State-level legislation on follow-on biologic substitution

In 2009, the Biologics Price Competition and Innovation Act (BPCIA) paved the way for market entry of generic biologics by establishing a pathway for their regulatory approval. Proliferating with the advent of recombinant DNA technology, biologic drugs are derived from living organisms to create vaccines, blood products, allergenic products, monoclonal antibodies, cytokines, growth factors, enzymes, immunomodulators, thrombolytics, proteins, arsphenamine (and derivatives), toxins, and antitoxins.1 Larger and more complex than traditional pharmaceutical molecules, biologics are more difficult to create (and replicate) than small-molecule drugs.2 Their clinical effects are determined not only by their primary chemical structure but also by glycosylation patterns found in their structural folds.3 Thus, follow-on biologics, also referred to as biosimilars, can never be exact replicas of a reference product.4 Unlike generic drugs, biologics with pharmacokinetic equivalence may nevertheless exhibit varying pharmacodynamics, clinical efficacy, and immunogenicity (the product's power to cause an immune reaction), not only between follow-on and reference products, but also within a particular reference product manufactured at different times or locations.5 
 
The BPCIA defines biosimilars as biological products that are highly similar to reference products with no clinically meaningful differences in terms of safety, purity, or potency.6 The Food and Drug Administration (FDA) is authorized to designate a biosimilar as ‘interchangeable’ with a reference product if ‘the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch’.7 Importantly, if deemed interchangeable, a follow-on ‘biological product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product’.8 
 
While the FDA's European counterpart has already approved 16 follow-on biologics,9 no follow-on biologics have yet been approved in the United States.10 In anticipation of their arrival, though, several states have sought over the past year to legally limit the extent to which pharmacies may actually treat follow-on biologics as interchangeable.

potency. 6 The Food and Drug Administration (FDA) is authorized to designate a biosimilar as 'interchangeable' with a reference product if 'the risk in terms of safety or diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alternation or switch'. 7 Importantly, if deemed interchangeable, a followon 'biological product may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product'. 8 While the FDA's European counterpart has already approved 16 follow-on biologics, 9 no follow-on biologics have yet been approved in the United States. 10 In anticipation of their arrival, though, several states have sought over the past year to legally limit the extent to which pharmacies may actually treat follow-on biologics as interchangeable.

OVERVIEW OF STATE-LEVEL LEGISL ATION ON FOLLOW-ON
BIOLOGIC SUBSTITUTION All states have generic substitution laws applicable to small-molecule drugs that either permit or prohibit pharmacists from substituting a reference product with a generic listed as bioequivalent in the Orange Book. 11 Forty states require mandatory generic substitution for drugs covered by Medicaid. 12 These generic substitution laws generally do not apply to follow-on biologics, however, as they usually require a higher level of chemical equivalence than is provided by the biologics standard of 'interchangeability'. 13 In 2013, follow-on biologic substitution bills were introduced in 18 states; they were enacted in Florida, North Dakota, Oregon, Utah, and Virginia. 14 By and large, these bills sought to establish strict procedures for pharmacy substitution not otherwise required by the BPCIA, such as requirements for patient consent or physician notification despite the BPCIA's designation of interchangeable biologics as substitutable without 6 BPCIA at 42, U.S.C. §262(k)(4) (2012). 7  a physician's intervention. While the details of various provisions differ from state to state, all of the follow-on biologic substitution bills have in common two features: (1) they permit substitution only if the FDA has designated the biosimilar as interchangeable, and (2) they prohibit substitution if the prescribing physician has specifically indicated a preference for the reference product. In addition, some of the bills include provisions regarding physician notification; patient notification or consent; additional labeling requirements, such as the name of the reference product being substituted; and retention of records regarding the substitution. Table 1 summarizes the key differences between the bills as of 20 February 2014. Notably, follow-on biologic substitution legislation has not been limited to the United States. Like the United States, the European Union allows for substitution but allows member states to determine how they would like to regulate such substitution. 40 Similarly, biologic substitution regulations in Canada are set by provinces. 41

POLICY CONSIDERATIONS
The promise of follow-on biologics in increasing access to life-saving therapy is enormous. In 2013, there were approximately 125 different FDA-approved prescription biologic products available in the U.S. market (not counting separate approvals for new  43 rheumatology, 44 and endocrinology. 45 On average, therapeutic biologics are more than 20 times as expensive as pharmaceutical drugs, with treatments ranging from tens to hundreds of thousands of dollars per year, with an average annual cost of $16,425. 46 In 2010, eight of the top ten highest expenditure Medicare Part B drugs were biologics, with the highest expenditure drug claiming $2 billion in Medicare funds. 47 The highest average annual expenditure per Medicare beneficiary in 2010 was for a biologic costing $216,833. 48 The high cost of biologics can be partially explained by higher manufacturing and quality control costs, as well as a lack of competition from generics; industry estimates of R&D for new biologics are comparable to those for new pharmaceutical drugs. 49 While stressing the importance of cost-effectiveness analysis keyed to differences in bioequivalence, 50 many commentators have begun calling for substitution of less expensive follow-on biologics as an important strategy for reducing healthcare costs, 51 particularly in the field of oncology, which has seen exponentially increasing medicine prices. 52 A 2008 study estimated that substitution of follow-on biologics in the top 12 biologic categories could result in U.S. savings of over $100 billion in the first decade. 53 Generic erythropoietin is projected to save eight billion Euros in Germany alone by 2020. 54 Recognizing the large potential for cost savings from increased competition, the Federal Trade Commission has called for public comments on new legislation impacting follow-on biologics. 55 How substitution laws are designed will determine the extent to which they promote or limit follow-on biologic substitution. For instance, shorter time frames for physician notification and longer requirements for record retention may make it more costly for pharmacies to substitute follow-on biologics. In the context of generic substitution, requirements that substitutions be labeled as such may increase patient anxiety, 56 perhaps even causing a nocebo-like effect in which drug effectiveness is decreased by the patient's belief that it is ineffective. 57 Patient consent requirements in generic substitution laws, like those found in Virginia's biologic substitution legislation, have been found to result in 25% less substitution. 58 Similarly, any requirements that physicians authorize substitution, such as the one found in one of Arkansas's failed bills, may play into some physicians' generalized mistrust of generic alternatives. 59 Broadly speaking, laws with fewer requirements and therefore less compliance costs are more likely to incentivize substitution. Massachusetts' proposed bill, which prohibits any additional requirements not also applicable to all generics, may be the most likely to incentivize substitution if passed. At the same time, too little detail can leave unintentional regulatory gaps. For instance, Michelle Derbyshire observes that because 'around 26% of top biologicals are distributed through mail order, the impact of these state bills may depend on how they regulate mail-order pharmacies'. 60 Only Utah's new law and Texas's failed House bill specifically address mail-order prescription substitution.
Regardless of any incentive-distorting effects of the specific requirements of substitution laws, they raise a number of bioethical questions regarding informed consent and patient autonomy. When the FDA designates a biosimilar as interchangeable, it may not be able to account for long-term risks that have yet to be observed, or potential increased efficacy of the current reference product over the original reference product, perhaps due to more experience producing the biologic. 61 Medical professional societies have called for increased pharmacovigilance to reduce these unknown risks. 62 Pharmacovigilance programs, in turn, may be able to advise state pharmacy board decisions to prohibit certain substitutions-as explicitly provided for by Pennsylvania's bill-faster than the FDA is able to review a biosimilar's designation of interchangeability. Moreover, patient autonomy-which is best safeguarded by consent requirements-would be compromised by default, notice-free Medicaid substitution if states were to extend such requirements to follow-on biologics in the absence of an explicit provision also extending any notice or consent requirements to public assistance programs.
Finally, questions of liability-both on the part of the pharmacies and the followon biologic manufacturers-are implicated by substitution laws. Only a handful of the state-level laws specify that a pharmacist's liability for substituting a biologic is the same as for substituting a traditional small-molecule drug. Moreover, manufacturers of follow-on biologics face uncertainty regarding their liability for failure-to-warn claims. In the context of small-molecule drugs, state tort claims would be preempted by federal law, which, under Mutual Pharmaceutical Co. v. Bartlett, shields generic drug manufacturers from liability if they adhere to the FDA's mandatory labeling requirements. 63 It is unclear whether warning labels used on follow-on biologics would be governed by a different standard, particularly in states that do not have specific labeling requirements. Even if failure-to-warn claims concerning follow-on biologics were governed by the Bartlett standard, the manufacturers of interchangeable biosimilars remain in a legal limbo until the FDA sets their labeling requirements.

CONCLUSION
As more states consider follow-on biologic substitution legislation, biotech companies are lobbying for greater restrictions on pharmacists' discretion to substitute follow-on biologics for their brand name products, claiming that such restrictions are necessary to protect patient safety. 64 Amgen, a leading biotech firm, has found itself on both sides of the debate as it begins to develop its own branded follow-on biologics. 65 While mixed messages from powerful stakeholders may cause delays in new legislation, states have time to choose their approach: Europe's early experience with follow-on biologics suggests that the U.S. market will first be composed primarily of biosimilars that fail to meet the BPCIA's requirements for interchangeability (and therefore would not be subject to substitution at all). 66 Indeed, a number of provisions-especially those relating to physician notification-will sunset before any follow-on biologics are even approved by the FDA as interchangeable. Nevertheless, it is important for biologics manufacturers to have a sense of how states plan on regulating follow-on biologics so that they can adequately assess their prospects for research and development.
Moving forward, states will have to decide how to strike an adequate balance between access and affordability of biologic products on the one hand, and adequate safety and efficacy on the other. For the most part, this will require more information on the cost-effectiveness of substitution in the context of biologics. Importantly, this will also require official guidance from the FDA regarding how brand and follow-on