May 2, 2024
Antitrust litigation continues to be an important vehicle for employers, multi-employer health funds, and public entities to recover damages for inflated prices they have paid for prescription drugs through their employee benefits package. Cohen Milstein has been at the forefront of these cases, serving as lead counsel and recovering hundreds of millions of dollars for employers who overpaid for prescription drugs. This article takes a forward-looking view of likely future developments in this area—specifically regarding the industry’s shift towards “biologic” drugs. Remaining well-advised about this area of the law will benefit employers and Taft-Hartley healthcare funds covering union workers, by enabling them to decide when they may want to participate in this type of litigation to recover the overcharges they have incurred on employees’ prescription drug purchases.
Generic Delay Cases and Biosimilars: Overview
Generic-delay antitrust litigation involves claims that pharmaceutical companies have improperly delayed the market entry of lower-priced generic versions of a drug, thereby causing payers (e.g., self-insured employers) to overpay for a period of time. Perhaps the most well-known type of generic-delay case is the “reverse-payment” or “pay-for-delay” case, which was recognized by the Supreme Court in FTC v. Actavis. In these cases, a company with a patent-protected drug whose patent is expiring pays generic manufacturers not to produce the drug.
Generic-delay cases have traditionally focused on small-molecule drugs—which are governed by the 1984 Hatch-Waxman Act. But an increasingly large share of prescription drug payments now goes towards biologics. Biologics are derived from living cells, and their therapeutic equivalents are called biosimilars. The statute authorizing biosimilars was enacted in 2010. Despite their relative nascency, biologics and biosimilars now account for approximately 46% of U.S. prescription drug spend—$261 billion per year.
With such substantial revenues at stake, pharmaceutical companies have strong motivations to use anticompetitive tactics to delay the onset of biosimilar competition, just as they have to delay the entry of small-molecule competition. Differences between small-molecule generic markets and biosimilar markets, however, may warrant special attention as the same litigation strategies that have successfully policed small-molecule delay cases may require adjustment in biosimilar cases.
Those differences were well illustrated by 2023’s launch of biosimilar versions of Humira. Humira was the single-largest line item in the 2022 U.S. pharmaceutical budget. Americans spent over $18 billion on the biologic, over which the manufacturer had long maintained a monopoly. In mid-2023, however, a wave of biosimilar Humira competitors finally came to market and are helping to lower prices.
Same-Tier Formulary Coverage
Payers (and pharmacy benefit managers acting on their behalf) use several tools to incentivize the use of lower-priced generic drugs. One tool is the “formulary,” a list that organizes drugs into “tiers” which render drugs more or less expensive for a plan member. For example, a formulary may impose a $10/$30/$50 copay for drugs on the first/second/third tiers, with generic drugs usually on the least-expensive first tier.
Despite biosimilar versions of Humira carrying a lower list price than the brand product, many biosimilars are nonetheless being placed on formulary tiers equal to those of the brand. This means that biosimilars may not capture the same high level of market shares as do small-molecule generics, as patients will not be incentivized to use the biosimilar by the promise of lower copays.
If biologics maintain greater share following biosimilar entry, one consequence in biosimilar[1]delay cases will be an increased importance of “brand-brand damages.” As with small-molecule drugs, biosimilar competition can drive down the price of the brand drug compared to what the brand’s price would be without competition. Thus, even where payers would have purchased the brand drug rather than the biosimilar, they should have paid less for the brand and were damaged. These are called “brand-brand damages.” For payers who may pursue biosimilar-delay litigation, they should be sure to seek brand[1]brand damages when available.
One Biosimilar, Two Prices
Another dynamic that has appeared in biosimilar markets is companies launching the same product at two different price points: one with a high list price and substantial rebates, and a second with a lower list-price but few or no rebates. Biosimilar versions of Humira have generally coalesced around 5% off and 85% off Humira’s list price, with multiple companies offering both a high-list price and low list-price version.
This dynamic will affect damages calculations in biosimilar-delay cases. In small-molecule cases, experts generally identify what the “brand” price is and what the “generic” price would have been at a given time. Identifying a “generic” price is possible because small-molecule markets tend to coalesce closely around a prevailing price. Unlike in small-molecule cases, however, the launch of biosimilar Humira products shows that there will be biosimilars marketed with markedly different list prices.
Payer-Plaintiffs might address this dynamic in different ways. One could be to group together the brand with the high-priced biosimilars as being the “brand” price and consider the lower-priced drugs as representing the “biosimilar” price. Another approach could be to model the market as having three price-points: a brand price, a high-priced biosimilar, and a low-priced biosimilar. Whatever strategy is ultimately taken, experts can help to understand the different biosimilar prices and address this dynamic in plaintiffs’ damages models.
Product-Specific Differences
Unlike with small-molecule generic drugs, there may be product-specific differences among the biosimilars. For example, some (but not all) Humira biosimilars contain citrate—an ingredient that can cause pain at the injection site. Some (but not all) Humira biosimilars are marketed in a high-concentration formula. In litigation, drug manufacturer defendants may attempt to seize on such product-specific differences to resist efforts to hold them accountable for anticompetitive conduct. For example, defendants could seek to argue that these differences affect class certification or the relevant product market definition. In turn, payer-plaintiffs should be prepared to retain experts to prepare for and respond to these arguments.
Conclusion
The emergence of biosimilars is a beneficial development for the payers, as these affordable medicines stand to save Americans approximately $180 billion over the next five years. Thus, cases policing anticompetitive delay of biosimilar competition will remain an important tool for antitrust enforcers to promote competition in healthcare markets—and for employers and multi-employer health funds to ensure that their employees and members are able to recover the inflated prices they have paid for prescription drugs.
Editor’s Note – A more in-depth version of this article, along with footnoted sources, is available on Law360.