It seems that, drug costs and strategies for cost containment are dominant topics as a subject for an employee benefits newsletter. We recently published an update of an article, and also presented a webinar on the impact of drug costs to benefit plans. This month, we will be discussing recent changes in the area of Biologic drugs.
By now, most people are familiar with the fact that drug plans will pay for the “lowest cost alternative”, where available. This is more commonly known as generic drugs vs. brand. The so-called generics are priced as low as 20% of the original brand. In Canada, when drugs first enter the market, the patents on these drugs protect the manufacturers for 20 years. This 20 year period allows the developing pharmaceutical company to recover their research and development costs, as well as make some initial profit. After the patents expire, other brands enter the market and, without the R&D costs, can produce and sell the same medications for pennies on the dollar. For the most part, drugs are easily and safely replicated. The differences are found in the binding materials, that is, the compounds that help form the medicinal ingredients into pills, for example.
Biologic drugs are relatively recent additions to the drug market. Their numbers are few; perhaps fewer than 150 are on the market. However, their costs can range from $10,000 per year to well over $200,000 annually. Biologic medications are not as simple as most medications. A biologic is manufactured from a living cell, often plant or animal, to create a complex mixture of molecules. Traditional prescription drugs are developed through chemical synthesis simply by combining specific chemical ingredients. Such a process is not possible with biologics.
Subsequent Entry Biologics (SEBs) or Biosimilars
Early biologics, such as Remicade, are just now reaching the end of their 20-year patent protection. However, the concept of a “generic” version doesn’t exist when it comes to biologics. Rather, they are called Subsequent Entry Biologics (SEBs) or biosimilars. An SEB is a biologic product that is similar to an approved originator (or innovator) biologic product. To be approved by Health Canada, an SEB application follows the New Drug Submission process and must demonstrate the same clinical outcomes in terms of safety and effectiveness as the originator product.
SEBs are not identical copies of the original products and, therefore, not interchangeable by Pharmacists. In addition, unlike generics, SEBs are required to undergo a more complex regulatory approval process that includes original studies demonstrating safety and effectiveness. As a result, while they can be produced for a lower cost than the originator biologic, the cost difference isn’t as significant as with traditional medicines.
The following shows some of the SEBs that are coming to market and for what biologics:
NUMBER OF SEBs in DEVELOPMENT
|Remicade® (one SEB – Inflectra® – already available )||
|Lantus® (one SEB – Basaglar® – already available)||
|Neupogen® (one SEB – Grastofil™ – already)||
Another major difference between the SEB or bio-similar approach and the generic brands of traditional medications is that pharmacists are not obliged to substitute SEBs for a biologic, where available, in the same way. Patients can be wary of SEBs and Physicians can be reluctant to prescribe them because they are not as informed of the clinical trial outcomes and the long-term studies that demonstrate safe and identical outcomes.
SEBs are now on many benefit carrier formularies, as well as provincial drug formularies (e.g. Ontario’s Trillium program will only pay for Inflectra when Remicade is prescribed). However, they are rarely substituted for the originator. Employee benefit plans are paying for biologics and, for the most part, SEBs are not yet seen as an option. This costs insurers and, therefore, employers hundreds of thousands of dollars annually.
ASSOCIUM Specialty Drug Program
While carrier Specialty Drug Programs try to mitigate the costs, the ASSOCIUM Specialty Drug Program, as an example, can potentially save employers premium dollars on biologics and other high-cost medications. As evidence of safety and efficacy mounts, carriers are taking the initiative to begin requiring claimants to substitute SEBs, and to make arrangements with their physicians to change their prescriptions for drugs such as Remicade® and Enbrel® for rheumatic conditions. As patent protection begins to run out on biologics the SEBs will start bringing the cost of biologic drug therapies down.
To discuss SEBs or our Specialty Drug Program, please contact your ASSOCIUM Representative for assistance.
ASSOCIUM Benefits is a very unique employee group benefits provider, focused on supporting benefits advisors and their employer clients. We provide Brokers and Plan Sponsors with a range of solutions from traditional group benefits to more customized, cost and tax effective employee compensation. Let’s connect to find out how we can help.