Better Alignment of Incentives Needed for Biosimilars to Reach Full Potential

Before biosimilars can relieve skyrocketing drug prices, symmetry must be improved among stakeholders through the specialty pharmacy landscape.

A recent analysis by Matrix Global Advisors found that in order to reap large savings from biosimilars, utilization needs to be encouraged and better alignment needs to be reached between the financial concerns of patients and physician approaches for presenting treatment options.

The study discussed health care payment reforms, the current biosimilar landscape, the low cost spending benefits of these drugs, and a new proposal for payors to incentivize biosimilar utilization.

Health Care Reform

In recent years, there has been an emphasis placed on incentives for providing high-quality health care that is cost effective.

The standard fee-for-service model within the US health care system is volume-driven and offers providers a financial incentive to treat as many patients as possible, which could potentially lead to overtreatment and unnecessary costs, the study noted.

However, in recent years with varying success, public and private payors have attempted to embrace strategies that reduce provider incentive of volume to promote savings.

A model launched in the 1990s focused on managed care strategies more than per-service payments. Concerns began to rise that the model ignored quality and the capitation created the financial incentive for providers to take on relatively healthy patients while avoiding the sickest of the population, the researchers wrote.

In order to discourage this, the study pointed to value-based purchasing payment reforms that were created to encourage quality while not incentivizing providers to avoid their responsibility to patients. These reforms were in the form of bundled payments and pay-for-performance programs. Additionally, besides quality of care, cost savings is an improved goal of value-based programs, according to the study.

In order for these programs to work, the authors wrote that large amounts of clinical and outcome data are required, but thanks to electronic medical records and other health technology, these mechanisms are now available for hospital systems and other large providers.

Government health care programs and private insurance companies have also moved toward value-based purchasing. Accountable care organizations (ACOs) created by the Affordable Care Act (ACA) helps health care providers to coordinate care for Medicare patients and sharing in savings that provide high quality care and more wise spending, according to the study.

In January 2015, the Centers for Medicare and Medicaid Services (CMS) established the goal of reaching 50% of Medicare payments to alternative payment models such as ACOs by 2018.

Although the efficacy of value-based purchasing has produce mixed results, there is an overall consensus that encouraging providers to pursue improved outcomes and cost savings is beneficial.

The authors wrote that patient incentives have long been implemented by private and public payors through strategies like deductibles, tiered copays, and provider networks that encourage patients to use the most cost-effective services, especially in outpatient care.

The differences in cost serve as an incentive for an individual without a dire emergency to choose more cost effective services compared with an emergency room visit.

The average copay for generic drugs has also been set much lower than branded drugs and patients will automatically receive the generic substitution. However, the branded drug is still an option if the patient chooses.

A large amount of the copay, coinsurance, and deductible design innovations are value-based insurance design (VBID) strategies that seek to optimize patient out-of-pocket costs that reflect the willingness of patients to pay and the value inherent in a given health care product or service, according to the study.

Although VBID shows promise, the authors noted that the usefulness of these incentives are limited because patients tend to delegate significant decision-making to their physicians. In regards to complex health care, it would be unwise to incentivize patients to do their own decision-making because of an “informational disadvantage.”

However, the authors wrote that a natural gap can exist between physician priorities and patient interests, especially financial interests, when patients rely on their doctors to make the decisions for them.

This gap can be addressed, however, with physician incentives geared towards promoting the interests of patients, as opposed to their own, according to the study. When it comes to health care reform, payors should take into account incentives that encourage physicians to help their patients look for treatments that require lower out-of-pocket expenses.

In fact, the study noted that surveys have shown that although physicians believe that control of out-of-pocket expenses for patients is important, physicians rarely or never consider themselves familiar with patients’ drug formularies or copays.

If physician incentives are carefully created, it could result in better alignment between a physician’s approach for reviewing treatment options and a patient’s financial concerns.

A key example of utilizing this type of incentive revolves around the US biosimilars market, where these drugs have the potential to create significant savings.

Biosimilars

Currently, biologics account for 28% of US drug spending and is projected to dramatically increase in the coming years. Biosimilars are expected to be cheaper than the biologic reference product, resulting in savings.

Uncertainty about the biosimilars market has increased, however, with some experts predicting large savings as others are reducing their expectations.

Competition within the market is needed to help drive decreasing costs. Although predictions for competition within the biologics markets are moderate, a large number of biologics could escape positive competitive pressures, according to the study.

The FDA is working with 51 biosimilar development programs, which may result in substantial savings for patients, taxpayers, and the US health care system as biosimilars become more widely available. However, the authors wrote that more action is needed to broaden competition and increase savings.

In October 2015, CMS issued a Final Rule that groups all biosimilars for a given reference product into 1 Medicare Part B reimbursement code. Biosimilar manufacturers will have to weigh their options and determine if future product sales will allow the manufacturer to break even, according to the study.

Biosimilars take about 8 to 10 years to develop with $100 to $200 million in research and development costs.

In the current market conditions, the study found that only the largest biologics could attract biosimilar competition. Although biosimilars are projected to lower costs, the potential savings from a broader amount of biosimilars will be limited without encouragement, the authors wrote.

Public and private payors need more strategies and tools that encourage biosimilar utilization and help maximize benefits and savings for patients and taxpayers. Additionally, payors could also turn to physicians to help drive the utilization of biosimilars.

Physician Incentives for Biosimilar Utilization

The authors wrote that a good way to encourage physician utilization of biosimilars is to create a reward system. Currently, private payors use this form of payment to reward physicians for prescribing generic drugs.

Biosimilar utilization incentives are necessary to ensure these drugs reach their full potential by encouraging greater alignment between a patient’s financial concerns and the treatment option preferred by physicians.

For Medicare Part D and Medicaid MCO patients to benefit from physician incentives, a safe harbor should be created by policy makers for these payors, according to the study.

Health care spending is continuing to increase, making the creation of incentives that increase value within health care vital.

Although many reforms have been implemented across the sector, the study concluded that cost savings from biosimilar utilization might not be fully realized unless there is better alignment between physician and patient incentives.