FDA's Gottlieb Blames Rebates, Reimbursement Issues for Holding Back Biosimilar Market

A reimbursement system that relies on rebates passed between pharmaceutical companies and pharmacy benefit managers (PBMs) is holding back development and competition in the biosilimilar market, FDA Commissioner Scott Gottlieb, MD, said in the opening session of the 2018 National Health Policy Conference of America’s Health Insurance Plans (AHIP) in Washington, DC.

“The FDA, after all, doesn’t—and shouldn’t–regulate drug prices,” said Gottlieb in the session called “Affording Tomorrow’s Cures.” But he said ensuring patient access to medicines is a matter of public health, and said currently there are misaligned incentives in the biosimiliar market. He called “the economics of development” unstable, and said that the pipeline is not robust enough because market incentives are weak.

Biosimilar sponsors typically need to invest $100 million to $250 million per program, he said. “Current rebating and contracting practice—combined with the increased consolidation that we’re seeing in many segments of the drug supply chain–has produced some misaligned incentives,” Gottlieb said.

He said the top 3 PBMs control more than two-thirds of the market, the top 3 wholesalers more than 80%, and the top 5 pharmacies more than 50%. Prices are not transparent, as PBMs, distributors, drug stores, and payors “use their individual market power to effectively split some of the monopoly rents with large manufacturers and other intermediaries rather than passing on the saving garnered from competition to patients and employers,” he said, adding that “the very complexity and opacity of these schemes help to conceal their corrosion on our system—and their impact on patients.”

Additionally, Gottlieb said biologics are an area where he has the most “significant concerns about the long-term impact of the pricing and rebating mischief.” About a third of new drugs approved by the FDA are biologics, and biologics accounted for about 40% of all drug spending, and 70% of spending growth, from 2010-2015, he said. Gottlieb warned that “pay for delay” schemes exist in the biologics market, discouraging biosimilar market entry.

Patients lose, he said, because PBMs have a “financial incentive to limit the uptake of biosimilars to continue the flow of large rebate payments” from the original biologic.

Gottieb referenced a development with UnitedHealthcare, which said this week that it would pass along its rebates back to consumers, saying he spoke with the company’s chief executive officer, Dan Schumacher, last night. Gottlieb called the company’s decision “a potentially disruptive step” and said, “I hope that others in the industry consider disrupting the current model."

In a comment to The American Journal of Managed Care^®, Kenneth A. Burdick, CEO of another health insurer, WellCare Health Plans, Inc, said, "I thought Commissioner Gottlieb raised a lot of good issues, especially around misaligned incentives." WellCare's PBM is CVS Health. Asked if WellCare might follow UnitedHealthcare's move, Burdick said he'd have to look into it some more, and that insurers and PBMs could still work together to deliver affordable medicine, even if the PBM is not owned by the insurer.

UnitedHealthcare owns its PBM, OptumRX.

In a statement, AHIP said insurers "welcome the introduction of generic biologics, or biosimilars, as a way to give patients quicker access to more affordable medicines." The industry association pointed to the branded drug makers for rising prices and said, "as branded biologic drug costs continue to soar, biosimilars won’t be able to fulfill the promise of greater access and affordability."