Q&A: The Future of Biosimilar Pricing at the Pharmacy Counter

Amongst declining reimbursements and increasing prescription drug prices, pharmacists and patients alike have recently looked to biosimilars to alleviate some financial pressures at the pharmacy counter. With federal legislation—namely the Inflation Reduction Act (IRA) of 2022—intervening to the benefit of prescription drug beneficiaries, biosimilars could arise as even better options for cheaper, alternative medications.

“[The IRA’s provisions are] meant to continue to incentivize manufacturers to create biosimilars because they want competition,” said Steve Callahan, Senior Director of Advisory & Insights at MMIT. “They don't want to [disincentivize] any manufacturer from coming out with a biosimilar.”

Biosimilars, which are alternatives to generic and brand-name prescription drugs, are newer products to the drug supply chain and are designed to increase competition amongst manufacturers. Callahan sat down with Drug Topics to discuss how biosimilars are intertwined with the provisions of the IRA and what their prices will look like going into next year.

"I think in the recent years, biosimilars have just become a lot more known," said Callahan. | image credit: João Macedo / stock.adobe.com

READ MORE: Amgen Gains FDA Approval for First Interchangeable Biosimilar to Eculizumab

Drug Topics: What are the IRA’s key provisions that are set to make the biggest impact on the distribution of biosimilars?

Steve Callahan: IRA had a number of provisions focused on the pharma industry. Medicare is now going to negotiate on prices. That's something that is starting to roll out in the near future. In 2026, the first set of drugs are going to come out at these new list prices. This is the first time that Medicare is actually negotiating on the drugs themselves. Of course, there's been negotiations in the past about rebating, etc., but this is the first time that the actual list price of drugs are being negotiated. That certainly has a very big impact. I think another big impact is there's this new inflation-based rebate. The rate of inflation is also known as a CPI. This is the CPI penalty, where if a drug's price increases faster than the rate of inflation, the manufacturer of that drug actually has to pay that money back to Medicare. Whatever that differential is above the inflation rate, they have to pay that amount that was paid above that back to CMS as a rebate for that drug.

Those are 2 key provisions that have an impact overall. But a couple things about the biosimilar were also mentioned in the IRA. There is proposed to be more beneficial biosimilar reimbursements. I believe the reimbursement rate is 106% of the ASP (average sales price) for traditional drugs. For biosimilars, they've actually increased that 2%, so they'll get 108% instead of 106%. There is some incentive to prescribe biosimilars because there is a slightly better reimbursement rate from CMS. Also, I had touched on the fact that Medicare is now negotiating on prices. How that works is CMS looks at the top spend of drugs overall, so it's the price of the drug multiplied by the number of patients using it. From that list, they identified the drugs that they're going to negotiate the price on.

But there's actually an exclusion where if a product is expected to have a biosimilar come out within 2 years, they can actually be excluded from that list. What's interesting is that it's not automatic, where a biosimilar manufacturer has to request that; they have to request that exclusion. It is there, and it's meant to continue to incentivize manufacturers to create biosimilars because they want competition. They don't want to disincentivize any manufacturer from coming out with a biosimilar. That provision is there to actually help biosimilars coming out by allowing that product to be excluded from the Medicare price negotiations. Really interesting is that Stelara was on that list, and there's actually a number of Stelara biosimilars that are set to launch next year. I was surprised to see Stelara was on the list of products that CMS negotiated with because, in theory, those biosimilar manufacturers could have petitioned for that product to be excluded, but that didn't happen.

Drug Topics: What is the future of biosimilars within the prescription drug market, and what is the industry seemingly pushing to do with these products 10 to 20 years down the line?

Steve Callahan: I think in the recent years, biosimilars have just become a lot more known. Now, this is something that's occurring in the market by maybe more everyday patients who aren't as in tune with the pharma industry. There's been products like insulin or HUMIRA. These are big-name products that had biosimilars launch that were newsworthy events. I think just the fact that this is a term that's being more understood, and since they've been in the market for longer, there's just a lot more acceptance of biosimilars that these are similar products to what a patient has been receiving.

Also in recent years, there's been biosimilars that came out [with] this interchangeable designation. One thing that separated the initial biosimilars from generics is that a generic has this interchangeable designation. [This means] if a physician prescribes you the brand name, at the pharmacy, they can just switch it to a generic product that's a lower cost. Because they've been shown to be the same, that's allowed at the pharmacy. With the first biosimilars, that wasn't the case; a physician had to actually write specifically for a biosimilar. If they put the original brand name on it, that's what the pharmacy was allowed to give. They couldn't switch it to anything else. But now that there's this interchangeable designation, I think that's eased a lot of the concern that maybe some patients who would otherwise be hesitant have had because now [it’s] showing that this is indeed the same output, the same outcomes a patient was already receiving.

I think that the factors that are making more acceptance are just the fact that there's more awareness of biosimilars, that there's more data, more overall public experience showing that the outcomes haven't changed for patients who've taken a biosimilar versus an originator over the past 10 years. There's been this new interchangeable designation, and then just some very high-profile products to get biosimilars. And there's a lot more in the works that are going to get biosimilars in the near future. I think that really this is just leading to more and more public awareness and acceptance of biosimilars, and that we're going to continue to see this be a space that just grows as time goes on.

READ MORE: Biosimilars Resource Center

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