Continuing the theme from our previous blog on the benefits of competition among prescription drugs, we now turn to another type of competition: the role of biosimilars in lowering the escalating prices of biologic drugs.
Pharmacy benefit managers (PBMs) are using the availability of alternatives, both biosimilars and their reference biologics, as part of an overall strategy to remove costs from the health care system. This direct competition, in turn, lowers patients’ costs.
As recently as 2019, some experts were concerned that biosimilars would never provide effective competition to actually make a dent in the reference biologic market. These concerns were justified: market share of biosimilars was low, many Food and Drug Administration (FDA)-approved biosimilars had been unable to launch, and pricing effects on the reference biologics were still unclear. However, the tide is finally turning, and to quote IQVIA, “recent events suggest an inflection has occurred” within the biosimilar market and use of biosimilars has been increasing.
Using new PCMA research, we can now examine the effects of biosimilars on the pricing of reference biologics. Currently, seven reference biologics have marketed biosimilars. For those seven biologics, with the exception of one increase by one biologic, list prices have not increased since the biosimilar launch, and for five of the biologics, net costs have declined since 2018. These price trends are starkly different from when no biosimilar existed. In fact, prior to the launch of their biosimilar competitors, all seven of these biologics had multiple list price increases, and four increased their list price more than 20 times. However, since the launch of the direct competitor biosimilars, the list price increases have stopped, and for five biologics, the freeze in list prices were paired with decreases in net costs. It is clear that biosimilar-to-biologic competition is playing an important role in containing drug costs.
When competition arrives, PBMs employ their tools to reduce drug costs through negotiations with drug manufacturers. However, the role of PBMs is smaller in the biosimilars market than for small molecule drugs, as most biosimilar drugs are provider-administered and outside of the “normal” PBM-retail pharmacy payment channel. However, even with limited biosimilar volume, PBMs are innovating ways to pass the savings created by the biosimilar-biologic alternatives on to patients. For example, one PBM is using formulary placement – preferring biosimilars and sometimes reference biologics – to drive the lowest net costs. Another PBM recently announced a new drug management strategy program that includes the adoption of more biosimilars. Finally, a third company took a direct route to patients by incentivizing them to switch to a biosimilar or other preferred drug. And all PBMs are looking towards 2023, when biosimilars for Humira (the top-selling drug in the US) are slated to launch.
The availability of more biosimilars allows PBMs to drive to the lowest net costs among biologic medicines, which is where the lion’s share of the most expensive treatments exist. However, market forces are just getting started. Only 18 of the 29 FDA-approved biosimilars are currently on the market. PCMA has policy proposals that promote use of and competition for generic and biosimilar drugs. Read more on The Critical Path Forward: Rx Policies to Reduce Patient Costs, Improve Access.