Formulary Management an Important Consideration for Biosimilar Stakeholders

As the biosimilar market continues to expand, many health systems and insurance companies will start making the decision on what product—the innovator or the biosimilar—will be on their formulary. Health systems will have a difficult time making this decision, which will be driven by their medical staff’s acceptance of biosimilars, the patient mix, and the predominant insurance provider. Making the decision to use or not to use a biosimilar is much more complex than converting to a generic product or switching agents within a therapeutic class.

The ultimate formulary decision requires the evaluation of multiple factors as listed below:

  • Provider acceptance: If physicians do not accept the biosimilar’s qualifications as a product of equal safety and efficacy as the originator biologic, formulary management will be very difficult, and there is the potential for errors with having to carry multiple products.
  • Pharmaceutical distributors: Not all pharmaceutical wholesalers will supply the product. Most pharmacy departments purchase products from the wholesaler at a cost minus. If the biosimilar does not come through the wholesaler, the pharmacy is charged a higher price.
  • Availability of 340B pricing: For health systems that are 340B—eligible, providing a competitive 340B price is critical to the formulary decision.
  • Reimbursement: For hospitalized patients (inpatients), drugs are reimbursed as part of a diagnosis-related group (commonly known as DRG); so the best-priced product is the preferred product. However, on the outpatient side, the price of the product is as important as the reimbursement. It is important to monitor the reimbursement of outpatient biosimilars to evaluate the overall reimbursement, as the average sales price (ASP) erodes over time. Biosimilars are to be reimbursed at 100% of the ASP for the biosimilar, plus 6% of the ASP for the originator biologic.
  • Contracting: Often, the products are bundled with other products within the company’s portfolio. The overall impact to any existing contracts or rebates need to be calculated.
  • Product availability/formulations: This is an important consideration when determining product storage and dispensing. Changing from a vial to a syringe may require purchasing larger refrigerators for storage.
  • IT build: The resources necessary to build the medication record and convert patients will need to be calculated. In addition, new insurance authorizations will be required since the products have different J-codes.

Given that the United States is considerably new in the biosimilar market, the exact degree to which prices will drop remains unknown. The ability to control biologic drug expenditures is challenging because of the complexities of the pharmaceutical supply chain and reimbursement. Overall, one of the most difficult things related to biosimilars will be the ability to accurately predict their value to your health system. It is critical that pharmacists and other stakeholders in the formulary decision process understand the complexity of calculating the overall impact of biosimilars.