Session 104L, Specialty Drugs - Biosimilar Impact on Medical Cost Trends Presenters: Drew Kirchner, FSA, MAAA Keith R. Klimek, FSA, MAAA SOA Antitrust Disclaimer SOA Presentation Disclaimer
Session 104L, Specialty Drugs - Biosimilar Impact on Medical Cost
Trends
Presenters: Drew Kirchner, FSA, MAAA
Keith R. Klimek, FSA, MAAA
SOA Antitrust Disclaimer SOA Presentation Disclaimer
Biosimilar Impact on Medical Cost TrendsSession 104Keith R. Klimek, FSA, MAAAPrincipal and Consulting Actuary
1. Biosimilar Background and Basics
2. Scenario Modeling for a Therapeutic Class
Topics
2
Background and Basics
3
• Biosimilar Definition:• A biosimilar is a biological product that is highly similar to and has no clinically
meaningful differences from an existing FDA-approved reference product.
Key Terminology
4https://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugsareDevelopedandApproved/ApprovalApplications/TherapeuticBiologicApplications/Biosimilars/ucm580419.htm#biosimilar, accessed 4/30/2018
• Reference Product: • A reference product is the single biological product, already approved by FDA,
against which a proposed biosimilar product is compared.• A reference product is approved based on, among other things, a full complement
of safety and effectiveness data.
How are these Reference products used?
Package inserts are identical
Infusion or subcutaneous injection
In the physicians office
• Shift towards self-administration (Dupixent1)
Both medical and pharmacy benefit are in play
Method of Administration
1https://www.dupixent.com/about -dupixent/how-dupixent-is-taken, accessed 4/30/2018
Biologics used in treatment on complex diseases
• Autoimmune
• Oncology
• Respiratory
Clinical Need
• Reference Products with Marketed Biosimilars
• Pipeline (illustrative sample)
United States Biosimilar Marketplace:
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12017 United States Sales, http://www.investor.jnj.com/releasedetail.cfm?releaseid=1054959, accessed 6/30/201822017 United States Sales, https://www.amgen.com/media/news-releases/2018/02/amgen-reports-fourth -quarter-and-full-year-2017-financial-results/, accessed 6/13/20183https://www.welldynerx.com/content/uploads/2018/02/PipelineReport -Biosimilar-Drugs.pdf42017 United States Sales, https://www.roche.com/dam/jcr:8476522e-ecb4-4c65-b91d-4a8301ccb14b/en/180201_IR_FY_release_en.pdf52017 United States Sales, https://news.abbvie.com/news/abbvie-reports-full-year-and-fourth -quarter-2017-financial-results.htm62017 United States Sales, https://www.amgen.com/media/news-releases/2018/02/amgen-reports-fourth -quarter-and-full-year-2017-financial-results/
Reference Sales # of CompetitorsRemicade $1,073 M1 2Neupogen $369 M2 1
Reference Sales Estimated Launch Date3
Avastin $2, 939 M4 Mid 2019Humira $12, 361 M5 2020-2023Neulasta $3,931 M6 2018-2019
Reimbursement Structure
7
Devil is in the Details
Interchangeability • State level• Dynamic environment
Medicare Part B
• HCPCS / J-Codes• Effective, 4/1/2018, different J-
Codes• Distinct Average Sales Price• Modifiers unnecessary
Commercial:• Varies (ASP, WAC, Value-Based)
Legal IssuesReimbursement
Average Sales Price (ASP)
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Discounts & Rebates
ASP = Eligible Sa les Dolla rs – Price Concessions
In Medicare Part B, Providers are reimbursed a t ASP+
Eligible Sa les Units
Accounted for on a lagged basis
Market-wide dynamic
$0$10$20$30$40$50$60$70$80$90
$100
Remicade 10 mgAverage Sales Price Trend
So let’s look at an ASP Trend
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Signals incrementa l discounting in the market
1https:/ /www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/2018ASPFiles.html
Scenario Modeling
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Therapeutic Class Analysis
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• Look at this from 4 Perspectives
Scenario Market Dynamic Your Health Plan1 Reference Moves to Block
BiosimilarNo change in policy, on the sidelines
2 Reference Moves to Block Biosimilar
Contract with Reference
3 Open Access No change in policy, on the sidelines4 Open Access Contract with Biosimilar
• A Biosimilar launches into a market with a dominant reference product (80% market share)
• Key Assumptions:• BioSim launches @ 5% lower WAC than reference• Reference Market Concessions; 8% 2019, increased 8% each year thereafter• BioSim Market Concessions; 4% in 2019, 2x each year thereafter• Each product takes 5% Price Increase each January 1st
• Impact Period• Compare 2019 and 2022 class cost
Scenario 1:Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
No change in policy, on the sidelines
Scenario 1:
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Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
No change in policy, on the sidelines
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
2019Q2 2020Q2 2021Q2 2022Q2
Annual Cost of Therapy
Reference_WAC
BioSim WAC
Reference_ASP
BioSim ASPImpact of increasing price concessions
Scenario 1:
15
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2018 2020 2022
Market Share
Reference Biosim Other
Gradual decrease in market share
Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
No change in policy, on the sidelines
Scenario 1:Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
No change in policy, on the sidelines
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,875 $ 92.3 $ 357.9
Biosimilar 125 $ 92.5 $ 11.6
Other 1,000 $ 120.0 $ 120.0
Total Cost 5,000 $ 97.9 $ 489.4
2019 Cost of Care 2022 Cost of Care
• 7.5% reduction in class costs over 4 years• Driven by ASP decline
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,156 82.9 261.6
Biosimilar 844 85.3 72.0
Other 1,000 120.0 120.0
Total Cost 5,000 $ 90.7 $ 453.5
• Key Assumptions:• BioSim launches @ 5% lower WAC than reference• Reference Market Concessions; 8% 2019, increased 8% each year thereafter• BioSim Market Concessions; 4% in 2019, 2x each year thereafter• Each product takes 5% Price Increase each January 1st
• Reference Product has additional 5% discount off ASP as negotiated by health plan
• Impact Period• Compare 2019 and 2022 class cost
Scenario 2:Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
Contract with Reference
Scenario 2:Market Dynamic Your Health Plan
Reference Moves to Block Biosimilar
Contract with Reference
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,875 87.7 340.0
Biosimilar 125 92.5 11.6
Other 1,000 120.0 120.0
Total Cost 5,000 $ 94.3 $ 471.5
2019 Cost of Care 2022 Cost of Care
• 10% reduction in class costs over 4 years*
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,156 78.7 248.5
Biosimilar 844 85.3 72.0
Other 1,000 120.0 120.0
Total Cost 5,000 $ 88.1 $ 440.4
*Baseline is $489M in 2019 costs under Scenario 1
Cost ($M)
347.1
92.8
120.0
$ 559.9
ASP Contract
WAC Contract
• Key Assumptions:• BioSim launches @ 5% lower WAC than reference• Reference Market Concessions; 8% 2019, stays constant• BioSim Market Concessions; 4% in 2019, 8% thereafter• Each product takes 5% Price Increase each January 1st
• Impact Period• Compare 2019 and 2022 class cost
Scenario 3:Market Dynamic Your Health Plan
Open Access No change in policy / sidelines
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
2019Q2 2020Q2 2021Q2 2022Q2
Annual Cost of Therapy
Reference_WAC
BioSim WAC
Reference_ASP
BioSim ASP
Scenario 3:
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Market Dynamic Your Health Plan
Open Access No change in policy / sidelines
ASP steadily increasing because discounts are
constant
Scenario 3:
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Market Dynamic Your Health Plan
Open Access No change in policy / sidelines
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
2018 2020 2022
Market Share
Reference Biosim Other
Reference is losing share much faster
Scenario 3:Market Dynamic Your Health Plan
Open Access No change in policy / sidelines
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,781 92.3 349.1
Biosimilar 219 92.4 20.2
Other 1,000 120.0 120.0
Total Cost 5,000 $ 97.9 $ 489.3
2019 Cost of Care 2022 Cost of Care
• 2022 Cost considerably higher than Scenario 1• Limited ASP declines/ trends to contribute to savings
Product Patients Avg. ASP ($K) Cost ($M)
Reference 2,313 103.6 239.5
Biosimilar 1,688 99.6 168.0
Other 1,000 120.0 120.0
Total Cost 5,000 $ 105.5 $ 527.6
• Key Assumptions:• BioSim launches @ 5% lower WAC than reference• Reference Market Concessions; 8% 2019, increased 8% each year thereafter• BioSim Market Concessions; 4% in 2019, 2x each year thereafter• Each product takes 5% Price Increase each January 1st
• Biosimilar Product has additional 15% discount off ASP as negotiated by health plan
• Impact Period• Compare 2019 and 2022 class cost
Scenario 4:Market Dynamic Your Health Plan
Open Access Contract with Biosimilar
Scenario 4:Market Dynamic Your Health Plan
Open Access Contract with Biosimilar
Product Patients Avg. ASP ($K) Cost ($M)
Reference 3,781 92.3 349.1
Biosimilar 219 78.6 17.2
Other 1,000 120.0 120.0
Total Cost 5,000 $ 97.3 $ 486.3
2019 Cost of Care 2022 Cost of Care
• 15% discount crea tes savings, but share shift is not sufficient to dramatica lly lower overa ll costs
Product Patients Avg. ASP ($K) Cost ($M)
Reference 2,313 103.6 239.5
Biosimilar 1,688 84.6 142.8
Other 1,000 120.0 120.0
Total 5,000 $ 100.5 $ 502.4
Therapeutic Class Analysis - Summary
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Scenario Market Dynamic
Your Health Plan 2019 Cost ($M)
2022 Cost ($M)
Change
1 Reference moves to block Biosimilar
No change in policy, on the sidelines
489.4 453.5 -7.3%
2 Reference moves to block Biosimilar
Contract with reference
471.5 440.4 -6.6%
3 Open Access No change in policy, on the sidelines
489.3 527.6 7.8%
4 Open Access Contract with biosimilar
486.3 502.4 3.3%
• Short-term, discounts on reference products projects the grea test savings in the considered scenarios
• Long-term va lue to diversifying your class spend• ASP responds to market dynamics, WAC does not
Risk is our business.
It shouldn’t be yours.
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