Navigating Biosimilar Integration: Cost Savings, Coverage, and Future Strategies for Payers

Featuring John Hennessy, MBA, Principal, Valuate Health Consultancy

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John Hennessy, MBA: Hi, my name is John Hennessy. I'm a principal at Valuate Health Consultancy, and I've been working in health care since dinosaurs roamed the Earth. I've been working in health care for about 30 years. I've had experience on the payer side as well as practice and hospital management.

What potential cost savings do payers anticipate with increased biosimilar adoption, and how do these savings impact other areas of health care spending?

Hennessy: That's a great question, and I think there's a couple things. The first is that biosimilars offer the opportunity to purchase a product, generally speaking, at a lower price than you would have gotten with the originator product. The other thing worth discussing is the contracting—the market incentives for adopting biosimilars.

There is a total cost of care element to this, but there's also a contracting element. In some cases, they're aligned. In some cases, they're not particularly well aligned. We've certainly seen, in some biosimilar adoption and some delays in biosimilar adoption, that total cost of care isn't necessarily the most important motivator. Contracting and different value propositions at different layers of the health care economy have changed adoption. We saw relatively rapid adoption in physician-administered biosimilars and a little bit longer to make that happen with some of the bigger biosimilars, especially in the pharmacy space.

I think it offers the opportunity to reduce total cost of care. How we get there is not necessarily a straight line. But there is certainly a lot of data to suggest that as more biosimilars come to market and the adoption of those biosimilars occur, we'll see total cost of care reduced, which, in theory, gives us capacity to absorb the new therapies that are relatively costly. This continued opportunity for adoption of biosimilars builds capacity to absorb the cost of very innovative new medicines. It's exciting, but it's worth acknowledging that it's not a simple process. Like many things in a free-market economy, they progress by stages and steps, not just an immediate "Boom! It's done."

How are payers addressing concerns or pushback from providers or patients who may prefer brand-name biologics over biosimilars?

Hennessy: I think we're seeing a couple of things. First, payers aren't necessarily abandoning the originator products. There are really 2 approaches that an originator can take. One is to say, “We're the originator, and you should just keep using us.” There are others that sit back and say, "Wait a minute. We've built a lot of brand equity here. We're going to price ourselves to be competitive with biosimilar. So, people who do prefer our product can maintain that.” Just because you stick with an originator product doesn't mean it's bad economics.

It really has to do with how that originator product has approached these changes. It's fair to say that, in many of these instances, providers are not necessarily greatly incentivized to adopt biosimilars. There isn't a value proposition directly for them in many of these cases. In fact, you could argue that it's more work to make a switch and to explain that to their patients than the compensation that would cover it. That's a relatively meaningful issue.

The same argument can be made for patients who have had access to patient support from originator brands. They may say, "I really didn't have an out-of-pocket cost before; the savings isn't accruing to me." I think you're absolutely spot on that those can be very sticky parts of this adoption curve. While the payer, either because of reducing cost of care or maybe through contracting incentives, may be very anxious to move from originators to biosimilars, you can imagine other folks in the continuum don't necessarily have the same incentives could throw an anchor out the back and delay it because this is an economy. It's what's in it for me. If there's nothing in it for me, my motivation to change is even lower than it usually is.

How do payers evaluate interchangeability status, and how does this affect coverage and adoption of specific biosimilars like in-office injectables?

Hennessy: You're spot on in acknowledging that the payers have a role in evaluating interchangeability, and the providers do as well. This affects prescribers, organized customers like big practices and health systems, and even health systems that own their own health plan.

The idea of interchangeability as it's designed means that a pharmacist can look at this and say, "I know you wrote for this, but I'm going to switch it to that." That sounds great, but I think it's really hard to make that happen in the real world, particularly with specialty pharmacy drugs and especially for patients who have taken them for a long time.

Some of these products, at least in the self-administered space, are not just a different drug—it might be a different pen or a different device or something like that. It's a little easier in the physician’s office setting because you have someone to be there with you and explain the difference or administer the drug for you. It's a little less complex there. But the idea of interchangeability, to the extent it continues to exist in the US (and there's certainly a conversation about whether that definition is going to go away), it is easier. It's logistically easier from an explanation standpoint to tell the patient why you're moving from product A to product B.

In the Humira space, there are plenty of products that are not in “interchangeable” per the definition, but that doesn't mean they're not substitutable. Those are 2 different things from a language standpoint, but from a provider administration standpoint, you're doing the same thing. You're changing from one thing to another that will yield the same result. There are other factors like high concentration, low concentration, and diluents, all sorts of other things that play into this equation. Interchangeability, theoretically, makes this a more logistically simple process, but the minute you bring in prescribers and patients, there's still a lot of complexity involved when you're moving from product A to product B.

Given recent regulatory changes or new biosimilar approvals, what strategic adjustments do you see payers making in the near term?

Hennessy: The transparency around biosimilar adoption has really had a bit of a shake-up this year. We are seeing a very unique approach to biosimilars with the Humira products. Certainly, if you had asked me 2 years ago whether I have projected that pharmacy benefit managers (PBMs) would have their own brands, I probably wouldn't have said, "Sure." But that's clearly been something that has taken place. I think it's not just the growth in the biosimilars market, but we're starting to see increased concern about the transparency of that marketplace. Regardless of the approach you might want to take, the end purchasers—whether that's the health plan, a health system, or self-funded employers—are acutely aware that this is an opportunity and are acutely aware that they ought to yield some benefit from it, particularly if you're a benefits administrator for an employer. That's where all the people are coming and saying, "How come I have to switch from this to that? If I'm not seeing some benefit from it, I may not be interested." I think what’s accelerating is this need for transparency. This need to see if I am switching X and Y, is there a benefit for me? And if not, why isn't there?

You'll continue to see this, in part, because we have seen a lot of transparency around the cost, particularly with Humira biosimilars. Mark Cuban has put his price out there, and Blue Shield of California has put their price out there—zero out-of-pocket and a very low price for access. That level of transparency will infect other areas of biosimilars, maybe not so much the physician-administered but certainly what's coming out of specialty pharmacy. That, to me, is probably the biggest economic influence that's going to change the way we look at these and change the adoption rates.

What factors influence a payer’s decision to include a biosimilar on a formulary, and how does this differ from traditional biologics?

Hennessy: I'm not sure it's incredibly different. It's a very obvious opportunity for substitution. It's not the only opportunity for substitution out there. There are products that are antiemetics, and they may not be biologics, but we've done substitution before. We have 2 products that treat the same thing. They're not exactly alike, but we'll sequence one in front of another. We do those sorts of things all the time. Biosimilars give you a much more transparent, and maybe a more level, playing field for that differentiation.

I think what we're going to see is that payers have taken the approach that this is an opportunity for contracting. This is an opportunity for total cost of care reduction, but also some improvements to the bottom line. We should expect something like that. The transparency is going to lead to much more of a focus on that total cost of care or the idea that, as part of this transition, there are other economic incentives, and the question may not be whether they should exist, but who should benefit from them.

I don't know if that’s a million-dollar question, but it's a bit of a moving target. Some folks out there are trying to make sure that the patients benefit from this. There are other folks who are trying to make sure the self-funded employer of the Taft-Hartley trust benefits from it. Some PBMs are trying to find ways to make sure they can benefit from it. The key is making sure that there's going to be benefit.

Some of that benefit may not just be switching to biosimilars. It may be recontracting with the originator product. So, there are a lot of moving parts here, but again, I think that idea of transparency and ensuring that the right people are benefiting from this, or at least feel that benefit, is really important.

What should payers consider when planning coverage for in-office injectables?

Hennessy: There are a million things to think of when you're talking about in-office injectables. Obviously, it has to be a sustainable model. You cannot ask a physician’s office or a hospital system to provide product X that cost them $10 and you pay them $8. That's not going to work. With regard to accountability to your other stakeholders, by the same token, if it costs $10 and you're paying $200, that's probably not sustainable either. But finding some way to make that sustainable is really important. We sometimes don't remember how difficult it is for some patients to get to a provider office.

I do a lot of work in oncology. We have many counties in this country—hundreds, at least, if not thousands—that don't have an oncologist in that marketplace. So, ensuring that there is a sustainable place where someone can go to get this injectable is really important. The other thing is acknowledging that when you are making changes to your formulary, making changes to what the preferred agent is, or creating step therapies or things like that, that's really expensive.

At the ASCO Quality Conference, back in September, I think it was Tennessee Oncology who did a study and showed that each one of these steps for each patient costs about $80. When you're going to go in and say, "Oh, this month, we're going to switch to this, and 6 months later, we're going to switch to that," understand that's incredibly challenging and expensive for the practice. Doing that without understanding the needs of those practices and those delivering that therapy is really problematic. So sustainability is first; second is making sure it's logistically sound; and the third thing is you have to make it work because that's the only way patients are going to have access to the medicines they need.

How do you see biosimilar strategies evolving over the next 5 years, and what should payers be planning for now?

Hennessy: It's really interesting. We've seen a big evolution in the last year. Humira was such a huge product for payers in this space. What started out as a very slow adoption suddenly has cascaded, and maybe that's the thing we should look for. I'll harken back to other experiences—when we first started seeing generic chemotherapies, the first product shook up the market a little bit, but once we got to 4, boom! The market shifted relatively rapidly.

It took more than 4 in Humira's case, but I think we are going to see some transformational changes in terms of biosimilars coming along. When we start seeing the PD-L1s, which I believe are going to be biosimilars, that's going to be transformative as well. What we've seen is that the marketplace has tipping points. The tipping point in the generic world and the biosimilar world may not be at that same number of manufacturers coming in, but there are tipping points, and when those tipping points occur—like we're facing in the generic marketplace today—it still has to be something sustainable. If we have so many entrants that you see the tip into very low-cost access to these products, at some point, when the cost or the reimbursement is so close to the cost of delivering them, people drop out of that marketplace. We start seeing what we see now with generic chemotherapies and other products—shortages.

I don't think you can avoid that massive tipping point change, but you want to wind up in a landing spot that's sustainable so that these products, which matter a lot to a whole lot of people, don't wind up being in shortage or at a point where we can't access them because no one wants to make them for the price that we're willing to pay. We've messed that up in generics, and I hope we don't do that with biosimilars.