Q&A with Brian Reisetter, RPh, MBA, PhD 
& Douglas Paul, PharmD, MS
Medical Marketing Economics

Pharmacy Purchasing & Products: Given the growing interest in follow-on biologics (biosimilars) and the potential cost savings for health care facilities, what is the current status of legislation on this issue?
Brian Reisetter: President Obama’s health reform bill, passed last March, gave the FDA authority to approve follow-on, or biosimilar versions of biologic drugs. The legislation allows for follow-on products, with supporting evidence, to be FDA-classified as interchangeable with their branded counterparts to promote substitution and price competition. However, the legislation does not provide specific details,  so the FDA is currently working out these issues in implementation. The FDA is expected to issue its guidance on the topic by the end of 2011. 

PP&P: Will biosimilars provide cost savings to institutions using these agents?
Reisetter: There is certainly potential for cost savings through the competition this legislation should help create. The actual savings will depend on several factors, including the criticality of the disease state being treated, the number of competing biosimilar products, the size of the overall market, and the clinical evidence available to support use of the product as interchangeable. 

PP&P: How will  the number of biosimilar versions available affect potential price savings?
Reisetter: The number of competitors will be dictated by how difficult the branded biologic is to replicate, the associated fixed costs, and how easy it will be to demonstrate the same therapeutic outcomes with clinical evidence. Current estimations from the Congressional Budget Office (CBO), for example, indicate there will be few competing products initially, which will limit the potential savings. The fixed costs of production also will be exponentially higher for these agents, which will limit the number of competitors. Thus, the dramatic price differences often seen between non-biologic brand name drugs and their available generics are not expected to define this market.In comparison to the non-biologic market, the expected savings from biosimilars is projected to be more modest. The CBO, in its 2008 report, estimated $25 billion in potential savings over 10 years, but this number is subject to change as the biologic market, currently at $75 billion annually, continues to grow. In another report,1 Medco Health Solutions, Inc, estimates the emergence of biosimilars will slow future growth of spending for cancer agents only a few percent per year once available. 

PP&P: How will orphan drugs be impacted by the introduction of biosimilar products?
Doug Paul: It is important to understand that there are numerous indications meeting the criteria for orphan status; the group under the orphan umbrella is diverse. Many people do not realize that virtually all oncology indications are orphan by definition, with exceptions for lung, female breast, prostate, and colorectal indications. There is no reason to think that a biosimilar for an orphan disease will be of greater value or be easier to develop than a biosimilar for a non-orphan disease. In most situations, the same rules and patterns we have been discussing will apply for the smaller markets.By way of example, in the past few years, a very interesting series of events occurred with an orphan drug while the biosimilar debate was gaining momentum. The biotechnology company Genzyme was unable to increase the vat size—only the vat size—of its own product, Myozyme, in the US without significant regulatory hurdles. This is a critical point. A seemingly simple change to increase production volume made the company’s own product unapprovable as a bioequivalent by the FDA, which essentially forced Genzyme to conduct new clinical trials. Lumizyme, or what could be known as Myozyme in a larger vat, was subsequently approved with a different label, which did not include patients younger than eight years. Notably, other regulatory agencies across the globe did not force this extra hurdle. 

PP&P: Beyond price, what additional factors should be considered in determining the viability of a switch to a biosimilar?
Paul: Initially, it is likely that institutional substitutions of biosimilar agents will still require P&T committee approval of the branded substitution, even with FDA assurances that the products are interchangeable. Clinical acceptance of generics in the 1980s was slow, and the acceptance of follow-on biologics may also take time. Once biosimilars are clinically accepted, institutions should be able to promote price competition among the existing products. The more interchangeable the products are in the minds of clinicians, the more prices will come down for institutions.For traditional generics today, an A-rating by the FDA means that the generic product is deemed a therapeutic equivalent, and therefore bioequivalent, to its branded counterpart. Even that level of assuredness, however, is not enough to automatically allow pharmacy-level substitutions in all instances. Generic versions of narrow therapeutic index (NTI) drugs such as phenytoin, levothyroxine, and digoxin have traditionally been more slowly adopted and less substituted than non-NTI products. We will likely have a similar situation when numerous biosimilars become available. Willingness to substitute one product for another may not be automatic simply because the FDA deems them interchangeable. Clinicians must feel comfortable that such substitutions will not negatively affect patient outcomes. The comfort level of clinicians will depend on the therapeutics of the drug, the severity of the disease state, and exactly how similar the products are to begin with.

PP&P: Are there any analogues we can look to for guidance regarding expected savings?
Reisetter & Paul: There are existing market situations that can provide some insight. For example, the human growth hormone market contains several naturally produced biologic products that are similar but not identical. Several differences in indication, dosing, and side effects have created a market in which clinician preferences drive product selection. Those subtle product differences have created a market where prices have not drastically eroded, even with multiple products available. The blood products market functions in much the same way. Several brands of recombinant Factor VIII and Factor IX products exist which are theoretically identical in chemical structure; however, subtle product differences have created patient and clinician preferences that have prevented drastic price erosion. It is likely that these subtle differences will exist within the follow-on biologic market as well. The more complex the molecule, the more skeptical clinicians will be of carte blanche substitutions—and that limits potential savings.PP&P: What changes do you foresee in the distribution of biologics and biosimilars? Reisetter: The role of GPOs for biosimilars remains unclear. Obviously, it would be most beneficial for institutions to have a single source for each agent, and GPOs are likely to work to make that happen. The prices available through these contracts likely will be impacted by clinical acceptance of the individual biologic agent, based on the criteria we have discussed.

PP&P: Many of these products, especially within cancer and rheumatoid arthritis, are administered in outpatient clinics. Should hospitals be thinking about this setting any differently?
Reisetter: Absolutely. The current legislation is written to allow or require the same J-codes to be used for products that are deemed interchangeable by the FDA for outpatient reimbursement. Because the average selling price (ASP) is an average of all products assigned that J-code, prices from several companies’ products will be lumped together to calculate that ASP. As a result, institutions will need to be very careful in selecting a product that does not cost them more than they will be reimbursed. I envision a situation where a different product will need to be used for patients in the outpatient setting than for inpatients in the DRG-based reimbursement setting.

PP&P: What regulatory issues do you foresee affecting the biosimilar marketplace in the future?
Reisetter: The biggest discussions within the FDA will continue to be about putting a process in place that ensures interchangeability of products in a way that is safe for patients. From a legal perspective, I think we can expect to see the same level of patent disputes we currently see for traditional generics today. All of that leads to uncertainty in this area, making potential savings difficult to predict.

PP&P: Any final thoughts on the future of biosimilars in hospital pharmacy practice?
Paul: Although etanercept (Enbrel) is not a high-volume product for institutional settings, watch what happens when it loses its patent in 2012—the first of the major biologic agents to do so. As new biologic competitors become available for that compound, there will likely be several novel actions and groundbreaking decisions that will affect the biosimilar market for decades to come. 

Reference

1. Medco Health Solutions, Inc. 2011 Drug Trend Report. Available at: http://www.drugtrendreport.com/2011-reportAccessed October 27, 2011.

Brian Reisetter, RPh, MBA, PhD, is a vice president and partner at Medical Marketing Economics. He is a former pharmaceutical sales representative for Eli Lilly & Company and a former director of pharmacy in the Chicago area. He holds a PhD in pharmaceutical marketing from the University of Mississippi and both pharmacy and MBA degrees from Drake University. He can be reached at brian@m2econ.com. 

Doug Paul, PharmD, MS, is a vice president and partner at Medical Marketing Economics. Prior to forming MME, Doug served as vice president of marketing for a medical device firm. He has been active at the national level with various pharmacy associations and played a key role in the development of the American College of Veterinary Pharmacists. He holds a PharmD and MS in pharmaceutical marketing from the University of Mississippi. He can be reached at doug@m2econ.com.

The FDA Defines Biologics

What is a biological product?
Biological products include a wide range of products such as vaccines, blood and blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins. Biologics can be composed of sugars, proteins, or nucleic acids or complex combinations of these substances, or may be living entities such as cells and tissues. Biologics are isolated from a variety of natural sources—human, animal, or microorganism—and may be produced by biotechnology methods and other cutting-edge technologies. Gene-based and cellular biologics, for example, often are at the forefront of biomedical research, and may be used to treat a variety of medical conditions for which no other treatments are available.

How do biological products differ from conventional drugs?
In contrast to most drugs that are chemically synthesized and their structure is known, most biologics are complex mixtures that are not easily identified or characterized. Biological products, including those manufactured by biotechnology, tend to be heat sensitive and susceptible to microbial contamination. Therefore, it is necessary to use aseptic principles from initial manufacturing steps, which is also in contrast to most conventional drugs.

To view this section of the FDA’s Website, About the Center for Biologics Evaluation and Research visit:
www.fda.gov/AboutFDA/CentersOffices/CBER/ucm133077.htm

Tips for IVIG Procurement Success
By Jason Lovero, PharmD, MS, MHA

Given the unique nature and high cost of IVIG, contracting and procurement of this biologic is often much more complex than for most conventional medications. The following are some quick tips to help ensure successful procurement of this drug.

Understand the various contracts you have and what the terms are for each one. For products that require special handling, a careful usage analysis must be done to ensure minimal waste.

Consider all the elements that go into direct contracting such as bidding, creating purchase orders and invoices, and arranging for payment. Make sure the fine details behind each of these processes are understood for every contract entered into.

More contracts mean more work; check with suppliers to see if certain contracts can be bundled together. Make sure to compare products across contract bundles to avoid duplication of line items.

Keep in mind the impact of shipping delays (such as bad weather conditions), especially when ordering products directly from manufacturers or through specialty distributors. Developing relationships with multiple vendors can be beneficial, particularly in an era of drug shortages. Also, if you choose to procure IVIG from the gray market, make every effort to verify the drug pedigree to ensure that quality has not been compromised. 

Take note of ordering limitations during holidays and understand the implications that emergency orders can have on pricing, availability, and quality.

Some distributors offer hospitals the option of consignment contracts. With this method, inventory is sent to and stored at the hospital, but the hospital does not have financial liability for the product until it is actually used. However, keep in mind that hospitals often pay an upcharge for medications used under consignment. 

When considering a consignment contract, conduct a utilization analysis; look at the institution’s IVIG usage history over a 12-month period, factoring in time spent managing the inventory manually, upcharge implications, and costs for emergency shipments. 

Jason Lovero, PharmD, MS, MHA, serves as an assistant director of pharmacy at The Ohio State University Medical Center (OSUMC). After graduating from the University of Houston College of Pharmacy, Jason completed a residency in health-system pharmacy administration and a pharmacy fellowship with an emphasis on financial management at OSUMC. In his current role, he is responsible for pharmacy revenue cycle, expense management, productivity, and strategic planning.