The market-based price for Dupixent is worth it for COPD

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Our Center for Pharmacoeconomics (CPE) Exclusive suggests Dupixent’s societal benefits for COPD are expected to outweigh its cost even at US market-based pricing over the exclusivity period. 

Our most recent CPE Exclusive evaluates the societal impact of dupilumab for chronic obstructive pulmonary disease (COPD). On September 27^th, 2024, the U.S. Food and Drug Administration approved dupilumab (Dupixent®, Regeneron and Sanofi) for adults with inadequately controlled COPD with an eosinophilic phenotype. Dupixent was initially approved in 2017 for atopic dermatitis and has received subsequent approvals for asthma, chronic rhinosinusitis, eosinophilic esophagitis, prurigo nodularis, and now COPD. Dupixent is the first biologic treatment option for patients living with COPD. 

As compared to standard triple therapy alone, Dupixent has been shown to reduce exacerbations, improve lung function, and increase quality of life when added on to standard triple therapy. Our model suggests that these clinical benefits can translate to an average 10-month life extension, 4% improvement in quality of life, 1,555 more hours of productivity, 40 fewer caregiving hours, and $6,000 fewer non-intervention healthcare costs per person treated. Based on our societal impact analysis, we think Dupixent could have a positive impact on all 24 value elements.

Our generalized cost-effectiveness analysis suggests that Dupixent’s societal benefits are expected to exceed its price over its time in the market. Accounting for the conventional, uncertainty, patient-centered, and community value domains, and assigning equal costs and outcomes in life extension, generates a cost-effectiveness estimate in line with previously used thresholds, although there is no explicit or single threshold for the US. Accounting for future expected price declines further improves the cost-effectiveness.

In the waterfall diagram below, we present the incremental cost-effectiveness ratio for Dupixent added on to standard triple therapy as compared to standard triple therapy alone and the impact quantifying each domain of value has on the incremental cost-effectiveness ratio.

Read our full report-to understand the model inputs and assumptions we used. Please check out Table 1 in the full report. It’s my favorite table in our CPE Exclusives. 

WE DID IT AGAIN

This marks the third CPE Exclusive we have released. CPE was recently launched with the goal of evaluating and communicating the societal impact of healthcare innovations, and we will release CPE Exclusives regularly to evaluate the impact an innovation has on patients, caregivers, the health system, and society as a whole. 

Dupixent is the first biologic we have evaluated within a CPE Exclusive. We expect future biosimilar competition for Dupixent, and we expect future price declines because of it. We included these future price declines in our analysis. Doing so had a big impact on the incremental cost-effectiveness ratio as displayed in the waterfall above.

Biosimilars are relatively new—the first one was introduced in the US less than 10 years ago. We might not have as robust data as we do for small molecule generics, but we do have evidence on when biosimilar competition might enter the market and how the price might change once competition is introduced. We used that evidence in our analysis but acknowledge potential variability around two key parameters:  the magnitude of the drop in price and the time to the drop in price. 

We explore this variability here.

In our CPE Exclusive, we assumed a post-loss of exclusivity price of $11,600 per year and assumed that price would occur in 15 years after the start of our model. 

The $11,600 annual post-loss of exclusivity price was calculated based on the average per pen cost of adalimumab biosimilars from the Mark Cuban Cost Plus Drug Company. The per pen cost for adalimumab-aqvh is approximately $292, and the per pen cost for adalimumab-bwwd is approximately $598. So $445 (average per pen price across those two biosimilars) times 26 (number of administrations per year for Dupixent) equates to approximately $11,600 per year. 

The 15 year exclusivity period (which would equate to 22 years after Dupixent first entered the market since it was initially approved seven years ago for atopic dermatitis) was based on the 22 years between the date of the initial launch of adalimumab (in December 2002) and the date (December 2024) we used prices from adalimumab biosimilars to inform the post-loss of exclusivity price for Dupixent. Because Dupixent had already been in the market for approximately seven years before our model started, we subtracted 7 from 22 to equate to an estimated 15 years.

Using these estimates and holding all other inputs and assumptions constant, the incremental cost-effectiveness ratio became dominant—suggesting that as long as there is a future price drop after the appropriate protected period, the US market-based price over the protected period seems quite defensible. 

The assumption of 15 years until a price drop is likely too long, as the patents are estimated to expire between 2033 and 2034 and Dupixent could be selected for Medicare Drug Price Negotiation in 2031. 

So here we also report a scenario of an earlier price drop. To keep things interesting, we also assumed a smaller price drop. So in this scenario, we assume a post-loss of exclusivity price of $16,600 per year and assume that price will occur in 8 years after the start of the model (15 years after Dupixent was first introduced in the market). The $16,600 annual price equates to a 50% price drop from the current net price which is supported by multiple sources reporting around a 50% decrease in net prices within the first year of biosimilar competition. The 8 years was based on the potential time frame to patent expiry and potential time frame for selection for Medicare Drug Price Negotiation. 

Using these estimates, the incremental cost-effectiveness ratio for Dupixent was also dominant—suggesting again that as long as there is a future price drop after the appropriate protected period, the US market-based price over the protected period seems defensible.

The takeaway from this scenario analysis is that as long as there eventually is a price drop, the short-term “high” price is very likely defended by the societal benefits it can provide over its time in the market. A drug’s price should/can only be high for a period of time. After the appropriate protection period to allow for the innovation to be paid back and rewarded, incentives must be in place for competition to eventually drop the price. If that is the case, a drug’s short-term high price can likely be defended relatively easily, but eventually our resources will need to go to work on other new innovations.

Two things in the weeds:

1. We elected to use the first set of assumptions in our CPE Exclusive for a few reasons. One, a lower post-exclusivity price (that is still high enough to ensure quality and supply) is preferred to lower health system costs after the innovation payback period. Second, the approach used to estimate the post-loss of exclusivity price follows the approach we recently published based on the cost of goods sold rather than a percent decline based on the originator product (albeit with less data to inform the cost of goods sold for biosimilars). In alignment with this approach, we used the average per pen cost of the adalimumab biosimilars in the Mark Cuban Cost Plus Drug Company to estimate the post-loss of exclusivity period independent of the originator biologic price. 
2. The two different sets of assumptions didn’t change our conclusion that Dupixent’s societal benefits for COPD should outweigh its cost even at US market-based pricing over the exclusivity period. The two different sets of assumptions would generate different threshold-based prices; however, our intent is not to suggest a price for Dupixent, but rather to examine if the price set by the market can be realistically defended by the drug’s societal benefits.

SAD BUT TRUE

Biosimilars are not generics. Biologics are large molecules that are complex and made from parts of living cells. You don’t have generics of a biologic, but biosimilars (i.e., a biologic that is highly similar to another biologic) are a thing. The first biosimilar was introduced in the US market in 2015. 

Biosimilars are much more expensive to develop than generics. Unlike small molecule generics, development of a biosimilar is extremely costly, takes many years, and has lower success rates. A biosimilar costs around $100 million to $300 million to develop. In contrast, a generic costs between $1 and 2 million to develop. A biosimilar takes between 5 and 9 years to develop. In contrast, a generic takes around 2 years to develop. 

Biosimilars are much more expensive to commercialize than generics. For biosimilars that reach approval, they require additional capital outside of the costs of goods sold (e.g., sales force, patient service teams).  

Biosimilars have a harder time getting market share than generics. On average, generics gain about 66% of the market share during the first year of generic competition. Contrast this with the 2% market share gained by adalimumab biosimilars during the first year of biosimilar competition. 

Despite the relative novelty of these biosimilar products and these substantial differences from small molecule generics, biosimilars have been effective at reducing drug prices. Estimates suggest that biosimilars generated $12.4 billion in cost savings in 2023 alone.

A biosimilar for adalimumab, which has been the top selling pharmaceutical in the US, was first introduced in January 2023. Within the first year of biosimilar competition, Rome and colleagues reported that the net spending and net prices for adalimumab decreased nearly 50%. This is good news. Competition is supposed to drive down pricing. Interestingly, these cost savings were not driven by cheaper biosimilars gaining a ton of market share and bringing down pricing. Rome and colleagues report that less than 2% of the adalimumab prescriptions in that first year were for biosimilar versions. Rather, the availability of the biosimilar drove down the price of the reference biologic, which during the first year still held the vast majority of the market share. 

LaMountain and co-authors state low uptake for biosimilars doesn’t mean there is a “broken biologics market”. It was the existence of a biosimilar that drove down pricing (which is what we eventually need) of the reference biologic. 

It is true that even with low biosimilar uptake at first, prices were still effectively reduced. Yet with low biosimilar uptake (and thus low revenue to the biosimilar manufacturer who had a substantial upfront development cost), there is a risk of the biosimilar being withdrawn from the market and a risk that future biosimilars will not be developed. Are the incentives adequate for the development of new biosimilars?

A roundtable of experts was recently convened to discuss the sustainability of the biosimilars market. They summarized the opportunities and threats here. “Perverse economic incentives” that encourage providers to prescribe the reference biologic over the biosimilar versions, “barriers to biosimilar access” resulting from rebate structures, and legal and regulatory obstacles must be addressed to ensure a sustainable biosimilar marketplace—thereby promoting a decline in a drug’s price after the appropriate protected period which is essential (see the first two sections of this newsletter).

Recent evidence and policies leave me more positive than negative about the biosimilar market. 

James Chambers and his team at CEVR have some recent encouraging research. He recently reported that in 2017, payers preferred the reference biologic the majority of the time. However, by 2023, payers preferred the biosimilar versions the majority of the time. 

The Inflation Reduction Act also has an interesting provision related to incentivizing the uptake of biosimilars with a higher add-on payment (ASP+8% vs. ASP+6%) for biosimilars that are priced less than the reference biologic. We will all stay tuned for how Medicare Drug Price Negotiation of biologics could influence biosimilar entry.