AARP Public Policy Institute INSIGHT on the Issues A Sense of Déjà Vu: The Debate Surrounding State Biosimilar Substitution Laws Leigh Purvis AARP Public Policy Institute The Affordable Care Act created an approval pathway for less expensive generic versions of biologic drugs, known as biosimilars, or follow-on biologics. However, new state legislation that could greatly limit the savings from biosimilars has ignited a debate similar to the one that followed the passage of federal legislation that encouraged the development of traditional generic drugs. Biologic drugs are medicines derived than 10 times faster than spending from living organisms that are often on traditional, chemically derived used to treat conditions that commonly prescription drugs.5 This trend is affect older populations, such as cancer, expected to continue as biologics capture multiple sclerosis, and rheumatoid more of the pharmaceutical market: there arthritis. Biologic drugs differ from are reportedly more than 900 biologic traditional, chemically derived drug products in various stages of prescription drugs in a number of ways, development.6 Meanwhile, biologic but perhaps the most obvious difference drugs with a combined market value of is their price. On average, biologic $50 billion are expected to be off-patent drugs are 22 times more expensive than by 2019.7 traditional brand name drugs.1 Some biologic drugs have annual costs of The costs associated with biologic $200,000 or more.2 drugs impact everyone in the health care system. Individuals, employers, In 2010, the Food and Drug and taxpayers all shoulder a portion of Administration (FDA) was granted the the costs in their health premiums and authority to approve less expensive through taxpayer-funded programs like generic versions of biologics, known Medicare and Medicaid.8,9 as biosimilars, or follow-on biologics,3 with the expectation that such products Patients who are prescribed a biologic could help reduce the costs associated drug also face the possibility of high with biologic drugs. However, recent out-of-pocket costs, particularly if their state legislative activity could negatively insurer requires them to pay a percentage impact these savings.4 of their prescription drug cost instead of a flat copayment. These high costs What’s at Stake could lead patients to forgo needed medications and eventually result in In the United States, spending on expensive hospitalizations and adverse biologic drugs is growing more health outcomes. A Sense of Déjà Vu: The Debate Surrounding State Biosimilar Substitution Laws States Debate Regulation of substitution legislation. For example, Biosimilar Substitution the trade organization that represents biologic drug companies argues, “Even Some aspects of the FDA’s new though interchangeable biologics will biosimilar approval pathway have not be ‘expected’ to produce the same been finalized, raising expectations clinical result, it remains the case that that it will be years before it is used to patients could react differently to an approve a biosimilar.10 Nevertheless, interchangeable biologic than if they several states are already considering were given the innovator product due to legislation that would regulate the complex nature of biologic products the substitution of biologics with and how they work in the human biosimilars. body.”16 State biosimilar substitution legislation Legislation supporters have also raised generally seeks to restrict the ability of the specter of adverse events, saying pharmacists to substitute biosimilars that, for the sake of public health, for brand-name biologic products.11 The everyone should know which biologic bills’ provisions vary from state to state, a patient is taking so it can be used for but typically require (1) patient consent adverse event reporting. for the substitution; (2) the pharmacist to notify the prescriber of the switch; Arguments against State and (3) the pharmacist and prescriber Biosimilar Legislation to maintain written records of the switch for several years. Some bills In contrast, generic drug manufacturers, also require the state board of pharmacy health payers, and some consumer to maintain a list of interchangeable groups argue that recent state biosimilar drugs.12,13 substitution legislation is designed to preemptively deter the substitution and Arguments for State Biosimilar use of biosimilars, which will drastically Legislation reduce any savings to consumers and taxpayers. These groups point to Biologic drug companies and some research that shows states with patient patient advocacy groups, whose views consent requirements have generic are often closely aligned with those of substitution rates that are 25 percent the drug industry,14 maintain that the lower than states that do not.17 Similarly, FDA will develop appropriate standards pharmacy record-keeping requirements for the approval of safe biosimilar and have been shown to lower generic interchangeable biologic products. substitution rates.18 However, they also believe that additional protections are needed in state An additional concern among opponents substitution policies that will “safeguard of state biosimilar substitution patient safety and the primacy of legislation is that requirements to the physician-patient relationship,” inform patients and prescribers when as well as “ensure transparency and biosimilar substitution takes place could communication between patients and serve to heighten any lingering anxiety their treatment care teams.”15 and suspicion of generic alternatives, deterring biosimilar use.19 Biologic drug companies and other state biosimilar legislation supporters Opponents also argue that state also cite quality concerns to support the biosimilar legislation is extremely need for additional safeguards in state premature given that the FDA is 2 A Sense of Déjà Vu: The Debate Surrounding State Biosimilar Substitution Laws still in the process of developing the regarding the interchangeability of biosimilar approval pathway and has generic drugs and whether generic drugs yet to approve a single biosimilar using were safe.23,24 Further, the FDA criticized its new authority. Thus, implementing several brand-name drug manufacturers state legislation now could result in for their efforts to imply that generic unnecessary conflict between state and drugs are inferior.25 national standards. Thirty years later, these concerns Another concern raised by opponents have been proven groundless: generic is that state biosimilar substitution legislation could conflict with federal prescription drugs are now broadly law governing biosimilar substitution, viewed as completely safe and an which specifies that biosimilars that are appropriate substitution for the brand- determined to be interchangeable with name version, and now represent their brand-name counterparts can be 86 percent of U.S. prescriptions.26 The substituted without the involvement of widespread availability and acceptance the prescribing doctor.20 of generic drugs has also resulted in substantial savings to the health care The FDA has also expressed concerns system.27 about the effects of state biosimilar substitution legislation on access to Conclusion lower-cost treatments.21 Between the rapid rise in the number A Sense of Déjà Vu of biologic drugs and the growing use The arguments currently being raised of products already on the market, against biosimilar substitution are similar biologics are becoming an increasingly to arguments used against traditional common treatment option. Given their generic drug substitution following substantial costs, every effort should the passage of the Hatch-Waxman Act be made to ensure that savings from in 1984.22 For example, opponents of less expensive biosimilars are not generic substitution raised concerns unnecessarily constrained. Endnotes 1 A.D. So and S.L. Katz, “Biologics Boondoggle,” New York Times, March 7, 2010. 2 F. Megerlin, R. Lopert, K. Taymor, and J.-H. Trouvin, “Biosimilars and the European Experience: Implications for the United States,” Health Affairs 32(10): 1803–1810. 3 Conventional drug products fall under the purview of the Federal Food, Drug, and Cosmetic Act, which has a streamlined process to approve generic drug products. However, the majority of biologics fall under the Public Health Service Act, which did not have an equivalent approval pathway until the passage of the Affordable Care Act in 2010. Biosimilars have been defined by the FDA as “highly similar to an already approved biological product …for which there are no clinically meaningful differences from the approved biological product in terms of safety, purity, and potency.” U.S. Food and Drug Administration (FDA), “FDA Issues Draft Guidance on Biosimilar Product Development,” Press Release, February 9, 2012. 4 A. Pollack, “Biotech Firms, Billions at Risk, Lobby States to Limit Generics,” New York Times, January 28, 2013. 5 IMS Institute for Healthcare Informatics, The Use of Medicines in the United States: Review of 2010 (Parsippany, NJ, April 2011). 6 PhRMA, Medicines in Development: Biologics (Washington, DC, 2013). 3 A Sense of Déjà Vu: The Debate Surrounding State Biosimilar Substitution Laws 7 G. Thornton, Bio-dynamism: Insights into the Biosimilars Market: An Overall Perspective (Grant Thornton India LLP, New Delhi, 2013). 8 The five highest expenditure Medicare Part B drugs were all biologics and accounted for over $6.5 billion in spending in 2010. Government Accountability Office, “Medicare: Information on Highest-Expenditure Part B Drugs,” Testimony before the Subcommittee on Health, Committee on Energy and Commerce, House of Representatives, Statement of James Cosgrove, Director Health Care, June 28, 2013. 9 J. Frederick, “Specialty Prices, Cost Shifting Raise Alarms,” Drug Store News, June 21, 2012. S. Rickwood and S. Di Biase, Searching for Terra Firma in the Biosimilars and Non-Original Biologics 10 Market: Insights for the Coming Decade of Change (Parsippany, NJ: IMS Health, 2013). 11 A. Pollack, “Biotech Firms, Billions at Risk, Lobby States to Limit Generics,” New York Times, January 28, 2013. 12 In 2013, 28 biosimilar substitution bills were introduced in 18 states. The bills were rejected in 10 states, enacted in 5 states, and carried over in 3 states. J.S. Mazer, “Introduction to State Biosimilar Substitution Laws,” Pharmaceutical Care Management Association Presentation at Federal Trade Commission Follow- on Biologic Workshop, February 4, 2014. 13 The FDA has defined interchangeability as “the biological product can be expected to produce the same clinical result as the reference product in any given patient and, if the biological product is administered more than once to an individual, the risk in terms of safety or diminished efficacy of alternating or switching between the use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch.” U.S. Food and Drug Administration (FDA), “FDA Issues Draft Guidance on Biosimilar Product Development,” Press Release, February 9, 2012. 14 Patient advocacy groups have recently faced scrutiny for their financial ties to drug companies. S.M. Rothman, V.H. Raveis, A. Friedman, and D.J. Rothman, “Health Advocacy Organizations and the Pharmaceutical Industry: An Analysis of Disclosure Practices,” American Journal of Public Health, Advance Access: e1-e8. C. Ornstein and T. Weber, “Patient Advocacy Group Funded by Success of Painkiller Drugs, Probe Finds,” Washington Post, December 23, 2011. A. Schwarz, “The Selling of Attention Deficit Disorder,” New York Times, December 14, 2013. 15 Biotechnology Industry Organization, “BIO Principles on the Substitution of Biologic Products,” January 24, 2013. Available online at: http://www.bio.org/advocacy/letters/bio-principles-patient-safety- substitution-biologic-products. 16 Biotechnology Industry Organization, “BIO Principles on the Substitution of Biologic Products,” January 24, 2013. Available online at: http://www.bio.org/advocacy/letters/bio-principles-patient-safety- substitution-biologic-products. 17 W. H. Shrank et al., “State Generic Substitution Laws Can Lower Drug Outlays under Medicaid,” Health Affairs 29(7): 1383–1390. 18 A. Kesselheim, “Lessons for Follow-On Biologics from Small Molecule Drugs,” Presentation at FTC Follow-on Biologic Workshop, February 4, 2014. 19 A.L. Benedict, “State-Level Legislation on Follow-On Biologic Substitution,” Journal of Law and the Biosciences, Advance Access: 1–12. 20 A. Pollack, “Biotech Firms, Billions at Risk, Lobby States to Limit Generics,” New York Times, January 28, 2013. 21 FDA, Statement from FDA Commissioner Margaret Hamburg to GPhA, August 29, 2013. Available online at: http://www.gphaonline.org/media/cms/fda_statement_biosimilars.pdf. 22 The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Act, was enacted to make it easier for traditional generic drugs to enter the market. 23 G. Boehm et al., “Development of the Generic Drug Industry in the US after the Hatch-Waxman Act of 1984,” Acta Pharmaceutica Sinica B 3(5): 297–311. 24 K.K. Midha and G. Mckay, “Bioequivalence; Its History, Practice, and Future,” AAPS Journal 11(4): 664–670. 25 T. Lewing, “Drugmakers Fighting Back against Advance of Generics,” New York Times, July 28, 1987. 4 A Sense of Déjà Vu: The Debate Surrounding State Biosimilar Substitution Laws 26 IMS Institute for Healthcare Informatics, Medicine Use and Shifting Costs of Insight on the Issues 94, September 2014 Healthcare: A Review of the Use of Medicines in the United States in 2013 (Parsippany, NJ, April 2014). AARP Public Policy Institute 601 E Street NW, Washington, DC 20049 27 Generic prescription drug use has generated www.aarp.org/ppi INSIGHT on the Issues more than $1.2 trillion in savings to the U.S. health care system between 2003 and 2012. 202-434-3890, ppi@aarp.org Generic Pharmaceutical Association, Generic © 2014, AARP. Drug Savings in the U.S., Fifth Annual Reprinting with permission only. Edition: 2013 (Washington, DC, 2013). 5