Sustaining competition for biosimilars on the pharmacy benefit: Use it or lose it

Abstract

Congress passed the Biologic Price Competition and Innovation Act of 2009, specifically to offer market competition as a counterweight to the rising costs of biologic medicines. As of April 15, 2024, 49 biosimilars have been approved by the US Food and Drug Administration in 15 biologic categories. Biosimilar competition has been undeniably successful: Through 2022, biosimilars have saved the US health system $23.6 billion, without significant care disruption or reduced quality. Through 2023, adalimumab biosimilar competition has added an additional $6.5 billion to this total, primarily through greater rebates from the reference manufacturer.

Despite launching at discounts as great as 85%, adalimumab biosimilars have not been given preferred formulary positioning in the vast majority of cases and have thus gained only 3% of market share through 2023, largely because of payers’ and pharmacy benefit managers’ preference for rebates over discounts. This situation may negatively influence future biosimilar development, posing a threat to a biosimilar pipeline that represents hundreds of billions in savings over the next 10 years.

Plain language summary

Biosimilars drive significant health care–system savings when introduced into a drug category, resulting in lower net prices. Overall, biosimilars overtake the utilization of the reference product within a few quarters after launch. The first biosimilar competitor for adalimumab, which has historically been covered under the pharmacy benefit of most health plans and insurers, was launched in January 2023. Through December 2023, 9 biosimilars were launched, many at a large discount to the originator product Humira; however, biosimilars accounted for only 3% of the adalimumab market share. The principal reason relates to rebates desired by pharmacy benefit managers (PBMs) and health plans for drugs covered under the pharmacy benefit. If PBMs and health plans don’t favor biosimilars over Humira, drug makers may reconsider the opportunity to introduce future biosimilars to compete with high-cost biologics when their market exclusivity ends. Without sufficient biosimilar competition, the cost of biologics may rise unchecked.

Implications for managed care pharmacy

If PBMs and health plans don’t prefer biosimilars over Humira, drug makers may reconsider the opportunity to introduce future biosimilars to high-cost biologics when they lose market exclusivity. Without sufficient biosimilar competition, the cost of biologics may rise unchecked.

Between 2016 and 2021, specialty drug spending (including biologics) increased 43% to $301 billion.¹ The specialty drug trend continues to test our health system’s ability to pay for future pharmaceutical innovation, payers’ and plan sponsors’ ability to manage health benefits, and patients’ ability to access and afford needed care. By 2021, US expenditures for specialty pharmaceuticals surpassed that for conventional or nonspecialty drugs.¹

The per-member per-month specialty drug cost rose from $900 in 2018 to $1,295 in 2021, and the average cost of a specialty claim on the pharmacy benefit in 2021 was $4,562.² The major portion of specialty drug spending is biologic medicines, which comprise 46% of all pharmaceutical expenditures.³ In an effort to address this trend, biologic costs are increasingly being shifted to the pharmacy benefit from the medical benefit.²

Congress passed the Biologic Price Competition and Innovation Act of 2009, specifically to offer market competition as a counterweight to the rising costs of biologic medicines.⁴ Biosimilar agents, inexact copies of the originator biologics, offer the promise of equivalent outcomes and lower costs compared with these valuable biologics, many of which have changed therapeutic paradigms in oncology and autoimmune diseases.^4,5

As of April 15, 2024, 49 biosimilars have been approved by the US Food and Drug Administration in 15 biologic categories.⁶ Over the next 10 years, a wealth of originator biologics will lose marketing exclusivity (eg, the interleukin inhibitors ustekinumab and secukinumab; the programmed cell death 1 inhibitors pembrolizumab and nivolumab; and the multiple sclerosis drug ocrelizumab, among others),³ fueling an opportunity for sustained savings through biosimilar development and commercialization.

The success of biosimilar competition has been unassailable: From the launch of the first biosimilar in the United States in 2015 through 2022, biosimilars have saved the US health system $23.6 billion, without significant care disruption or reduced quality.⁷ For 2023 alone, the savings attributable to the introduction of adalimumab biosimilars were $6.5 billion.⁸ From 2023 to 2027, cumulative biosimilar savings may exceed $125 billion.³ These financial figures may be conservative, as biosimilar competition has worked in 2 ways: (1) lowering both list prices and net prices⁹ and (2) halting future price increases for the originator biologic (the latter is rarely considered in estimates of biosimilar savings).⁵

In the oncology and oncology-support categories, average annual declines in net prices (expressed generally as average sales price) associated with biosimilar competition have measured 12%-15%, until generally reaching 60%-70% of the reference product’s price prior to biosimilar launch.⁹

Based on these figures, one might assume that the future of the biosimilar industry is secure. However, for biosimilars covered under the pharmacy benefit, quite the opposite is true. And the plans and plan sponsors who have the most to gain from biosimilar savings may be the greatest threats to biosimilar industry sustainability.

The Concerning Case of Adalimumab

The adalimumab category represents the greatest savings opportunity yet seen in the US biosimilar marketplace. In 2022, prior to biosimilar availability, AbbVie reported US net revenues for the originator product Humira of $18.6 billion.⁸ Notably, it is the first biologic for the treatment of autoimmune diseases that is covered under the pharmacy benefit and subject to biosimilar competition.

From January to October 2023, adalimumab biosimilars were launched with list-price discounts generally between 55% and 85%, based on the Humira wholesale acquisition cost (WAC) of $3,461 per 40-mg pen.^9,10 These discounts were introduced as part of a dual-pricing strategy, in which purchasers (such as pharmacy benefit managers [PBMs] and health plans) could choose a high-WAC option (at an approximately 5% discount) plus large rebate or a low-WAC option (at discounts of ≤85%). Each option is assumed to attain a similar net cost.¹⁰

These WAC discounts should not be considered an accurate proxy for net cost. However, a WAC discount of 85% provides little room for further price reductions or rebates, without cutting deeply into the remaining profit margin.

Prior to biosimilar competition, AbbVie had offered substantial rebates on their originator product; the exact amount is not publicly disclosed. These rebates served as a potent inducement to PBMs and health plans to cover Humira with preferred formulary position.¹¹

In 2023, the adalimumab biosimilars with a low-WAC option were launched at a net price of at least 30% below Humira’s 2022 net price. AbbVie increased its rebates on Humira to approximate the net price of the first adalimumab biosimilar, which was introduced in January 2023.

Despite these considerable price reductions, adalimumab biosimilar utilization in 2023 was extremely low. Amgen reported just $50 million in revenue on Amjevita for the first half of 2023 and $76 million in the second half.¹² The other biosimilar manufacturers, who had launched products in July or later, have between 0.1% and 0.8% market share. The overall biosimilar market share in December 2023 totaled less than 3%,³ even though the array of biosimilar choices available included interchangeable products and formulations that closely matched those available for the originator product.^9,10

The adalimumab biosimilar manufacturers registered a notable achievement in 2023: An informal survey of the big 3 PBMs revealed that they decided to cover Humira plus 2 or more biosimilars, at parity. In other words, adalimumab biosimilars (though not every adalimumab biosimilar) were generally accessible to health plan and self-insured employers’ members. Yet the statistics show this has not translated into biosimilar utilization. Several potential issues may be the result of payers’ lack of motivation to encourage physicians and their patients to switch to biosimilars (ie, no cost-sharing advantages for the biosimilars, no practical physician incentives like reduced prior authorization burden).

Nonetheless, payers have seen impressive savings in their adalimumab expenditures in 2023, without having to prefer the use of a biosimilar or discourage the use of the reference product. Based on AbbVie’s reported 2023 figures, its net sales were approximately 35% ($6.5 billion) less than in 2022, with minimal reduction in prescription volume.⁸

Entering 2024, based on low-WAC options, the net costs for several adalimumab biosimilars are $658 or less per 40-mg pen.⁹ However, a PBM or payer that opted for a high-WAC/high-rebate contract can still obtain large net savings compared with 2022 expenditures and still retain healthy rebate revenue provided by the originator manufacturer. AbbVie has also introduced in 2024 an unbranded version of Humira at a similar WAC discount level,¹³ further complicating the problem of low utilization of adalimumab biosimilars: The economic impetus for switching to biosimilar utilization remains limited.

As a result, biosimilar manufacturers’ expectations for gaining a toehold into the adalimumab market are dwindling. They now must hope that payers will begin to disadvantage Humira in 2024, opening the door to significant market share and sales. Yet, unless plans and PBMs choose to shun rebates for greater WAC discounts, there will be little reason to expect significant gains in biosimilar uptake.

At the end of 2023, 9 competitors were actively vying for adalimumab market share.⁶ The total revenue for the category will likely shrink rapidly in 2024 and beyond because of competitive forces.^3,8 Business considerations may cause adalimumab biosimilar makers with 1% or 2% market share by year’s end to reconsider their participation. Some paring of adalimumab biosimilar competitors is expected normally, but the looming danger is that this situation may restrict competition for the pipeline of new biosimilar agents.

What of Future Pharmacy Benefit Biosimilars?

Numerous ustekinumab biosimilars are anticipated to launch in rapid sequence in 2025, and this pharmacy benefit scenario may play out once again: Large net price declines coming because of biosimilar competition but not with biosimilar utilization.

The potent competitive forces that unleash similar net cost declines in the future are not guaranteed. Manufacturers considering the resource-intensive efforts and opportunity costs to develop biosimilars may find the risks outweigh the rewards. If biosimilar developers believe that obtaining reasonable market share is not possible owing to payers’ formulary decisions to not prefer their lower-cost biosimilars over the reference product, the business case for commercialization may not be supported. The same calculation will be made for developing other pharmacy benefit biosimilar candidates, and the pipeline is rife with candidates. (Note that this discussion is already taking place as a result of provisions of the Inflation Reduction Act.)

In this case, payers would lose the sharp sword of biosimilar competition to manage present and future biologic expenditures. Payers may laud the ability of biosimilar competition to gain tens of billions of dollars in savings with adalimumab and future pharmacy benefit–covered biosimilars. If the current situation is not rectified, however, biosimilar development for pharmacy benefit products will shrivel, and biologic prices will rise unimpeded by competition.

Although other factors, such as obtaining physician buy-in are crucial to optimizing biosimilar uptake, only payers and PBMs can make the fundamental decision to prefer pharmacy benefit–covered biosimilars or exclude coverage of the originator product. Their choices today will define tomorrow’s savings on biologic coverage. Additionally, biosimilar coverage and utilization, keys to market sustainability, also directly affect health equity. The use of these low-cost biosimilars may enable wider patient access to and their ability to afford these effective biologic medicines.¹⁴

If we fail to take optimal advantage of the opportunities afforded by biosimilars, payers and PBMs will bear the greatest responsibility. They reaped the savings afforded by the introduction of biosimilar competition but did not ensure its sustainability for adalimumab and future pharmacy benefit biosimilars.