®
PUBLIC POLICY INSTITUTE

Fact Sheet

State Biosimilar Substitution Laws
Could Reduce Consumer Access and
Savings

Leigh Purvis and James McSpadden
AARP Public Policy institute

Biosimilar drugs are less expensive but equally safe and effective substitutes for expensive biologic
drugs. Yet biosimilars that qualify for automatic substitution often have to meet more stringent state
substitution requirements than traditional generic drugs. This differential treatment in state laws
could contribute to lingering concerns about biosimilars and unnecessarily reduce consumer access to

and savings from these increasingly important products.

Biologic drugs are made from living organisms and are used to treat conditions that commonly
affect older populations, such as cancer, multiple sclerosis, and rheumatoid arthritis. Biologics
differ from traditional, chemical-based prescription drugs in many ways, but one of the most
obvious differences is price. Many of the most widely used biologics have annual prices that
exceed $30,000 per year-'!

Patients facing high prescription drug costs often see substantial savings when they switch from
a brand-name drug to a generic equivalent; however, this option is not yet widely available for
biologic drugs. It wasn't until 2010 that the US Food and Drug Administration (FDA) received
authority to approve biosimilars, which are highly similar to and have no clinically meaningful
differences from their originator biologic equivalents. Twenty-two biosimilars are currently on
the market,' and FDA has designated only one of the marketed products as interchangeable-
meaning it has met additional requirements and can be substituted by a pharmacist without
consulting the prescriber.*

Despite a relatively slow start, the biosimilar market is expected to grow rapidly over the next
decade.' In the United States, spending on biologics is now growing more than 10 times faster
than spending on traditional drugs; this trend will likely continue as biologics capture more of
the prescription drug market. Meanwhile, products representing over half of current biologic
spending are either facing or could soon face biosimilar competition.'

These trends indicate that consumers and payers could soon see substantial savings from increased
utilization of less expensive biosimilars. However, even with a strong body of research that shows
these drugs to be safe and effective, state biosimilar substitution laws may be standing in the way.

Given the potential implications for consumers and overall health care spending, AARP's
Public Policy Institute recently analyzed drug substitution laws in all 50 states and the District
OCTOBER 2022

of Columbia to identify specific differences
in state requirements for generic and
interchangeable biosimilar substitution.

Considerable variation in state drug
substitution laws

Over the past decade, every US state and

the District of Columbia passed legislation
regulating pharmacist substitution of biologics
with interchangeable biosimilars. Often these
laws were controversial, as they typically
included additional requirements that did not
apply to traditional generic substitution.*

Supporters of additional requirements for
interchangeable biosimilar substitution-which
included brand-name biologic manufacturers-
contended that increased regulation

would protect both patient safety and the
prescriber-patient relationship as well as
reduce the possibility of adverse drug events.°
Many of these arguments mirror concerns
previously raised about traditional generic
drug substitution that ultimately proved
groundless.'°

In contrast, generic drug manufacturers,
health insurers, and some consumer

groups argued that some drug substitution
requirements can create barriers that reduce
generic substitution and that additional
restrictions could limit biosimilar utilization
and savings." The FDA and the US Federal
Trade Commission echoed these concerns."

Despite extensive clinical evidence that
biosimilars are safe and effective-and that
they can be safely switched with their brand-
name biologic counterparts*-most state drug
substitution laws continue to include more
stringent requirements for interchangeable
biosimilars.

Differential treatment of biosimilar
substitution

Our analysis found that state drug substitution
laws differentiate between generic and
interchangeable biosimilar drugs in a

variety of ways (see appendix). For example,
47 states and the District of Columbia require
pharmacists to notify the prescriber when
they substitute an interchangeable biosimilar.
Pharmacists typically must complete this
communication within a specific timeframe
(e.g., five business days) and via specific
channels €@.g., electronic prescribing system,
telephone, or facsimile). Only 2 states have
comparable requirements for traditional
generic substitution.

Similarly, many state drug substitution laws
also require pharmacists to notify or obtain
consent from patients prior to substitution,
which can lower generic drug utilization.»
However, while 29 states and the District

of Columbia require patient notification for
traditional generic drugs, 40 states and the
District of Columbia require such notification
for interchangeable biosimilars. Thus, patients
in 11 states will only receive a notification,
potentially for the first time, when their
pharmacist substitutes an interchangeable
biosimilar for its brand-name counterpart.

Some pharmacists also face unique record-
keeping requirements when they substitute
an interchangeable biosimilar. Thirteen
states require pharmacists to keep written or
electronic records of each interchangeable
biosimilar substitution or each biological
product dispensed for a defined period (.g.,
at least two years). There are no comparable
state requirements for traditional generic
substitution.

Yet another difference stems from mandatory
substitution laws that require pharmacists to
dispense a generic drug when one is available.
Although 18 state laws include mandatory
generic substitution, only 12 states require
substitution for interchangeable biosimilars,
giving pharmacists more discretion in the
interchangeable biosimilar substitution
process.
OCTOBER 2022

Benefits of updating state biosimilar
substitution laws

Less expensive generic drugs are associated
with improved adherence and health
outcomes," and pharmacy-level generic
substitution is a known driver of generic
uptake and price competition.* However,
the more stringent requirements for
interchangeable biosimilar substitution
could prevent biosimilars from having

a similar impact. Different patient and
provider notification requirements could
contribute to lingering patient and health
care provider concerns about biosimilars
and interchangeable biosimilar substitution®
as well as reduce uptake,"° particularly
since patient4 and pharmacist awareness
of biosimilars remains low." In addition,
potentially onerous communication and
documentation requirements could reduce
pharmacist willingness to substitute
interchangeable biosimilars for their brand-
name counterparts."

State interchangeable biosimilar substitution
requirements can also help improve patient

access. Consumers often face high cost-
sharing for brand-name biologics, particularly
if their insurer requires them to pay a
percentage of the drug's price instead of a
flat copayment." Like generic drugs, lower-
priced interchangeable biosimilars could

help reduce these out-of-pocket costs and,

in so doing, improve patient adherence and
health outcomes" as well as reduce overall
health care spending."* The biosimilar market
will be unable to provide such benefits if
interchangeable biosimilar substitution is
unnecessarily constrained.

Between the rapid rise in the number of
biologic drugs and the growing use of products
already on the market, biologics are becoming
an increasingly common treatment option.
Given their substantial costs for patients and
government programs, it is critical to ensure
that the biosimilar market is competitive

and sustainable. As more interchangeable
biosimilars begin to enter the market, one
critical aspect of this work will be updating
state drug substitution laws to ensure that
patients have appropriate access to these
important products.
OCTOBER 2022

 

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1 Victor L. Van De Wiele et al., "The Characteristics of Patents Impacting Availability of Biosimilars," Nature Biotechnology 40 (2022):
22-25, https://doi.org/10,1038/s41587-021-01170-5.

2 "Biosimilar and Interchangeable Products," US Food & Drug Administration, accessed August 1, 2022, https://www.fda.gov/drugs/
iosimilars/biosimilar-and-interchan -pr

3 IQVIA Institute, Biosimilars ir in the United States 2020-2024: Competition, Savings, and Sustainanitiy, September 2020,

 

5 David Bottom and Clare Davies, "Biosimilars to Continue Rapid Growth over the Next Decade," QV/A (blog), January 3, 2022,
https://www.iqvia.com/blogs/2021/12/biosimilars-to-continue-rapid-growth-over-the-next-decade.

6 IQVIA Institute, Biosimilars in the United States 2020-2024.
7 IQVIA Institute, Biosimilars in the United States 2020-2024.

 

8 Andrew Pollack, "Biotech Firms, Billions at Risk, Lobby States to Limit Generics, " New York Times, January 28, 2013,

 

10 For example, opponents of generic substitution raised concerns regarding the interchangeability of generic drugs and whether
generic drugs were safe. The FDA also criticized several brand-name drug manufacturers for their efforts to imply that generic
drugs are inferior. See Garth Boehm et al., "Development of the Generic Drug Industry in the US after the Hatch-Waxman Act of
1984," Acta Pharmaceutica Sinica B 3, no. 5 (2013): 297-311, https://doi.org/10.1016/j.apsb.2013.07.004; see also Kamal K. Midha and
Gordon McKay, "Bioequivalence; Its History, Practice, and Future," AAPS Journal 11, no. 4 (2009): 664-70, https://doi.org/10.1208/

11 Yan Song and Douglas Barthold, "The Effects of State-level Pharmacist Regulations on Generic Substitution of Prescription
Drugs," Health Economics 27, no. 11 (2018):1717-37, https://doi.org/10.1002/hec.3796.

12 Federal Trade Commission, "FTC, FDA Sign - Joint Statement Promoting Competition i in Markets for Biologics," February 3, 2020,

 

13 Nitzen Arad et al., Realizing the Benefits of Biosimilars: What the U.S. Can Learn from Europe - A Guide for U.S. Policymakers, April
2021, https://healthpolicy.duke.edu/sites/default/files/2021-04/Realizing%20the%20Benefits%200f%20Biosimilars.pdf.

 

14 Chana A. Sacks et al., "Assessment of Variation in State Regulation of Generic Drug and Interchangeable Biologic Substitutions,"

JAMA Internal Medicine 181, no.1 (2021): 16-22, https://doi.org/10.1001/jamainternmed.2020.3588.

15 Benjamin N. Rome, Ameet Sarpatwari, and Aaron S. Kesselheim, "State Laws and Generic Substitution in the Year after New
Generic Competition," Value Health S1098-3015, no. 22 (2022), https://doi.org/10.1016/j.jval.2022.03.012.

16 Notably, all state drug substitution laws include protections that require pharmacists to dispense a specific brand-name or biologic
drug if the prescriber indicates that substitution is not permitted.

17 Rome, Sarpatwari, and Kesselheim, "State Laws and Generic Substitution."

18 Patricia M. Danzon and Michael F. Furukawa, Cross-National Evidence on Generic Pharmaceuticals: Pharmacy vs. Physician-Driven

Markets, July 2011, https://www.nber.org/system/files/working_papers/w17226/w17226.pdf.

19 Allison Kolbe et al., "Physician Understanding and Willingness to Prescribe Biosimilars: Findings from a US National Survey,"

BioDrugs 35, no. 3 (2021): 363-72, https://doi,org/10,1007/s40259-021-00479-6; see also Isabelle Arnet et al., "Community

Pharmacists' Preparedness for Substituting Biologics and Dispensing Biosimilars - Lessons Learned from a Multinational Survey,"
Exploratory Research in Clinical and Social Pharmacy 4 (December 2021), https://doi.org/10.1016/j.rcsop.2021.100084.

20 Jennifer N. Howard et al., "Influencers of Generic Drug Utilization: A Systematic Review," Research in Social and Administrative

Pharmacy 14, no. 7 (2018): 619-27, https://doi.org/10.1016/j.sapharm.2017.08.001.

21 Ira Jacobs et al., "Patient Attitudes and Understanding about Biosimilars: An International Cross-Sectional Survey," Patient

Preference and Adherence 10 (2016): 937-48, https://doi.org/10.2147/PPA.S104891.
OCTOBER 2022

22 Tony Hagen, "Survey: US Pharmacists Have Homework to Do on Biosimilar Interchangeability," AJMC, October 23, 2021,

 

23 Aaron Kesselheim, "Lessons for Follow-On Biologics from Small Molecule Drugs," (presentation, FTC Follow-on Biologic Workshop,
Washington, DC, February 4, 2014).

24 Juliette Cubanski, Nolan Sroczynski, and Tricia Neuman, Medicare Part B Drugs: Cost Implications for Beneficiaries in Traditional

Medicare and Medicare Advantage, March 2022, https://www.kff.org/medicare/issue-brief/medicare-part-b-drugs-cost-

implications-for-beneficiaries-in-traditional-medicare-and-medicare-advantage/.

 

25 Ravi Gupta, Nilay D. Shah, and Joseph S. Ross, "Generic Drugs in the United States: Policies to Address Pricing and Competition,"
Clinical Pharmacological Therapy 105, no. 2 (2010): 329-37, https://doi.org/10.1002/cpt.1314.

26 Andrew Mulcahy et al., "Projected US Savings from Biosimilars, 2021-2025," The American Journal of Managed Care 28, no. 7 (2022):
329-35, https://doi.org/10.37765/ajmc.2022.88809.

Fact Sheet 1486901, October 2022

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