ViewPoints: As lawsuit against Johnson & Johnson is filed, FirstWord's new biosimilar report sheds light on Pfizer's Inflectra challenges in US market

It would appear that biosimilars are not reaching US patients. As Bloomberg reported earlier this week, despite approval of seven biosimilars by the FDA to date, only three of these have reached the market; launch of the other four is being delayed by litigation relating to intellectual property.

Now Pfizer has called foul against Johnson & Johnson's "anticompetitive" practices, which it says are working to exclude access to its cheaper biosimilar Remicade (infliximab) product Inflectra. The often discussed 'rebate trap' – viewed as a potentially significant barrier to biosimilar utilisation – appears to be in full effect.

Pfizer has responded by filing a lawsuit against its Big Pharma rival, but has been discussing the challenges faced in commercialising Inflectra in the US market for some time, including with FirstWord for a new report that maps critical uncertainties and the impact of future events in the US biosimilars market…  

To put respective shares of the infliximab market for Remicade and Inflectra into perspective, it is first worth looking at the cost of these two products.

Pfizer has secured wholesale distribution of Inflectra and its coverage for Medicaid and Medicare patients as a Part B-covered drug. In comparison to Remicade, Inflectra entered at a 15-percent list price discount as of January 1, which quickly jumped to 19 percent when Johnson & Johnson raised its list price for Remicade.

These concessions make Inflectra less expensive on a per-unit basis than Remicade. More specifically, Remicade's wholesale acquisition cost (WAC) increased 4.9 percent from $1113.27 in September 2016 to $1167.82 in February 2017. In addition, Remicade's Average Selling Price (ASP) – the US government-sponsored measure of the overall price for a drug product net of discounts, rebates and other price concessions – also increased 3.5 percent from $781.81 in October 2016 to $808.87 in July 2017. In contrast, Inflectra's ASP is $753.4 (approximately 7 percent less than Remicade's ASP). Nonetheless, Inflectra has achieved only 2.3 percent of total infliximab sales through June 2017, despite the fact that Johnson & Johnson's ASP for the drug actually increased after Inflectra was introduced, and Pfizer's ASP for Inflectra has been lower than Remicade's; indeed, Pfizer claims Inflectra's ASP is now more than 10 percent less than Remicade's and in some cases discounts of up to 40 percent off the WAC price have been offered.

While some have speculated that Pfizer could have achieved greater sales if it simply cut prices even more, or that the entry of a second Remicade biosimilar could 'tip' the market toward greater biosimilar uptake through a price war, there is a more fundamental issue that warrants initial scrutiny regarding whether Johnson & Johnson is blocking competition for biosimilars through exclusionary contracts designed to maintain its sales of infliximab.

As Cheryl Schwartz, general manager at Pfizer biosimilars US, told FirstWord earlier this year "it has become increasingly important to also address a more pressing barrier related to commercial payer coverage. Currently, biosimilar uptake in the US is being limited given the ability of originator companies to leverage dominant market positions to block providers and patients from gaining access to biosimilars. This is in contrast to Medicare, where biosimilar coverage has been strong." Indeed, Johnson & Johnson has acknowledged that it has been engaging with physicians to ensure Remicade is given preferred patient access and commercial coverage. "We are also working to ensure physicians who want to prescribe Remicade as the first choice have access to do so," said a company representative of Johnson & Johnson, adding "of note, 74 percent of commercial medical lives are covered by plans that prefer Remicade."

The core features of Johnson & Johnson's exclusionary contract strategy involve the company using its power over existing, stabilised Remicade patients to establish what has been called a 'rebate trap' and thus obtain exclusive contracts with commercial payers and providers. These contracts secure commitments from insurers to reimburse only Remicade and no other infliximab biosimilar, or alternatively, to require failure on Remicade before using Inflectra. Given that Inflectra is a biosimilar of Remicade, there is no medically sound reason to use Inflectra after failure on Remicade. Thus, the result of these exclusionary contracts is to effectively prevent access to Inflectra and block hospitals and clinics from purchasing Inflectra, despite its lower pricing.

Bernstein analysts recently summarised Johnson & Johnson's effort to block biosimilar competition to Remicade, noting that the company has: (1) "negotiated with [insurers]" and set up "exclusive contracts...in nearly half the market," thereby making providers unwilling to purchase Inflectra; (2) "offered up deeper discounts to large independent infusion centres (i.e. major providers), which are more economically sensitive"; and, (3) "bundled several drugs and medical devices [together] for larger hospitals." Bernstein's Ronny Gal also noted that a key to Johnson & Johnson's strategy was the "long 'tail' of [patients] remaining on the brand,"—the incontestable demand—which gives Johnson & Johnson leverage to extract commitments from insurers not to cover Inflectra. Another industry observer, commenting on the Bernstein survey, summarised Johnson & Johnson's conduct to FirstWord as follows:

"[T]here has been little coverage for Inflectra, according to [Bernstein]. [Bernstein] queried the 40 largest payers – based on the number of beneficiaries covered – and found the Pfizer drug is either not covered or there is a requirement to first try Remicade for 36 percent of the people who are covered. That's a sizable number. Moreover, Inflectra is listed as the preferred treatment for only a smidgen – just 2 percent. These sorts of restrictions, of course, force hospitals and clinics to buy Remicade. But [Johnson & Johnson] has had yet another advantage, an ability and willingness to bundle different medicines as part of a package deal. By offering discounts and rebates for several drugs, [Johnson & Johnson] can secure contracts and crowd out rivals. And discounts are also appealing to physicians who run their own infusion centres."

Up until now, Johnson & Johnson's commercial strategy to thwart biosimilar competition and retain majority market share in the US has been more successful than expected. Earlier in the year, Johnson & Johnson predicted a modest impact of only 10 percent to 15 percent erosion in the US market in the first year by biosimilars. However, in the second quarter of 2017, Remicade's sales were performing better than anticipated, with sales down by about 5 percent after adjusting for rebates.

In contrast, Inflectra’s market penetration is limited at just 2.3 percent of the US infliximab market. With the exception of closed systems like Kaiser (where the insurer and the provider are the same entity), almost no major commercial health insurer currently provides unrestricted coverage for Inflectra on a national plan, despite some coverage on regional and government plans. In addition to the payer-level contracts in nearly half the market noted above, Johnson & Johnson has also established volume-based provider discounts, and product bundling for larger hospitals, thus ensuring that a broad preference for Remicade remains.

In the generic market, research has shown that the entry of a second generic competitor lowers the average generic price to nearly half of the branded drug. As the number of generic competitors increases, the prices continue to fall, albeit more slowly. This is concordant with basic economics, which predict that prices would fall in response to a new entrant offering significant price discounts due to an increase in market competition. Remarkably, the opposite has occurred in the case between Remicade and Inflectra.

Since Inflectra entered the market, Johnson & Johnson has raised the price of Remicade (both its WAC and its ASP have increased) without losing any substantial volume or share of sales. This increase in ASP has resulted in the government spending more in reimbursement each time Remicade is used than prior to the launch of Inflectra. In addition, Johnson & Johnson is reportedly bundling Remicade with other products in its portfolio (e.g. Simponi), making rebates on such products contingent on the above-noted contractual exclusivity restrictions. Such multi-product bundling arrangements further increase the financial penalty on insurers for not accepting an exclusive contract with Johnson & Johnson, and make the possibility of price competition from Inflectra (or another biosimilar) even more challenging.

Currently, Merck & Co. and Samsung's Renflexis is being priced at a 35 percent discount to Remicade's WAC to compete against Remicade and Inflectra. Thus, Renflexis' WAC is similar to the ASP for Inflectra. However, price alone is insufficient to greatly impact sales and market share of Remicade, as shown in Inflectra capturing less than 3 percent of Remicade’s sales venue, despite a lower price (ASP) – ViewPoints: Merck & Co. bears its biosimilar teeth with Renflexis, but is greater discounting necessary?

Rather, Johnson & Johnson's restrictive contracts may be the more formidable hurdle to patient access of biosimilars in the US. This underscores the urgent need for further payer, provider and patient engagement to create reimbursement policies and incentives that prevent 'rebate traps' by originator companies that discourage fair competition amongst biologics and biosimilars.

For more information about our latest report The Future of Biosimilars in the USA: Mapping critical uncertainties and the impact of future events, click here

To read more ViewPoints articles, click here.