State laws limit the interchangeability of biosimilars

sarah-burnettBiosimilars have been on our radar for a while. With Europe leading the way, this fall marks 11 years of the European Medicines Agency’s biosimilars guidelines with 20 biosimilars approved corresponding to seven different reference drugs. As part of the Patient Protection and Affordable Care Act (ACA) in 2010, President Obama amended the Public Health Service Act (PHS Act) to create an abbreviated Biologic License Application (BLA) regulatory process for biosimilars, which has yet to catch on for a variety of reasons.

Key challenges in the U.S. regulatory environment remain for establishing interchangeability for biosimilars. Drug interchangeability allows for substitution for the less expensive biosimilar version of the brand-name biologic (reference drug). The Food and Drug Administration (FDA) can classify biosimilars as interchangeable. However, state legislature can regulate the substitutability by requiring a biosimilar in question to be first approved as interchangeable by the FDA. These regulatory hurdles thus create limits at the prescriber level to prevent substitution. So far, only two products have gained full FDA approval yet are not considered interchangeable; it is estimated that many more biosimilars are currently in development.

Before biosimilars flood the market en masse, states were taking measures to assure their regulation. In the U.S., 23 states and Puerto Rico have passed legislation in the past three years to regulate the substitutability of biosimilars. The National Conference of State Legislators outlines the substitution laws for each state with an enacted law here. The common threads to the legislation are summarized below:

FDA approval. All biosimilar products seeking substitutability status must be approved by the FDA. The FDA has yet to approve a biosimilar as an interchangeable drug.

Prescriber decides. Substitution of a biosimilar for another product can be prohibited by the prescriber. In such cases, “dispense as written” or “brand medically necessary” must be noted on the prescription.

• “Notification” versus “communication.” Previous legislation in 2013 and 2014 required that prescribers be notified of legally permitted substitutions made at a pharmacy. In 2015, language regarding “notification” was adjusted to allow certain “communications” to be sufficient for drug substitutions. These “communications” included notation in an electronic medical record, pharmacy benefit management (PBM) files, or pharmacy records shared with prescribers. The purpose of this language change was to allow prescribers to monitor their patients without causing unnecessary access barriers.

Patient notification. Certain states require that patients be notified of a drug substitution. Stricter versions of these regulations require explicit patient consent before any substitution is made. Documentation of notification/consent are possible barriers to adoption of approved biosimilars.

Records. Any biologic product substitution must be accompanied by records in the prescriber’s medical practice and at the pharmacy.

Immunity. In certain states, laws provide protection to pharmacists who substitute a biologic product in compliance with the state’s laws.

Web lists. States must keep an up to date list of permissible interchangeable products that is publically available.

Cost or pricing. Legislation exists requiring pharmacists to explain the cost or price of a biologic and its interchangeable biosimilar. Five states require that a substitution must have the lowest cost.

Understanding the extent of the state and federal laws regarding substitutability can help employer groups and pharmacy programs estimate the potential cost impact for their organization. Milliman has done previous research on cost savings for employer groups that uptake biosimilars. As more biosimilars are approved, there will be more competition for high priced biologics and additional drug choices will be available at more affordable prices.

To learn more about Milliman’s pharmacy benefits consulting services, click here.

Developing population health management programs under risk-based contracts

Risk-based contracts are driving the development of population health management programs (PHMPs) that are designed to achieve the Institute for Healthcare Improvement’s Triple Aim goals. Health systems may need to redesign how they deliver healthcare to meet these goals. Risk-based contracts often give providers both the financial flexibility and incentive to redesign care.

In the article “Population health management program development: The path to the Triple Aim,” Milliman’s Nick Creten and Blaine Miller discuss the following five steps healthcare organizations must address when developing a PHMP in a risk-based contracting environment.

Step 1: Assess population costs, utilization, and risk
Step 2: Identify opportunities
Step 3: Segmentation
Step 4: Intervention development
Step 5: Monitor, assess, and improve

Regulatory roundup

More healthcare-related regulatory news for plan sponsors, including links to detailed information.

IRS extends due dates for furnishing to individuals with 2016 Form 1095-B and Form 1095-C
The Internal Revenue Service (IRS) released Notice 2016-70, which extends the due dates for certain information reporting requirements for 2016 imposed by the Patient Protection and Affordable Care Act (ACA) under section 6055 and 6056 of the Internal Revenue Code.

Specifically, this notice extends the due date for furnishing to individuals the 2016 Form 1095-B, Health Coverage, and the 2016 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, from January 31, 2017, to March 2, 2017. This notice also provides for transitional good-faith relief from the penalties imposed by sections 6721 and 6722 of the Internal Revenue Code relating to the 2016 information reporting requirements under sections 6055 and 6056.

To read the entire notice, click here.

The ACA transitional reinsurance program
The Congressional Research Service (CRS) released “The Patient Protection and Affordable Care Act’s Transitional Reinsurance Program.” The first section of the report provides background information on reinsurance and the ACA risk-mitigation programs. The second section describes the components of the transitional reinsurance program as well as the amounts currently collected and remitted through the program. The third section discusses questions, including those raised by a recent Government Accountability Office (GAO) report, regarding the scope of the authority of the Department of Health and Human Services to administer the transitional reinsurance program. The last section briefly summarizes relevant legislation regarding the transitional reinsurance program.

To read the entire report, click here.

Registration now open for 2017 advance monthly payments of the Health Coverage Tax Credit
The IRS opened the new registration and enrollment process for qualified taxpayers to receive the benefit of the Health Coverage Tax Credit (HCTC) on an advance monthly basis during 2017.

Eligible taxpayers can have 72.5% of their qualified health insurance premiums paid in advance directly to their health plan administrators each month. Each payment made on their behalf to the health plan administrators lowers their out-of-pocket premium costs.

To learn more, click here.

2017 COLAs for Medicare benefits

The Department of Health and Human Services’ Centers for Medicare and Medicaid Services (CMS) has announced cost-of-living adjustment (COLA) figures for Medicare Part A and Part B for 2017. In April this year, CMS announced the updated amounts for the Medicare Part D standard prescription drug benefit for 2017. This Client Action Bulletin provides perspective.

MedPAC’s proposed changes to Medicare Part D: Considerations for Part D plan sponsors

The Medicare Payment Advisory Commission’s proposed modifications to the Part D federal reinsurance program could change the financial dynamics for Plan D plan sponsors, particularly if appropriate updates are not made to the risk score model. This paper by  Milliman consultants David Liner and Nicholas Johnson outlines key considerations for plan sponsors as they prepare for proposed changes to the Part D program.

This article is part two of a two paper series. Read paper one about considerations for Part D stakeholders.