Pharmaceutical Commerce - May/June 2017 - 19
this through on-invoice discounts, promptpay discounts, stocking fees (typically based
on a percentage of the wholesale acquisition
cost [WAC]), and other margins. As a result,
wholesalers may have a disincentive to carry
a lower WAC biosimilar, potentially creating
a barrier to the manufacturer's goal of wide
Payers, on the other hand, focus on net
cost. Fewer rebates and discounts exist in
many oncology-related conditions than
other therapeutic areas,  and pharmacy
directors tend to seek contracts that lower
their net costs. Because pharmacy directors
often use average sales price (ASP) or
average wholesale price as a reference price,
simply entering the market at a lower WAC
may not be enough to establish a formulary
position with the reference biologic.
Additional discounts and rebates to reduce
net cost may need to be considered. Also, call
points beyond the pharmacy director, such
as the negotiators of provider contracts,
may have differing priorities within the plan
and may warrant attention.
Complexities of reimbursement for
The majority of biologic drugs, including
the oncolytic biosimilars under review by
FDA, are administered by physicians and
reimbursed under Medicare Part B or
commercial insurance under the medical
benefit. This means that they are purchased
and administered by providers under a
benefit that is not as tightly controlled as the
Medical benefit reimbursement is
typically based on ASP or average selling
price. The ASP is a weighted average price
net of all discounts and rebates, updated
quarterly with a lag, and it often deteriorates
over t ime as re bates and discounts
increase. Many commercial payers follow
the Medicare Part B structure, but some
may choose to contract with providers for
reimbursement based on other reference
prices, such as WAC or average wholesale
The Centers for Medicare & Medicaid
Services (CMS) finalized rules on biosimilar
reimbursement specifying that all
biosimilars to one reference product will
be assigned a single Healthcare Common
Procedure Coding System (HCPCS) code,
and reimbursement will be based on a
blended ASP of all included biosimilars
plus 6% of the payment for the reference
biologic product.  This policy was
intended to create price competition, but
biosimilar price reductions drive down the
overall blended rate and reimbursement for
all biosimilars. There may be unintended
downstream consequences associated with
this over time. These include physicians
choosing a reference product with a greater
The oral chemotherapy parity legislation
has furthered this shift in oncology by
requiring equal treatment of drugs under
both benefits so as not to disadvantage oral
drugs covered under the pharmacy benefit.
 This increases the need for patient
input in treatment decisions, and patients
may be more likely to choose a lower-cost
biologic option such as a biosimilar rather
than a less expensive, and potentially less
drugs. Payers may offer providers financial
incentives to follow pathways such as higher
reimbursement rates or care management
fees. Biosimilar inclusion in a pathway could
lead to lower costs, and the net savings can
be shared between the provider and the
To demonstrate the value of biosimilars
to payers, manufacturers will need to
collect and communicate relevant data
that helps facilitate the discussion on how
cost containment, reduced acquisition cost,
and higher cost sharing can lead to better
utilization and outcomes.
Marketing considerations for the impact
of oncolytic biosimilars
Given payers' expectations and the
evolving oncolytic and supportive care
biosimilar market, there are many factors
that both originator and biosimilar
manufacturers should consider.
Fig. 1. The introduction of the short-acting biosimilar filgrastim raised the overall
filgrastim market in the UK. Source: IMS Consulting Group
dollar margin, reducing the potential
profitability of biosimilars to a degree that
deters manufacturers from developing
them, and biosimilar manufacturers
independently deciding to keep prices high
to protect profit margins.
Biosimilars are likely to become a part
of impending oncology management
Ma n d a t e d cove r a g e o f o n co l o g y
therapies creates payer management
challenges. The extensive development
of new drugs, increased availability of
diagnostics, competition within cancer
types, and advent of oncolytic biosimilars
w ill drive plans to make difficult
Some payers are beginning to increase
out-of-pocket responsibilities for patients
under both the medical and pharmacy
benefits in hopes of better controlling costs.
Bundled or episode-based payments
reimburse providers at a prospectively
set rate for a group of services during an
episode of care, including reimbursement
for pharmaceutical costs. An example of
this is the CMS Oncology Care Model
(OCM) pilot program, which utilizes
bundled payments and currently includes
approximately 190 practices.  The
OCM program can be expanded to include
commercial patients, and this new financial
accountability may help shift oncologists
toward less costly biosimilars.
Some private payers reward higher
generic prescribing with a payment bonus
incentive. This type of program could be
extended to interchangeable biosimilars and
would be based on the volume of biosimilar
prescribed relative to the reference product.
Another cost-containment opportunity
for commercial payers is the use of
standardized clinical pathways to drive
utilization to a preferred sequence of
One consideration for originator
manufacturers that will face biosimilar
competition is setting the stage for
re l i a b i l i t y. Pro m o t i n g a h i s to r y o f
established efficacy and safety along with
the benefits of a proven distribution
channel with cost-of-switching implications
may help sway payers and providers to stay
with an originator manufacturer and slow
down biosimilar uptake.
Another consideration is to refocus on
brand loyalty programs, patient support
programs, or wraparound services that
support patients and providers in order to
keep existing relationships strong. These are
all elements that raise the cost of entry for a
biosimilar and help differentiate originator
Lastly, innovative contracting models
based on outcomes, preferred status,
or existing volume to build additional
discounts and rebates are a potential
strategy to blunt competition.
Wh i l e b i o s i m i l a r m a n u f a c t u re r s
should consider how originators might be
shaping the market, there are a number of
considerations for manufacturers before
and during product launches.
continued on page 30
1. Data on file. inVentiv Health Managed Markets, Saratoga Springs, NY. inVentiv Health Research and Insights, Newtown, PA.
2. Friends of Cancer Research and the Duke-Margolis Center for Health Policy. "The Future of the US Biosimilars Market: Development, Education, and Utilization." https://www.focr.org/sites/default/files/pdf/The%20Future%20of%20
U.S.%20Biosimilars_0.pdf. Published October 18, 2016. Accessed March 8, 2017.
3. Rifkin R, Cutler c, Gascon P, McCamish M. "Biosimilars in Oncology: Proceedings From a Roundtable Discussion, December 6, 2015, Orlando, Florida, in conjunction with the 57th ASH Annual Meeting." The ASCO Post. http://www.
ascopost.com/issues/november-10-2016-supplement/biosimilars-in-oncology/. Published November 10, 2016. Accessed March 8, 2017.
4. IMS Institute for Healthcare Informatics. "Delivering on the Potential of Biosimilar Medicines: The Role of Functioning Competitive Markets." http://www.imshealth.com/files/web/IMSH%20Institute/Healthcare%20Briefs/Documents/
IMS_Institute_Biosimilar_Brief_March_2016.pdf. Published March 2016. Accessed March 8, 2017.
5. Stanton, D. "Biosimilars land in the US as Sandoz launches Zarxio." BioPharma-Reporter.com. http://www.biopharma-reporter.com/Markets-Regulations/Biosimilars-land-in-the-US-as-Sandoz-launches-Zarxio. Published September 3,
2015. Accessed March 14, 2017.
6. IMS Health. "The impact of biosimilar competition on price, volume and market share." Published June 2016. Report available at the European Commission website: http://ec.europa.eu/growth/tools-databases/newsroom/cf/itemdetail.
cfm?item_id=8854. Updated October 24, 2016. Accessed March 8, 2017.
7. "Comparison of biosimilars and generic drugs." Managed Health Care Connect. http://www.managedhealthcareconnect.com/articles/comparison-biosimilars-and-generic-drugs. Published October 16, 2013. Accessed March 8, 2017.
8. MagellanRx Management. "Medical Pharmacy Trend Report; 2015, 6th ed." https://www1.magellanrx.com/media/409913/2015trendreport_mayfinal.pdf. Accessed March 17, 2017.
9. "Patient Protection and Affordable Care Act." Sec 3139. 2010. US Government Printing Office. https://www.gpo.gov/fdsys/pkg/BILLS-111hr3590enr/html/BILLS-111hr3590enr.htm. Accessed March 8, 2017.
10. "Oral oncology parity laws." State Patients Equal Access Coalition. http://speac.myeloma.org/wp-content/uploads/2014/08/OralOncologyParityOnePageFactSheet_August2014.pdf. Accessed March 8, 2017.
11. Centers for Medicare & Medicaid Services. "Oncology Care Model." https://innovation.cms.gov/initiatives/oncology-care/. Updated March 16, 2017. Accessed March 16, 2017.
12. Vandervelde A, Blalock E. "The pharmaceutical supply chain: gross drug expenditures realized by stakeholders." Berkley Research Group. http://www.thinkbrg.com/media/publication/863_Vandervelde_PhRMA-January-2017_WEBFINAL.pdf. Published 2017. Accessed March 8, 2017.
May | June 2017 Visit our website at www.PharmaceuticalCommerce.com 19