Summary
Biologics are often used to treat a range of life-threatening and debilitating conditions such as cancers, autoimmune diseases, and kidney diseases. They are made from living cells, structurally complex, and most often handled and administered to patients via IV infusion or injection by a health care professional in a hospital outpatient department (HOPD) or physician office (PO).
The original biologic, known as the innovator biologic, sometimes has substitutes, which are known as biosimilars. Biosimilars are exactly as their name implies: highly similar versions of the medicine with no clinically meaningful difference in effectiveness or safety from the innovator biologic. In recent years, a robust biosimilar marketplace has emerged, driving substantial savings for patients, employers, and insurers. As of February 2023, there are 29 biosimilars on the market competing against 11 innovator biologics.
Competition in the evolving market suggests innovator biologics and biosimilars both are competing on price to retain or gain market share. However, as HOPDs continue to mark up the price of biologics — and at rates that are higher and faster than those for biosimilars — and consolidation drives care away from POs into HOPDs, employers will continue to see costs go up, and the savings potential from biosimilars may not be fully realized.
In this Issue Brief, we focus on waste caused by pricing failure related to the cost of biosimilars. We conduct an analysis of site-of-treatment price differentials for innovator biologics and biosimilars. Specifically, we examine whether the potential cost savings from biosimilars is impacted by whether patients seek care from POs or higher cost HOPDs, as the trend towards HOPDs might be impacting potential savings.
Key Findings:
- Use of biosimilars among individuals with employment-based health benefits in the United States is growing as more biosimilars enter the market. Among the nine innovator biologics with available biosimilars as of October 2022, most of the biosimilars were launched in the United States in 2019 and 2020.
- With the exception of biosimilars for Neupogen, the market share for the innovator biologics was between 65 percent and 87 percent in 2020.
- HOPDs were sometimes more likely and sometimes less likely than POs to use innovator biologics over biosimilars. HOPDs were more likely than POs to use Neupogen, Herceptin, and Rituxan over their biosimilars. However, POs were more likely than HOPDs to use Remicade and Avastin. HOPDs and POs were about equally likely to use Neulasta and Epogen/Procrit.
- For all seven innovator biologics examined, allowed charges were higher in HOPDs than in POs. HOPD markups on innovator biologics are roughly doubling costs for employers and minimizing savings that could be achieved through biosimilar competition. Allowed charges were about double in 2019, averaging 98 percent higher. In 2020, allowed charges were more than twice as high in HOPDs, averaging 121 percent.
- In 2020, the HOPD markup ranged from 75 percent to 183 percent. The HOPD markup increased between 2019 and 2020 for all innovator biologics examined.
- Allowed charges for biosimilars were higher in HOPDs than in POs. However, the markups for biosimilars were lower than the markups for innovator biologics. Biosimilar markups in HOPDs averaged 87 percent in 2019 and 101 percent in 2020. In 2022, HOPD markups ranged from 59 percent to 141 percent. The HOPD markup increased for 7 of the 9 biosimilars examined.