Biosimilars, Formularies, Contracting, and PBMs

Amanda Forys, MSPH: Let’s turn to the commercial market. I think this is an interesting area where we’re seeing some dynamics between plans and reference manufacturers. What we’ve seen is that some of the health plans are bypassing the adoption of biosimilars on their formularies because they have had favorable contracting relationships with the reference product sponsors. Let’s talk about that a little bit. Let’s talk about what the implications of that could be—first, from how the federal agencies might react to this. Is this something that the FDA or the Federal Trade Commission (FTC) could view as an anti-competitive relationship between manufacturers and plants?

Ha Kung Wong, JD: That’s a really well-timed question, Amanda. Just yesterday,* Pfizer sued Johnson & Johnson (J&J), in district court, alleging that the contracts and rebates with the insurers and providers for Remicade are anticompetitive under the antitrust laws. And essentially, what we have there is J&J offering rebates to insurers for Remicade in order to not have contractual commitments with Inflectra. What they’re saying is, “If you want to get these rebates, then don’t cover the biosimilar.”

The question is, is that anticompetitive? Although it sounds, in high-level context, that it might be, the fact of the matter is that J&J has come out and said, “Listen, what we’re doing is we’re providing Remicade to what’s called an ‘economically uncontestable group.’ So, it’s a group of people who are already taking Remicade and they’re not going to switch to anything else. They’re going to continue taking it, so it doesn’t really matter.” And, “The portion that’s contestable is not really that big of a deal. That’s just new patients taking infliximab therapy.” But it could be. Pfizer is alleging that J&J is leveraging the incontestable demand in order to lock up the contestable demand. They’re trying to get the new patients, too, by making sure that health plans are not going to cover Inflectra, the biosimilar.

It’s unclear what’s going to happen. The complaint was just filed. We don’t know what J&J is going to say about it. Certainly, it will be very, very interesting. Part of this is a discussion that this might just naturally be out of the fact that it’s a biosimilar and not an interchangeable. The fact is, biosimilars need to be specifically prescribed, and if that makes the demand for the innovator biologics incontestable, then is that really the market power that the FTC is looking to kind of curtail where it’s unclear?

Amanda Forys, MSPH: Dr. Worthing, how could something like this affect your patients and their access to these products? What are you concerns there?

Angus Worthing, MD, FACR, FACP: We’ve got a lot of concerns. The way that the system is currently working, it appears like a biosimilar manufacturer who is trying to get into the marketplace needs to contract with a pharmacy benefits manager (PBM). The way that this is working brings up a lot of concerns. As we’re talking about, here, today, the purpose of biosimilars is to try to reduce cost and increase access to drugs. But the way a pharmacy benefits management company designs formularies for payers appears to be that there is an extraction or payment system of rebates and fees from manufacturers (on the one hand) and payers or pharmacies (on the other hand). That fee or rebate is a combination of the list price multiplied by rebate percentage, multiplied by the market share. And so, if a biosimilar doesn’t have much market share, yet, because it’s a new drug, they could offer a higher rebate percentage or they could raise their list price in order to get on that formulary and pay the PBM.

And so, it’s concerning that there appear to be these incentives to increase price and increase rebate percentages in order to get on a formulary. The way the system appears to work, it might actually disrupt or prevent the process of biosimilars reducing costs. What does this mean to patients? It appears that if a patient is paying a co-payment or a coinsurance on their drug, the way the system is set up, they may actually pay a percentage of the list price as opposed to the discounted or rebated price. To some people, this seems to be unfair. Or, because of this rebating process, they might just not have access to the drug that the prescription is written for in the first place. The American College of Rheumatology that I represent has a lot of concerns about this, and we’re happy to be educating stakeholders and talking about this in the public forum.

*As of the date of filming.