In this article, we examine the issues surrounding the regulation of biosimilar drugs in Australia, including pricing issues under the Pharmaceutical Benefits Scheme.

The 2007 Pharmaceutical Benefits Scheme (PBS) reforms introduced provisions into the National Health Act 1953 which treat the pricing of bioequivalent and biosimilar drugs, and its implications for the corresponding innovator drug, in essentially the same way. However, biosimilar drugs cannot be compared to bioequivalent drugs and, unlike bioequivalent drugs, may not be substitutable with the innovator drugs.  

What are biosimilar drugs?

Biosimilar drugs are biologic drugs that are similar, but not identical, to an innovator drug. They are generally much larger and more complex than small molecule (chemically synthesised) drugs. They are manufactured through biological processes that separate the active ingredient from crude cellular material, and subtle variations in the cell manufacturing process can confer significant changes in the product.

For example, glycosylation processes can impact safety and efficacy, as the glycosylation pattern can affect the biological activity, stability and pharmacokinetics of the product. For this reason, safety issues for biologics are a major concern. In 1998, minor changes to Johnson & Johnson’s recombinant erythropoietin drug Eprex resulted in loss of immunological tolerance in a small number of patients with chronic renal disease. The patients developed antibodies against erythropoietin (EPO), which neutralised the effects of the drug and endogenous EPO, and led to patients developing pure red cell aplasia, a condition which led to severe anaemia.

The regulation of biosimilar drugs

One of the major concerns with biosimilars has been that there is no specific regulatory approval process for these drugs. They are not considered to be ‘generic’ drugs and the regulatory approval processes for generic small molecule drugs is not appropriate for biosimilar drugs. The term “biosimilar” is not defined under legislation and its meaning is still poorly understood.

To address this problem, the EU introduced the concept of Similar Biological Medicinal Products (SBMPs) in Directive 2001/83 and in the European Medicines Agency (EMA) guidance CHMP/437/04. These documents determined, by definition, that similar biological medicinal products are not generic medicinal products and that because of the complexity of these products, the existing regulatory framework for generic products was not appropriate for SBMPs.  

In 2005, EMA issued a statement declaring that biosimilars are not generic drugs and that they should therefore be subject to different regulatory requirements. The EMA has developed a specific set of guidelines for the registration of biosimilar drugs, which include quality, non-clinical and clinical requirements. They also include guidelines for specific product classes and describe requirements for crossover trials against the innovator product, randomised clinical trials, safety monitoring and submission of a risk management plan. The TGA has adopted these guidelines for evaluating biosimilar products.  

The TGA is still considering its position with respect to the naming of SBMPs. Whether or not a biosimilar nonproprietary name will be different depends on whether detectable quality differences exist between it and the innovator product. This may result in different names being assigned to the same product in different markets (eg Sandoz/Novartis’ epoetin product is epoetin alpha in the EU and epoetin lambda in Australia). This may create a few headaches when it comes to gathering data for periodic safety update reports.  

PBS pricing of biosimilars

Substitutability is the main issue when it comes to considering the PBS pricing of biosimilar products. Use of a different non-proprietary name in some instances only serves to complicate the issue of substitutability.The Department of Health and Ageing1 currently proposes that SBMPs should not be permitted to carry an “a flag” (an indicator of bioequivalence and substitutability) on the PBS. It also proposes that a SBMP with the same non-proprietary name as the innovator product should be placed on the F2 formulary along with the innovator product, and would be subject to statutory price reductions and price disclosure requirements. There is no clear position, however, on how SBMPs which have a different non-proprietary name to the innovator will be priced and, particularly, whether a SBMP with a different non-proprietary name to the innovator would be listed on the F2 formulary, triggering a movement from F1 to F2 of the innovator drug.

This raises a number of issues in relation to the legislation, which currently provides that if a biosimilar or bioequivalent drug becomes PBS-listed, then it no longer satisfies the criteria for inclusion on the F1 formulary. The F1 formulary is intended for single-branded (on-patent) drugs which have no market competition. The F2 formulary is for multiple brand (off-patent) drugs which have significant market competition. It also includes all drugs that are in a therapeutic group as well as drugs which have multiple brands (some of which may have been in F1 but for the formation of the therapeutic group).

An innovator drug will normally be placed in the F1 formulary and its price based on the cost effectiveness of that drug relative to currently available therapy. The pricing of such a drug is, therefore, a value proposition.  

When the TGA approves the registration of a bioequivalent drug, it determines that the drug is substitutable for the innovator drug. In a market sense, therefore, the bioequivalent drug competes with the innovator drug for market share. The price of the bioequivalent drug and the innovator drug is, therefore, governed by market forces, such that the market sets the price. This substitutability, and market competition, is the basis for placement of the bioequivalent drug in the F2 formulary, and movement of the innovator drug from the F1 to F2 formulary.  

However, this is not the case for a biosimilar drug. The Pharmaceutical Benefits Branch has determined, at least for the time being, that biosimilar drugs are not substitutable with the innovator drug, regardless of whether or not the non-proprietary name is the same. This means that the PBS listings for the innovator drug and biosimilar drug will not include an “a flag” which will permit substitution at the pharmacy level. Effectively, this removes the market competition which would apply in relation to two drugs that are substitutable. This being the case, if a biosimilar drug is PBS listed but is not substitutable for the innovator drug, can PBS listing of the biosimilar drug on the F2 formulary and movement of the innovator drug from F1 to F2 be justified? The inability to substitute a biosimilar drug with the innovator drug indicates that a different pricing approach in relation to these drugs to that which is applied to bioequivalent drugs is required.