Biosimilars, FDA

‘Rigged’ payment schemes by insurers and PBMs is blocking the switch to biosimilars, says FDA commissioner

Having called out brand name drug companies for delaying market entry of generic drugs, FDA Commissioner Scott Gottlieb made insurers and pharmacy benefit managers his latest targets to blame for laggard biosimilar development.

In a speech addressing a conference of health insurers, Gottlieb condemned a “rigged payment scheme” that disincentivizes payers from switching to biosimilars — a notion some have called a “rebate trap.”

“(W)hile we see a growing number of sponsors pursuing biosimilar development programs, the economics of development are currently unstable; and the pipeline of biosimilar products that we hope for could be dramatically affected by the weakening of market incentives to bring these products to patients,” he said in prepared remarks.

Gottlieb has previously gone on the record blasting “pay for delay” tactics deployed by drug makers, against which insurers and PBMs alike have spoken out. But in biosimilars, they are complicit in a slightly different construct.

Biosimilars, Gottlieb pointed out, are much more sophisticated and thus more expensive to develop than generics. When they launch, the initial discount they offer over branded drugs is often insufficient to offset the rebates already offered on the biologics. Add that to the small number of patients who would switch immediately, and there’s no reason for PBMs to even try switching.  

Despite the FDA’s efforts to help by smoothing the path for biosimilar approval, only three out of nine approved biosimilars are currently marketed in the US.

“(W)e can solve only one part of this equation,” Gottlieb said.

He urged payers to do their part by making biosimilars the default option for newly diagnosed patients. Payors can also lead the way in formulary design by making biosimilars the default option for newly diagnosed patients, and consider sharing the savings with patients by waiving co-insurance. He gave a shout out to United Healthcare, which announced yesterday that it would start passing full rebates onto people on its plans. He asked earlier in the speech:

After all, what’s the point of a big co-pay on a costly cancer drug? Is a patient really in a position to make an economically-based decision? Is the co-pay going to discourage overutilization? Is someone in this situation voluntary seeking chemo?

The Pharmaceutical Care Management Association, which represents PBMs, fired back in a statement:

It’s unfair to blame payers – who pay 2/3 the cost of drug benefits – for seeking the lowest costs in a marketplace where they have no control over the prices drugmakers set, how quickly FDA approves biosimilars, or when FDA will finalize workable interchangeability guidelines to increase uptake of biosimilars.

Likewise payers – not the pharmacy benefit managers (PBMs) they hire to negotiate discounts – determine how rebates and other savings are allocated to reduce premiums, out-of-pocket costs and other expenses. Increasingly, large commercial payers are requiring 100% of such rebates to be passed through to them directly.”

Nonetheless, Gottlieb’s remarks drew praise from many healthcare commentators, with former Centers for Medicare and Medicaid Services administrator Andy Slavitt calling the speech “extraordinarily frank.”

Image: FDA Commissioner Scott Gottlieb.

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Sr. Manager, Regulatory Affairs, CMC
CytomX Therapeutics San Francisco, CA
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Catalytic Data Science Charleston, SC
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Flatiron Health New York City or San Francisco

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