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Wednesday, August 17, 2016

Interchangeability – should science or economics prevail?

By Sarah Matheson, Partner, and Ric Morgan, Special Counsel

We are about to find out a little more about Australia's unique stance on interchangeability for biosimilars.  Later this week, the PBAC's consideration of Brenzys, MSD's biosimilar version of etanercept, currently marketed only by Pfizer as Enbrel will be made public, including whether it will be 'a-flagged'.

In our recently released discussion paper, Biologic medicines and biosimilars in the Australian landscape we raise this important issue and we have explored this further in a more detailed white paper Costs before Caution—Australia's unique approach to the interchangeability of biosimilars developed in support of our discussion paper.

A brief history of Australia's position


In Australia, there are two government arms responsible for pharmaceutical products – the TGA and the Pharmaceutical Benefits Advisory Committee (PBAC).  Until early 2015, it was thought that there was a relatively clear demarcation over biosimilars: the TGA assessed safety and efficacy and the PBAC evaluated cost effectiveness.

However, as part of the consideration of Basaglar, Eli Lilly's insulin glargine product, the PBAC made a recommendation for Basaglar to be 'a-flagged', with Sanofi's Lantus. This would allow pharmacist to dispense Basaglar where a patient presented a prescription for Lantus. This was contrary to the TGA's advice which required that this only occur "under the supervision of the prescribing medical practitioner". Its also seems that Eli Lilly did not seek to have the products 'a-flagged' and provided no data in support of interchangeability. Eli Lilly subsequently withdrew its product from the reimbursement scheme.

The PBAC has since made decisions in relation to two other biologic medicines. It decided that Inflectra, Pfizer's version of infliximab, should be a-flagged with Janssen's Remicade, the reference product. In contrast, Bemfola, Finox Biotech's version of follitropin alfa, was not recommended to be a-flagged with Merck's Gonal-f.

While there is no clear pattern, etanercept, like insulin glargine, is dispensed in pharmacy for use by patients in the home setting. In such circumstances it is not surprising that there are concerns that 'a-flagging' of the biosimilar versions of etanercept will facilitate multiple switching, or true interchangeability to happen in practice. Such practices are likely to be less concerning where the products are administered in a more 'medical' environment as is the case with infliximab.

It appears that there is a policy approach in Australia of prioritising economics over the science in assessing interchangeability. The PBAC's Basaglar decision and the policy approach it released at that time was quickly entrenched by legislative changes which assigned the burden of assessing interchangeability to the PBAC. This plainly prioritises the arbiter of cost effectiveness over the assessment of efficacy and safety undertaken by the TGA. Despite this, the PBAC continues to assert that it considers the safety and efficacy of biosimilars to be outside its remit. However, by making decisions about interchangeability, the PBAC is making decisions about safety and efficacy.

Is Australia's position problematic?


The unstated policy objective coupled with the decision made by the PBAC to date leaves the interchangeability of biosimilars in a very unsatisfactory position.


  • Given the clear safety and efficacy issues raised by the lack of identity between biologics and their biosimilars, charging the PBAC with sole responsibility for advising the Minister is a mystifying choice due to the PBAC's focus on cost effectiveness.
  • The higher risk profile should necessitate that the Minister always be required to seek advice from the TGA, or perhaps both the TGA and the PBAC, before making a decision regarding interchangeability. Currently, the Minister is not required to take advice and only the PBAC is empowered to give that advice. 
  • It is not appropriate that an originator biological should be regarded as interchangeable with a biosimilar merely because the biosimilar is also effective or not shown to be more toxic. With the TGA silent on the subject, the PBAC's position has the potential to shape the Australian pharmaceutical industry over the next decade as the new wave of biologic medicines are opened up to competition.


Australia's focus appears to be directed by policies that are driven by cost rather than safety by a government co-opting the generic style of substitutability to drive cost savings. This is because currently, cost savings are baked into the PBS scheme through ongoing price competition between interchangeable products. First, (as for generics) there is a 16% price cut on the first entry of a biosimilar, followed by price disclosure based price cuts thereafter. It is this second part that depends on in-pharmacy price competition that can only be realised where 'a-flagging', or true interchangeability, between biosimilar products is allowed.

In those circumstances, there is an incentive to the payer – the government – to prioritise interchangeability. In its desire to facilitate the introduction of biosimilars into the market, the Government's default position now seems to presume interchangeability.

Whether these policies will actually support a sustainable market for biologic medicines is questionable. Eli Lilly's withdrawal of Basaglar following the PBAC's decision to treat it as interchangeable suggests they will not. The implementation of a model of brand competition developed for generics may not actually deliver the greatest cost savings, especially where there is significant hospital use, use for a limited course of treatment, or where clinicians are not confident in the assessment of interchangeability. The sustained entry of biosimilars and the cost benefits to payers is likely to require a more nuanced approach – one that examines how any particular biosimilar will be used in the market and how the greatest long-term cost benefits can be achieved for that biologic medicine.

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