PBM and Drug Maker Discount Game Limits Biosimilar Competition

Starting in 2023, five years after their European counterparts, patients in the United States who were prescribed Humira to treat autoimmune diseases could finally choose from cheaper biosimilars. However, the discount game of drug manufacturers and pharmacy benefit managers in the US limits optimal biosimilar competition. As a result, US patients' out-of-pocket costs are too high.

Employers, health insurers and government agencies hire PBMs to provide services including negotiating prescription drug prices and managing formularies – lists of outpatient medications covered by payers. The discount plays a crucial role. Drug manufacturers offer PBM discounts that lower net prices in return for preferential positioning in drugs, which in turn can lead to a shift in market share. Although PBMs pass on a large portion of these payments to companies with which they contract, patients typically do not see these discounts at the point of sale or at the pharmacy counter. Patients' deductibles are calculated based on the list and not the net price.

PBMs can take a number of measures to ensure that “preferred” medications achieve higher volume uptake, including designating less restrictive reimbursement conditions, such as: B. fewer pre-approval protocols. More importantly, PBMs can use formulary exclusions, or even the threat of them, to gain additional bargaining leverage in price negotiations with pharmaceutical manufacturers. Therefore, formal exclusions represent a strong barrier to access to non-preferred products. An example of this is the inability of Humira-related biosimilars to compete optimally.

Biosimilars are versions of branded biological products that can theoretically be manufactured and sold once the original manufacturer's patent has expired. There was initially very low acceptance in the first 15 months following the launch of the first Humira-related biosimilars in the US in January 2023. Although there were more than ten biosimilars approved for marketing, their total market share was only 2% by the end of March 2024. Discounts played a role as originator drug company AbbVie gave large sums to PBMs to keep Humira on the formulary or retaining its preferred form status.

The situation is changing as the number of new patients starting biosimilar versions of Humira rose to 36% from just 5% in the first week of April after CVS Caremark changed its formulary. CVS Caremark — the largest PBM in the U.S. — removed Humira from most of its commercial lists of reimbursed medications starting April 1. In its place, the Humira-related biosimilars Hyrimoz, Hadlima and Adalimumab-fkjp (an unbranded product) were included in the PBM. Hyrimoz appears to be the most popular biosimilar.

While the removal of the creator, 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 by a preferred Humira-referenced biosimilar manufactured by CVS-owned Cordavis, which simultaneously produces a co-branded product with AbbVie.

PBM Express Scripts follows a similar path to CVS Caremark. Beginning in June, Evernorth, a division of Cigna that includes Express Scripts, will launch its private-label Humira-referenced biosimilar adalimumab-adbm. The product is manufactured by Boehringer-Ingelheim for Quallent Pharmaceuticals, a wholly owned subsidiary of Express Scripts. Additionally, the product will be available to patients at Accredo, the PBM's specialty pharmacy.

CVS Caremark and Express Scripts (mostly) direct patients to their preferred products, which are not necessarily the cheapest. In such a scenario, it is unlikely that other biosimilars will advance in acceptance, although the wholesale cost of Hyrimoz is higher than, for example, the biosimilar Yusimry sold by Mark Cuban's Cost Plus Drug Company.

In fact, the strategies employed by CVS Caremark and Express Scripts retain elements of the oft-criticized rebate system, although not with rebates per se, but rather with co-branded royalties and acquisition cost rebates. Likewise, we could see something similar in the Stelara (ustekinumab) space next year, when PBM Optum Rx will launch a Stelara-referenced biosimilar under the trademark Wezlana through its new Nuvaila business.

Since the spring, the market share of Humira-related biosimilars has continued to increase; another 4% from May 2024 to August 2024, primarily due to the proliferation of private label biosimilars. What is striking, however, is that the original manufacturer, Humira, still held an incredible 82% share of the total market share of adalimumab products this summer. Compare this to the situation in Europe, where Humira's average market share had already fallen to 65% five years ago.

Maybe things will change if insurers like Blue Shield of California bypass the rebate route and try to disrupt the market. But only time will tell.

Meanwhile, discount dynamics between drugmakers and PBMs complicate biosimilar competition. And that's putting it mildly. Perhaps a better way to put it is that the interaction between pharmaceutical manufacturers and PBMs exacerbates the problems of a suboptimal market for biosimilars.