生技仿製藥規範與公費報銷政策對藥廠經營策略之影響 — 美國、歐洲與日本制度之比較分析

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國立臺灣大學企業管理碩士專班碩士論文

Global MBA College of Management National Taiwan University

Master Thesis

生技仿製藥規範與公費報銷政策對藥廠經營策略之影響 — 美國、歐洲與日本制度之比較分析

Biosimilar Regulations and Reimbursement Policies and Impact on Corporate Strategy: A Comparative Analysis of

the US, EU, and Japan Pharmaceutical Markets

山口傑西 Jesse Yamaguchi

指導教授：盧信昌博士 Advisor: Hsin Chang Lu, Ph.D.

中華民國 103 年 7 月 July, 2014

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Abstract

This thesis identifies major trends in biosimilar regulations and reimbursement policies, using the US, EU, and Japan pharmaceutical markets as the case subjects. Research is focused on a comparative analysis of regulatory policies with respect to market licensing of biosimilars and major reimbursement policies affecting market use of biosimilars. The information from this comparative analysis, as well as data reported by biologic manufacturers, is used to evaluate the corporate strategies that incumbent, patent holding biologic manufacturers are pursuing to respond to future biosimilar competition. Lastly, recommendations are provided to domestic biosimilar

manufacturers planning to enter their home market of Taiwan.

Regulatory agencies in the US, EU, and Japan have established abbreviated review processes to allow biosimilars to come to market faster than if they were to be reviewed as completely new molecular entities. Key differences between the agencies are in granting „interchangeable/substitutable‟ labels and in the timing of the first biosimilar submission. For instance, the US FDA‟s option for biosimilars to be licensed as

„interchangeable,‟ a shorter time in which biosimlars have to wait to submit applications, and an exclusivity period for the first-to-market biosimilar will theoretically encourage wider biosimilar adoption in the market.

The US is expected to have wide variation in biosimilar reimbursement policies as policies will vary on the size of the insurance market and the level of competition between plan administrators. On the other hand, the EU member states analysed for reimbursement policies - Germany, France, and the UK - and Japan have national-level policies that influence the type of pharmaceuticals covered as benefits and their

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reimbursement prices. European countries were found to use pricing tools, such as negotiated discounts, reference pricing, and tendering, that should provide an opportunity for biosimilars to gain market share.

Differences in major regulations and reimbursement policies in the studied markets were found to lead to differences in the degree of potential competition between biologics and biosimilars. In response to greater potential biosimilar competition in the US, biologics marketed for the US were more likely to take legal action to defend patent rights. In Japan, the market determined to have the lowest degree of potential biosimilar competition, the incumbent biologic manufacturers were more likely to apply for

additional indications, which can be revenue increasing only without biosimilar

competition. Lastly, the EU, which is the more mature system in terms of regulation and reimbursement policies for dealing with biosimilars, also sees incumbents applying for new indications, as well as developing new biologics to cannibalise sales of the existing biologic.

Finally, advice for Taiwan domestic biosimilar manufacturers are to work with the government in developing regulations and health insurance policies more favorable for biosimilars, and to gain first-mover advantage as preferred suppliers for large hospitals and medical centers, focussing on additional incentives manufacturers can offer

providers for biosimilars requiring infusions.

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List of Figures and Tables

Figure 1.1: Summary of Main Points of Comparison in Chapters 3 and 4

Figure 1.2: Summary of Framework for Evaluating Biologic Incumbent Strategies in Chapter 5

Figure 3.1: Main Features of US FDA Biosimilars Regulation

Figure 5.1: Factors Influencing Strategic Responses to Biosimilar Competition

Figure 5.2: Dimensions of Corporate Strategies in Response to Biosimilar Competition Figure 5.3: Number of Biologics with a Specified Strategy, Aggregated by Market Figure 5.4: Frequency of Strategies Reported Plotted Over Patent Expiration Year Figure 5.5: Number of Strategies Adopted Plotted Over Sales for the Biologic as Percent of Total Company Sales

Table 2.1: Summary of Select Biologics with Patents Expiring 2012 – 2019 Table 3.1: Biologic Product Classes Covered by EMA Guidelines for Biosimilars Table 3.2: Summary of Comparasion of Biosimilar Regulation for FDA, EMA, and PDMA

Table 4.1: Comparason of Reimbursment Policies for Germany, France, and the UK Table 4.2: Summary of Comparasion of Reimbursement Policies Affecting Biosimilars for US, Germany, France, UK, and Japan

Table 5.1: Assessment of Relative Potential for Biosimilar Competition in the US, EU, and Japan

Table 5.2: Summary of Case Biologics and Company Actions in Response to Biosimilar Competition

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Chapter 1: Introduction

This thesis analyzes the current environment for an emergent class of medicines known as biosimilars. Biosimilars are the competitor “copies” of biologic medicines which have been the main drivers of pharmaceutical spending growth in recent years.

Biosimilars present an opportunity for healthcare systems worldwide to realize more competitive pricing and wider access to beneficial biologic treatments. However, there is still much uncertainty regarding the safety and efficacy of biosimilars. These trade- offs have led government regulators and health insurance administrators to develop complex regulations and reimbursement policies through which biosimilar

manufacturers must navigate to have their products sold on the market. These regulations and reimbursement policies, in addition to patents on originator biologic products, create both entry barriers and incentives for competition that will shape the future of this important market for pharmaceuticals.

The goal of this thesis is to examine major trends in biosimilar regulations and reimbursement policies, within the context of the implications they have on market competition. This information will be valuable for biosimilar manufacturers, such as those based in Taiwan that must not only prepare products for regulatory review; they must also face challenges from incumbents.

Focusing on the US, EU, and Japanese markets for pharmaceuticals, the research results have wider implications for other markets which are influenced by the largest three. This thesis addresses the following research questions:

1) What barriers to entry and incentives for competition have regulators and policy makers created in the market for biologic and biosimilar

pharmaceuticals?

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2) How have these barriers to entry and incentives for competition influenced incumbent, patent-holding biologic manufacturer corporate strategies?

Finally, after addressing these research questions with specific case studies from the three largest markets, attention is focussed on the smaller market of Taiwan, where domestic biosimilar companies are seeking to develop biosimilars for the domestic market. Recommendations for these companies are provided, based on research collected in this study.

1.1 Research Methodology

This thesis presents a qualitative analysis of primary sources: government regulations and policy guidance; and secondary sources: academic journal articles and industry reports. A comparative framework is developed, which identifies key

similarities and differences between the jurisdictions chosen for this study (US, EU, and Japan). Attention is placed on regulations and reimbursement policies that create entry barriers protecting biologics from biosimilar competition, or create incentives for entry of biosimilars. This study is motivated by other comparative studies that analyze biosimilar regulations across the globe.^1,2,3Other studies were found to be helpful in comparing national drug reimbursement agencies and policies across major developed economies.^4,5,6 However, these studies did not cover specific drug classes such as biologics or biosimilars. Two studies were identified for linking biosimilar regulations and reimbursement policies in comparisons of European Union member states.^7,8 This study appears to be the first that links biosimilar regulations and reimbursement policies

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for the largest potential markets for biosimilars - US, EU, and Japan - with a focus on impacts to the competitiveness of the markets for these drugs.

The final section of research in this thesis analyzes the corporate strategy adopted by incumbent biologic manufacturers faced with patent expiration of biologic products and potential biosimilar competition. Six high worldwide sales volume

biologics – Avastin, Enbrel, Humira, Lucentis, Remicade, and Rituxan – first introduced in Chapter 2 will be used as case examples to evaluate corporate actions in response to biosimilar competition. Similar to the comparative analysis of regulations and

reimbursement policies, the analysis of corporate strategies is descriptive and qualitative in nature.

1.2 Structure of Thesis

The body of this thesis is divided into four main sections. First, the background section provides working definitions of biologics and biosimilars, as well as a literature review of major works cited in this paper. In this section, the concept of the “biologic patent cliff” is introduced, which is driving current interest in biosimilars. The second section analyzes regulations for marketing approval of biosimilars in the US, EU, and Japan. The third section analyzes these jurisdictions‟ major reimbursement policies related to coverage of biosimilars on national healthcare plans. In the US, the Medicare drug plans are the central focus. For the EU, country specific policies of Germany, France, and the UK are discussed. The fourth section analyzes the corporate strategies adopted by incumbent biologic manufacturers focusing on manufacturers of the six case biologics in the US, EU, and Japan markets. Finally, in the conclusion of the thesis, recommendations are provided for domestic biosimilar companies in Taiwan.

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Figure 1.1 below illustrates the main points of comparison in this thesis from the perspective of the market pathway for biosimilars. The comparative analysis of

regulatory and reimbursement policies identifies critical stages of review for biosimilars entering the US, EU, and Japanese markets.

Figure 1.1: Summary of Main Points of Comparison in Chapters 3 and 4

Figure 1.2 illustrates the framework used for understanding incumbent strategies in response to future biosimilar competition. This analysis compares differences in the factors influencing corporate strategies for biologics sold in the US, EU, and Japan.

Figure 1.2: Summary of Framework for Evaluating Biologic Incumbent Strategies in Chapters 5

United States European Union Japan

Pre-market stage

Biosimilar reviewed by regulatory agencies for license to market - Chapter 3

Food and Drug Administration European Medicines Agency Pharmaceuticals and Medical Devices Agency

(FDA) (EMA) (PMDA)

Post-market stage

Biosimilar reviewed for reimbursement on insurance plans. Pricing and clinical criteria developed - Chapter 4

Medicare Part B Germany

Medicare Part D France

United Kingdom (Chuikyo)

Central Social Insurance Medical Council Biosimilar Market

Pathway

Differences in external factors Regulation and reimbursment policy in:

United States

Patent Protection European Union

Company Sales at Risk Japan

Differences in internal factors

Corporate Strategies

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Chapter 2: Background on Biologics and Biosimilars

2.1 Introduction

Total spending for pharmaceuticals in the developed world dropped for the first time in 2012.⁹ The combination of government austerity measures and the “patent cliff”

where former blockbuster drugs‟ patents expired at around the same time (e.g. Lipitor, Plavix, Crestor), opening markets for generic competition, caused this dramatic

slowdown in spending. The new source of spending growth in pharmaceuticals are biologic type drugs which are expected to take up to 20 percent of the total

pharmaceutical market by 2017.⁹ These drugs are typically more expensive in per treatment costs and target smaller populations than traditional medicine. For example, patients in the US with moderate to severe rheumatoid arthritis may receive biologics costing $1,300 to $5,300 per month of treatment.¹⁰ The most popular biologics treat rheumatoid arthritis along with other inflammatory diseases and various types of cancer.

As with the best-selling prescription drugs of the past, new biologic blockbusters are protected by a patent system in developed countries designed to reward innovation without over-extending monopoly profits to the patent holders. By 2020, most current biologic blockbusters will lose patent protection, leading to a phenomenon termed by analysts as the biologic patent cliff.¹¹Whether the coming biologic patent cliff results a new wave of generic competition depends on a number of factors including regulations, reimbursement policies, and prescribing practices as they related to biosimilar versions of biologics. The body of this paper will explore these factors in further detail. Before proceeding to the body of this paper, the terms biologic and biosimilar will be clarified in further detail in the next two sections.

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6 2.2 Definition of Biologic

The terms biologic(s), biologic drug(s), biologic product(s) are used interchangeably throughout this paper to refer to a class of medicine containing or manufactured by living organisms.¹² Examples of biologics include:

 vaccines;

 blood products used for transfusion and/or manufacturing into other products;

 allergenic extracts used for both diagnosis and treatment;

 human cells and tissues used for transplantation;

 gene and cellular therapies.¹³

Other information sources, including academic research, industry reports, and government regulations may use terms such as “biological products”, “biological drugs”, or “biopharmaceuticals” to generally refer to the same forms of medicine. Differences in the makeup of some products may exclude them from some sources‟ classification of biologics (note the difference between US FDA and EU definitions of biologics for regulatory purposes in Radar, 2008).¹²

The following table lists six significant biologic products in terms of worldwide sales. The majority are monoclonal antibody types of biologics (mAb) indicated for treatment of autoimmune diseases. These biologics will be discussed regarding their manufacturers‟ corporate strategies in Chapter 5.

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Table 2.1: Summary of Select Biologics with Patents Expiring 2012 - 2019

Sources: Calo-Fernandez & Martinez-Hurtado, 2012;¹¹ Indications from products‟ US webpages. Patent expiration dates provided by Calo-Fernandez & Martinez-Hurtado validated by dates provided in company 2013 annual reports. After validation, dates for Enbrel¹⁴ and Rituxan¹⁵ were updated.

For traditional medicines, the patent expiration dates indicate roughly the time when the brand name product‟s exclusivity for sales ends and when generic

manufacturers can start to sell same versions of the brand name product. Much of the sales for the brand product would be a risk as a result of heavy price competition and market share displacement of generic pharmaceuticals.

However, unlike for traditional medicines, the upcoming patent expiration dates for these biologic products will not see the introduction of identical generic copies and an immediate displacement of brand name versions‟ market shares. Instead, the market will be open to similar, but not identical, “biosimilar” products (defined in the next section). The timing and level of market adoption of biosimilars is not certain and will

US Marketing

Company

Brand Name

(Molecule Name) Indications Class of

Biologic

Global Sales 2011 (billion

USD)

Patent Expiration

Year

AbbVie Humira

(adalimumab)

RA, JIA, PsA, AS, plaque psoriasis, ulcerative colitis (UC), Crohn's disease

monoclonal

antibody (mAb) 8.2 2016

Amgen Enbrel

(etanercept)

rheumatoid arthritis (RA), juvenile idiopathic arthritis (JIA), psoriatic arthritis (PsA), ankylosing spondylitis (AS), plaque psoriasis

dimeric fusion

protein 7.9 2019

Janssen (J&J) Remicade (infliximab)

RA, PsA, AS, plaque psoriasis, UC, Crohn's disease

mAb 7.2 2018

Biogen Idec Rituxan (rituximab)

certain types of non- Hodgkin's lymphoma, leukemia, RA

mAb 6.8 2015

Genentech (Roche)

Avastin (bevacizumab)

certain types of colorectal,

lung, kidney, brain cancers mAb 6.0 2019

Genentech (Roche)

Lucentis (ranibizumab)

wet macular degeneration, diabetic macular edema, macular edema following retinal vein occlusion

mAb 3.8 2019

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depend on regulations, reimbursement policies, and prescribing practices that are still works in progress. The body of this paper will explore these factors in further detail.

2.3 Definition of Biosimilar

Biosimilars can be thought of as generic versions of biologics. Unlike generic versions of traditional medicines, which can be shown to be chemically identical to brand versions in chemical structure, generic versions of biologics can never be shown to be as identical to brand versions of the same biologic. This is due to the complexity of biologics‟ molecular structures, proprietary manufacturing processes including originating cell cultures, and uncertain responses in real life use. Regulatory agencies developed terms to describe these generic versions of biologics as being very similar, but not exactly the same as the brand version.

The US Food and Drug Administration (FDA) define biosimilarity as: “a biological product highly similar to the reference product notwithstanding minor differences in clinically inactive components;” and with “no clinically meaningful differences between the biologic product and the reference product in terms of the safety, purity, and potency of the product.”¹⁶ Other regulatory agencies use the terms

“follow-on biologics” or “subsequent entry biologics” to generally refer to the same

“biosimilar” products, emphasizing the common characteristic of these products as imitators of the originator product.

For the remainder of this paper, the terms biosimilar(s), biosimilar drug(s), biosimilar product(s) will be used interchangeably to refer to imitator versions of originator biologic products.

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9 2.4 Literature Review

This study is motivated by other comparative studies that analyze biosimilar regulations across the globe.^1,2,3 Ricardo Ibarra-Cabrera et. al., 2013 conducts a worldwide comparison on biosimilar regulations highlighting European Medicines Agency (EMA) product-specific guidelines and special focus on laws in Mexico forming the basis of the country‟s “biocomparables‟ regulations.¹ While Abreu et. al., 2014 also describe global biosimilar regulations, special focus in their study is on the information requirements of regulators to address uncertainty in outcomes from biosimilars in comparison to the originator biologic.² Knezevic and Griffiths, 2011 highlight WHO‟s role in developing recommendations for biosimilar regulations and the opportunity for global and regional cooperation in setting standards for licensing biosimilars.³

Other studies were found to be helpful in comparing national drug

reimbursement agencies and policies across major developed economies.^4,5,6 Cohen, Malins, and Shahpurwala, 2013 describe how national health insurer‟s reviews of comparative-effectiveness and cost-effectiveness evidence can lead to lower drug prices in comparison to the US which does not conduct such reviews at a national level.⁴ O‟Donnell et. al., 2009 also describes in detail national bodies conducting health technology assessments (HTA) and some challenges they face such as arguments on rationing health care.⁵ Barnieh et. al., 2014 similarly describes national bodies (in OECD countries) that administer restrictive formularies as an approach to manage drug expenditures.⁶ This thesis applies many of results from these three studies to the

biologics or biosimilars drug classes. A similar approach was taken by Rovira et. al., 2011 and Declerck and Simoens, 2012 which were identified for linking biosimilar regulations and reimbursement policies in comparisons of European Union member states.^7,8

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In the analysis of corporate strategies of pharmaceutical companies, Wilkie, Johnson, and White, 2012 was cited for empirically testing relationships between brand name defense strategies against generic competition in traditional, small-molecule pharmaceuticals.¹⁷ Rothaermel, 2001 describes strategic alliances between large pharmaceutical companies and smaller biotech companies in the early development of biologics.¹⁸

In developing hypothesis for incumbent biologic manufacturer‟s corporate strategy, in response to potential biosimilar competition, Porter, 1979 motivates the view that corporate strategy can be viewed in part as a response to competitive forces in the market.¹⁹ An important addition to this view of competition comes from Ellison and Snyder, 2010 who propose a theory of countervailing power where the effectiveness of reimbursement policy in obtaining pricing concessions from suppliers depends on the size and market power of payers, as well as the degree of competition between

suppliers.²⁰ Lastly, the time dimension of corporate strategy is viewed by Ramaprasad and Stone, 1992 as event-based, where time is measured relative to a series of important events that may pose a threat or opportunity for the company.²¹ Applying this event- based view of strategy to patent-holding biologic pharmaceutical companies, the short- or long-term time horizon of their strategy can be measured by the time required to prepare new pharmaceuticals for market and the temporary lifetime of their patents.

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Chapter 3: Regulation of Biosimilars. Comparison of FDA, EMA, and PDMA

This section discusses the regulation of biosimilar drugs in the US, Europe, and Japan. The primary focus is the market licensing process established by these markets‟

main pharmaceutical regulatory agencies: the US Food and Drug Administration (FDA), European Medicines Agency (EMA), and Japan‟s Pharmaceutical and Medical Devices Agency (PMDA). These agencies directly influence the US$590 billion pharmaceutical markets over which they have jurisdiction;⁹ the regulations from these agencies are also closely followed by regulatory agencies of other countries around the world.

This section will first introduce the three regulatory agencies. The approaches these agencies take with respect to generic drugs is briefly described, along with the challenges posed by the new class of biologic drugs. Each regulatory agency‟s approach to biosimilars is then discussed in further detail. This section concludes with the main observations found in comparing the three agencies.

3.2 Regulatory Mandate of FDA, EMA, and PDMA

The FDA is responsible for ensuring that drugs, vaccines and other biological products and medical devices are safe and effective.²² The FDA also has a goal of advancing public health by supporting product innovations. The formal step in which the FDA is asked to consider approving new drugs is called the New Drug Application (NDA). The NDA includes all animal and human data, and information about how the drug behaves in the body and its manufacturing process.²³ The Prescription Drug User Fee Act (PDUFA) gives the FDA the authority to collect user fees for NDA submitted to the FDA‟s drug review agency, the Center for Drug Evaluation and Research

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(CDER), and the biological product review agency, the Center for Biologics Evaluation and Research (CBER). With this fee-collecting authority, the CDER and CBER are required to meet certain performance metrics related to the review of new drug applications.²⁴

The EMA‟s main responsibility is the protection and promotion of public health through evaluation and supervision of medicines.²⁵ The EMA acts as the centralised review body, responsible for providing an opinion to the European Commission on whether the medicine should be marketed or not. The European Commission then provides the centralised marketing authorisation for European Union (EU) states. EMA reviews and European Commission marketing authorisations are compulsory for the following categories of medicines:

 human medicines for the treatment of HIV/AIDS, cancer, diabetes,

neurodegenerative diseases, auto-immune and other immune dysfunctions, and viral diseases;

 medicines derived from biotechnology processes, such as genetic engineering;

 advanced-therapy medicines, such as gene-therapy, somatic cell-therapy or tissue-engineered medicines;

 officially designated 'orphan medicines' (medicines used for rare human

diseases).²⁶

The PMDA is responsible for protecting public health by assuring safety, efficacy and quality of pharmaceuticals and medical devices.²⁷ Similar to the EMA, the PMDA provides a review report to Japan‟s Ministry of Health, Labour and Welfare which has final authority for whether the applicant drug can be marketed in Japan. The

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PMDA‟s drug reviews encompass all new drugs, generic drugs, over-the-counter drugs, and quasi-drugs.²⁸

All three agencies have a role in providing pre-submission guidance and consultations (when the drugs may be in various stages of clinical trials), as well as post-market pharmacovigilance, where drugs are monitored in the community setting for adverse events.^28,29,30

3.3 Regulation of Traditional Generic Drugs and the Challenge of Biosimilars Generic drugs, in principle, contain the same amount of the same active ingredient and have the same indications, dosage, and administration, and the same route of administration as those of its brand-name reference drug.²⁸ Recognizing the potential welfare gains from having price competition in the generics market, the US government passed the Hatch-Waxman Act in 1984, establishing the Abbreviated New Drug Application (ANDA) which expedited the FDA approval process of generic drugs.³¹ After the establishment of ANDA, applicants no longer needed to conduct clinical trials of the generic drug to demonstrate safety and efficacy. The main evidence required from applicants is proof of bioequivalence to the brand-name reference drug;

that is, the generic version delivers the same amount of active ingredients into a patient‟s bloodstream in the same amount of time as the brand-name drug.

Currently the FDA, EMA, and PDMA share a similar abbreviated approval process for generic drugs, in which the main evidence requirements are bioequivalence studies.^28,32,33 The safety and efficacy studies conducted for the brand-name drug can be used to demonstrate safety and efficacy of bioequivalent generic drugs. The agencies still regulate quality and manufacturing processes to the same standards as brand-name

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drugs; also, the applications are only to be submitted after the brand-name drug loses patent protection.

The emergence of complex, large-molecule, biologic drugs in the 1990s and 2000s presents a challenge to the relatively straightforward regulatory treatment of traditional generic drugs. Biologics are made in living organisms to produce proteins to treat diseases, often by genetically modifying cell constructs or cell lines.³⁴The

manufacturing process for biologics is highly complex, involving several factors that make it difficult for competing firms to produce copies of the brand-name biologic drug, even after the drug‟s patent has expired:

 Biologic manufacturers have their own master cell bank producing

unique cell lines replicated for manufacturing, often under a proprietary process;

 The physical and clinical properties of the medicine are sensitive to small

variations during the manufacturing process. Small changes to the properties of biologic medicines can cause serious harm to a patient by way of unwanted immune responses;

 Production requires a high level of monitoring and quality testing:

typically around 250 in-process tests for biologics compared to around 50 tests for traditional small-molecule medicines.³⁵

Due to the nature of the manufacturing process of biologic drugs, copies of biologic drugs produced by unrelated manufacturers will not be bioequivalent to the reference product. Regulatory agencies needed to develop special regulations for these biosimilar drugs, as the minimum standard of bioequivalence used for traditional generic drugs could not be used to evaluate marketing approvals for this class of medicine. At the same time, the safety and efficacy of biosimilars are still a high

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concern for regulators because small variations in the biologic product can have a significant impact on the safety and efficacy profile of the drug.

The next three subsections describe the biosimilar regulations developed specifically for the US FDA, EMA, and Japan PDMA.

3.4 Regulation of Biosimilars by the US FDA

The US FDA‟s regulatory pathway for biosimilar approvals are the result of amendments to the Public Health Service Act (PHS Act) introduced by the Patient Protection and Affordable Care Act, signed into law in 2010. The amendments as part of the Biologics Price Competition and Innovation Act (BPCI Act) create an

abbreviated licensure pathway for biological products that are demonstrated to be

“biosimilar” to or “interchangeable” with an FDA-licensed biological product (section 351(k) in PHS Act).³⁶ To date, no biosimilars have been approved for market under this abbreviated pathway; however, numerous biosimilars are in various stages of

investigation prior to final submission of the 351(k) application for FDA‟s right-to- market decision.³⁷

The 351(k) application includes information demonstrating that the applicant product is:

 Biosimilar to a reference product that is licensed for sales in the US;

 Utilizes the same mechanism of action for the proposed conditions of use, only to the extent known for the reference product;

 Conditions of use proposed in labeling have been approved for the reference product;

 Has the same route of administration, dosage form, and strength as the reference product.³⁶

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The main criteria for approval under the abbreviated pathway - biosimilarity - is defined to mean “that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components” and that “there are no clinically meaningful differences between the biological product and the reference product in terms of safety, purity, and potency of the product”.³⁶ The sponsor must include information demonstrating biosimilarity including data from analytical studies, animal studies, and one or more clinical studies. The FDA can determine at its

discretion whether certain studies are not necessary for demonstrating biosimilarity.

Market approval with the higher standard of comparability to the reference product - interchangeability - allows the biosimilar to be substituted for the reference product without the intervention of the prescribing healthcare provider. In order to meet the standard of interchangeability, the applicant must provide sufficient information to demonstrate biosimilarity, and also to demonstrate that the product can be expected to produce the same clinical result as the reference product in any given patient.

Furthermore, if the product is switched with the reference product, the risk in terms of safety or diminished efficacy is no greater than the risk of using the reference product without such switch.³⁶ The higher evidence requirements for a biosimilar to be approved as an interchangeable product underscore the greater uncertainty inherent in using biosimilars for the same line of treatment. However, the interchangeable label is necessary for biosimilars greater acceptance in the market vis-à-vis the brand-name reference biologic.

FDA‟s biosimilar regulation also specifies the exclusivity period for the first-to- be licensed reference biologic product (12 years) during which biosimilars referencing the product may not be approved for market. The reference biologic also has a initial 4- year exclusivity period during which biosimilars may not submit the 351(k)

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application.³⁵ Similar to the FDA‟s first-to-market generic exclusivity period, there will be an exclusivity period for the first interchangeable biologic, during which subsequent biosimilars may not be determined to be interchangeable. The length of this exclusivity period may vary depending on the date of first marketing and patent litigation

milestones.³⁷

The following diagram shows the main features of FDA‟s biosimilar regulation under the BPCI Act‟s abbreviated licensing process:

Figure 3.1: Main Features of US FDA Biosimilars Regulation

3.5 Regulation of Biosimilars by the EMA

The European agency has the longest history of biosimilar regulation, with the current overarching guidelines for biosimilar reviews being in effect since October 2005.

As the early leader of biosimilar regulations, the EMA‟s guidelines are influential for other non-European countries‟ adoption of biosimilar market license regulations. The EMA‟s overarching guidelines set the basic principles for evaluating „similar biological medicinal products‟ based on comparability studies with a licensed reference product, as opposed to bioavailability studies used for traditional generic drugs. The biosimilar

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must have the same pharmaceutical form, strength, and route of administration as the reference product, with any differences justified by additional studies on a case-by-case basis.³⁸

An important distinction between EMA‟s advice and the FDA is the EMA does not give advice on whether a biosimilar is interchangeable/substitutable with the reference product.³⁹ Individual member states must make the decision on

interchangeability of the biosimilar because it touches on the regulations of professional practice among health care providers, which is the jurisdiction of the member states.

The EMA‟s guidelines recognize that that acceptance of a biosimilar product, as being a „similar biological medicinal product,‟ will depend on technology of the

analytical procedures, the manufacturing process, and clinical and regulatory

experiences.³⁸ Each of these factors will evolve over time and vary across the spectrum of biologics. The EMA guidelines, therefore, specify product-class specific guidance which is made over time.

To date, the EMA has published product-class guidance for 9 classes of biologics. Overarching evidence requirements are also listed, while the specific requirements are published within the product-class guidance forms. Table 3.1 below shows classes of biologic drugs for which the EMA has published class specific guidelines:

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Table 3.1: Biologic Product Classes Covered by EMA Guidelines for Biosimilars

Documents can be downloaded at EMA‟s webpage for scientific guidelines on biosimilars.⁴⁰

An example of different standards for evidence for different classes of biologics is the extrapolation of indications, which describes cases when studies on a biosimilar in use for one indication can be used to determine biosimilarity of the drug in use for a different indication. For example, in the Extrapolation of indications section in the guidelines for interferon beta, the EMA states that:

Extrapolation of clinical efficacy and safety in confirmed RRMS (relapsing- remitting multiple sclerosis) to the other indications of the reference medicinal product in MS is possible on the basis of the totality of the evidence provided from the comparability exercise. (Ref# CHMP/BMWP/652000/20100, Pg 8)⁴⁰

Product Class Effective Date Topics Covered in

Guidelines Biosimilars containing recombinant

follicle-stimulating hormone September 2013

Biosimilars containing interferon beta September 2013 • Non-clinical studies (in vitro, in vivo, toxicological) Biosimilars containing monoclonal

antibodies December 2012

Biosimilars containing recombinant

erythropoietins September 2010

Biosimilars containing low-molecular- weight heparins

October 2009 (effective revision date to be determined)

interferon alpha April 2009 • Extrapolation of indications

Biosimilars containing recombinant human insulin and insulin analogues

June 2006 (effective revision

date to be determined) • Pharmacovigilance plan

Biosimilars containing somatropin June 2006

granulocyte-colony stimulating factor June 2006

• Clinical studies (pharmacokinetics, pharmacodynamics, clinical efficacy, clinical safety)

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The EMA‟s guidance for interferon beta biosimilars does not require specific studies for proving biosimilarity with the reference product used in other indications of MS. On the other hand, in guidance for monoclonal antibodies (mAb) biosimilars, which have indications for wider array of diseases, EMA‟s guidance lists a number of cases where further studies are required to extrapolate to different indications, including challenges faced when the mAb is licensed both as an immunomodulator and as an anticancer antibody (Ref#EMA/CHMP/BMWP/403543/2010).⁴⁰ In such cases, the EMA may require separate studies demonstrating comparability for the different indications rather than an extrapolation of the data.

EMA‟s biosimilar review process allows submissions of applications at earliest 8 years after the reference biologic received its initial marketing authorisation through the centrally-licensed process (licensed by European Commission) or by any individual member state.⁴¹This period of „data-exclusivity‟ is longer than the 4 year period

specified by FDA regulation.

3.6 Regulation of Biosimilars by the Japan PDMA

Japan‟s Ministry of Health, Labour and Welfare issued guidelines for PMDA review of biosimilars in March 2009. Since this date, two biosimilar products have been approved in Japan: Somatropin BS s.c. and Epoetin alfa BS.⁴²Although the two

products were submitted to PDMA before 2009 in the same pathway as new biologics, they both experienced shorter review times as a result of the new biosimilar guidelines.

The PDMA guidelines refer to biosimilars as “follow-on” biologics, developed to be comparable in quality, safety, and efficacy to and existing biologic approved for sale in Japan. The PDMA approach to evaluating follow-on biologics is generally the same as the EMA, whereby the evidence that the applicant provides demonstrates

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comparability with the reference product in terms of quality, safety and efficacy. Any differences in quality should be demonstrated with existing information to have no adverse impact on safety or efficacy.⁴³

PDMA provides guidance on the following items making up the follow-on biologics review application:

 Manufacturing process and quality characterization of follow-on biologics (including drug formulation and stability testing);

 Evaluation studies of comparability of quality attributes;

 Specifications and test procedures;

 Non-clinical studies (including toxicity studies and pharmacological studies);

 Clinical studies (including pharmacokinetic and pharmacodynamic

studies, comparison of clinical efficacy, and evaluation of clinical safety);

 Post-marketing surveillance.⁴³

Similar to the unique requirements for different types of biologics set out in EMA‟s biologic class guidance, the PDMA will consider different types of evidence depending on the class of biologic being reviewed. The PDMA recommends manufacturers consult with the regulatory authority to determine the applicability of the guidelines on a

product by product basis.⁴³

Japan‟s regulatory authority prohibits automatic substitution and

interchangeability of biosimilars.⁴⁴In this regard, Japan‟s regulations for the adoption of biosimilars are more restrictive than the US and Europe, with the US FDA providing an opportunity for licensing with an „interchangeable‟ label, and the European Commission handing this decision to individual member states.

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In terms of timing for the follow-on biologic submission, the PDMA allows for submissions to occur typically 8 years after the date the original biologic was licensed.⁴⁵ This date begins the „reexamination‟ period, when the follow-on biologic submission may include data from the original biologic submission.

3.7 Discussion

The regulation of biosimilars is still in its infancy: the US FDA, as the

regulatory authority for the world‟s larget pharmaceutical market, has yet to make any rulings under its new biosimilar approval pathway; the EMA and Japan‟s PDMA, despite having a longer history with established biosimilar review processes, have only begun to review the largest classes of biologics which are starting to lose patent

protection. Regulations of biosimilars will surely change as the agencies gain more experience reviewing this class of drugs.

The three agencies described in this section have established abbreviated review processes to allow biosimilars to come to market faster than if they were to be reviewed as completely new molecular entities. As a motivation for the creating the abbreviated review process, the FDA has stated that it aims to create regulations that help industry develop biosimilars to “enhance competition” and “lead to better patient access and lower cost to consumers.”⁴⁶

In general, these regulations have the same goal, to ensure that new biosimilar products are nearly the same as their referenced biologic product in terms of safety, efficacy, and quality. Generally, the same type of evidence will be required to

demonstrate similarity (summarized in Table 3.2 below). Key differences between the agencies are in granting „interchangeable/substitutable‟ labels and in the timing of the first biosimilar submission. The FDA‟s option for biosimilars to be licensed as

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„interchangeable,‟ shorter time in which biosimlars have to wait to submit applications, and an exclusivity period for the first-to-market biosimilar will theoretically encourage wider biosimilar adoption in the market. It remains to be seen whether this will

materialize in practice.

Table 3.2: Summary of Comparasion of Biosimilar Regulation for FDA, EMA, and PDMA

FDA EMA PDMA

Goal

Evidence considered

General approach

Interchangeability

Option for approved biosimilar with further evidence of

interchangeability

Decision for individual

member states Prohibited

Earliest submission date

4 years after 1st biologic

licensed to market

8 years after 1st biologic licensed to market

Other important differences

exclusivity period also available for first-to-market biosimilar

no special treatment for first- to-market biosimilar

• ensure that new biosimilar products are nearly the same as their referenced biologic product in terms of safety, efficacy, and quality;

• generally the referenced biologic must be licensed in the respective market

evaluation of manufacturing process, non-clinical & clinical studies, pharmacovigilance plan

• consider 'totality' of evidence;

• different requirements for different classes of biologics; •

• possible extrapolation of indications depending on class of biologic;

• consultations with sponsors throughout the process

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Chapter 4: Reimbursement Systems for Biosimilars. Comparison of US, Europe, and Japan

The high cost of biologics (and likely high cost of biosimilars) leads to large payer organizations funding the majority of the drug costs for individual patients. The US, EU countries and Japan have different systems of pharmaceutical reimbursements that will be discussed in this section to explain different biosimilar pathways to market across developed economies.

The US healthcare system is highly fragmented with numerous sources of private and public financing to insure the costs of medical services. Out-of-pocket spending on healthcare is significant burden for many patients with out-of-pocket expenses of nearly $1,000 US per capita.⁴⁷ Major reforms to the US healthcare system were introduced in the 2010 Patient Protection and Affordable Care Act (ACA), with steps to expand healthcare coverage through the “individual mandate” and Medicaid expansion taking effect in 2014.⁴⁸

Under the Medicare program (social insurance for US seniors 65 and older and people with disabilities), Medicare Part B provides a major source of funding for biologics administered in a clinical setting. Medicare Part B provides medical coverage for services administered in a non-acute care clinical setting, including treatments which require infusions in a clinic. Medicare Part B uses private contractors to process claims, using public funds to reimburse the treatment cost (pharmaceutical products) and services on behalf of the government.

However, within publicly financed care, the largest program for pharmaceutical funding is Medicare Part D which provides subsidies for private drug coverage to

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beneficiaries eligible for Medicare. Medicare Part D is administered by private

insurance organizations, primarily drug benefit management organizations which act as third part administrator of employer, patient, or public funded plans. In 2012, Medicare Part D subsidized drugs for 31.3 million beneficiaries at an expense to the government of $65.5 billion US.⁴⁹

Although the EMA and European Commission are responsible for reviewing and granting licensing of drugs for sale in the EU, individual member states have

jurisdiction over the healthcare systems provided to citizens of the state. Compared to the US, EU countries have relatively large public systems; however there are

differences in the types of payers (public or private insurance) and providers of healthcare across member states.⁴⁷

The pharmaceutical reimbursement systems of the three most populous EU member states, Germany, France, and the United Kingdom will be discussed in this section. Each country has a national review body that makes recommendations on whether a treatment should be covered by public insurance.⁴ Germany‟s reimbursement of prescription drugs including biologics and biosimilars is primarily through

compulsory insurance provided by a number of public and private healthcare funds.

France, similarly, reimburses drug costs through compulsory health insurance administered by non-competing, occupation-based funds.⁴⁷ However, in the UK, reimbursement of prescription drugs is primarily through a single government payer (National Health Services); although in each country, there is a small market for supplementary private insurance.⁵⁰ Impacting reimbursements of biologics (and biosimilars in the future) are different pricing policies these countries take at the national level either through regulation or reimbursement policies.

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Lastly, Japan, like most EU member states, has a universal healthcare system in which health insurance is compulsory for all Japanese citizens. Prescription drugs are reimbursed through the insurance system which is made up of roughly 3,500 private and public insurers. Japan‟s Central Social Insurance Medical Council makes coverage decisions and sets the price list for all pharmaceuticals which must be covered by all insurance plans in the country.⁴⁷ Therefore, despite having many different insurance organizations operating within the country, Japan‟s major healthcare reimbursement policies are set at a national level and apply universally for all insurance plans.

This section will introduce in further detail each country‟s drug reimbursement system and specific policies toward reimbursement of biologics and biosimilars. As biosimilars are emergent issue, many of the policies towards this class are under development and subject to change with more experience with this class.

4.2 US Reimbursement of Biosimilars 4.2.1 Medicare Part B

Medicare Part B was established as part of the Medicare plan‟s coverage for medically necessary services for patients outside of the hospital, acute care setting.

Medicare Part B covers lab tests, procedures, and doctor visits deemed medically necessary or preventative, as well as prescription drugs and vaccines which patients are unable to administer themselves.⁵¹ In 2012, Medicare Part B‟s fee for service

reimbursements benefited 32.8 individuals, costing $166.6 billion US (approximately 30% of the total Medicare budget).⁴⁹

Some of the top spending items in Medicare Part B are biologics which require infusions at clinics. According to Government Accounting Office (GAO), the 8 highest expenditure pharmaceuticals in Medicare Part B in 2010 were biologics. These 8

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products accounted for $8.3 billion US in spending and included monoclonal antibody products such as Rituxan, Lucentis, Avastin, and Remicade.⁵²

4.2.2 Medicare Part B Biosimilars Policy

Biosimilars will likely be introduced in reference to biologics that are existing benefits under Part B, including the high expenditure biologic products previously listed.

The approval of biosimilars for benefits where the reference biologic is already a Medicare Part B benefit should not require extensive review by Part B plan administrators.⁵³

The main mechanism Medicare Part B uses with respect to reimbursement of prescription drugs is setting a maximum price with which in reimburses providers of the prescription drug. For brand name drugs and biologics, the maximum reimbursement price is 106% of the lower of the Average Sales Price (ASP) and the Wholesale Acquisition Cost based on calculating ASP for all drugs belonging to the same billing code.⁵⁴

The definition of biologic and biosimilar products included in the calculation is an important factor to determining the eventual weighted average price and prescribing practices that are incentivised by the price change. If lower cost biosimilars are included in the same billing code, thus decreasing the average price, prescribing would be

incentivised toward lower cost biosimilars because they would offer higher margin for the prescriber based on the difference between the wholesale cost and reimbursement price. However, according to legal experts, the exact criteria for including biosimilars in the same billing code and ASP calculations has not yet been determined by regulation.⁵⁴ One issue limiting further clarification of the Medicare Part B pricing regulation is the

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FDA has not given specific rulings on determining interchangeability of biosimilars with the reference biologic (discussed in Chapter 3 on regulations).

4.2.3 Medicare Part D and the Role of Pharmacy Benefit Management

Medicare Part D subsidizes private drug insurance for patients eligible for Medicare. The government role in this subsidized insurance system is to set regulation under which partnering insurance companies operate. For example, reimbursement policies were introduced in the 2010 Affordable Care Act with the aim of reducing the Medicare Part D coverage gap between initial insurance coverage and catastrophic drug costs coverage (known as the “donut hole”). Beginning in 2013, drug companies must provide discounts to patients within the coverage gap, with the discounts also counting towards the accumulated costs needed to qualify for catastrophic coverage.⁵⁵

Medicare Part D is a large funder of biologics that may be administered by patients at home (in contrast to infusion products funded by Medicare Part B). The biologics, Humira and Enbrel which are self-injectable treatments for Rheumatoid Arthritis, are covered by Medicare Part D. These biologics were expected to take significant market share from the Part B covered biologic, Remicade, when Medicare Part D began coverage in 2006. However, research found mixed results, with Remicade maintaining its share of use when coverage under Part B was more generous. More low- income individuals were likely to initiate biologic treatment on Humira and Enbrel because they received more assistance from Medicare to cover the otherwise high out- of-pocket costs for these treatments.^56,57

Pharmacy Benefit Management (PBM) organizations have an important role in administering drug insurance for much of the US market, including for patients under Medicare Part D. PBM began by providing pharmacy claims processing services to

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employee benefit health plans in the 1990s. PBM have since expanded into managing networks of pharmacies that accept negotiated discounts on drug prices and dispensing fees for plan members. An estimated 71% of the US population are on private insurance with PBM.⁵⁸

Medicare Part D was not found to have any specific policies or regulations directed to the reimbursement of biosimilars. However, PBM have an important role in determining the reimbursement policies for Medicare Part D patients, and PBM have a range of policies directed toward specific drugs or classes of drugs including biologics and biosimilars. The following policy tools PBM use can be applied to many classes of drugs:

 Formulary development and management;

 Generic substitution;

 Therapeutic interchange;

 Rebates and discounts.⁵⁸

PBM manage a formulary which includes all treatments it determines to be

“worth” covering as insurance benefits for patients. Benefit managers may use clinical and pharmacoeconomic evaluations to determine which treatments should be coverage and under which type clinical criteria (for pre-authorized coverage). In this role, PBM act similar to national review agencies in countries with forms of public health

insurance (see sections on EU countries and Japan).

Generic substitution and therapeutic interchange policies can shift utilization to lower cost pharmaceuticals deemed bio- or therapeutic- equivalence. PBM‟s main tool to shift behavior is setting different co-pay rates, with lower rates for treatment that save the drug plan more money. Sometimes the costs of these treatments are kept

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confidential with hidden discounts and rebates so that manufacturers can maintain higher published prices.

PBM have been aggressive in lowering costs with generic substitution.⁵⁸ With biosimilars entering the market, they will make use of similar substitution policies to shift utilization from higher cost originator biologics to biosimilars.⁵⁹

4.3 Europe Reimbursement of Biosimilars. Comparison of Germany, France, and the UK

4.3.1 Introduction

Germany, France, and the UK are the three most populous countries in the EU.⁴⁷ These countries differ from the US in that they have high, direct government support for pharmaceutical care for nearly all of the population. Germany provides most of its prescription drug reimbursements through non-governmental, not-for-profit health insurance funds, or substitutive private insurance. France, similarly, provides drug reimbursements through multiple occupation-based funds, while most reimbursements in the UK go through a single, public payer system, the National Health Services (NHS).⁴⁷

Biologics make up a significant share of public funding compared to other drug classes because of the high-cost of individual treatment on biologics and features of insurance that limit total private expenses for health care. These large markets are also influential for guiding policies in other countries with national-level policies for pharmaceutical reimbursements. For example, the UK‟s National Institute for Health and Clinical Excellence (NICE) which makes recommendations to NHS on whether it should cover new medical technologies has far reaching impacts beyond the UK.⁵

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The following table summarizes each country‟s biologic market size, representing the total potential size for biosimilar penetration and health care cost savings. Also included in the summary table are each country‟s national review body for new pharmaceuticals, such as UK‟s NICE, and other key points of comparison with respect to the reimbursement of biosimilars.

Table 4.1: Comparason of Reimbursment Policies for Germany, France, and the UK

Sources: Cohen et. al., 2013;⁴ Rovira et. al., 2011;⁷ Declerck and Simoens, 2012.⁸

4.3.2 National Health Technology Assessment Agencies

Germany, France, and the UK have national agencies responsible for making recommendations on whether new treatments should be covered by public funded healthcare plans. These Health Technology Assessment (HTA) agencies make recommendations that are based on evidence reviews that take into account clinical benefits of new treatments in comparison to existing treatments (comparative

Germany France UK

Market value of biologics (% of total

medicines spend)

7.0 billion € (24%) 6.2 billion € (21%) 2.4 billion € (17.1%)

National Health Technology Assessment Agency

Institute for Quality and Efficiency in Healthcare (IQWiG)

National Authority for Health (HAS)

National Institute for Health and Clinical Excellence (NICE)

Type of recommendations

Reimbursement decisions, pricing, prescribing information

Reimbursement decisions, clinical practice guidelines

Pricing policies

Mandatory discount for social insurance, negotiated rebates for providers, reference pricing

Mandatory discounts for insurance

Negotiated rebates, competitive tender by purchasers

Substitution of biosimilars by

pharmacy

Prohibited Permitted Prohibited

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effectiveness) as well as economic considerations such as cost-effectiveness and budget impact. In this respect, HTA agencies differ from the EU level EMA reviews which are focused solely on safety and clinical efficacy. Reviews must take place at a national level because of each country‟s unique healthcare system and financial situation.

Research has shown that the presence of these agencies improves affordability for payers and increases access for patients to the new health technologies that receive positive recommendations from the review agency.⁴

HTA are expected to use different types of evidence to review biosimilars depending on how they are shown to be equivalent to the reference biologic in clinical trials. Biosimilars that are approved for sale in the EU by showing equal safety and efficacy to the reference product in head-to-head trials may go through a shortened review process at the national level. In these cases, the biosimilar may be evaluated on the basis of cost-minimization, where the recommended treatment provides equal

benefit at the lowest cost. When the biosimilar shows differences in clinical outcomes to the reference biologic, the national review agency may still require a full evaluation in which the lower cost of the biosimilar will be weighed against the clinical and economic impacts from the difference in efficacy or safety.⁸

Besides recommendations for whether there should be public funding of new treatments, HTA are also responsible for developing guidelines on how best to prescribe new treatments. These guidelines are designed to ensure that prescribing takes into account the cost-effectiveness of the new treatment for different severities of illness.

NICE clinical practice guidelines detail the clinical criteria that must be present before a patient can receive coverage NHS coverage for the new treatment. Clinical practice guidelines are especially important for prescribing of biologics because of their high cost and the range of treatment options depending on severity of illness and response to

生技仿製藥規範與公費報銷政策對藥廠經營策略之影響 — 美國、歐洲與日本制度之比較分析

Global MBA College of Management National Taiwan University

Master Thesis

Abstract

Table of Contents

List of Figures and Tables

Chapter 1: Introduction

Chapter 2: Background on Biologics and Biosimilars

Chapter 3: Regulation of Biosimilars. Comparison of FDA, EMA, and PDMA

Chapter 4: Reimbursement Systems for Biosimilars. Comparison of US, Europe, and Japan