Beginning in 2023, five years after their European counterparts, patients in the United States prescribed the autoimmune disease treatment Humira could finally choose from lower-priced biosimilars. However, the rebate game played by drug manufacturers and pharmacy benefit managers in the U.S. limits optimal biosimilar competition. As a result, U.S. patient out-of-pocket costs are too high.
Employers, health plans and government agencies contract with PBMs for services, which include negotiating prescription drug prices and managing formularies—lists of outpatient pharmaceuticals covered by payers. Here, rebating plays a critical role. Drug makers offer PBMs rebates which reduce net prices in exchange for preferential positioning on formulary, which in turn can move market share. Though PBMs pass through a large portion of these payments to entities with whom they contract, patients generally don’t see these rebates at the point of sale or pharmacy counter. Patients’ out-of-pocket co-insurance is calculated based on list and not net price.
PBMs can do a number of things to help ensure “preferred” drugs get more volume uptake, including designating them with less restrictive conditions of reimbursement, such as fewer prior authorization protocols. More importantly, PBMs can deploy formulary exclusions, or just the threat of doing so, as a tool to gain additional negotiating leverage in price negotiations with pharmaceutical manufacturers. As such, formulary exclusions form potent impediments to access non-preferred products. An illustration of this is the inability of Humira-referenced biosimilars to compete optimally.
Biosimilars are versions of branded biologic products that can be manufactured and sold, theoretically once the originator’s patent has expired. Initially, during the first 15 months following the launch of the first Humira-referenced biosimilars in the U.S. in January 2023, there was very little uptake. Despite there being more than ten biosimilars authorized for marketing, their aggregate market share was only 2% by the end of March 2024. Rebating played a role, with the originator company AbbVie giving large sums to PBMs to keep Humira on formulary or maintain its preferred status.
The situation is changing, as the number of new patient starts on biosimilar versions of Humira soared to 36% from just 5% during the first week of April, after CVS Caremark altered its formulary. CVS Caremark—the largest PBM in the U.S.—removed Humira from most of its commercial lists of reimbursable drugs starting April 1. In its place, the PBM included the Humira-referenced biosimilars Hyrimoz, Hadlima and adalimumab-fkjp (an unbranded product). Hyrimoz appears to be the most favored biosimilar.
While removal of the originator Humira from the formulary may be the headline, the story is more complex than meets the eye. This is because in the case of CVS Caremark, Humira is being replaced with a preferred Humira-referenced biosimilar manufactured by CVS-owned Cordavis which at the same time is producing a co-branded product with AbbVie.
PBM Express Scripts is following a similar path to the one taken by CVS Caremark. Starting in June, Evernorth, a division of Cigna which owns Express Scripts, is launching its private label Humira-referenced biosimilar, adalimumab-adbm. The product will be manufactured by Boehringer-Ingelheim for Quallent Pharmaceuticals, which is a wholly owned Express Scripts subsidiary. Moreover, the product will be available to patients at Accredo, which is the PBM’s specialty pharmacy.
What CVS Caremark and Express Scripts are doing is (mostly) steering patients to their preferred products, which aren’t necessarily the least expensive. In such a scenario, it’s unlikely other biosimilars will make inroads in terms of uptake, despite the fact that the wholesale acquisition cost of Hyrimoz is higher than, for example, the biosimilar Yusimry which Mark Cuban’s Cost Plus Drug Company sells.
Effectively the strategies employed by CVS Caremark and Express Scripts preserve elements of the oft-criticized rebate system, though not with rebates per se but rather with co-branded licensing fees and acquisition cost discounts. Likewise, we could see something similar play out next year in the Stelara (ustekinumab) space as the PBM Optum Rx will launch a private label Stelara-referenced biosimilar called Wezlana via its new Nuvaila business.
Since the spring, Humira-referenced biosimilar market share has continued to rise; another 4% from May 2024 to August 2024, primarily due to the uptake of biosimilars through private label brands. But what’s striking is that the originator Humira still held a staggering 82% of the aggregate market share of adalimumab products as of this summer. Contrast this with the situation in Europe where five years ago, the average market share of Humira was already down to 65%.
Perhaps things will change as insurers like Blue Shield of California bypass the rebate route in an attempt to disrupt the space. But only time will tell.
In the meantime, the rebate dynamics between drug makers and PBMs complicate biosimilar competition. And that’s putting it mildly. Perhaps a better way of saying it is that the interplay between pharmaceutical manufacturers and PBMs exacerbates the problems of a sub-optimal market for biosimilars.
