ACM: a broad-based effort is needed for long-term competition in anti-rheumatic prescription drugs
The expiration of patents and the market entry of competing drugs have led to drops in the net purchasing prices of three important anti-rheumatic prescription drugs, the so-called TNF-alpha inhibitors. As a result, hospitals have been able to save tremendously on the procurement of these drugs. In order to guarantee their affordability in the future as well, it is important that competitors are able to gain sufficient market share. It is the hospitals, health insurers, and the government’s turn to make a move. This is the conclusion of the Netherlands Authority for Consumers and Markets (ACM) in its sector inquiry into TNF-alpha inhibitors.
Study into the biological-drug market
TNF-alpha inhibitors are biological drugs that are mostly used by patients with rheumatic disorders, but also by patients with other autoimmune diseases. Hospitals buy these drugs for their patients. In the period prior to the patent’s expiry, TNF-alpha inhibitors took up the largest share of hospitals’ drug budgets. With approximately 50,000 patients, the total costs of TNF-alpha inhibitors in 2016 amounted to almost 550 million euros. Over the past few years, the patents of three of the five TNF-alpha inhibitors expired. As a result, competitors were able to introduce generic variants of these medicines, the so-called biosimilars, onto the market.
Successful biosimilar competition is not only important for the affordability of TNF-alpha inhibitors, but also for other biological drugs the patents of which will expire in the future. Therefore, ACM studied the market trends of TNF-alpha inhibitors before and after the expiration of patents.
Competition after the market entry of biosimilars
ACM concludes that the expiration of the patents has created considerable price competition between the original and the biosimilar versions of these medicines. In that context however, ACM does see risks for the durability of that competition. Biosimilars do not always succeed in obtaining sufficient market share. This is particularly true for drugs that patients have to administer themselves using lancing devices. Hospitals have switching costs because they have to put time and energy in internal coordination and patient education. In addition, there is a residual population of patients who cannot or do not want to switch. For this residual population, hospitals may no longer be able to buy the original drug for a favorable price, if they also buy biosimilars. This may prompt hospitals to stay with the original drug after all. These switching barriers are of less importance for drugs that are administered intravenously, because, in that case, hospitals have more control over the switch. ACM expects that, if the biosimilars’ market shares remain limited in the long run, there will be a risk that biosimilar manufacturers will leave the Dutch market, causing the prices to rise again.
Martijn Snoep, Chairman of the Board of ACM, comments: ‘What we see is that new entrants to this market have difficulties securing a solid position. In order to guarantee competition in the long term, a broad-based effort is needed. We are calling on all parties involved to make that effort. And to that end, we will do our bit as well.’
ACM believes that hospitals, health insurers and the government are able to help promote competition on this market. One of the ways in which ACM will contribute, is by looking into reports about exclusion through the use of conditional discounts, and, if necessary, by taking enforcement action. The Ministry of Health, Welfare and Sport (VWS) is able to contribute by adjusting the price regulation in such a way that providers of the original drug will not be able to ask a much higher price for the residual group of patients. In their reimbursements, health insurers can take into account the switching costs that are associated with the choice for a biosimilar. Hospitals can contribute by organizing tender processes based on fair opportunities for all providers, using a clear procedure that will not be deviated from. In conclusion, hospital buyers can inform ACM when they encounter discount systems that impede the market entry of competitors.
24-09-2019 Sector inquiry into TNF-alpha inhibitors