Stakeholder perspectives on the sustainability of the United States biosimilars market

Abstract

Biologic therapies play a critical role in modern medical practice but also present challenges for payers, patients, and other stakeholders because of their high cost. Biosimilars can mitigate the cost pressures of reference biologic therapy because they are typically priced at least 25% lower, providing a means to administer cutting-edge biologic therapy while also managing cost of care. In fact, the US health care system has saved an estimated $23.6 billion from use of biosimilars. However, the market is still in a nascent phase of development, and early cost-saving successes are not guaranteed to persist unless sustainable market conditions are established. To better understand the perspectives of stakeholders about opportunities and threats to the sustainability of the US biosimilar market, a multistakeholder roundtable discussion was convened in December of 2023 and included health care payers, providers, self-insured employers, a manufacturer, and a biosimilar research and advocacy organization. The objective of this commentary, authored by the roundtable participants, is to posit specific opportunities and threats that stakeholders should consider to better facilitate sustainable biosimilar market conditions in the United States. We highlight key points, including (1) biosimilar price volatility with large quarter-on-quarter declines for most products; (2) perverse economic incentives that encourage providers to use more expensive reference products because reimbursement dynamics make them more profitable; (3) complex rebate structures that create barriers to biosimilar access; and (4) ongoing changes to the legal and regulatory environment, including evidence requirements to gain “interchangeable” status. We conclude with an overview of potential policy solutions to address the sustainability opportunities and threats. The authors welcome the opportunity to advance this dialogue toward action and encourage additional stakeholders to join the effort. We are optimistic that, through informed decision-making and compromise, we can collectively achieve a robust and sustainable US biosimilars market that appropriately benefits all stakeholders.

Plain language summary

Biologics are complex treatments made from parts of living cells, play an important role in modern medical care, and typically have a high cost. Biosimilars closely resemble biologic treatments that are already available but are usually priced at least 25% lower. Biosimilars have delivered large cost-savings to the US health care system, but these successes may not continue unless action is taken to improve market sustainability. We review key considerations in this journey.

Implications for managed care pharmacy

Biologics are critical therapies in modern medical care but present challenges for stakeholders because of their high cost. Biosimilars can mitigate the cost pressures of reference products because they are typically priced at least 25% lower. However, the US biosimilar market is in an early phase of development, and initial cost-saving successes may not persist unless sustainable market conditions are established. We review key points to maintain a viable US biosimilars market.

Biologic therapies, such as monoclonal antibodies and colony-stimulating factors, play an increasingly critical role in modern medical practice but also present challenges for health care payers, patients, and other stakeholders because of their high cost. Biosimilars are defined as “a biologic medication that is highly similar to, and has no clinically meaningful differences from, an existing US Food and Drug Administration (FDA)–approved biologic, called a reference product.”¹ Biosimilars can mitigate the cost pressures of reference biologic therapy. This is because biosimilars are typically priced at least 25% less than their reference products, providing a means to administer cutting-edge biologic therapy while also managing cost of care (vs reference product).^2,3 The entry of biosimilars can also produce cost savings by increasing competition for reference products and other branded products in a given drug class, thereby influencing those products to reduce their prices.³

The US health care system has already saved an estimated $23.6 billion from use of biosimilars as an alternative to reference products,⁴ a tremendous accomplishment over the short 9 years since they first entered the market.⁵ Furthermore, IQVIA projects increase biosimilar savings impact because of reference biologic loss of exclusivity in the coming years.⁶ However, the market is still in a nascent phase of development, and these early cost-saving successes are not guaranteed to persist into the future unless sustainable market conditions are established. Current challenges to sustainability in the US biosimilar market include (1) price volatility with large quarter-on-quarter declines for most products; (2) perverse economic incentives that can encourage providers to use more expensive reference products because reimbursement dynamics can make them more profitable; (3) complex rebate structures that create barriers to biosimilar access; and (4) ongoing changes to the legal and regulatory environment, including evidence requirements to gain “interchangeable” status.^2,7,8

We are now at a critical juncture in which threats and opportunities for the market are emerging, and today’s stakeholder actions could fundamentally alter tomorrow’s marketplace. To better understand the perspectives of key stakeholders about opportunities and threats in relation to the sustainability of the US market, a multistakeholder roundtable discussion was convened in December of 2023. The discussion included participants representing health care payers, providers, self-insured employers, a manufacturer, and a biosimilar research and advocacy organization. The objective of this commentary, authored by the roundtable participants, is to summarize the key perspectives expressed and posit specific opportunities and threats that stakeholders should consider to better facilitate sustainable biosimilar market conditions in the United States.

Stakeholder Perspectives on the Opportunities Presented by Biosimilars

The roundtable discussion began with an exploration of ways in which the availability of biosimilars benefits the mission of each of the participating stakeholders’ organizations. In this regard, there was broad agreement among participants that biosimilars create value by competing with reference products to create more favorable market conditions, ultimately reducing the cost of given molecules. Importantly, participants noted that competition-based reductions in cost typically impact reference products in addition to biosimilars, meaning that even patients treated with reference products may realize reduced cost of care based on the availability of biosimilars (an effect demonstrated in Figure 1). Collectively, these cost reductions are beneficial in that savings can be reinvested in expanding access to biologic therapy, allowing access to biologic therapy at earlier points in the treatment pathway where clinically appropriate, and/or reallocated to other therapeutic areas. For example, one participant noted the finding from the Association for Accessible Medicines that availability of biosimilars is estimated to have resulted in an additional 150 million patient days of biologic therapy in the United States over the period of 2015 to 2021.⁴ However, these opportunities can be blunted in cases in which coverage policies provide more favorable access to reference products, require patients to initiate treatment with reference products before accessing biosimilars, and/or require patients to access biosimilars through nonstandard channels. For example, “white bagging,” in which pharmacy benefit managers require therapies to ship to providers directly from their own specialty pharmacies, and “brown bagging,” in which therapies are shipped directly to patients and then brought to providers, can introduce challenges if dose changes are required, can create chain of custody concerns, and can ultimately result in treatment delays.

FIGURE 1.

ASP for Originator and Biosimilar Trastuzumab, 2015–2024

Another important opportunity related to competition is that the availability of biosimilars diversifies the supply chain for a set of molecules that are increasingly foundational therapies in oncology, rheumatology, gastroenterology, and other therapeutic areas. As more manufacturers enter the market with additional biosimilar products, the likelihood of a shortage of a given molecule due to a manufacturer leaving a market, having quality issues, or going bankrupt is diminished. As the supply chain becomes more robust in this manner, patient health outcomes are less likely to be impacted because of shortages and suboptimal treatment. However, there is a balance to be struck, because if prices are driven too low, there is potential for manufacturers to leave the market, thereby heightening threats to supply. This dynamic is particularly salient at this moment in time, when shortages of certain generic small-molecule drugs, particularly sterile injectables, have arisen for similar reasons, and patient treatment plans and outcomes are being impacted as a result.^9,10

Additionally, there was discussion of the important opportunity to partner with biomedical professional societies to increase biosimilar-related education for providers and patients and to advocate for better biosimilar-related policies in government. For example, there remains a well-documented “nocebo” phenomenon whereby some stakeholders perceive that biosimilar therapies are lower quality than their reference products because they are lower cost.^11-13 Professional societies are well positioned to develop and disseminate educational campaigns to combat these types of misunderstandings that run counter to evidence and the FDA’s approach to regulating biosimilars. Specific examples of educational campaigns include those from the American Society of Clinical Oncology, American College of Rheumatology, American Gastroenterological Association, and the Crohn’s and Colitis Foundation.^14-17 Continued efforts of this type are warranted, as recent studies continue to document misunderstanding about biosimilars among patients and providers.^11,12,18

Lastly, there was substantial discussion about how, at this early phase of the US biosimilar markets’ development, there is opportunity to center approaches to sustainability around the patient. Conceptualizing the biosimilar market with the patient at the center can lead to incentives that better align stakeholders on achieving improved health outcomes, appropriately reducing health care expenditure, and developing new biosimilars that meet the most pressing needs of end-users. One participant noted that stakeholders should “work backwards from the patient, with them at the center…they have a right to access the most appropriate treatment at a reasonable price…[and] that concept of reasonable price should flow to all parties.” One specific idea to operationalize this concept was for payers to institute lower copayment or coinsurance amounts for patients treated with biosimilars (rather than reference products), as is often the case with generic small-molecule therapies. There is evidence that these approaches have not been undertaken to date, as a recent study of commercially insured patients demonstrated that the introduction of biosimilar competition was not associated with lower out-of-pocket costs.¹⁹ There was also discussion of the importance from a provider and payer perspective of manufacturer patient assistance programs to reduce patient copays and increase access for patients.

Stakeholder Perspectives on Key Threats to Biosimilar Sustainability

Among the threats to biosimilar market sustainability discussed, price dynamics received the most attention. Specifically, many participants noted that mechanics of Average Sales Price (ASP)—the metric that the Centers for Medicare and Medicaid Services (CMS) uses for reimbursement of Medicare Part B claims—was seen as a primary threat to sustainability.²⁰ ASP reflects the mean price paid in the US market inclusive of manufacturer rebates and discounts and adjusts on a quarterly basis. As a result of this methodology, and accentuated by the need for rebates/discounts in a competitive marketplace, the ASP for molecules with biosimilars typically declines over time.⁸ For example, the mean biosimilar ASP for trastuzumab, a common treatment in HER2-positive breast cancer, reduced from $84.06 per 10 mg in quarter 1 of 2021 to $38.99 in quarter 1 of 2024 (53.6% decline vs 2021) (Figure 1).²⁰ This constant decline in price, when combined with rising production costs, creates pressure on manufacturers to leave markets.⁸ Furthermore, these price dynamics create a disincentive to invest in developing additional biosimilars in the future. One participant noted “we need to understand that while some stakeholders want to see prices go down as far as possible, if they go down too far, then those products won’t exist on the market and competition may be harmed.”

Biosimilar price dynamics also threaten purchasers of biosimilars, primarily health care providers operating in the “buy and bill” paradigm. In these settings, providers make cash outlays to procure biosimilars with the expectation of recouping the net cost via future reimbursement from health care payers.²¹ However, with price dynamics resulting in continuous declines in reimbursement, providers often risk not receiving sufficient reimbursement to cover the full cost of acquiring a given therapy.⁸ As such, providers are put in a precarious economic situation in which the viability of their own medical practices can become threatened because of unsustainable price dynamics in the biosimilars market. In these circumstances, there is a perverse incentive for providers to select more costly therapies, with better likelihood of net cost recovery, as an alternative to biosimilar therapy.^21-23

An overarching price-related issue that threatens biosimilar sustainability is that price dynamics are not sufficiently stable and/or predictable to facilitate business planning for all stakeholders, creating tremendous uncertainty.⁸ Manufacturers require sufficient and predictable return on investment to justify keeping products in markets and developing new biosimilars. Providers need assurance of net cost recovery on drug acquisition cost to ensure that the economics of their medical practices are viable. Even payers, who largely benefit from price declines, may have trouble in forecasting expenditures as prices change at unpredictable rates from quarter to quarter. The participants noted that modifying contracting practices could potentially mitigate these concerns if price and/or volume guarantees are implemented over a long enough time horizon.

Several participants also noted that structure and economic incentives in the US market can limit which stakeholder groups are able to realize benefit from biosimilar-related cost savings. One participant commented that “one stakeholder’s ‘cost’ is another stakeholder’s ‘revenue’, and efforts are needed to recognize all of these considerations in a way that appropriately benefits all parties.” Specifically, the idea was raised that payers may derive a disproportionate amount of the biosimilar-related value in the form of reduced reimbursement expenditure (and potentially rebates that were not given on reference products), whereas patients may not always benefit from such savings through lower out-of-pocket cost benefits, and providers might actually reduce their revenue by choosing biosimilars rather than reference products.²¹ Accordingly, the question was raised as to whether there could be mechanisms created that allow all stakeholders to equally benefit from “reinvestment” of savings. For example, one panelist noted that “reinvesting in executive leadership compensation doesn’t lead to biosimilar sustainability, but reinvesting savings to eliminate patient co-insurance for biosimilars, or to expand biosimilar manufacturing capacity could.”

Policy Change Approaches to Enhance US Biosimilar Market Sustainability

In discussion of potential policy changes to realize opportunities and address threats to sustainability, the participants discussed 3 areas in which policy changes might be particularly beneficial (summarized in Table 1).

TABLE 1.

Overview of Key Biosimilar Sustainability Opportunities, Threats, and Potential Strategies to Address Them

	Biosimilar sustainability opportunity/threat	Potential strategies to address biosimilar sustainability opportunity/threat	Primary stakeholders involved
Opportunities to enhance sustainability	Realize the cost-saving and supply chain robustness promise of biosimilars	•Pursue pricing policies that incentivize manufacturers to develop and maintain biosimilar portfolios while providing cost savings vs reference products	Manufacturers, payers, government
	Partner with professional societies to educate stakeholders about biosimilars	•Support professional societies in efforts to disseminate reliable, unbiased evidence about biosimilars to a range of stakeholders to reduce misunderstanding about biosimilar safety and effectiveness	Professional societies, manufacturers, payers, patients, providers
	Develop a patient-centric approach to biosimilar sustainability	•Develop biosimilar market sustainability frameworks that explicitly define key dimensions and stakeholders, with the patient at the center •Engage patients and their advocates in efforts to establish a sustainable biosimilars marketplace	Patients, researchers, manufacturers, payers, providers, government
Threats to sustainability	Biosimilar price volatility and decline	•Establish biosimilar price based on competitive discount to reference product WAC and reduce rebates and discounts that drive down ASP •Pursue contracts that are long term, specify minimum purchasing volume, and establish sustainable pricing for biosimilars	Manufacturers, payers, self-insured employers, providers
	Address challenges with CMS reimbursement methodology for biosimilars	•Increase differential ASP add-on payment for reimbursement of biosimilars vs reference products •Reduce the time horizon for calculating ASP to be less than 2 quarters, making the ASP more responsive to changes in price and rebates/discounts	Government, providers, payers, manufacturers
	Promote equitable sharing of value created by biosimilar cost savings	•Create coverage policies in which patients have consistently reduced out-of-pocket expenditure when biosimilars are selected •Create mechanisms that allow providers to benefit from biosimilar-related cost savings	Patients, providers, payers
	Reduce legal/regulatory barriers to use of biosimilars	•Modify state and/or federal laws that create artificial barriers to biosimilar use and create confusion among stakeholders •Implement quality measures that benchmark and encourage appropriate levels of biosimilar use	Government, manufacturers, providers, payers, patients

ASP = average sales price; CMS = Centers for Medicare and Medicaid Services; WAC = wholesale acquisition cost.

PRICING AND REIMBURSEMENT

Changes to pricing and reimbursement approaches were raised as a primary means to enhance market sustainability. For example, in relation to the challenges of biosimilar price dynamics, and specifically ASP, it was noted that biosimilar reimbursement methods could be modified to make payments stable and predictable over time. One example of this is the Inflation Reduction Act (IRA) of 2022 change to reimburse biosimilars at ASP plus 8%, rather than ASP plus 6% (as for reference products), to increase access and utilization of biosimilars.²⁴ This type of differential add-on to ASP could be increased further to enhance incentive to use biosimilars while maintaining meaningful savings relative to reference products.

Another approach, related to that above, is to reduce the time horizon for calculating ASP to be less than 2 quarters. Currently, ASP reflects average prices in the past 6-month period less rebates and discounts. If this time horizon was shortened, the ASP calculation would become more responsive to manufacturer changes in price and rebates/discounts over time. In turn, this could give a manufacturer better ability to manage the ASP of its product in a manner that creates value and savings for providers, payers, and other stakeholders.

CONTRACTING PRACTICES

Participants noted the potential to improve market sustainability by changing biosimilar contracting practices. This concept was also noted in a 2020 report from the FDA focused on mitigating the threat of drug shortages in the United States—an end result of unsustainable markets.²⁵ That report suggested focus on “promoting sustainable private sector contracts” via purchasers, payers and group purchasing organizations, finding ways to shift risk and uncertainty away from manufacturers to incentivize development of biosimilars and more predictable market conditions and supply. One specific approach that has been discussed is for purchasers to consider long-term contracts that specify a minimum purchasing volume and a “fair” price for the drug.²⁰ In turn, manufacturers would commit to establish measures to promote supply chain robustness, such as using multiple manufacturing sites and holding an agreed-on level of safety stock, which could collectively safeguard against supply shortages.

Contracting in a manner that allows providers to share in the value created by biosimilar-related savings could also create impactful changes to the landscape. For example, CMS could allow providers that administer biosimilars to patients with Medicare coverage to share in a portion of the difference between the ASP of the biosimilar and that of its reference product in the form of an additional add-on payment.

LEGAL & REGULATORY BARRIERS TO USE OF BIOSIMILARS

Modifications of state laws that inhibit biosimilar uptake were also noted. For example, Ohio Revised Code section 4729.38 states “the pharmacist shall not select a generically equivalent drug or interchangeable biological product unless its price to the patient is less than or equal to the price of the drug as prescribed.”²⁶ Though sharing the value created by biosimilars with patients is an important consideration, this type of legislation can create additional artificial barriers by requiring documentation and comparison of prices to facilitate therapy choice.

Legal challenges to biosimilar market entry were mentioned as an important barrier to a sustainable market as well. For example, there are cases of reference product manufacturers asserting large numbers of patents and causing delayed market entry of biosimilars²⁷. One well-known case of this phenomenon is the recent experience in the adalimumab market. The patent on the monoclonal antibody adalimumab expired in 2016, but because of legal challenges related to a large number of patents asserted on manufacturing processes and alternative formulations, the first adalimumab biosimilar did not enter the US market until 2023.²⁷ Policy efforts aimed at reducing these types of delays could benefit biosimilar access and market sustainability.

The IRA also has potential to influence biosimilar market sustainability. For example, the IRA has a provision that biologics can have prices negotiated by Medicare 11 years after FDA approval if no biosimilar competitor is marketed.²⁸ Given the time required to develop a biosimilar (a median of 6 years from just initiation of phase 1 testing to FDA approval), it is likely that most biologics will become eligible for price negotiation before biosimilar competition enters the market.²⁹ If reference products go through negotiation and have their prices reduced in the process, the lowered benchmark price will likely drive future biosimilar competitors’ prices lower as well. As a result, these dynamics could create disincentive for manufacturers to develop additional biosimilars—an unintended consequence of the IRA that should be considered by policymakers.

Lastly, changes to federal law related to interchangeability status were also referenced. Specifically, the “Biosimilar Red Tape Elimination Act” (S.2305), currently under review in the Senate, could deem FDA-approved biosimilars as interchangeable without requiring additional switching study evidence.³⁰ Participants noted that, if implemented, this change could streamline biosimilar development and provider management processes and reduce interchangeability-related confusion among stakeholders. However, such a change could also diminish prescriber agency in selecting specific biosimilars and could create misaligned incentives if payers thereby gain additional influence in therapy selection and give preference to the lowest-cost biosimilars with limited regard for other attributes.

Conclusions

The views of multiple stakeholders as reflected in this article serves as an early step in efforts to diagnose and address opportunities and threats related to the sustainability of the US biosimilars market. It should be noted that a limitation of our roundtable discussion was the lack of a patient stakeholder representative. It will be critical to document and incorporate patient perspectives in subsequent efforts to promote biosimilar market sustainability.

Importantly, we found broad agreement on the opportunity of biosimilar therapies as valuable tools in contemporary medical practice to deliver optimal patient outcomes at a more affordable cost in many disease areas. Patients benefit from a sustainable biosimilars market that supports dependable access and affordability. With a consensus on this key element of opportunity, we turned to the most pressing threats to biosimilar market sustainability. In this conversation, participants expressed views that threats to the market are real, and stakeholders need to take timely action to ensure a robust market and mitigate the likelihood of supply chain disruptions.

Future efforts will be required to achieve this goal, including more documentation and alignment of stakeholder views, coalescing around a common framework for pursuing sustainability, and evaluating alternative policy reforms to support mutually agreeable market conditions. The participants in this roundtable welcome the opportunity to address these next steps and encourage other stakeholders to join the dialogue. We are optimistic that, through informed decision-making and compromise, we can collectively achieve a robust and sustainable US biosimilars market that appropriately benefits all stakeholders.

Funding Statement

This study was funded by Pfizer Inc.