What Went Wrong: How Formularies, Contracts, and Rebates Created a Headwind for Biosimilars

The promise of biosimilars was supposed to be simple: more competition, lower costs and better access for patients. Yet as the dust settles from the introduction of adalimumab biosimilars following Humira's (AbbVie) patent expiration at long last, it’s clear that formularies have become one of the biggest barriers to realizing the cost-saving potential of biosimilars.

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When adalimumab-atto (Amjevita; Amgen), the first biosimilar for adalimumab, launched, its adoption was alarmingly low.¹ As other biosimilars entered the market in quick succession, hopes were high that price competition would soon follow. But the market manipulations enabled by formulary management have instead slowed down the entire process by creating significant headwinds.²

The first installment of this series examined why biosimilars have struggled to make an impact on drug prices. This one looks at how formulary design and the behavioral psychology behind it have played a significant role in this story, resulting in prescribers and patients having to navigate a dense jungle of price points, rebates, and confusing tier placements.

THE ROLE OF FORMULARIES IN SLOWING ADOPTION OF BIOSIMILARS

When adalimumab-atto came to market, the manufacturer offered 2 pricing strategies: one with a higher wholesale acquisition cost (WAC) and another with a lower WAC.² Although both pricing options initially appeared lower than adalimumab’s list price, the net cost was often higher once factors like adalimumab’s manufacturer copay assistance and the rebate structures favoring the brand drug were taken into account. Overall, adalimumab-atto was often still more expensive than the brand drug, contributing to its slow uptake and sowing confusion among prescribers and patients regarding its true cost advantage.

As more biosimilars entered the market, there were inconsistencies in how they were placed on various formularies, creating additional confusion.³ Lack of parity in placement and clear interchangeability between biosimilars resulted in a fragmented path to adoption.

When new, lower-cost biosimilars like adalimumab-aqvh (Yusimry; Coherus Bioscienes) entered the market—offered at $569.27 plus dispensing cost, more than 90% below adalimumab’s WAC—formulary contracts and rebate structures that had already been locked in for years prevented a quick pivot to adoption by further complicating efforts to capitalize on the potential savings biosimilars offered.⁴

FORUMLARIES, CONTRACTS, AND BEHAVIORAL PSYCHOLOGY

The behavioral psychology behind formulary decision-making has played a major role in why biosimilars have not gained more traction. Formulary design, coupled with aggressive branded drug marketing, influences—and some would say manipulates—prescriber and patient behaviors. Branded drug makers use rebates and marketing strategies to maintain market share, even when lower cost biosimilars are available. Status quo bias embedded (and deliberately stirred) risk perceptions surrounding newer biosimilars, and financial incentives tied to rebates from established manufacturers have also played significant roles. Formularies are not just lists of approved drugs—they are also closely tied to complex financial agreements. Two contracts dictate how drugs are accessed: the manufacturer-PBM contract and the PBM-plan sponsor contract. These contracts form the foundation for rebate strategies, pricing negotiations, and, ultimately, the placement of drugs in the formulary’s preferential tiers. Plan sponsors are often locked into multiyear agreements, making it difficult to shift quickly—even when biosimilars like adalimumab-aqvh enter the market with a significantly lower WAC.

PBMs often have an inherent conflict when trying to balance the goal of reducing drug costs with the financial incentive to preserve lucrative rebate structures. Excluding a high-rebate drug like adalimumab or making a sweeping shift to biosimilars could lead to a substantial loss in rebate revenues. Additionally, timing is a critical challenge. By the time adalimumab biosimilars entered the market in 2023, most PBMs had already committed to their formulary strategies for 2024 and 2025, leaving little room for sudden changes.

These structural barriers slow biosimilar adoption, preventing stakeholders from fully capitalizing on their potential to lower costs and improve patient access.

A SLOW PATH TO CHANGE: THE CURRENT STATE OF BIOSIMILARS

After years of challenges, there has been a recent—albeit slow—shift towards biosimilar adoption. CVS Health’s decision in early 2024 to give adalimumab biosimilars outright formulary preference over adalimumab resulted in a rapid shift in utilization.⁵ In just 1 week, the biosimilar’s market share among patients subject to the CVS Caremark formulary jumped from 5% to 36%.⁵ However, this strategy also left open the option for prescribers to use other, more expensive alternatives to adalimumab, resulting in some erosion of biosimilar opportunity.

Other PBMs, like Express Scripts, have opted for formulary parity between biosimilars and adalimumab, allowing prescribers to choose between the 2 without cost consequences.⁶ This strategy, while more flexible, slows down the conversion to biosimilars, leaving the door open for maintaining the status quo with adalimumab, especially when considering factors such as a high volume of direct-to-consumer advertising for the brand drug, and copay assistance coupons from the manufacturers. All that means the playing field is not actually so level.

Optum has elected to exclude adalimumab from its formulary in favor of adalimumab-atto starting in 2025—a hopeful sign that other PBMs may eventually follow suit and embrace more aggressive biosimilar-adoption strategies.⁷ However, these shifts will only truly benefit the health care system if paired with a commitment to making biosimilars the first-line therapy and closing off more expensive brand-name options.

THE CONSEQUENCES OF INACTION

The slow pace of change in formulary strategies and the reluctance to pivot quickly to biosimilars has had real-world consequences. A recent analysis estimated that broader access to adalimumab biosimilars could have saved the health care system up to $6 billion in 1 year.¹ Instead, these potential savings remain out of reach, highlighting the inefficiencies in the health care system that favor entrenched brand drugs over lower-cost alternatives.

For biosimilars to reach their full potential, formulary strategies must evolve. PBMs, plan sponsors and health care providers need to be more proactive in removing barriers to adoption and facilitating the transition from biologics like adalimumab to biosimilars. It is difficult to imagine this occurring without a fundamental re-ordering of incentives for those who design and manage formularies—rethinking how contracts are structured, rebates are negotiated and educating prescribers and patients about the benefits of biosimilars. Whether the various entities involved embrace these changes as inevitable, or policymakers and litigators are compelled to intercede, remains to be seen.

The third and final part of this series will explore lessons for the future, including the timing of the biosimilar pipeline, predictions for upcoming high-cost brand patent expirations and what could happen if the industry does not make the necessary changes.

REFERENCES

1. Wingrove P. AbbVie's tight grip on Humira market raises concerns about biosimilars. Reuters. June 7, 2024. Accessed September 23, 2024. https://www.reuters.com/business/healthcare-pharmaceuticals/abbvies-tight-grip-humira-market-raises-concerns-about-biosimilars-2024-06-07/

2. Joszt L. First Humira biosimilar, Amjevita, launches in the United States. AJMC. January 31, 2023. Accessed September 23, 2024. https://www.ajmc.com/view/first-humira-biosimilar-amjevita-launches-in-the-united-states

3. Humphreys S, Gluckman R, & Bahou EM. Biosimilars Integration Insights: A Stakeholder Case Study. AJMC. September 16, 2024. Accessed September 23, 2024. https://www.ajmc.com/view/biosimilars-integration-insights-a-stakeholder-case-study

4. Jeremias S. Mark Cuban’s online pharmacy partners with Coherus Biosciences for Humira biosimilar. The Center for Biosimilars. June 8, 2023. Accessed September 23, 2024. https://www.ajmc.com/view/mark-cuban-s-online-pharmacy-partners-with-coherus-biosciences-for-humira-biosimilar

5. Cohen JP. CVS Caremark’s Policy Shift on Humira Biosimilars May Not Be What the Doctor Ordered. Forbes. May 2, 2024. Accessed September 23, 2024. https://www.forbes.com/sites/joshuacohen/2024/05/02/cvs-caremarks-policy-shift-on-humira-biosimilars-may-not-be-what-the-doctor-ordered/

6. Myshko D. Express Scripts to remove Humira from commercial formularies. Managed Healthcare Executive. August 26, 2024. Accessed September 23, 2024. https://www.managedhealthcareexecutive.com/view/express-scripts-to-remove-humira-from-commercial-formularies

7. Wingrove P. UnitedHealth to remove AbbVie's Humira from some US drug reimbursement lists next year. Reuters. September 10, 2024. Accessed September 23, 2024. https://www.reuters.com/business/healthcare-pharmaceuticals/unitedhealth-remove-abbvies-humira-some-us-drug-reimbursement-lists-next-year-2024-09-10/