Turning Tides: is 70% the new 30% biosimilar discount?

How many times have we heard that biosimilars are expected to be priced at a 20-40% discount to their originators? This is a hypothesis that until recently appeared to hold true based on the examples of early biosimilar launches for ESAs and G-CSFs in Europe. Many predicted that the additional manufacturing complexities associated with monoclonal antibodies would further help maintain higher pricing for these biosimilars. However, given the situation in Norway, the tides may be shifting on this paradigm.

As expected, Orion Oyj, which licenses and sells an infliximab biosimilar (REMSIMA) in Norway from South Korea’s Celltrion, entered the market with a 39% list price discount vs. the originator, REMICADE. Many would expect that magnitude of discount to begin to migrate share to the biosimilar version, but in almost a year, only 6% of the originator REMICADE share had shifted to REMSIMA. Faced with increasing biosimilar competition from Hospira and a significant market opportunity, Orion Oyj decreased the RESIMA list price to a discount of 69% – which allowed them to capture approximately 50% of the market. Although a 40% discount wasn’t sufficient to migrate the market from the strong position REMICADE held, the 70% discount was hard for physicians and payers to ignore.

Biosimilars may have been able to maintain a 20-40% discount to the originator brand in a market without payer orchestrated incentives, but as local stakeholders engage in cost savings techniques, this discount magnitude may no longer be sufficient. Throughout Europe the implementation of win-all tenders has helped drive prices lower and certainly helped in the case of infliximab in Norway. We expect that as more competition from well-respected manufacturers enter these markets, tenders will become a more significant avenue to force competition and decrease prices.

Although tenders are likely to propagate through various European and emerging markets, they are unlikely to be a management driver for biosimilars in the USA. However, this will not necessarily mean that the USA pricing will align with the predicted biosimilar discounts. In fact, depending on the molecule at hand, current contracts in place with various large PBMs or MCOs will likely force biosimilar manufacturers into steep discounts if they are interested in capturing a significant percent of the market’s share; without this steep discounting, the payer incentive to migrate the share will be unlikely to exist for brands like RITUXAN, HUMIRA and ENBREL.

The increasing pressures on healthcare systems throughout the world and the hope that biosimilars may help alleviate payer budgets will push local payers to seek creative avenues to ensure that they are providing patients with effective and cost-appropriate treatments. It is probably fair to say that Norway’s situation with REMSIMA is the first of many to come – we will have to watch closely how each originator manufacturer seeks to prevent the price erosion that is likely in the horizon.