February 19, 2025
Inflation Reduction Act may accelerate generic and biosimilar market entry, but questions remain over CMS guidance

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Last week, the Centers for Medicare and Medicaid Services announced a selection of the first 10 prescription drugs that will be subject to Medicare price negotiation under the Inflation Reduction Act. Clearly, four of the CMS drugs included in the first batch of 10 will face generic or biosimilar competition before or during 2026 when the “maximum fair price” comes into force. Another drug selected by CMS has been more than 25 years from its initial date of approval by the Food and Drug Administration.

Going forward, the IRA may actually change the incentives given to drug companies to pursue evergreen strategies, as having generic or biosimilar competition may make a drug exempt from selection for price negotiation. However, questions remain regarding what CMS guidance calls “meaningful” competition.

Although not explicitly stated in the IRA, lawmakers have expressed concern about some of the barriers to competition that the promoter drug companies have set up. These include strategies such as the patented “evergreen”. The term refers to the continued extension of patent rights on a specific product that prevents generic and biosimilar competition from entering the market.

In a recently released study Journal of the American Medical Association found that there was a 200% increase in patents filed by originator companies between 2000 and 2015, often involving relatively minor changes in dosage and formulation. Such patent “thickets” can delay generics and biosimilars from entering the market.

Of the 10 prescription drugs selected by CMS for price negotiations, Stelara (ustekinumab), Xarelto (rivaroxaban), Januvia (sitagliptin) and Entresto (a combination of sacubitril and valsartan) have biosimilar or generic competition pending early approval, though exact There is uncertainty about the timing of market entry. And then there’s Enbrel (etanercept), which is a special case. An Enbrel-referenced biosimilar, Arelzi (etanercept-SzS), was approved in 2016. But its US launch has been delayed to 2029 due to patent litigation. By the time the Enbrel-reference biosimilar is launched in the US, the original product will be almost ready. 30 years of exclusivity.

Notably, in addition to the maker of Enbrel, the makers of Stelara, Xarelto, and Entresto have also taken legal action in connection with preventing the potential launch of biosimilar or generic competitors.

Ambiguity in CMS Guidance

When selecting a drug for Medicare price negotiation, a small or large molecule must be at least seven or 11 years old, respectively, removed from its original FDA approval. But after that the CMS guidance—which governs IRAs—gets unclear.

Current guidance states that the availability and “truthful” marketing of a generic or biosimilar will exempt the original drug from selection for Medicare price negotiation. However, the determination of marketing on normative basis is unclear. It is not based on quantitative definition or numerical limits. Rather, CMS uses the phrase “the totality of the circumstances” to include an examination of unspecified use and sales data, an evaluation of whether the generic or biosimilar is “readily available for purchase,” and the existence of any agreements between the manufacturers of the brand and the generic. detection is included. A drug that may limit the availability of competitors. In turn, the CMS will evaluate whether “meaningful” competition exists.

The phrases “truth,” “totality of the circumstances” and “meaningful” are subject to interpretation.

The CMS guidance further exacerbates the problem of lack of clarity by introducing more ambiguous language when it states that originator manufacturers of biologics can seek a “delay” in selecting their drugs for interactions if there is a “high probability” of biosimilar market entry. possibility”. “within two years of the publication date of the selected drug list.”

To illustrate how problematic the ambiguity is, Stelara was last week selected for price negotiations, despite its high probability of entering the biosimilar market by January 2025, which is before the two-year deferment window expires. This begs the question why Stelara was chosen. Did the sponsor not apply for a deferment? Or, if an application was submitted, is it that maybe CMS wants to first make sure there will be “meaningful” competition. But that begs the question of whether that’s worthwhile and how much influence Stelara’s sponsor has on the biosimilar eclipse.

Is it meaningful enough when Janssen (the sponsor of Stelara) only allows biosimilar competition? Or does significance indicate a numerical threshold in terms of numbers of competitors or actual market share figures? The CMS guidance is silent on this.

In the cases of Xarelto and Januvia, generics won’t be available until some point in 2025 and 2026, respectively. This implies that it is very likely that the maximum fair prices of the two pharmaceuticals will apply for only one year, unless the issue of meaningful competition arises and CMS determines that this is not sufficient.

These problems are compounded by the CMS’s clear assumption that the power to influence generic or biosimilar intake is mostly with the original drug makers. It appears that CMS overlooks the important role of payers and pharmacy benefit managers because it is their formal decisions that influence the adoption of generics and biosimilars. In addition, sales of biosimilars depend on considerations such as physician and patient trust regarding the interchangeability of originators and biosimilar products. In most cases, influencing the use of generics and biosimilars requires multiple parties other than the original drug makers.

Branded drug companies fearful of net price erosion from CMS negotiations will face a calculus in which the pros and cons of pursuing litigation are weighed against being freed from Medicare price negotiations.

Companies may decide that seeking legal action to prevent competition is not appropriate. Thus, the threat of Medicare drug price negotiations could indirectly lead to generic and biosimilar competition in the short term.

But facilitating such decisions will require better clarity in CMS guidance around generic and biosimilar competition. This implies the use of clear language to avoid (possibly legal) conflicts around words such as “the totality of the circumstances,” “truth,” “meaningful,” and even “high probability.” Perhaps it would be better to adopt a more direct and simple language in this context.

For example, a branded drug may be exempt from price negotiation when it is known that a generic or biosimilar is on the market (or will be within two years in the case of a biosimilar) and exclusionary exemptions or contracts that prevent such competition Stops, there is no playing in it.

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