, like where the number of enrollees in the biosimilar product development program, they are able to share that when it doesn’t expose what the company is doing or what it’s [inaudible]. But my sense is that that is not as robustly developed in the private sector space.
SARAH DASH: Adam?
ADAM FEIN: Okay. All right. Good morning everyone. I’m going to start off by giving you a gift. I will not use PowerPoint slides. I know that is sort of non-traditional. But the other good news, as Sarah said, I may not do my presentation in interpretive dance. So we’re going to just kind of run with it, but I think it will be okay.
That was very interesting what we heard, but I want to take a little bit of a different spin on what’s actually been going on in the marketplace. Now, many people may not realize this, but our healthcare system is a little messed up. Have you heard this? You may have. And one of the things it’s messed up in is the incentives are completely out of whack for almost everyone in the system. For payers, for physicians, for hospitals, for almost everyone. For wholesalers, for pharmacies — even for manufacturers. And that — those warped incentives — the distortions in our system, are leading us to not adopt biosimilars in a way that other countries have. Now obviously some of them haven’t even been approved, because litigation issues, and I can’t comment on that.
I want to just talk about the biosimilars and what’s been happening in the marketplace. And I want to talk about the two kinds of biosimilars that have been approved. One kind, I think we mentioned there were 17 approved biosimilars, four of them are what we may call “pharmacy benefit”, the kind of prescription that you might get at a pharmacy or a mail pharmacy. Where someone writes a prescription, you get a drug, you give it to yourself. The other 13, we call them “medical benefit” products, where typically it would be administered by a hospital or in a physician’s office. Where you’d have to go somewhere and have something infused. Thirteen of the products fall into that category. The one that we heard about earlier, Zarxio Neupogen, falls into that medical benefit category. And each of them have very different reimbursement models.
Let me talk about first the medical benefit, that buy-in bill. And some of them are called “buy-in bill”, if you are not familiar with that, because the provider, the hospital, or the doctor’s office, buys the drug typically from a wholesaler, puts it into their inventory in their office, and you and I come in, they give us the drug, and then they bill the insurance company afterwards. So the model in the Medicare system, that would be under Part B, as in “boy”. And the commercial world, commercial health plans, it would be a medical benefit. And that system has created some very warped incentives. For example, in both Part B, and in the commercial market, the hospitals or the physician offices are paid based on the — essentially a mark up on the price of the drug. The pre-rebate, pre-discounted list price of the drug. So if I have a brand-name drug that costs X, $100, and I have a biosimilar that costs $80, I as the hospital or the physician, will actually make more money if I dispense the one that is $100. That slows the adoption of biosimilars in this country. The other thing that happens is sometimes for the other occurrence in our system, is the presence of rebates or transactions that occur after the prescription is written or the drug is given, between a manufacturer and a health plan, or the manufacturer and the agent of a health plan called a pharmacy benefit manager, a PBM, which I will talk about in a minute. And those transactions reduce the actual price of the drug to the payer, but may or may not affect what the patient pays, or what the hospital gets.
So for example, let’s take that $100 drug, that could have a $50 rebate. And then the real cost of the plan could be just $50. But the patient may be asked to pay a percent of the $100. And that happens in the Medicare Part B system. It happens there through a program that I’m sure you may or may not be familiar with: 340B Drug Pricing Program; one of my personal hobbies. And that’s led to incredible distortions. In some cases, hospitals can buy drugs for 60 to 80 percent off the price that Medicare pays. They get that difference, but the Medicare patient has to pay a percent of that full price. Some hospitals will share the savings with the patients, but there is clear evidence from the GAO and others, that some hospitals will not sure the savings with the patients. So while I hear your point about patients not being able to afford prescriptions, and I’d love to come back to that later, in many cases that money might be somewhere that’s not going to the patient. So that creates some warped incentives in our system, and that’s why when you see the data from Kaiser, it’s very interesting; they somehow have a — I think you said 80 percent substitution rate, whereas the rate in the market overall, if I read that slide correctly, was 2.3 percent. We have to ask, why is it that every other hospital and doctor is thinking about this? When they save money on a drug, with all due respect, they are not using it to pay for another drug, they are not an insurer. That’s just money that goes into their operations. And a lot of our health systems are very large. They are very powerful. They are technically non-profit, but they behave in a profit seeking way.
So this has led to a very slow adoption of the biosimilars that have been launched. When you get rid of the pharmacy benefit side, that looks more like the kind of drugs you and I get at a pharmacy. Now of the four drugs that have been approved, none have been launched. Three of them are biosimilars of the largest drug in the country, Humira. Two of those three — now you are doing some math here — but two of the four, if you will, have signed agreements with the manufacturer of Humira not to launch their product till 2023, in exchange for not being subject to litigation over the patent issues. One of them is not signed, as far as I know, and the other product is a biosimilar for a competive product to Humira, and it is also engaged in some sort of litigation that I have a vague understanding of.
When you get to the pharmacy benefit side, remember the products we’re talking about are not generics. They are not interchangeable. They can’t be automatically substituted. You know, today in almost every single state, a pharmacist is required to automatically substitute a generic without even asking you. Unless your doctor says, no, they must have the brand. Or the payer says, we’re not going to pay for the generic. But almost every state — not every state — but in almost every state, the pharmacist has to do it. Here biosimilars are not interchangeable. They can’t be automatically substituted. The pharmacists can’t say, “Hey, there’s a biosimilar, I’m going to give you that one instead.” They essentially are different drugs. For all practical purposes they are — they are the ultimate “me too” drug. Your doctor has to write a separate prescription, which means that the control of what biosimilar gets used, doesn’t sit with the patient and is going to barely sit with the prescriber. It’s really going to sit with the company or entity that’s paying for our drugs — the employer, the government, whomever. And almost every one of them uses an independent agent, or an agent they own, called a Pharmacy Benefit Manager, to choose the drug. And we have a very — we have a lot of really crazy, warped incentives in the system. And one of the warped incentives we have is that it’s often more attractive to a payer — to your employer — to pick a drug with a very high list price and a very big rebate, as compared to picking a drug that just has a low price. This is very complicated issue, and it is slowing, and will continue to slow the adoption of biosimilars. Just to give you — I will give you back my $100 drug. That $100 drug, with a $50 rebate is more attractive to a payer than a $50 drug. Because the $50 is going somewhere. It’s going back to the employer, it’s going to lower the premiums of all the other people in the plan. It’s going to offset other costs. It’s essentially like a — money that comes later. You can do whatever you want with it. And that kind of distortion is really affecting the ability of biosimilars to be adopted quickly.
Now my personal feeling is, if you look at the pharm industry and just zoom out for a minute — on that pharmacy benefit side, nine out of ten drugs dispensed in the U.S. now, 90 percent are generic drugs. They are cheap, they are getting cheaper, they are in a massive deflationary cycle. Of the other 10 percent, a lot of them are these highly rebated drugs where it’s hard to get that price down, and people feel it. And you know, the next — and we have a number of drugs on the market now, biologics, which have been around for a while. They had a good run. But it’s very hard to get — they substitute it, there is scientific issues, but there is also these reimbursement issues. And until we can kind of figure that out and have the same thing happen to biologic drugs that happened to brand name drugs that all became generic, we’re not going to create the headroom to be able to afford the next generation of therapies.
And I guess I’ll make one other comment: Pharmaceuticals are both the pharmacy and the medical benefit combined. About 15 percent of all that we spend on healthcare. Have been for quite a few years, projected to be so for the next few years. That 15 percent we spend 99 percent of our time talking about it. We don’t talk about the other 85 percent, and there’s a good reason for that, which I don’t have time to go into. But when we’re talking about this, we’re really talking about how do we just keep that 15 percent at 15 percent, which is not an unreasonable number. And I think that’s a bigger question as we think about trying to get the system to adapt to biosimilars. So I’ll leave it there.
SARAH DASH: Thank you. Adam, can I — at the risk of sort of [inaudible], I wanted to clarify for a second, because when you talked about the four biosimilars that are approved that are under the pharmacy benefit, so that would be Medicare Part D as in “dog”, right? And then the 13 would be the medical benefit under Medicare Part B as in “boy”?
ADAM FEIN: Correct.
SARAH DASH: And then you talked a little bit about the pharmacy benefit. So can you talk a little bit more about kind of how the rebate system you talked about relates to those two, at least as far as currently on the market, and then how does that translate into the commercial market? Just to kind of clarify where it shakes out for everyone.
ADAM FEIN: Rebates are primarily in that pharmacy benefit side of the world, both in the commercial insurance and in Medicare Part D. Medicare Part D rebates are about 30 billion dollars and commercial maybe it’s about 45 billion dollars total, that represent on average 40 percent or more off the list price of the drug. In some cases, 80 percent off. On the medical benefits side, Medicare Part B doesn’t have rebates for the government, but it does have, on the commercial side — like a commercial health plan or an insurance company, could negotiate an arrangement with a manufacturer to have rebates to sort of drive product selection. They tend to be used less often there, because in the pharmacy benefit side, we all know you go into the pharmacy and you show your card and they swipe it and they say, oh, this drug is or is not covered. And you can then do something about it or not. Pick it up, not pick it up, whatever. In the medical benefits side, remember I said it’s “buy and bill”, so in many cases the physician has a lot more autonomy and again, this may not be a surprise, physicians generally don’t like insurance companies. They don’t like taking medical advice from insurance companies. So they want to make that decision and in some cases they will actually give that drug, and then say, well, I billed it. That’s it. So there is many fewer restrictions on what physicians can do. So you don’t have as much ability — the health plan doesn’t have as much ability to control things. And one of the proposals that HHS has put out, is try to bring some of the tools that health plans and the commercial side try to use, into Medicare Part B, but that’s very controversial.
SARAH DASH: Thank you so much. Okay, we talked about the scientific issues, some of the regulatory issues, some of the reimbursement issues and then of course at the end it all comes down to how does this affect the patient? So Anna, could you share some of your insights with us?
ANNA HYDE: Absolutely. Thanks for inviting me to be here. This is a really rock star panel. I have been with the Arthritis Foundation for about five years, so it’s kind of interesting to see the arch where five years ago we didn’t have any biosimilars approved, let alone on the market. And now we’ve got 17 approved and however many on the market — three? And two of them are for arthritis, which actually leads me to my first point, which is, why does this matter for people with arthritis? People with arthritis, particularly rheumatoid arthritis, psoriatic arthritis, other forms, rely on biologic medications to stay healthy. There are a lot of rheumatologists who treated arthritis patients pre-biologic, and they described their waiting rooms as a sea of wheelchairs. And that’s not true anymore because of biologic medicines. So they really have been game changers for people with arthritis, and because it’s a chronic disease, people who are on a biologic medication can maybe anticipate being on one for the rest of their life. So the access and the cost really, really matter for this population.
So of the — there are seven that have been approved in this therapeutic area, and two are currently on market. And what’s interesting there is that they are both on the medical benefit side and they are both for the same reference product. And I believe we’re the only therapeutic area for which that is true so far So it gives us kind of a real life test case of what’s going on, at least with CMS policies in that space.
Out-of-pocket costs always ranked high on our surveys. We do surveys regularly of our patient population. It’s always up there. And then really, what we’ve been saying for years is that biosimilars hold promise for reducing costs and thereby increasing access. And I’m not just talking about being able to go to the pharmacy county and pick up your drug, but what you heard earlier about being able to adhere better to your drug. Okay, so that brings up two questions: What do patients with arthritis think about biosimilars, and are they using them?
On the first question, we have done a couple of surveys now, and this — it’s from 2017 and five years ago, just — the way that we’ve talked about and thought about biosimilars has evolved greatly. I’m really curious to see how the next five years evolves. But I would almost say that this data is old now. Even though it was only a couple of years ago. Less than half in this survey were familiar with biosimilars, and 27 percent had never heard the term. I wouldn’t be surprised if that data tracks similarly to what we would find now. And I imagine that we will repeat this survey sometime soon. There is confusion about the difference between a biologic and a biosimilar, and frankly a lot of patients are confused about what a biologic is, period. It is a complex medication. You know, people — they — they know the basics maybe, they listen to what their doctor has to say, they look for information in various places and if the medicine works for them, they are happy. A little over half of respondents said that they would be confident using a biosimilar knowing they have been approved by the FDA, and that data has borne out in other focus groups and things that we’ve done. People trust the FDA. If it’s approved by the FDA, it’s a trusted resource for them. And really, they care deeply about — this comes up over and over, I can’t stress this enough. The provider-patient relationship; they want decisions about [inaudible] to be made at the provider level. I feel like — and not just about biosimilars, but when we talk to patients about what their challenges are in the healthcare system, over and over and over again, it’s really about control and stability and being able to have some control over what’s happening to them in their treatment decisions. And then once they are on a medication that works for them, it is so vitally important to them that they are able to stay on that medication. We hear that over and over and over again. It often can take a long time to get diagnosed and when we talk to patients about what that experience is like, it’s very dark for them. And they just want their life back — that’s what we hear a lot. And so once they find something, it really is miraculous for them.
Okay, so are patients then taking biosimilars if it’s supposed to reduce cost and increase access? In an answer, no. And you’ve already heard that today; biosimilars have not been able to crack into the market to the rate at which maybe some of us anticipated a few years ago. Why would an arthritis patient not take a biosimilar? Based on our conversation, surveys, focus groups, et cetera, there are a few key themes that come up. One is simply they don’t know about them. They are most likely going to find out information about treatment options from their healthcare provider. So if a doctor isn’t talking to them about it, they are not likely going to go then, look — you don’t know what you don’t know, right? They are not going to go looking around for — for information on something that they are not familiar with. I think that this has changed a bit. It’s starting to change a little bit at least in the rheumatology space. More providers are talking to their patients more often about these drugs. They fear that they won’t work as well, and you’ve heard that already today as well. And I don’t think that that’s a scientific issue, I think it’s an emotional one. And I hear that from providers too, who — I don’t that just exists on the patient level, I think it exists at the provider level too. They have concerns about interchangeability and I really think that that is a matter of not understanding what interchangeability is, and I think that goes for a lot of us, not just a patient issue. Interchangeability is really just a flashpoint for a lot of us. And then really, ultimately, aside from hearing about it from your provider and having those conversations, it’s — you know, having access to your formulary, or your out-of-pocket costs being significantly lower. I mean, truly — the value proposition of a generic for a patient is the lower cost. The same would be true for a biosimilar if it’s clinically efficacious and it’s equivalent to the biologic drug, why would you want to switch to it? Because it costs less. It’s going to impact your pocketbook and perhaps your administrative burden is going to be lower as well.
The other thing is, you know, because we have seven biosimilars approved for arthritis and only two on the market, we have to sort of be careful about how we talk about the promise to patients, right? Because if we say all of these great things about how it can make your life a little bit easier or because you’re not stepping through as many hoops, or your out-of-pocket cost is lower, and then they go say, “Okay, healthcare provider, I really want to try a biosimilar.” And then health provider than has to say, “Well, guess what, five of them aren’t on the market, and you can’t access it.” Literally, you cannot access this medication. We have to be careful about sort of tempering expectations, right? With our patients. So that’s the other kind of piece there.
So where do patients turn for information on biosimilars? Their healthcare provider — we’ve already talked about that — that really is the key source that patients go to for information. The FDA is another one, we’ve talked about that as well. Kind of the third that ranked really high on our list when we did the survey, was they look on the internet for better and worse, so 6 percent in our survey back in 2017 went to the internet looking. And if you Google search biosimilars, the first five or six searches that come up are pharmaceutical company ads, right? And then eventually you get down to maybe the FDA and some other places. There is a lot of biases information and misinformation around what biosimilars are. And I think what we’ve seen when we talk to patients about what they find on the internet about biosimilars, is it just adds to their confusion, as opposed to lessening their confusion. That’s become a particularly big flash point for us in the last year or so, and trying to combat some of that.
So what are we doing with these insights? Really, we’ve done patient education around biosimilars for a number of years now and I think what we’ve learned particularly in the past year with what we’ve seen in the marketplace, is that what we want to do is normalize the term “biosimilars”, that’s really what we’re talking about. If patients are confused about biologics, let alone biosimilars, and providers aren’t necessarily talking to them about it, or even maybe providers are confused about what some of the differences are, what we really need to do now is normalize the term. Make it a comfortable term, make it a household term, which it really isn’t at the moment. Working with provider groups on patient education — this is another key piece. I hope I’ve made that case throughout this presentation that that — it’s not just about us educating patients, it’s about providers being comfortable with talking about biosimilars to their patients. Working with the FDA, which we are actively doing. I know they are working on building out a suite of patient education materials and we are working actively with them and we really appreciate the level at which they’ve engaged with us throughout this process.
Working with stakeholders — actually I see a lot of people in this room who we’re working with on a regular basis, and it really goes back to that normalizing piece and making sure we’re all using the same terminology to talk about biosimilars. That we’re talking about these things, that we’re addressing what are the barriers to getting these things out there a little bit more, and that we’re coming up with some consensus around how to get past those barriers.
And then continuing to survey and focus group our patients. We want to have those continuous touchpoints to know what is happening with them, what they are thinking about these things, et cetera. We have a number of rheumatologists who work closely with us, and I had an interesting conversation just a couple of weeks ago with one who is very steeped in healthcare policy issues and made the decision within his practice to switch every single patient onto one of the biosimilars that are on the market. And I thought that was really interesting, and for him it was, I believe personally in the value of biosimilars to increase access for patients over time, and so I wanted to take this step. Part of what I really want to do in the coming months is to find other providers who have done that, and really ask those kinds of questions: Well, what is that experience like? How did your patients respond to that? Have their been any issues? So that we can have some of that real world evidence around what’s happening in the U.S. I think that’s another thing that people are really interested to see — what is happening with patients as we’re switching them to biosimilars in the United States?
So with that, I will end and ready for questions.
SARAH DASH: Thank you so much. So we’re going to have about a half an hour for questions. I want to kind of lead off maybe by asking to kind of bring it up full circle, and asking you, Sameer, since you are practicing: Do you have reflections on kind of what Anna talked about? Bring us into that conversation; what is that conversation like when someone is starting on a biologic, let alone a biosimilar? Is this new to people? Can you illustrate that for us? And as you all are thinking about your questions, we have a mic, and we’re going to ask you to raise your hands and speak loudly. But first — go ahead, Sameer.
- SAMEER AWSARE: So I might actually take a step back, and it really needs to engage not only the physicians, but the patients as well. And Adam actually brought up this “warped incentives”, as he mentioned it, and I believe that’s true. And I feel so fortunate to actually work in an integrated delivery system where the physicians actually come up with the formulary. So it’s not, “Mother may I?” calling some insurance company, saying, what can I prescribe? Or this is the only choice that’s available. We actually start with our physicians and pharmacists looking at the evidence. If one of the products is actually superior to the other one, there is no way we’re going to take the other product, because those physicians would not feel that it would be what we would do for ourselves or our friends, our family, our patients. Once we are able to look at that research ourselves, and we find equivalent products, we are actually able to get pharmacy contracting to go get a good contract.
And that’s why we actually have that buy-in that you’re talking about from the physician’s side. We’ve looked at the research ourselves. And we actually go to the right specialists for this kind of thing. I’m an internal medicine physician. I’m not the health plan physician, I’m actually one of the practicing physicians. We would actually ask our rheumatology colleagues to take a look at the rheumatology literature. What do they understand and what products would they get? That’s how it ends up on the formulary. So there is a lot of buy-in when the products are actually picked by the physicians and pharmacists themselves, based on evidence. We don’t actually participate in the 340B at all, and we actually are our own PBMs, so — and we don’t like rebates. So that helps as well. So we would just like you to lower the price, if that’s appropriate. So that’s kind of why it works in our system. And so the physicians understand what they have on the formulary, and why it works and it’s based on evidence, and it’s a lot easier for me to then have that discussion with my patient who trusts me. As you actually pointed out, Anna, most of the information actually comes from the physician’s office. And if I have no perverse incentive of making money on one or the other one, actually just picking the right one that’s going to help my patient, that sort of solves the issue as well for us.
ADAM FEIN: I think, Sameer, you actually said the number one thing there, the magic — we are not 340B. If you’ve been following the 340B dynamic in the hospital system, it has created incredible warped incentives. In fact, a typical 340B hospital will make four to five times as much from biological arthritis drugs, then the manufacturer will make. And I show you the math on my blog, Drug Channels — free to subscribe, you could check it out, but I can walk through math. That is an amazing distortion in the system and encourages — or discourages the adoption of biosimilars. And I’ll just mention one other factoid, another fun fact for you: When the biosimilars launched, to your point, Anna, in 2017, 50 percent of health plans didn’t cover biosimilars at all. They wouldn’t pay for them. Last year, that dropped to only one-third wouldn’t cover biosimilars. So they are preferring the brands, and this is kind of the distortion in the system. And if you listened to the hearings, on Tuesday, you heard manufacturers and senators talking about these distortions in the system that are lowering prices, but not to the patient, and creating some warped incentives in our system. That’s — that’s kind of what’s going on.
SARAH DASH: Any response to that?
JEREMY SHARP: I just want to point out a couple of things that may be getting lost over here. Less about biosimilars, but more about some of what we’ve talked about. One is, on 340B, one of the things to remember is the best testaments on what the impact of 340B is on the drug spend in this country, is less than two percent of the drug spend in this country. So even if you accept that it is a market distortion, which I don’t always accept, it is — it’s important to understand that it is being discussed in a way as if it is one of the core problems with the system, and it simply is not. And this also goes back to the rebates issue. I think there is a lot of accurate statements here about the impact of rebates in the system, but we need to understand that those rebates have come about because of the high list prices that the drug company has done, and the drug companies have then used these high list prices to drive — they have used the rebates to allow them to drive even higher list prices. So we need to look at that whole picture and all of it together. The complexity of this is not to be underestimated. And there probably are policy answers that have to do with addressing rebates and so forth, but we need remember that those answers have got to be in the context of other changes that are also being done around this. But that’s bigger than biosimilars by a light year.
ADAM FEIN: I would say that two percent figure, with all due respect, Jeremy, is a complete fabrication. Remember, I said there’s pharmacy benefit and there is medical benefit? Eighty percent of what we spend is pharmacy benefit. There is really no 340B there. Twenty percent of what we spend on drugs is medical benefit spending. That’s where all the 340B is. So if you want to use your denominator that entire thing, you can get it down to that low single digits. But if you just plug it where 340B actually happens, right now about half of all hospital purchases are purchased using 340B. Fifty percent. Now you want to divide that over this giant number, it looks small, but that’s really fun with math.
SARAH DASH: So let me — because I think it’s fair to say we could probably spend the entire hour and a half or more on just kind of understanding 340B and —
ADAM FEIN: Cool, let’s do it. No, sorry, sorry.
SARAH DASH: We might have to make you guys stay after class. But can I just — just to kind of — and maybe to not put too fine a point on it, but it sounds like what’s emerging from this discussion is kind of, biosimilars is like a microcosm of part of this broader debate, or policy debate around drug pricing. But that there is some unique attributes to biosimilars and that perhaps what I’m hearing from Adam, and I’m not sure so much from Jeremy, but like, on this 340B issue, is that because it affects hospitals and because as we noted before, the majority of these biosimilars are the Part B Buy-In Bill, that that’s kind of why — is that why there is more at stake here? Is that why perhaps this issue [inaudible]?
ADAM FEIN: Yeah, I mean Kaiser is a little bit of an exception, and I credit you for actually kind of taking the lead there, but if you look at the marketplace, where you see biosimilar having greater adoption in physician practices versus hospital outpatient departments. Hospital outpatients, especially those that are 340B, have essentially negative incentives. It’s called “disincentives” to adopt biosimilars, as I mentioned. In the physician practices, they don’t have access to 340B, so they are in some sense buying from a wholesaler at some price and getting reimbursed, often don’t have the ability to get reimbursed as much. I mean, on average hospitals get reimbursed twice as much as a physician practice with the exact same drug. The exact same arthritis drug. The exact same biologic. Hospitals get 2X what a physician gets. So they are much more sensitive to these issues and trying to figure out how to be more profitable and stay in business. But for the hospitals, there is some major distortions. It’s just sort of the economic reality. It’s not an opinion.
SARAH DASH: Great.
JEREMY SHARP: I think it is important to recognize that this is true in part because of what biosimilar are, and what biosimilars are not. This goes back to — we keep expecting biosimilars to be like the generic market and biosimilars will not. There is an open question about whether or not interchangeables may get to that place, but biosimilars are not statutorily meant to be at that space, they are not scientifically meant to be in that space. Whenever you’re going to have the prescriber being the first gatekeeper on whether or not this will be substituted, you can’t use the other market tools. That doesn’t mean that what Adam is describing is not accurate in terms of some of the other market incentives that disrupt this, but it all comes back to that issue, I think. And why —
ADAM FEIN: I mean, that’s a great point, Jeremy. And that’s, I think, one reason why you see hospitals have essentially — and very actively acquiring physician practices. I mean, if you went back ten years ago, roughly ten percent of all oncology practices were owned by a health system. Last year it was closer to 50 percent. So essentially the prescriber and the hospital are now the same entity. They vertically integrated and kind of have these little local monopolies that they can negotiate with health plans over. So it gives them a lot of economic power to both be the prescriber and the decider in setting their hospital formularies. So it’s a really complicated market and like I said, for better or worse, we have a profit drive healthcare system, which has good things and bad things. And one of the potential problems is you have entities that try to create power in a market, and that’s what we have in a lot of local markets. Local healthcare markets.
- SAMEER AWSARE: I just wanted to focus us back on biologics, as to why they are important. As you pointed out, in 2006 they never existed. And if we looked at how we spent our pharmacy budget, and last year we spent $10 billion, 32 percent of that went into biologics. We’re thinking in the next two years it’s going to be 50 percent and in the next seven years it’s going to be 78 percent. So we really need to have something happen in this biosimilar space, because as a country, as a health system, as patients, we simply cannot afford this, if this is what’s going to keep happening. And I know you mentioned drug prices have hung around 15 percent. So if they can hang around there, that would be great, but if they kept going and going, that would be an issue, and I would actually take — you mentioned something about generics not going up — there is data to show that in a time period, some of the generic costs went up 200 percent and some of those folks have been right here on the Hill where something that cost $20 is now $900 or several thousand dollars. I know those are sensational stories, but definitely the cost of drugs for integrated delivery system, if I look back at 1997, it was a certain amount. It’s gone to double digits, it’s actually more than what we pay for our physicians today, so — and the cost continues to rise.
JEREMY SHARP: [inaudible]
- SAMEER AWSARE: Well, I look at my financials and you haven’t so I can actually —
ADAM FEIN: The American Hospital Association says drugs are and have been six to seven percent of hospital expenses for the last fifteen years. Physician salaries, hospital administrator salaries, outsourced personal services, are 80 percent. There is just no way drugs are more than physician salaries. That’s just not mathematically possible.
SARAH DASH: Clearly there is some disagreement; we’re probably not going to resolve it on this panel. But I do want to refocus on the biologics. I just want to ask you — I do want to ask you though — that’s kind of remarkable that in 13 years your drugs have been kind of shifting to biologics in that way. I mean, do these have the potential to perhaps off-set other spending? What’s happening to the rest of that pie chart as you’re looking at the drug spend? And then I’m going to open it up to the audience for questions.
- SAMEER AWSARE: Well, you know, for some of them it’s actually too early to tell, but you mentioned so far patients who don’t then progress with their rheumatoid arthritis and they are actually functioning and going to someone’s graduation, can open a jar, button their clothes. So that definitely can help. Some of the drugs we’re not sure. Sometimes it’s supposed prevent a bone marrow transplant [inaudible] and we’ve had people who failed it, they’ve had a second one, and now they’ve had a bone marrow transplant. So some of the research is being done by the health delivery system today to see what’s going to happen with some of these things. But hopefully if it changes the equation elsewhere, people are not hospitalized, and actually a better quality of life, and we definitely want that.
SARAH DASH: Thank you. Okay, we have about 15 minutes. I’m going to open it up for questions and we don’t have our usual — we have one standing mic, but I will go ahead and — you can ask your question and then the young lady over there. So just speak up if you will. Yes, thank you.
AUDIENCE MEMBER: What is the biggest [inaudible] to biosimilar uptake and regardless if the answer isn’t patents — on the issue of patents, can you talk a little bit about whether you fix the drug patent problem without getting — without it affecting the patents for other products? And within the patent debate, what are the biggest problems [inaudible]?
SARAH DASH: Alright, I heard three questions: One was, what’s the biggest barrier? Yes, three questions: One of the biggest barriers to biosimilar uptake? Can you change the patent laws for biosimilars without affecting other patent laws? And then, within the patent system. So try to get to that question and then we’ll get to the young lady’s question over here. Thank you.
JEREMY SHARP: So my limited knowledge and gut tell me that the biggest obstacle to uptake right now is actually the lack of the understanding and awareness and appreciation of the value of biosimilars by patients, providers and payers together. And that dovetails into some of the things that Adam’s described in terms of the way the market — their ability to purchase these things. I believe the lack of a functioning purchasing market at the back end of the process is what’s holding things up the most. In terms of patents, I think patents — it’s clear based on the litigation that’s holding up some of the marketing of some of these biosimilars that have been approved by FDA, that the patents are clearly playing a role there and are being utilized to block competition. And I think it’s very clear that in the generic drug space, the broader pharmaceutical space, that that’s also — continues to be the case. The patents are a major obstacle competition. One of the challenges that we would face if we tried to change the way patents themselves, and we should separate patents from exclusivities, because these are different things. Patents — my understanding is that some of our trade policies have meant that we cannot arbitrarily treat different industries differently under the patent system. So there’s some — there are some limitations there. I haven’t delved as much into that, maybe my colleagues have more understanding, but that would be my quick answer on that.
- SAMEER AWSARE: I would agree with that; the education and trust. I mean, first patients have to understand what these are, and physicians have to understand what these are, and then that relationship — feel that they are doing what’s clinically right for that patient. So the trust and belief that these products actually work is one of the biggest things and I’m really not a patent lawyer, so I can’t tell you more about it, other than the fact that a lot of those products are held up. I just sort of showed that to you on the slide.
ADAM FEIN: Well, I’m not a lawyer either, but I guess I’ll put it this way: When I was young, I would be like, oh man, it’s all just about the money. And now that I’m old, I know it’s all about the money.
ANNA HYDE: Well. Going back to the knowledge factor and the data that we have shows that the average patient doesn’t know what a biosimilar is, and why should they? You know, and they are going into their doctor’s office — the doctor is the front line at talking about the treatment options for the patient. Perhaps the patient, ahead of time, or certainly afterwards, is going online and trying to find more information. But to my earlier point, they tend to walk away more confused by that then less. And so I think that’s where the normalizing piece will help to instill the trust factor.
SARAH DASH: Thank you. Hopefully they will go online and see the recording of this briefing and it will shed some light on the topic. I saw a question over here? Yes? Go ahead.
AUDIENCE MEMBER: [inaudible — no mic]
JEREMY SHARP: So this is the issue of the day. It’s a really good question. It’s one that many people are asking and it’s come up at most of the Congressional hearings that have addressed this. As insulin has become a poster child of some of the challenges we have in drug pricing and some of the weaknesses in the market that we see. First thing, you referenced this, so the BPCIA transitioned these 505B2 products like insulin, to become biosimilars in March of 2020. And unfortunately, what that’s meant is that there’s a period of time where you could use the old generic pathway for these products to get it, but if you didn’t get approved in that — in the window before March of 2020, your application would go away, and you’d have to resubmit a new biosimilar application under the other pathway. And that has made it a challenge for some companies to step in and offer that. I’m not — I don’t think that’s the whole problem, but I think that is one of the problems that existed there and I think the question will be whether or not post-March 2020, we see the biosimilar pathway being an effective way of creating competition. That being said, we have, what? Four or five different major insulin products on the market today, and their pricing just keeps going up and keeps — I think people should be looking at whether or not it’s the lack of competition that is labeling that, or is it something else in the way the system is working to address that?
ADAM FEIN: Two quick comments on it. First of all, insulin is a broken therapeutic category from a payment perspective. The list prices have been going up consistently, but the actual net price has been flat. And what’s happened is insulins are now sold to payers at discounts that average about 80 to 85 percent. Yet increasingly, patients have to pay something based on that list price. So the system is completely out of whack and I think most people would like to see that rebate system reformed so that we can actually change that. But if you look at insulin, it’s actually an interesting category, because there is a drug on the market that is a follow-on biologic. It is technically a biosimilar in Europe, but it’s a follow-on biologic and Jeremy could probably explain the difference if you care to know. But what’s happened is the innovator product, which is a [inaudible] product called Lantus, has lost more than half of it’s sales, primarily through discounts. And switching to this follow-on biologic, which is called Basaglar, manufactured by Eli Lilly. And so you actually have seen a big shift there, and that has reduced costs. And in fact, one of the things that we even heard from the CEO of Sonofe on Tuesday, was that although they’ve raised the list prices on average about four percent, their actual net prices went down by about nine percent, because of all of these other rebates and discounts. And so it’s a category where the patient is really being hurt by the system. You know, of rebates. So the actual price is not visible, but it’s very easy for a politician to tweet and comment on the list prices without really understanding what’s actually happening to the money. But I will save that for another time.
SARAH DASH: One of the areas we haven’t delved into too much, but you just touched on it, Adam, is this issue of patient cost sharing, and so I want to spend a minute on it, because we’ve talked about patient access and affordability. But can you sort of touch on how does patient cost sharing work in some of these scenarios? And again, kind of going back to the mode of delivery or who the payer is. What could some of the different effects be on the patient cost sharing?
ADAM FEIN: Well, yeah, let’s start with some facts. I’m a big believer in saying everyone is entitled to their own opinion, but they are not entitled to their own facts. The facts are, people have insurance — 85 percent of people that have insurance pay less than $20 a month. Half of those people don’t even take any pharmaceuticals. Another 10 percent spend less than $40 a month. We have a few people who end up spending a lot. And what’s happening is there’s been a change in benefit design. We have a world of 90 percent generic dispensing. Ten years ago, that was 55 percent. So we’ve had massive generic substitution that are very cheap. Most people can take those. So we find that where cost sharing is coming in, it’s increasingly for people in a deductible or in co-insurance. More than half of all patient out-of-pocket are now co-insurance deductibles. Those are tied to this bogus list price. And so for biologics, for insulins, for other things, people are paying on this list price even though your employer, the insurance company, whomever, is getting a large discount. And that’s kind of warped patient perspective of cost sharing. It’s warped how our system works. It’s gotten out of control. I mean, I have called it the gross to net bubble. That was the term that HHS adopted in fact, in their proposal to change the rebate system in Part D in managed Medicaid. So it is a big problem and it’s affecting patient cost sharing and distorting even our ability to have a sensible conversation about drug pricing. I mean, people can’t — we can’t even have a sensible conversation anymore. It’s very frustrating. I don’t like reading the news.
SARAH DASH: I don’t think anyone does. Anyone want to — Jeremy, do you have a comment? And then Anna?
JEREMY SHARP: I was just going to say, the answer that HHS has put forward is to get rid of the rebates and I won’t debate that because I’m still thinking about what I think about that particular proposal. But one of the other things that people should consider is whether or not cost sharing should still be tied back to list price, and whether or not cost sharing should be tied to what the net price is. And that’s something that has come up over the years with different pieces of legislation and it will be interesting to see if that’s part of the debate that comes in the next six months to a year.
ADAM FEIN: And I think that would be a good first step.
ANNA HYDE: The issue with co-insurance is large, not just because of all the reasons that Adam teed up, but also because the percentage of co-insurance is rising too, in places that we’re able to see that. So federal exchange plans every year, we’re seeing that co-insurance number rise. Medicare — 100 percent of Medicare plans use co-insurance Part D plans, and certainly for rheumatoid arthritis, where one of the therapeutic areas where you’re more likely to end up in that catastrophic phase, right? So the out-of-pocket issue there is really huge. And even in the employer market in the last 15 years, the number of plans using specialty tiers and requiring co-insurance has risen dramatically.
ADAM FEIN: Anna, I’m kind of curious; one of the things that I think about, there’s a survey United Healthcare did of consumers and asked them, do you understand basic insurance terms? Out-of-pocket maximum, co-insurance, things like that? And for co-insurance, they said, how many people have a good understanding of the term “co-insurance”, which is now dominant for specialty products. It was like 35 percent. Like two out of three people did not understand “co-insurance”, and that’s the dominant form of insurance. So you want to ask people why people are mad, they don’t even understand their benefits.
ANNA HYDE: Yeah, that tracks really closely, actually, with what we find in our surveys. We actually — for the first time — we do a survey at least once a year asking about what I would call health coverage literacy, and this year for the first time we asked, in a series of terms, including some of these, like “co-insurance”, “co-payment”, “specialty tier”, et cetera, how comfortable would you feel telling a friend what that means? And it’s exactly what you expect, that co-insurance is not a household term for the average patient.
ADAM FEIN: It really lowers the quality of health policy debate to a lot of demagoguery and populous things that we don’t get into the real issues. And nerds like me really want to get into the real issues.
SARAH DASH: And that’s what we’re all about. And I think to — the real issues — and I think just to clarify, I mean, again, kind of to go back to this Medicare question and the mode of delivery that part — people who have a Part B benefit under Medicare, that is a different mode of cost sharing than people who have a Part D plan, oftentimes. And so that’s kind of — the factual basis for sort of what might be at stake here.
So I want to just kind of survey the audience and see if anyone has a burning question that they would like to ask. We definitely still have time for a question or two. Okay, great. Go ahead and then you, ma’am and then we’ll probably close. Thank you.
AUDIENCE MEMBER: Yeah, my question is pretty broad: Hoping the panel can maybe provide some context more broadly for the health of the biosimilar’s market. We got the sense from you, Dr. Awsare that Kaiser has shown potential, and you [inaudible] but we hear about how U.S. is really leading the way in product development and pharmaceuticals more broadly, but Europe is so far ahead of U.S. when it comes to [inaudible]. I’m curious what your broad perspectives are for whether we’re in a position where the floodgates are going to open and we’re a couple years away from seeing a U.S. biosimilar market that’s closer to the fifty drugs that they have on the market in Europe, or if biosimilars are sort of languishing in the U.S. and there is a threat that we’re on a specific point to sort of [inaudible] the other way and see companies less interested in investing in this space.
SARAH DASH: Thank you. Anyone want to take first stab at that?
ADAM FEIN: Well, I live by the crystal ball, so I don’t mind eating broken glass. Within five years we’re going to have a very vibrant biosimilar market, and you’re going to see the prices of biologics, for many of them, plummet. Humira, which is the number one selling product in the country is going to face enormous biosimilar competition. Now it’s not till 2023, and that’s for a lot of reasons which I don’t want to get into. But you’re going to see the payers play off the biosimilars against each other. You also have the PBMs absorbed into health insurance companies now, so I think we’re going to move there, but it requires reform of some of the things we’ve talked about to motivate the providers, particularly hospital systems in the buy and bill side. The PBMs will probably go for it, if there’s enough competition and they can create negotiations. So I think within five years it’s going to be there. And I also just credit FDA Commissioner Gottlieb for really pushing this harder than his predecessors in trying to say, let’s go. Put the pedal to the metal to try to get this to happen.
JEREMY SHARP: So I don’t disagree with Adam on the general thrust of things. He knows more about what may be driving the industry and so forth, in terms of the financial side of this. But what I will say is I will take issue with what he said about his predecessors not putting the pedal to the metal. BPCI created a new pathway that fundamentally altered the way FDA and its scientists and its reviewers were going to consider the safety and efficacy of these products — these very complicated products, which have a great deal of potential, but also carry with them some risk. And FDA had to take some time to understand how they were going to collect the data that meant that when they approved a product, they could be confident they could be on the market with a minimum of risk to the patients. And FDA took that time, and it continues to take that time. And I think one of the things, when you look at how FDA talks about its approval standards is it talks about a stepwise approach. Do an analytical study to first characterize the product and compare. Do a functional assay to compare it. Do some human PK and PD studies. And getting away from the jargon of this, what they are essentially saying is, the more your early information can tell us that we should have a high degree of confidence that these are biosimilar, the less clinical data that we’ll need at the backend for us to approve it. And that also means that the more applications that come in, the more different kinds of data that come in, the more experience FDA has reviewing those products, the more comfortable they will become approving these products at the backend on less and less data. There is a limit to that at some point, but I think over time we’re already seeing the acceleration of these products, and I think it’s less to do with — I applaud Commissioner Gottlieb and what he’s done. I don’t — I don’t think he’s taken a misstep in this space, but I think it’s less to do with him saying — beating the drum and saying, “Let’s do this faster.” And more to do with the fact that Cedar and [inaudible] and the review staff and the policy staff there have become more familiar with this space and how it could work. And I think that will continue, and I think that will drive more market uptake. And I think at the end of the day, the amount of savings that are available will cause people to want to make this work.
- SAMEER AWSARE: I’m optimistic that we’ll have more products. I’m not as optimistic that the prices will go down, because if you’ve looked at any other types of medications, that really has not been the case. Competition has really not worked in this space. I mean, if you remember those flat screen TVs — you remember when they came out they were $10 or $15,000, and now you can order one online or walk into a store and get it for $300 or $400. Well, think back about ten years ago, there was one multiple sclerosis drug, it was $10,000. Today we have 14 or 15 maybe, I missed one, and they are all $50 – $60,000. So competition has lowered the price in almost every drug category. Whether it’s the list price, or whatever price they’ve given. But somebody puts the list price and then gives you a rebate. So if you kept the list price low, and gave a rebate, that’s a whole different story. You keep raising the price and you keep giving a rebate, but the total price does not go down. Competition has not worked in this space. So yes, we’ll have lots of products. I’m still concerned that the prices may not go down like they’ve gone down in Europe.
ADAM FEIN: And I’ll worry about that next time.
SARAH DASH: And if anyone wants more information about rebates, I will just put in a plug that the Alliance did do a briefing last November and if you want more information, check out our website, ask our staff. It should give a good grounding for what’s going on currently and what’s going on with the proposed rule. You had a question and then that will be our final question. For those of you who do need to run to another meeting, please don’t leave without filling out your blue evaluation, we really do use them. Yes, ma’am?
AUDIENCE MEMBER: What do you know about how [inaudible] biosimilars as far as formulary tiers? Treating them like generics? They are not generics, so are we going to see them on the brand tiers?
ADAM FEIN: Biosimilars right now are being treated as “me too” brands, if you will. Again, they are not really — if you look at like, Basaglar Lantus, that’s a pharmacy benefit. Those are situations where they are preferring one versus the other, especially for new patients, instead of switching patients. On the medical benefit, as I mentioned, a third of health plans don’t even cover some of the biologic — don’t cover the biosimilars at all. 40 percent put them on an equal tier, and the remainder are favoring the biosimilar. So you’re seeing kind of shift a little bit, but they are treating them right now in that way. And because they aren’t generics. They can’t be auto substituted. State laws apply to auto substitution of generics. They don’t apply to auto substitution of biosimilars. In fact, there is a lot of state laws that say you can’t auto substitute.
AUDIENCE MEMBER: [inaudible]
ADAM FEIN: Well, again, I don’t know the science. If they are legitimately non-interchangeable, I don’t necessarily want my local pharmacist making an interchange. But if they are, and I will defer to the FDA on that, well, then have it and then it will look just like the generic market. But that’s not where we are now. But the more competition you create between these products, the more prices go down, just like you create a — Kaiser created a competition between Zarxio and Neupogen and I assume lowered the price that they’re paying. And some portion of that savings probably benefitted the patient, some of it benefited Kaiser. We don’t know how much. But whenever there is competition, multiple therapies in a therapeutic class, there is bigger discounts and bigger rebates.
SARAH DASH: All right, so I think we’ve come to the end of our time and certainly opened up a lot of really fascinating issues. I want to thank all of our panelists for really bringing your time and your expertise on this enormously complex issue. Hopefully we can stay a little bit in case anyone has follow-up questions. Thanks to all of you for bringing your focus and attention here and once again, thank you, Johnson and Johnson for making this possible. Please do fill out your blue evaluation forms. We really use them. Quality is important to us. Join me in thanking our panelists.