Price Deals for Reference Products Pose a Threat to Biosimilars

While US healthcare providers are growing more willing to adopt lower-cost biosimilar drugs as way to address the rising costs of biologic treatment, biosimilar developers are facing yet another challenge: competing against reference products for a preferred place on formularies.

Jared Hopkins, writing in Bloomberg, reported this week that Ascension Health, a nonprofit hospital system in St. Louis, Missouri, had hoped to begin using biosimilar infliximab (Inflectra), which is listed at a 15% discount to the branded infliximab product (Remicade), in order to reduce its $55 million spend on infliximab treatment. However, the health system soon learned that insurers overwhelmingly preferred to cover the branded treatment despite the lower list price of the biosimilar.

The Bloomberg article also notes that UnitedHealth Group, the nation’s largest insurer, continues to prefer reference infliximab, and that pharmacy benefits managers (PBMs) Express Scripts and CVS Caremark also list the branded drug as their preferred infliximab treatment. What’s behind these choices to prefer higher-priced innovator drugs to biosimilars? Many industry experts point to pricing negotiations among members of the supply chain as a primary factor.

As the makers of branded drugs seek to maintain their market share in the face of biosimilars and generic drugs, they become incented to offer rebates to PBMs and health systems that make their innovator products competitive with the lower-price options. As Kyle Skiermont, PharmD, COO of Fairview Pharmacy Services, told The Center for Biosimilars^® in a recent interview, “We originally thought that, if there was a 15% to 20% price difference [for biosimilars], we’d see a lot of movement. We don’t know, when we see that price difference, if the downstream costs really are that different.”

Just how different those downstream costs can be post-rebate for PBMs and the health plans with which they contract is impossible to assess. As the Los Angeles Times reports, PBM contracts with health plans are regarded as trade secrets, and are concealed from both the public and from other health plans. “The PBMs are sitting at the center of a big black box,” Linda Cahn, a drug pricing consultant, told the LA Times. “They’re the only ones who have knowledge of all the moving pieces.”

Critics say that PBM cost savings through rebates are not necessarily passed along to patients; while PBMs may pay far less than list price for expensive drugs like reference infliximab, patients must still pay copays, coinsurance, and other out-of-pocket costs on a drug’s list price. For the 29% of Americans who have high-deductible insurance plans, those costs can create a significant strain on household budgets.

Patients, though, could see some relief from those costs from an unlikely source: Amazon is rumored to be entering the pharmaceuticals business. As Fierce Pharma reports, Goldman Sachs analysts see strong potential for the Seattle-based retailer to disrupt the drug supply chain and its $125 billion in annual profits by leveraging its robust logistics and distribution systems. The report suggests that Amazon could potentially offer its own PBM in conjunction with an online pharmacy, and that its entrance into the supply chain could drive a greater trend toward transparency in drug pricing.