Tennessee spent $48 million on a single drug, Humira, last year — about $62,000 for each of the 775 patients covered by the state’s employee health insurance program and receiving treatment. So, when nine Humira knockoffs, known as biosimilars, appeared on the market for as little as $995 per month, the opportunity for savings appeared plentiful and immediate.
But it hasn’t arrived yet. Makers of biosimilars must continue to work within a health-care system where basic economics rarely seem to prevail.
For true competition to take hold, the major pharmacy benefit managers, or PBMs, which negotiate prices and set the prescription drug menu for 80% of insured patients in the United States, would have to position the new drugs favorably in health plans.
They haven’t, despite the fact that the logic seems clear.
For the past 20 years, Humira has enjoyed high-priced exclusivity in the United States. Its opponents could save the health-care system $9 billion and herald savings from an entire class of drugs known as biosimilars — a windfall comparable to the hundreds of billions saved each year by purchasing generic drugs.
Biosimilars function similarly to Humira, an injectable treatment for rheumatoid arthritis and other autoimmune diseases. Since the rival drugs were introduced in Europe in 2018, countries such as the United Kingdom, Denmark, and Poland have switched more than 90% of their Humira patients to them. Kaiser Permanente, which manages medical care for 12 million people across eight states in the United States, switched most of its patients to a biosimilar in February and expects to save $300 million this year alone.
Biologics, which include both brand-name drugs and biosimilars, are made from living cells such as yeast or bacteria. With dozens of biologics nearing the end of their patent protection in the next two decades, Paul Holmes, a partner at Williams Barber Morel who works with self-insured health plans, believes biosimilars could generate much higher savings than generics. This is due to the fact that biologics are significantly more expensive than pills and other formulations created through simpler chemical processes.
For example, when the first generic versions of the blockbuster anti-reflux drug Nexium were released in 2015, they cost around $10 per month, compared to Nexium’s $100 price tag. Yusimry, a Humira biosimilar from Coherus BioSciences, was launched in July for $995 per two-syringe carton, compared to Humira’s $6,600 list price for a nearly identical product.
“The percentage savings may be comparable, but the total dollar savings are much greater,” Holmes explained, “as long as the plan sponsors, the employers, recognize the opportunity.”
That is a huge if.
While a manufacturer may need to spend a few million dollars to get a generic pill to market, biosimilar manufacturers claim that development can take up to eight years and $200 million. They claim that the business will fail unless they gain a significant market share.
The PBMs appear to be the biggest stumbling block. Two of the three major PBMs, Express Scripts and Optum Rx, have added biosimilars to their formularies, but at the same price as Humira. This provides little incentive for doctors and patients to switch. As a result, Humira remains dominant for the time being.
“We’re not seeing a lot of takeup of the biosimilar,” Keith Athow, pharmacy director for Tennessee’s group insurance program, which covers 292,000 state and local employees and their dependents, said.
The ongoing saga of Humira exemplifies the convoluted US health-care system, with prescription drug coverage that can be patchy and expenditures that are far more unequal than in other advanced economies.
Biologics such as Humira are accounting for a growing portion of U.S. health-care spending, with annual costs increasing by 12.5% over the last five years. The drugs are becoming increasingly important in the treatment of cancers and autoimmune diseases such as rheumatoid arthritis and inflammatory bowel disease, which affect approximately one in every ten Americans.
Humira is the best-selling drug in history, with global sales of $200 billion. AbbVie, the drug’s manufacturer, has aggressively defended the drug, filing more than 240 patents and deploying legal threats and product tweaks to keep patent protections and competitors at bay.
When biosimilars became available, the company’s fight for Humira did not end. The pharmaceutical company has told investors that it does not expect to lose much market share until 2024. “We are competing very effectively with the various biosimilar offerings,” said AbbVie CEO Richard Gonzalez during a conference call.
How AbbVie Keeps Its Market Share
According to PBM officials, one of AbbVie’s strategies was to warn health plans that if they recommended biosimilars over Humira, they would lose rebates on purchases of Skyrizi and Rinvoq, two drugs with no generic imitators that are each listed at around $120,000 per year. In other words, discontinuing one AbbVie drug would raise the cost of others.
According to industry sources, the PBMs also persuaded AbbVie to increase its Humira rebates — the end-of-year payments based on total drug use that are mostly passed along to health plan sponsors by the PBMs. Although rebate amounts are kept secret and vary widely, some have reportedly increased by 40% to 60% of the drug’s list price this year.
Express Scripts, Optum, and CVS Caremark are the leading PBMs, each part of a massive health conglomerate that includes a leading insurer, specialty pharmacies, doctors’ offices, and other businesses, some of which are based overseas for tax reasons.
Nonetheless, challenges to PBM practices are increasing. Last year, the Federal Trade Commission launched a major investigation into the companies. Kroger canceled its pharmacy contract with Express Scripts last fall, citing a lack of bargaining power in the arrangement, and Blue Shield of California announced on Aug. 17 that it was terminating most of its business with CVS Caremark for similar reasons.
Critics of the top PBMs see the Humira biosimilars as a potential watershed moment for the shadowy business practices that have contributed to exorbitant drug prices.
Although the list price of Humira is many times higher than that of the new biosimilars, AbbVie’s discounts and rebates make the drug more competitive. Even if health plans only paid half of what they do now for Humira — and if several biosimilar makers charged as little as a sixth of the gross price — costs could fall by around $30,000 per patient per year, according to Greg Baker, CEO of AffirmedRx, a smaller PBM that is competing with the big companies.
When multiplied by the 313,000 patients currently prescribed Humira, that equates to about $9 billion in annual savings — a not insignificant 1.4% of total national pharmaceutical spending in 2022.
The introduction of the biosimilar Yusimry, which is available through Mark Cuban’s Cost Plus Drugs pharmacy and elsewhere, “should raise red flags for employers,” according to Juliana Reed, executive director of the Biosimilars Forum. “‘Time out, Mr. PBM, why are you charging me 85% more than what Mark Cuban is offering?'” “What exactly is going on in this system?”
Cheaper drugs may make it easier for patients to pay for their medications, thereby making them healthier. According to a KFF survey conducted in 2022, nearly one-fifth of adults reported not filling a prescription due to the cost. There have been numerous reports of Humira patients discontinuing the medication due to the high cost.
Fear, Inertia, and Convenience
Sue Lee of Louisville, Kentucky, learned in 2017 that her monthly copay for Humira, which she used to treat painful plaque psoriasis, was increasing from $60 to $8,000 per year when she retired as an insurance claims reviewer and went on Medicare.
Lee, now 81, found the experience especially painful because AbbVie had paid her for the previous three years to promote the drug by chatting up dermatology nurses at fancy AbbVie-sponsored dinners. Looking for a way to stay on the drug, Lee approached the company for assistance, but her income was too high at the time to qualify for its assistance program.
“They were done with me,” she admitted. Lee stopped taking the medication, and the psoriasis returned with a vengeance within a few weeks. Her calves, torso, and even the tips of her ears were covered in sores. Months later, she found relief by enrolling in a clinical trial for a different drug.
Because of convenience, inertia, and fear, health plans are motivated to keep Humira as a preferred option. While such information is not publicly available, one Midwestern firm with 2,500 employees told KFF Health News that AbbVie effectively reduced Humira’s net cost to the company by 40% after July 1, the day most biosimilars were launched.
CVS Caremark, one of the top three PBMs, announced in August that it was forming a partnership with drugmaker Sandoz to launch its own cut-rate version of Humira, called Hyrimoz, in 2024. Caremark, on the other hand, did not appear to be fully embracing even its own biosimilar. According to Tennessee’s Athow, PBM officials informed customers that Hyrimoz will be placed on the same tier as Humira in order to “maximize rebates” from AbbVie.
According to PBMs, the majority of the rebates are passed on to health plans. However, if Tennessee received a check for, say, $20 million at the end of last year, it was simply recouping some of the $48 million it had already spent.
“It’s the devil’s bargain,” Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, said. “The happiest day of a benefits executive’s year is walking into the CFO’s office with a several-million-dollar check and saying, ‘Look what I got you!'”
PBM executives have stated that their clients prefer high-priced, high-rebate drugs, but this is not the whole story. According to Antonio Ciaccia, CEO of 46Brooklyn, a nonprofit that researches the drug supply chain, some of the fees and other payments that PBMs, distributors, consultants, and wholesalers earn are calculated based on a drug’s price, giving them equally misplaced incentives.
“The large intermediaries are wedded to inflated sticker prices,” Ciaccia explained.
According to Alex Jung, a forensic accountant who consults with the Midwest Business Group on Health, AbbVie has warned some PBMs that if Humira is not offered on the same tier as biosimilars, it will stop paying rebates for the drug.
Requests for comment were not returned by AbbVie.
Organon’s Hadlima, one of the low-cost Humira biosimilars, has made it onto several formularies, the ranked lists of drugs that health plans offer patients, since its launch in February, but “access alone does not guarantee success” and does not mean patients will get the product, said Kevin Ali, Organon’s CEO, in an earnings call in August.
Rheumatologists will have little incentive to prescribe biosimilars if they are priced no lower than Humira on health plan formularies. When PBMs place two drugs on the same “tier” of a formulary, the patient’s copay is usually the same.
Optum Rx stated in an emailed statement that by including several biosimilars on its formularies at the same price as Humira, “we are fostering competition while ensuring the broadest possible choice and access for those we serve.”
According to Marcus Snow, chair of the American College of Rheumatology’s Committee on Rheumatologic Care, switching a patient incurs administrative costs for the patient, health plan, pharmacy, and doctor.
Doctors’ Inertia Is Strong
Doctors appear hesitant to wean patients off Humira. After years of dealing with insurance, the patient and rheumatologist’s main concern, according to Snow, is “forced switching by the insurer.” If the patient is doing well, any change worries them.” Despite this, the American College of Rheumatology recently distributed a video informing patients about the availability of biosimilars, and “the data is there that there’s virtually no difference,” according to Snow. “We all know that the cost of health care is skyrocketing. At the same time, my job is to improve my patient. That takes precedence over everything.”
“All other things being equal, I like to keep the patient on the same drug,” said Madelaine Feldman, a rheumatologist in New Orleans.
Gastrointestinal specialists, who frequently prescribe Humira for inflammatory bowel disease, appear to be conflicted as well. According to Rachel Shubert, a spokesperson for the American Gastroenterological Association, the group’s policy guidance “opposes nonmedical switching” by an insurer unless the decision is shared by the provider and the patient. However, Siddharth Singh, chair of the group’s clinical guidelines committee, stated that he would not hesitate to switch a new patient to a biosimilar, despite the fact that “these decisions are largely insurance-driven.”
According to Cora Opsahl, director of the Service Employees International Union’s 32BJ Health Fund, a New York state plan that procures drugs through HealthTrust, HealthTrust has only had five patients switch from Humira this year.
However, biosimilar companies hope to gradually gain market share. Companies like Coherus will have a niche, and “they might be on the front end of a wave,” according to Ciaccia, given employers’ increasing demands for system change.
The Inflation Reduction Act’s $2,000 out-of-pocket limit on Medicare drug spending, which takes effect in 2025, may increase interest in biosimilars. With insurers on the hook for a larger portion of a drug’s cost, they should look for less expensive alternatives.
According to Mary Beth Lang, KP’s chief pharmacy officer, the company’s decision to use biosimilars was obvious once the company determined they were safe and effective. Amjevita, the first Humira biosimilar, was 55% less expensive than the original drug, and she indicated that KP was paying even less since more drastically discounted biosimilars became available. She claims that switched patients pay less for their medication than before, and that very few have attempted to return to Humira.
Prescryptive, a small PBM with transparent policies, switched 100% of its patients after most other biosimilars hit the market on July 1 “with absolutely no interruption of therapy, no complaints, and no changes,” according to Rich Lieblich, the company’s vice president of clinical services and industry relations.
He claimed that AbbVie refused to respond with a competitive price.