Pharmacist Substitution of Biosimilars: An Overview of State Laws

Cost savings through competition

Introducing generic versions of innovative medicines reduces prescription drug costs for consumers. According to the Generic Pharmaceutical Association (GPhA), increasing competition by introducing generic drugs led to $1.68 trillion in cost savings between 2005 and 2014. The GPhA also encourages competition for biologics, for example, by creating policies that improve access to “generic” versions, properly called biosimilars, stating: “These policies would provide American consumers with more choices, greater access to medicines, and billions of dollars in increased savings.”

The RAND Corporation reviewed studies of cost savings estimates from the introduction of biosimilars in the U.S. over a 10 year period and found savings estimates up to $108 billion and a range of price reduction from 10 to 50%.

State laws on pharmacist substitution of biologic products

Because a biologic is fundamentally different from a chemically synthesized drug, state laws need to be updated in order to advance consumer access to biosimilar medicines. Since 2013, states have been attempting to clarify when and how a pharmacist can substitute a “biosimilar” for a biological product that has been prescribed by a health care provider.  As of May 31, 2016, 21 states have passed laws allowing pharmacists to substitute an interchangeable biologic product for a prescribed biologic under certain circumstances. (See map)

Interactive map

Exact language varies by state, however, there are a number of similar provisions, including:

• Interchangeability—In order to be substituted by a pharmacist, the FDA must have approved the biosimilar as “interchangeable.”
• Provider override of substitution—The prescribing provider may prevent a substitution, usually by indicating “do not substitute”, “dispense as written”, or “brand medically necessary”.
• Provider notification requirements—The prescribing provider must be notified of a substitution, typically within five days of dispensing. States may also require the patient or patient’s representative to be notified of the substitution or, in some cases, consent to the substitution.
• Link to FDA-approved substitutions—Many state biosimilar laws require the Board of Pharmacy or some other state entity to maintain a link to the website listing of FDA-approved substitutions.

Why do state laws need to change?

Generally speaking, pharmacist substitution is permitted — or, in some states, required — if: (1) the drugs are therapeutically equivalent, (2) the substituted drug is less expensive, and (3) the prescriber has not precluded substitution, for example, by writing brand medically necessary or dispense as written (DAW). Many state statutes explicitly cite the Orange Book[1] as the basis for automatic substitution, however, the Orange Book does not address biologic products. As such, some observers have commented that, “under current law in most states, automatically substituting a biosimilar for the reference product may be interpreted as being beyond the pharmacist’s scope of practice.”[2]

States that have passed laws allowing pharmacist substitutions of biologics have addressed this uncertainty by making clear that pharmacists may consider a biological product for substitution if it has been approved as “interchangeable” by the FDA.

This approach is squarely in line with the Biologics Price Competition and Innovation Act (BPCIA) of 2010, the federal law which establishes an approval pathway for biosimilars. The BPCIA is clear that an interchangeable biosimilar “may be substituted for the reference product without the intervention” of the prescribing health care provider.[3] “Biosimilars: Implications for Health-System Pharmacists” published in the American Journal of Health-System Pharmacy in 2013, reiterated “Only interchangeable biosimilars are substitutable by a pharmacist without the intervention of the prescriber.”[4]

As of May 31, 2016, two products have gained approval by the FDA as a biosimilar, but not yet interchangeable. Zarxio, a biosimilar to Amgen Inc.’s Neupogen (filgrastim) was approved March 6, 2015, and Inflectra, a biosimilar to Janssen Biotech, Inc.’s Remicade (infliximab), was approved April 5, 2016.

References:

[1] The United States Food and Drug Administration (FDA) publishes a list of drugs classified as being therapeutically equivalent in the Approved Drug Products with Therapeutic Equivalence Evaluations, otherwise known as the “Orange Book.”

[2] Li E, Hoffman JM. Implications of the FDA draft guidance on biosimilars for clinicians: what we know and don’t know. J Natl Compr Canc Netw. 2013; 11(4): 368-372.

[3] PHSA §351(i)(3), 42 U.S.C. § 262(i)(3).

[4] Lucio SD, Stevenson JG and Hoffman JM. Biosimilars: Implications for health-system pharmacists. Am J Health-Syst Pharm. 2013; 70:2004-2017.

About M2

M2 Health Care Consulting started in May of 2005. We celebrated our 10 year anniversary last year, and we are still asked, what does the “M2” stand for? It is a story we tell often, and to health policy wonks, it is at least somewhat amusing!

For most of my career, the federal agency that administered Medicare and Medicaid was called the Health Care Financing Administration (HCFA). In 2001, the U.S. Department of Health and Human Services (HHS) changed the name from HCFA to CMS. If you are in this line of work, you know that CMS stands for Centers for Medicare & Medicaid Services. You may have also have wondered why the acronym is not CMMS. Why only one “M”? And why does Medicare come before Medicaid? That isn’t even in alphabetical order.

While I admit I don’t know the real reason one “M” was dropped or why Medicare comes first (feel free to email me with the answer!), I do know, that state Medicaid programs are endlessly fascinating and I knew I could dedicate my work to understanding these programs and making them better.

The “M2” stands for the second M in CMS. We just thought if CMS wasn’t going to rename themselves CMMS, we could do our part to remind the health care policy world that there are two “Ms” that form the base of the U.S. health care system.

Insurers and Providers Clash As States Expand Medicaid Managed Care

More than a dozen governors are trying to contain Medicaid costs by requiring more people to enroll in managed care plans. With billions of dollars at stake, insurance companies, hospitals and doctors are fighting over money and control.

About half of the nation’s 50 million Medicaid recipients are in private managed care plans, which the states typically pay a set amount each month per patient. The other half has more freedom to choose where to go for medical care, with the Medicaid program paying a fee for each visit and procedure.

Medicaid is increasingly becoming a managed care program, a significant trend as the states prepare for a massive expansion required by the federal health care law. Beginning in 2014, an estimated 16 million more Americans are expected to qualify under the law’s expanded eligibility criteria.

Medicaid managed care plans are gearing up. UnitedHealthcare,(NYSE: UNH) the largest plan with about 3.4 million Medicaid recipients, announced this month it plans to add another 300,000 this year. While some patient advocates worry about the quality of managed care, the most powerful opposition to the states’ expansion plans this year is coming from hospitals, doctors and nursing homes.

Opposition by health care groups has held up plans in Maine and Louisiana to require Medicaid recipients to enroll in managed care plans. Elsewhere, in January, Mississippi became one of the latest states to institute managed care for Medicaid. But hospitals and doctors successfully lobbied to limit the program to 15 percent of Medicaid recipients and to end it in June 2012. The health industry also made sure managed care companies could not lower reimbursement rates to providers or reduce benefits to recipients. Those provisions left managed care companies little room to control costs. Medicaid managed care expansions are also being attempted in other states, including Texas, Michigan, Illinois, South Carolina and Florida.

Revenue Growth at Not-For-Profit Hospitals Lowest in a Decade

Not-for-profit rated hospitals showed the lowest revenue growth rate in more than a decade and reported flat patient admissions in 2010, a negative indicator for revenue growth in 2011, according to a Moody’s Investors Service report.

Entitled “Revenue Growth Lowest in More Than a Decade for Not-For-Profit Hospitals in 2010, According to Preliminary Median Data,” the report finds that “median revenue growth experienced a sharp decline from 6.5 percent in 2009 to 4.2 percent in 2010, the rating agency reported.”

“Management at not-for-profit rated hospitals reduced expense growth to a median of 4.4 percent, but Moody’s says more cuts in expenses will be difficult in the future as hospitals face pressure from all payers, leading to limited revenue growth. Balance sheets improved as median cash on hand increased to 164 days in 2010, from 150 days in 2009.”

Separately, Moody’s announced rating volatility slowed in the first quarter, according to a report entitled “U.S. Not-For-Profit Healthcare Quarterly Ratings Monitor: Rating Volatility Lessened in First Quarter 2011.” Eleven rated not-for-profit hospitals were downgraded or upgraded, the lowest quarterly total in more than 10 years. “Moody’s anticipates downgrades to continue outpacing upgrades throughout 2011 as hospitals continue struggling to achieve strong revenue growth due to mounting reimbursement pressures,” the article says.

Experts Weigh in on ACO Rule and Say – Take it Easy, HHS!

The proposed rule on accountable care organizations issued April 7, 2011, “requires ACOs to be capable of collecting, managing, using and reporting an enormous amount of clinical, quality and administrative data,” according to “perspectives” article written by former CMS Director, Bruce Merlin Fried.

“The health IT infrastructure required to accomplish this will be substantial (we’re not just talking about EHRs),” Fried explains. “While some ACO sponsors may be existing, integrated networks of physicians and providers with installed IT data management systems, others considering sponsorships of ACOs will be unaffiliated combinations of physicians, physician groups and community hospitals. They will not have the kind of data infrastructure that will be necessary to meet the requirements of the proposed rule.”

Also, “the capital required to acquire and install such infrastructure is likely to be beyond their reach. The lack of investment capital to allow emerging ACOs to obtain and install necessary health data systems will be a barrier to success. We hope the final ACO regulation or another CMS program will offer a solution to this challenge.”