Express Scripts and PCMA Follow-On Biologics Studies Are Based on Flawed Assumptions That Undermine Their Credibility

BIO Analysis Raises Serious Concerns Over Two Cost Savings Studies

BIO Analysis Raises Serious Concerns Over Two Cost Savings Studies

WASHINGTON, D.C. (February 22, 2007) -- Two recent studies examining potential savings in health care costs resulting from the establishment of a pathway for regulatory approval for follow-on biologics contain significant flaws and assumptions that call into serious doubt their validity, said the Biotechnology Industry Organization (BIO) today in an analysis of two separate studies released by the Pharmaceutical Care Management Association (PCMA) and by Express Scripts.

“As a result of numerous flawed assumptions, and the lack of any credible evidence to support these alleged savings, we believe these studies should be rejected as unscientific and unreliable,” stated BIO President and CEO Jim Greenwood.

“This debate should be focused on and driven by credible science, fact-based studies and patient safety. These studies fail to meet these standards. They cannot be relied upon in lieu of a more rigorous analysis,” stated Greenwood. “Congress should recognize these flaws and misleading assumptions and reject these studies as it evaluates proposals regarding follow-on biologics.”

The BIO analysis details nine serious flaws in the PCMA and Express Scripts that call into serious doubt the validity of their claimed savings. These flaws include:

• Assumptions about patent expirations that are inconsistent with credible analyst reports seriously call into question more than $40 billion of the alleged savings cited by the Express Scripts study;
• Calculation errors in the PCMA study result in an overestimate of savings of 40 percent, even taking their other assumptions as correct;
• Internally inconsistent allegations of interchangeability in the Express Scripts study call into question an additional $13.8 billion in alleged potential savings;
• Presuming that a pathway under one law would generate savings for products approved under another law calls into question over $17 billion in additional alleged savings in the Express Scripts study;
• Market penetration rates for follow-on biologics incorrectly modeled on generic drug experience are inconsistent with credible published analyses;
• Calculations based on determinations of interchangeability that include presumption of savings beginning in 2007 are unsupported in both studies.

“No credible analysis of follow-on biologics suggests that we will see anything close to the savings we’ve seen from generic drugs, nor any savings close to the flawed estimates claimed in these studies,” stated Ted Buckley, Ph.D, BIO’s Director of Economic Policy. “As leading health economists have pointed out, the traditional generic drug business model is simply inapplicable when dealing with these complex biological products.”

BIO’s analysis details flaws in the PCMA and Express Scripts studies regarding claims of immediate savings from follow-on biologics. The assumption made in both studies that follow-on products will be promptly rated as interchangeable by the FDA and that as a result market substitution will occur rapidly ignores existing regulatory, scientific and market experience.

In fact, as noted in BIO’s analysis, the U.S. Food and Drug Administration (FDA) has not determined how interchangeability can be established for complex proteins. FDA has stated that, “Different large protein products, with similar molecular composition may behave differently in people and substitution of one for another may result in serious health outcomes.” According to the European Medicines Agency, “[d]ue to the complexity of biological/biotechnology-derived products the generic approach is scientifically not appropriate for these products.”

The faulty assumption of interchangeability likely results in a significant overestimation of savings, as products not designated as interchangeable would very likely experience slower adoption rates. These differences do not appear to be taken into consideration in either the PCMA or the Express Scripts studies.

BIO’s analysis also finds that both studies are based on dubious claims regarding patent expiration timelines leading to significant overestimates of savings. The Express Scripts report acknowledges that “additional patents have been granted, which may extend the protection of Procrit and Epogen,” but then goes on to make the explicit assumption that, ‘This model assumes that these patents would not be a barrier to biogeneric entry in this therapeutic area.” Using Express Scripts’ own estimates, reliance on this unexplained assumption accounts for more than half of their total projected savings.

Furthermore, both studies also implausibly assume that the current market share of the biologics will not evolve over time, despite the fact that this has not been borne out by experience. “One of the basic facts of a dynamic marketplace is that products are replaced by newer, more innovative products,” stated Buckley.

Finally, the PCMA study assumes that for every biologic that comes off patent there will be an associated follow-on product. There is no credible evidence to suggest that it is scientifically possible to develop a follow-on for every biologic that is currently on the market. Further, many biologics have a limited market, and therefore, it likely will be economically less attractive for companies to pursue manufacturing of follow-ons for many of these products.

“Overall, we find that these studies contain claims of potential savings based on a seriously flawed set of assumptions that defy current experience and lack credible evidence,” concluded Greenwood. “Congress should move deliberately as it examines proposals to develop a pathway for follow-on biologics.”

The full BIO analysis can be found at http://www.bio.org/healthcare/followon/20070222.pdf .