BIO Charges Express Scripts, PCMA With Over Estimating Follow-On Biologic Savings

Industry group issues white paper outlining “seriously flawed assumptions” made in the two reports.

The Biotechnology Industry Organization countered reports by Express Scripts and the Pharmaceutical Care Management Association estimating the development of a regulatory pathway for follow-on biologics would save the U.S. health care system as much as $71 billion, calling the reports "seriously flawed" and representing a significant overestimation of potential savings in a Feb. 22 white paper.

"We have determined that these analyses contain conclusions of potential savings based on a demonstrably flawed set of assumptions that contradict current experience and lack credible evidentiary support," BIO said.

The white paper responds to a report released by Express Scripts Feb. 15 claiming that the development of follow-on biologics could save $71 billion over 10 years. The report was based on data from the pharmacy benefit manager's Drug Trend Report and IMS modeling potential savings in four therapeutic categories: interferons for multiple sclerosis, erythropoietin for anemia, growth hormone for growth failure and insulin for diabetes (¹ (Also see "Follow-On Biologics Would Save $71 Billion Over 10 Years, Express Scripts Estimates" - Pink Sheet, 15 Feb, 2007.)).

PCMA had previously issued an analysis predicting that follow-on biologics could save Medicare Part B $14 billion over 10 years, based on actual Medicare expenditure data from fiscal years 2003 to 2005, combined with projections from the Congressional Budget Office and the Supplemental Medical Insurance Trustees.

Among the analytical flaws that BIO points to as leading to a significant overestimation in savings is that "the two studies assumed that follow-on products will be designated by the FDA as interchangeable beginning in 2007." In fact, FDA has not accepted interchangeability of biologics, and the European Union has rejected an interchangeable approach, BIO said.

"In the face of these regulatory decisions, the studies failed to provide any credible basis for calculating savings based on interchangeable products," according to BIO. "This led to a significant overestimation of savings if, in fact, these products are not interchangeable in a way that would result in the extremely rapid market penetration that appears to be presumed."

In addition, both studies based analysis on certain patent expiration dates for a sampling of biotech products that were "inaccurate, internally inconsistent and/or inconsistent with other credible analyses," according to the trade group.

For example, PCMA claimed that 30 percent of all biotechnology spending under Medicare Part B would lose patent protection by 2007, while the Express Scripts report said its model assumes patents would not be a barrier to biogeneric entry for Amgen's Epogen and Johnson & Johnson's Procrit . Express Scripts' estimates included $40.69 billion in savings from erythropoietins alone.

BIO points instead to a Citigroup report showing that expiring patents in 2007 would affect at most 5 percent of the spending on the top 10 Medicare Part B biologics and that Epogen is protected by matter, process and product patents extending from 2012 to 2015.

"The incorrect patent expiration dates led to significant overestimates of savings," BIO said. "The Express Scripts' assumptions surrounding epoetin alfa casts serious doubt on at least $40.7 billion of its claimed savings."

Both reports also fail to assume appropriate market penetration rates for follow-on biologics in the first year, BIO claims. The PCMA study incorrectly assumed that market penetration would immediately reach 30 percent for products coming off patent from 2012 and beyond, while the actual penetration rate, according to BIO, would be 5 percent.

Market penetration in the Express Scripts study was based on the PBM's 83.4 percent generic fill rate for non-biologic drugs. "However, given the complexities of biologics manufacturing, and the fact that follow-on biologics will likely be different from the innovator product - and therefore not designated as interchangeable - the studies presented no credible evidence to justify or explain this adoption rate for follow-on products," BIO said.

The studies also incorrectly assume that savings would begin to accrue in 2007, that there is adequate manufacturing capacity for follow-on biologics and that every biologic that comes off patent will have an associated follow on, the trade group added.

The development of a regulatory pathway for follow-on biologics is gaining increasing ground, with Democratic legislators recently announcing the reintroduction of legislation that would create a pathway for FDA to approve generic biologics (² (Also see "Generic Biologics Bill’s Key Battleground May Be Senate Health Committee" - Pink Sheet, 14 Feb, 2007.)).

- Jessica Merrill ([email protected])