Savings for European healthcare systems through biosimilars

In recent years, the use of biotechnologically produced drugs has increased significantly. These active ingredients, which are usually produced through the use of bacteria or cell cultures, are used in a variety of indication areas. Biotechnologically produced active ingredients are used particularly in the treatment of serious diseases such as anemia in kidney disease, rheumatoid arthritis and other systemic diseases as well as various cancers (Roger 2006). One way to save costs in the area of biologicals is to increase the use of so-called “biosimilars”, which can be developed by other manufacturers and brought onto the market after the patent protection of the biological has expired. As part of a model calculation, it was examined how high these expected savings could be by substituting the reference biologicals with biosimilars using the example of selected European countries between 2007 and 2020.

>> The development of so-called "biologics" involves high investments (Ernst & Young 2011, Sensabaugh 2007). This, combined with the increasing prevalence of biotechnologically produced drugs, leads to high annual treatment costs. Total sales of biopharmaceuticals in the USA amounted to almost 70 billion US dollars (approximately 52 billion euros) in 2009 (Hirsch et al. 2011). In Europe, sales volume reached 60 billion euros in 2008 (Covic et al. 2008). The considerable expenditures for biologicals place additional burdens on healthcare systems, prompting measures to reduce expenditures.
"Biosimilars," which can be developed and marketed by other manufacturers after the patent protection of the biological product has expired, differ significantly from chemically synthesized generics due to their manufacturing process. While conventional generics are pharmacological copies of the original product in terms of qualitative and quantitative characteristics, a biosimilar is the result of a manufacturing process involving induced synthesis by living cells. It can therefore be assumed that the biosimilar differs from the reference product. However, the pharmacological mechanism of action is identical. Therefore, different regulatory requirements apply to biosimilars than to generics. In Europe, the European Medicines Agency (EMA) defines biosimilars as biological medicinal products whose effects are comparable to those of already approved biological medicinal products (Roger 2010).
However, due to the higher development costs compared to generics (DeMasi et al. 2007, Sensabaugh 2007), the savings potential of substituting biologics with biosimilars is estimated to be lower than in the generics sector. While a price difference of up to 80% between the original and generics is assumed for generics (de Joncheere et al. 2002, King et al. 2002), the price differences between the reference biological and the biosimilar are estimated at 15% to 30% (Blackstone 2008, Simoens 2011, Mellstedt 2010, Zuniga et al. 2010). Despite these smaller price differences, it is estimated that a 20% price reduction for the five most commonly used off-patent biologicals could result in annual savings of €1.6 billion across Europe (Oldham 2006). The use of biosimilars could achieve the necessary price reduction.
The model calculation presented here investigated the expected savings from substituting reference biologicals with biosimilars in eight European Union countries (Germany, France, Great Britain, Italy, Poland, Romania, Sweden, and Spain) between 2007 and 2020. The study focused on three groups of biologicals: erythropoietin (EPO), granulocyte colony stimulating factors (GCSF), for which biosimilars already exist, and monoclonal antibodies (MABs). For MABs, the selection was limited to the active ingredients with the highest sales. Significant savings are possible, particularly in the field of oncology, through the increased use of biosimilars (Hirsch et al. 2011). An overview of the active ingredients included can be found in Table 1.
The following analysis was based on quarterly data from IMS Health for the eight European Union countries under consideration. The data included the average dispensing prices charged by pharmaceutical companies per standard unit (in US dollars), the sales generated (in US dollars), and the total quantities (in dispensed standard units) of all marketed products containing the active ingredients in question per quarter during the observation period from the first quarter of 2007 to the third quarter of 2010. Information on the potency, dosage form, and manufacturer's name was also available for each product. Based on this information, the number of standard packs dispensed per product was converted into defined daily doses* (DDD). This resulted in the total quantity of DDD dispensed per country when summed across all manufacturers. The dispensing prices per standard unit were first converted to the dispensing price per pack, and then the respective reimbursement prices were determined (for details, see Section 1.3). For further calculations, the concept of sales per defined daily dose was used (Pavcnik 2002). The reimbursement prices of all manufacturers per active ingredient and package were divided by the daily doses per package. In conjunction with the dispensed daily doses per package, this allows expenditures and market share-weighted prices to be determined at the active ingredient level. The EPO group was treated as a single active ingredient. For both EPO and filgrastim, a distinction was made between reference products (including reimports) and biosimilars when calculating prices.
The calculation of savings in the eight EU countries was carried out in a multi-stage process, which is shown in Figure 1. The individual steps are explained below.
In a first step, the development of future pharmaceutical consumption in DDD for the individual active ingredients up to 2020 was estimated individually for each country under consideration. Two approaches were chosen for this purpose. The "top-down" approach estimates the theoretical medical need for the respective country based on existing epidemiological literature. The "bottom-up" approach extrapolates the previous volume development, generally assuming a slowdown in the previously observed trend. Top-down modeling was generally preferred. The bottom-up approach was chosen for those active ingredients and countries where the observed pharmaceutical consumption deviated significantly from the demand modeled using the top-down approach. Top-down modeling leads, for example, to underestimation if the active ingredient in question is used extensively outside of its primary indication and no epidemiological data are available for this disease. An overestimation results if prescribing behavior (be it for medical or economic reasons) deviates from "guideline-compliant" treatment. The decision between the approaches was based on expert assessments, research into the market environment in the respective European healthcare systems and discussions with national experts (Fig. 1).
Based on information on the healthcare systems of the countries under consideration (literature research, expert interviews) and the respective manufacturer's selling prices of the biologicals (data from IMS Health), the average reimbursement prices for the individual active ingredients were modeled. Country-specific factors such as wholesaler surcharges, taxes, co-payments, as well as regulations regarding reimbursement restrictions, statutory discounts, and price negotiations in the inpatient sector were taken into account. However, only regulations with national validity could be included. In the case of Great Britain, the prices were determined based on the regulations for England. The reimbursement prices for outpatient and inpatient care were calculated separately, and a weighted average price was calculated for each product.
In the next step, the expected expenditure for biologicals up to 2020 was calculated per active ingredient. This was done by multiplying the expected pharmaceutical consumption by the calculated average price per active ingredient for each of the countries considered. The resulting product is the expected expenditure volume per active ingredient and country and represents the expenditure scenario without the market launch of biosimilars (baseline scenario). A similar procedure was applied retroactively for the EPO group and the active ingredient filgrastim, for which biosimilars have been on the European market since 2007 and 2008, respectively. Here, prices were maintained at the level prior to the market launch of the biosimilars.
To calculate the potential savings from biosimilars, country-specific scenarios regarding market development after the introduction of biosimilars were developed for each active ingredient. Various assumptions were made:
I. regarding the development of market shares.
II. regarding the average reimbursement prices of the reference biologicals and the respective biosimilars.
III. regarding the entry point of biosimilars after patent expiry.
The current development of market shares (I) for biosimilars in the European countries under consideration does not yet provide a consistent picture and is therefore not readily transferable to the expected development of MABs. Therefore, the observed market activity in the outpatient German pharmaceutical market of the statutory health insurance (SHI) for selected generics from 1998 to 2010 was used as an example to determine the development of market shares. The data is based on the Pharmaceutical Prescription Report for the years 1999 to 2011 (Schwabe et al. 1999-2011). An average was calculated across active ingredient markets that exhibited slow or rapid market penetration with generics over a 10-year period. This formed the basis for the two scenarios "Slow Growth" and "Rapid Growth." A third, medium scenario, "EPO," is based on the market share development of EPO biosimilars in the outpatient EPO market of the statutory health insurance system—so far the only market segment in which the development of biosimilars can be observed over a longer period. For the price development (measured in sales per DDD) (II), the respective country-specific development for the biosimilars of the active ingredient EPO and the active ingredient filgrastim was used for the first three years. The scenarios were formed by the largest, smallest, or average discount of the reference product and the biosimilars compared to the prices of the reference product before patent expiration. For the further time course, the results of the sector inquiry into the generics market by the European Commission (European Commission 2009) were used, which show a slow price decline on the generics market from the third year onwards. This price decline was assumed for all scenarios from the fourth year onwards (Table 2).
The combination of parameter values leads to a multitude of scenarios for the individual countries and active ingredients. It is important to note that in the case of EPO and filgrastim, unlike the other active ingredients considered, no assumptions were made regarding the development of the price decline of biosimilars or the time it takes for biosimilars to enter the market after the patent expiration of the biological, as biosimilars were already available on the markets in the eight EU countries during the observation period. Therefore, only the parameters listed in Table 2 were used for the development of market shares, as the necessary period (10 years) for a conclusive assessment of market share development for EPO had not yet been reached at the time of data collection.
Results of the scenarios
The expenditure volume for the eight healthcare systems was estimated at €229 billion across all active ingredients and countries between 2007 and 2020, assuming that no biosimilars had been introduced since 2007 or that no biosimilars would be introduced in the future. Table 3 shows the expected cumulative savings for the three active ingredient groups considered.
The expected savings from biosimilars for the EU countries considered by 2020 range between €11.8 billion and €33.4 billion, depending on the scenario. This corresponds to savings of between 5.2% and 14.6% of the considered expenditure volume. A comparison of the values in Table 3 shows that the development of the market share of biosimilars and the time until market entry of biosimilars after patent expiration have a strong influence on the amount of savings.
The results for the individual drug groups show that there are significant differences in terms of savings potential.
In the case of the GCSF, biosimilars for filgrastim have been on the European market since 2008. Therefore, not a fictitious price development, but the actual price development was used for the countries. The same assumptions apply to the active ingredient pegfilgrastim as for the MABs. Table 4 shows that the expected cumulative savings for both active ingredients are estimated to be between €0.7 billion and €1.8 billion. Based on the expenditure volume of €12.0 billion, this represents savings of €5.5 billion to €15.3 billion.
The expected savings for the MABs are significantly higher, as shown in Table 5. Savings of between €1.8 billion and €20.4 billion are expected from the market entry of biosimilars. However, measured against the expenditure volume of €173.3 billion, this represents a savings effect of only between €1.0 and €11.8 percent. It should be noted, however, that many of the MABs are expected to lose their patent protection very late in the period under review (see Table 1).
In the case of etanercept, the first biosimilars could come onto the market as early as 2012 or 2013, resulting in expected savings of 3.8 to 20.8 percent, with a total expenditure of €21 billion. Other high-revenue active ingredients, such as rituximab and bevacizumab, will only be able to contribute significant savings by 2020 if biosimilars are introduced immediately after patent expiration.
The calculated scenarios for savings for EPO deviate from the previous methodology because biosimilars were already introduced into the European market between 2007 and 2009, and the actual market share development after market entry can be taken into account. As shown in Table 6, the expected cumulative savings—depending on the expected market share development for EPO—range between €9.4 billion and €11.2 billion. Based on an expected expenditure volume of €43.8 billion, assuming that no biosimilars had been introduced in the past, this represents savings of €21.4% to €25.5% for the period from 2007 to 2020.
discussion of the results
The presented results demonstrate considerable savings potential through the use of biosimilars in the drug groups considered. In particular, the development in the area of EPO and filgrastim shows that—compared to the baseline scenario—savings of 20 to 25 percent of expenditures are possible. However, since many patents for biotechnological drugs will not expire until the second half of the decade considered in this model calculation, savings of this magnitude are not yet to be expected from the expected biosimilar launches by 2020.
Despite all this, there is great potential for savings through biosimilars in the monoclonal antibody (MAB) group. Of this, a maximum of EUR 11.3 billion, or 14.9%, can be realized by 2020 through the market launch of biosimilars for the active ingredients etanercept, rituximab, and trastuzumab alone.
The analyses of the selected scenarios show that the amount of savings is diametrically opposed to the market share and the time it takes for biosimilars to enter the market. Rapid availability of biosimilars after the patent expiration of the reference biologics thus leads to the rapid realization of significant savings.
Ideally, biosimilars should be available immediately after patent expiration, similar to the usual case for chemically synthetic generics.
The results also emphasize the importance of market penetration of biosimilars, with the associated rapid price decline having an almost more significant effect than a high market share of the biosimilar. This is due to the price pressure on the reference biologicals caused by the lower prices of biosimilars. Biosimilars also lead to savings for healthcare systems through this indirect route. However, biosimilar manufacturers do not benefit from this effect.
Due to the complexity of the modeling, certain limitations must be considered when interpreting the results. For example, not all existing discounts could be taken into account when calculating the country-specific reimbursement prices. This applies particularly to regional and patient group-specific discounts. Therefore, some calculations were based on average values or assumptions based on expert assessments. The exact expiration of patent protection for pharmaceuticals is often subject to a certain degree of uncertainty due to the complexity of patent law. Furthermore, a status quo of regulations in the individual healthcare systems was assumed. Future regulatory changes could only be considered if they had already been announced during the observation period.
As the model calculation shows, various factors influence the savings potential of biosimilars. This creates opportunities for regulation to promote substitution with biosimilars through appropriate requirements and thus influence the potential savings. One relevant lever is the market share of biosimilars. This can be influenced through regulations, requirements, or recommendations, particularly for physicians, regarding the substitution of reference biologicals with corresponding biosimilars.
With regard to pricing, the higher development and production costs of biosimilars compared to generics must be taken into account. The price development for erythropoietin and filgrastim in countries with free pricing, such as Germany and the United Kingdom, shows that smaller price reductions can be expected compared to generics. Some European healthcare systems demand a flat-rate discount of up to 50% for generics. It should be examined whether this could lead to a reduction in the savings potential for biosimilars, as biosimilars might not even be brought to market in the expectation of low reimbursement prices.