Biosimilars have obviously hurt Roche, so much so that the Swiss pharma is now trying to compete on prices by offering up discounts to doctors.
That’s the message Bernstein analyst Ronny Gal gleaned from perusing average sales prices published by the Centers for Medicare and Medicaid Services. This buy-and-bill market constitutes about 30% of U.S. pharma.
Roche previously resisted matching discounts offered by biosimilars to its three oncology megablockbuster trio—Herceptin, Rituxan and Avastin—but it’s now following them down that price-cut road, according to Gal.
In the buy-and-bill model, healthcare providers first purchase the products and then submit claims for reimbursement. In the CMS system, the drugs are reimbursed at a rate of the average sales price (ASP)—which reflects the “true” commercial price in the previous cycle of six months—plus a percentage. An additional discount off the ASP gives physicians a higher margin and more incentive to use a drug.
Because ASP is recalculated every six months, drugmakers need to continue offering additional discounts to keep clients happy. So right now, Gal’s seeing a downward trajectory of 10% price cuts per year.
But those follow-up discounts may grow when new entrants join. Pfizer, with its Ritxuan biosimilar Ruxience, offered up a whopping 83% discount in a recent national contract with the Department of Veterans Affairs while a newly negotiated price for a Herceptin biosim marked a 68% discount, Gal noted.
“It seems the late-entrant biosimilar players are seeing the increasing competition and are willing to accept lower price[s] to ensure commercial viability,” Gal wrote in a Wednesday note to clients.
Roche clearly feels the peer pressure as physicians may opt for copycats to increase their own profitability. In the third quarter, U.S. biosimilars together ate away CHF 2.68 billion ($3.02 billion) from Roche’s sales compared with the same time last year. Rituxan sales were down 38%, Avastin dropped 34%, and Herceptin’s haul marked an alarming 43% decrease.
During a conference call with investors, Roche pharma chief Bill Anderson acknowledged that the impact was “at the high end” of management’s projections, which they'd already dialed up after totting up the initial effect of biosims on its three meds at the beginning of 2020.
Gal noted Roche has started offering bigger price cuts for Herceptin and Avastin than it is for Rituxan. Amgen and collaborator Allergan have biosimilars to Avastin and Herceptin, which already faces five knockoff versions on the U.S. market. Pfizer’s selling biosimilars to all three drugs, while Teva and partner Celltrion launched Rituxan copy Truxima last year.
Amgen has been a more effective competitor than Teva, Gal noted, proposing an explanation for Roche’s narrower discount on Rituxan compared with the other two drugs.
Roche’s absolute prices are still much higher than biosim stickers, but in the pay-and-bill market, it’s that difference between ASP or private reimbursement and the price doctors pay—that counts. There, Roche’s discounts are “relevant,” even though biosimilars are still offering sweeter deals, Gal noted.
For Herceptin, biosimilar discounts are generally better than Roche’s, except for Merck’s Ontruzant, according to Gal. For Avastin, Amgen’s Mvasi looks most enticing, while Roche is almost on par with Pfizer. In the Rituxan market, Teva’s ASP pricing is now trending flat, and the Pfizer product’s margin looks better.