Part 1: Jim Koeller Talks Payer Influence on Biosimilars

The Center for Biosimilars® (CfB): Hello, I'm Matthew Gavidia. Today on MJH Life Sciences News Network, The Center for Biosimilars® is pleased to welcome Jim Koeller, who's currently a professor of pharmacotherapy and member of the Center for Pharmacoeconomic Studies in the College of Pharmacy at the University of Texas at Austin, where he holds the Eli Lilly/CR Sublett Endowed Fellowship in Pharmacy.

So, as more biosimilars are approved, what's happening on the prescribing, treating level with respect to payer pressure to use biosimilars?

Koeller:

That's actually a good question. I think most people realize that health insurance covers most of the things that we do these days. I always have a saying when I am talking to my students: "He who pays makes the rules," and people have to realize most of the medical care we get today is actually paid for by our insurers.

Yes, there are copays when, even now, with a lot of the medications, the industry has come up with ways to help cover some of those copays. But the majority of cost of health care hospitalization visits and drugs are still paid for by the insurers. Now, we pay for that insurance, or our employer pays for the insurance, but the real purchasers of most health care are the insurers, not the people.

So, when there are these big choices to be made on what kind of drugs or the type of drugs to be used by an employer like UnitedHealth Group that insures 77 million lives, and they're the ones paying, they can then, they have the power to choose and have their own formularies that say, "As United, we will cover this drug," and we're seeing that now.

A lot of this came through with hepatitis C. The new antiviral drugs [for hepatitis C] were $100,000 to cure someone, but there are a lot of people with hepatitis. What the insurers did is they bid against the various companies with those agents to bring down the cost from $60,000 to $80,000 to $90,000, down to $20,000 to $30,000, to $40,000, which is a big savings in cost.

So, they would say, "We're going to pick this combination as our choice to treat hepatitis." Understand the drugs that they were picking are oral therapy, and oral therapy can be dispensed from any pharmacy. It's relatively easy. I think that was one of the big starts and now insurers have their own formularies, and they can pick those drugs.

But then, if I have UnitedHealth patients in our system, we would have to use their drugs because that's what they're covering. Now, that's not such a big deal when you're just dispensing them out of a pharmacy, and I can get a variety of oral drugs in our pharmacy [that] we can dispense.

When you see the problem occurring is when they try and do the same thing with injectable drugs. A lot of these biosimilars now are injectable drugs, and the whole intent of a biosimilar was to bring a version of the originator’s biologic to market at a cheaper price. The biologics are hugely expensive. They've been 1 of the highest costing groups of drugs that we have in health care's armamentarium.

There's always been a push to try and get the cost of these expensive biologics down. Biosimilars actually fit that bill. But now if an insurer picks 1 of the originator drugs [and says] I need you to use this agent, it may be that I only have a small percent of my patients through that insurer. That could dictate [what] all my patients [are treated with] if I now have to use their drug for, let's say, 10% of my patients. They're dictating 100% of use of drugs in my institution, based on their 10% of patients that I actually need to give that drug to, because I may not want [the added expense and complexity of keeping multiple] versions of that drug on board.

The difference is, it's easier to dispense oral drugs of multiple kinds from a pharmacy [such as pills]. But for injectables, I have to have the injectable, I have to have the order sets, I have to be able to keep inventory. The drugs are mixed up. We mix them up with technicians and give them to patients. To have more than 1 version of an injectable drug in a health system is a difficult thing to do. No one wants to be able to do that. We want a single version of an antibiotic; we want a single version of a growth factor. We don't want 3 or 4. It's very complicated to manage those within a hospital.

So, the insurers can have a big impact on these injectable biosimilars. We've already seen now that [UnitedHealth] is picking what they call preferred agent, which means this is our agent that's part of our formula, that if you have a UnitedHealth patient, you need to give them this biologic. That may not be the biosimilar I want to pick based on the deal our institution can get for that drug. So, the payers can actually force us into products that we may or may not want to use. So, they're calling the shots; we are not. So, as you can see, that can create a problem, and certainly logistical issues, for how you're going to approach that.

CfB: Beyond payers, is the pressure to use individual biosimilars coming from anywhere else.

Koeller: I think in general, if you look over the last numerous years, the rate of rise of biologics has gone up 15% to 20% every year. Typical pharmaceuticals go up 7% to 9% every year. So, a lot of the health care cost in drugs is related to these expensive biologics. There has always been pressure in institutions to bring down drug budgets.

When a certain class of drugs is driving a lot of that drug budget, there has always been pressure to [say] "Are there less expensive ways to do this?" As I said, biosimilars now offer a less expensive version of that more expensive biologic agent. I think just in general, there's been pressure to bring down the cost of drugs used in general health care, and the biologics are at the top of the heap of most of those expensive drugs.

On top of that, we've had recent action by Medicare through their Oncology Care Model for people in cancer and through QPP, which is the Quality Payment Program that now anyone taking care of Medicare patients has to manage. Medicare, as you know, is in trouble. We have what are called the Baby Boomers, [including] me. Our age group is coming like a freight train. There are 3 million people retiring every year in America. We haven't reached the peak yet but you're going to have 70+ million elderly Medicare patients for younger taxpayers to pay for and Medicare has been looking at ways to bring down the rise of costs of care for Medicare.

As part of that program, they've not trying to move away from volume to value. Historically, if there's a code for a procedure or drug and a physician writes that code, writes that for a patient, that Medicare patient would get it. So, there's a lot of things being given with no real limits on that per se. Now, they're moving to more quality and value versus quantity. Value is [asking] "Can I do a procedure?" [or] "Can I give something that's equally effective at a lower cost?" Outcome over cost equals value. So, they're trying to get more value—more cost-effective treatments in therapy and care into the VA [Veterans Affairs] system, just because of what is going to happen in the next 15 to 20 years.

So, with that, they're looking at pushing quality value programming. Again, if you're looking at a biosimilar that is equal or equivalent to the biologic that is less costly, by definition that biosimilar offers a better value. That better value fits exactly into what Medicare and insurers are trying to move us forward to in the future. So, there's a lot of pressure to use less expensive therapy in health care today and these drugs fit the bill perfectly.

CfB: How much freedom do providers have to pick the biosimilars they want?

Koeller: In general, until the insurer starts to pick preferred agents, we can pick between the agents available. You look at the contract or at the company, you do a very thorough evaluation. All this is done through the P&T [pharmacy and therapeutics] committees of institutions and health systems. Again, people will look at the product, the provider, the company, their record, how much of the drug they have, are they going to be able to meet our needs, and what kind of contract can we get.

So, in most cases, providers can choose what they want to use, based on whether it will be paid for. One of the problems they have, and [what] people don't realize, is we cannot bring in a drug into our institution unless it gets paid for. We can't give out free drug.

So, it's always interesting when drugs get approved, that you have to check with your payers to see how you're going to pay for this product. In general, I think the insurers are actually causing 1 of the biggest hurdles now in institutions using biosimilars. If all insurers would basically do this by parity, [where] basically they can say "Yes you can. You need to use a biosimilar before the originator. But you pick which one you want. You have the ability to pick the one you want." That's called parity. That's what we're looking for.

Yes, we would love to use a biosimilar and we don't need to use the originator, then let me pick which one fits best for our situation and circumstance within our [group purchasing] group within our [institution]. Again, if we have 340B [Drug Pricing Program] institutions, there are differences in prices. There are all kinds of variables that can make an institution pick 1 agent over another. But we think we are smart enough to be able to make those decisions and not have the payers, the insurers, make them for us.