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August 23, 2018

Will Part B step edits impact US biosimilar uptake?

Step edits are the process of an insurance company requiring a patient to undergo less expensive medications before moving on to a more expensive therapy.

By GlobalData Healthcare

Increased autonomy awarded to Medicare Advantage (MA) plans by the Centers for Medicare and Medicaid Services (CMS) to introduce step edits for Part B therapies is unlikely to have a major impact on biosimilar uptake due to similar financial challenges that have been seen with commercial payers. Step edits are the process of an insurance company requiring a patient to undergo less expensive medications before moving on to a more expensive therapy.

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The CMS is a US federal agency that administers the national health insurance Medicare program for those 65 and older, certain younger people with disabilities and people with end-stage renal disease.

On 7 August, CMS announced that MA plans – currently serving a third of Medicare beneficiaries or 20 million people – now have the option to apply step therapy to choose the most cost-effective option for Part B drugs (non self-administered). MA plans are offered by private companies, approved and paid for by Medicare.

Some experts noted while these step edits may spur the use of biosimilars, highly similar versions of originator biologics intended to be less expensive, there may be other legal and financial challenges – also observed with commercial health insurance plans – that may put the brakes on drastic changes to biosimilar use under MA plans.. The possibility of lower reimbursement for physicians as a result of step edits, or step therapy, may compel physicians to oppose any step-edit changes. That, coupled with the competitive MA landscape, may make it tough for all plans to introduce step edits at the risk of patients switching over to another plan in response to an unfavorable change.

The CMS has said approximately $12bn is spent by CMS on Part B drugs per year. Analysts anticipate biologics to be the main target after CMS explicitly noted biosimilars as an example for the use of this cost-efficiency measure.

Analysts specifically called out an impact on Amgen  due to an erosion of Neulasta (pegfilgrastim) sales, where Part B comprises 30% of the global Neulasta franchise – for chemotherapy-induced neutropenia – and could face up to 2% erosion by biosimilars. Amgen ’s share price dropped 2.5% on 8 August as a result of the news. Amgen ’s market cap is $130.2bn.

An Amgen spokesperson said the company expects a small fraction of its business to be exposed to step therapy under the new policy, but did not comment on the exact fraction. If a payer decides to implement these changes, Amgen is poised to compete, said the spokesperson, adding the company anticipates the MA landscape to now more closely resemble the commercial environment.

Generally low impact/rebates and other issues continue

As per CMS, private companies that manage MA are paid a fixed amount by Medicare to cover all its services for an enrollee’s care each month. This amount is capitated and does not change as per individual patient costs. Prior to the CMS announcement, treatment choice was driven by physician prescriptions and plans were not allowed to suggest step-edits based on cost-savings.

In the absence of any direction to choose a biosimilar over a biologic, since branded biologics are covered under Part B, the latter were commonly chosen, said Precision For Value vice president of payer access solutions Charline Shan. Now, with the step-edits, there is potential for the plan to choose a lower-cost biosimilar, said experts.

But branded manufacturers can still employ the same negotiation and rebate tactics used in commercial plans to promote their biologic use, she and Health Strategies Group research director Howard Flushman agreed.

Branded biologic manufacturers have been aggressive and effective with legal strategies to keep biosimilars off the market before and after approval, said Dr Joel Hay, professor of pharmaceutical economics and policy at the University of Southern California. Patent lawsuits, interchangeability concerns (whether a biosmilar can be substituted for the reference product without the involvement of the prescriber) and financial issues involving discounts and rebates are significant obstacles to biosimilar uptake, said Milliman principal and consulting actuary Bruce Pyenson. While the CMS rule may promote use of existing biosimilars, the changes in MA plans don’t address all those aforementioned challenges, said Pyenson and Hay.

But overall there are very few biosimilars on the market and they are not much cheaper than the branded biologics, said Hay, adding there is not enough competition among them to drive costs down, and hence step edits may not have a large impact. Fulphila, a Neulasta biosimilar manufactured by Mylan and Biocon, was approved on 4 June, and a few companies like Coherus BioSciences  and Sandoz  – a division of Novartis – have ongoing submissions for their own biosimilars to the FDA. Mylan did not respond to a request for comment.

Also, the new CMS rule only applies to new patients – a fraction of the estimated 20 million people under MA plans – and hence the impact will be relatively small, Shan and Hay agreed. The number of new patients on MA plans each year is difficult to estimate due to varied disease prevalence, said Shan.

Individual MA plan challenges and physician resistance

The 15-20% Part B savings projections by CMS – based on commercial plan experience – is aggressive, and still depends on how many MA plans participate and successfully introduce step edits, said Shan.

A CMS spokesperson did not comment specifically on whether the agency expects all plans to participate in the step edits, but added that it anticipates plans will be interested in the flexibility to offer step therapy, and will have a better idea about the number of beneficiaries impacted by this after MA plans review the memo.

Since the market is so segmented, not all individual MA plans have the power to negotiate changes to introduce step edits, said Hay, adding that it would be a different situation if CMS would have implemented these changes for all of Medicare. If a plan has only 10-20% of the MA market in a region, and introduces step edits, there is the risk of the patient moving on to a competing MA plan, he added.

Compared to commercial plans, MA beneficiaries may be more price-sensitive with making choices, and depending on the MA plan competition in a particular region, patients could shop around if the plan changes are unfavourable, said University of Pennsylvania Wharton School professor Dr Patricia Danzon.

In its announcement, CMS said beneficiaries can switch plans through March once the 2019 MA plan begins.

Flushman said if plans have the opportunity to introduce step edits to save costs, they will do so and any patient loss from individual MA plans will be minimal as most patients would want to stay with their doctors, he added. Established practices with a large enough patient pool can switch MA plans if they want, but newer or smaller ones are unlikely to do that, added Flushman.

Physician organizations like The American Society of Clinical Oncology and American College of Rheumatology issued statements that did not support the rule, saying it would create barriers to access. As per the current system – calculating the reimbursement at average sales price (ASP) of the drug +6% of ASP – any manufacturer discounts given to the provider purchasing the drug allow them to have a net profit, said Shan. If a less expensive drug or a biosimilar is pushed through step edits, it would likely erode into the physician’s net profit, she added.

by Manasi Vaidya in New York

Manasi Vaidya is a Senior Reporter for Pharmaceutical Technology parent company GlobalData’s investigative journalism team. A version of this article originally appeared on the Insights module of GlobalData’s Pharmaceutical Intelligence Center. To access more articles like this, visit GlobalData.

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What is the Global Healthcare and Pharma Market Q2 Outlook?

Given the background of high inflation, re-emerging supply chain issues, and the widespread macro-economic implications of the Ukraine conflict, the global pharmaceutical industry is facing an entirely new set of challenges following the turbulence of the COVID-19 pandemic. GlobalData’s World Markets Healthcare (WMH) service has released its latest Q2 forecast. This report incorporates the latest thinking on the opportunities and risks this new environment presents for pharma companies. However, the pharma sector is proving resilient, and we are projecting 4.4% global growth for the year ahead. Yet it remains that the current economic picture is inverting some baseline assumptions from previous quarterly forecasts and altering which markets we expect the key growth levers to derive from. Download our latest executive summary for a snapshot view of what our clients use to formulate winning strategies.
by GlobalData
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