What the dickens is going on with biosimilar pricing? Despite great expectations, the follow-ons have yet to deliver a rags-to-riches story in terms of health care savings.

While current biosimilar discounts of 15 percent to 30 percent on biologics that can cost six figures are no small pip, they aren't providing the savings policymakers and payers had longed for. But the hope of enormous savings from biosimilars seems to spring eternal, judging from the price corralling plans being proffered on the presidential campaign trail. (See BioWorld Today, Sept. 23, 2015.)

Part of the problem in the U.S. is how long it's taken the FDA to lay out the biosimilar path. Although Congress opened the door to the follow-ons in 2010, the FDA didn't approve the first one until this year. But even in Europe where biosimilars have been on the market for nearly a decade, early predictions exceed reality, Beth Herbert Silvia, managing director/AVP of pharmacy at Blue Cross & Blue Shield of Rhode Island, said at a recent webinar on drug pricing.

The average biosimilar discount in Europe is now 25 percent, said Todd Evans, director of strategy, sales and marketing for the pharma/life sciences and health advisory industries at PricewaterhouseCoopers LLP. As more biosimilars enter the market and compete for the same space, the discount is expected to approach 50 percent, or so the story goes. It's hard to say whether that will play out, in either Europe or the U.S., Evans said at the webinar.

So far, it doesn't appear likely, if Europe's short-acting G-CSF market is any indication. Eight filgrastim biosimilars – seven of which were approved in 2008 or 2009 – are vying with Amgen Inc.'s Neupogen for EU market share. While Sandoz Inc.'s Zarzio has overtaken the reference biologic and claimed 30 percent of the European market, Neupogen is still available there and the average filgrastim biosimilar discount hovers at 30 percent.

If that much competition were present in the generic world, especially after six or seven years, the reference product would be off the market and the discounts would be south of 70 percent.

Today's biosimilar market in Europe is what the U.S. market will probably look like in five years, Frank Kopenski, a consulting actuary with Milliman, told BioWorld Today. While generic-type discounts could occur well down the road, he said it would be far-fetched to think that biosimilar competition would result in that kind of market anytime soon. And regardless of the discount biosimilars offer, he expects the reference biologic to stick around.

Regardless of whether they ever come close to generic expectations, biosimilars will be part of a permanent pricing strategy in the U.S., Herbert Silvia said, but the makers of the follow-ons are going to have to let patients and payers know what they can do. And they have to be ready to negotiate.

NEGOTIATING ROOM

Two or three years ago, biosimilars would have been the formulary option of choice – had they been available in the U.S., Herbert Silvia said. Today, they give payers negotiating room in a market that's turning from unit-based pricing to negotiated prices and bundling. Thus, makers of both the reference product and biosimilars will have to negotiate with payers. And depending on what other in-demand drugs they have on the table, makers of the reference product could undercut a biosimilar discount.

Biosimilars will have another impact on U.S. drug pricing. To offset the pricing pressures brought on by biosimilar competition in Europe, drugmakers have raised their U.S. price in the past. But if they're facing biosimilars in the U.S. as well, they won't have that option. (See BioWorld Insight, Sept. 14, 2015.)

However, drugmakers are still likely to raise a biologic's price in the lead-up to biosimilar competition. That's been the pattern in the generic world, Kopenski said. Consequently, a 15 percent discount could just return the price to what it was originally.

Perhaps the biggest unknown in the future of biosimilars and their impact on health care costs is patient uptake. Patients who are stable on the reference product are not going to want to switch to a biosimilar, even though it's cheaper, Kopenski said. And before insurers require patients to switch, they're going to want to gauge the marketplace to see what other payers are doing and determine what employers expect from company insurance policies.

Biosimilars intended to treat conditions such as cancer may have faster adoption as they would be targeting new patients. But even with this population, payers are going to assess the market and monitor patient outcomes before giving a preference to a biosimilar, Kopenski said.