Biosimilar Breakdown: Can Lower Drug Prices Survive the PBM Squeeze?

Featured Guest: Stan Mehr — Editor of Biosimilars Review & Report, healthcare journalist, and market strategist with decades of expertise in biosimilars, pharma reform, and drug pricing dynamics. https://biosimilarsrr.com/about/

In this critical episode, we explore the evolving biosimilars landscape, pricing transparency, and the tangled web of pharmacy benefit managers (PBMs) with biosimilars expert Stan Mehr. From inflated rebates to private-label manipulation, Stan sheds light on how PBMs and policy changes under the Inflation Reduction Act are reshaping access to lower-cost drugs.

If you're an employer, payer, or pharma manufacturer navigating the biosimilar space, this episode is your roadmap to understanding where opportunity lives—and where it's quietly being suffocated.

Key Topics Covered:

• The $25B+ in biosimilar savings… and why it could vanish
• Why employers aren’t seeing those savings—and how PBMs control the game
• The problem with private-label biosimilars 
• How the Inflation Reduction Act could unintentionally collapse biosimilar pipelines
• What fiduciary responsibility means for employer health plans
• Long-term predictions: who survives, who exits, and who profits

Hosted by:
Michael Navin & Dr. Randy Vogenberg

Michael's LinkedIn

Randy's LinkedIn

Sponsored by:
Peek: A game-changing prescription shopping solution that allows its members to view all their prescription cost options across cash discount programs and their insurance in one easy-to-use platform. Peek is currently being offered to organizations to help both employees and plan sponsors save money on their prescription spend. https://peekmeds.com/.

Institute for Integrated Health (IIH): Health care benefits, insurance coverage regulations, and doing business in the healthcare industry can be complicated. At IIH, Dr. Randy Vogenberg and his team understand these unique challenges and provides strategic guidance customized to every client. To help overcome your unique challenges, IIH delivers education, planning and advisory on market trends, and U.S. health care market intelligence. The firm’s decades of proven success are due to strategic collaboration with associates from the business, clinical, and scientific communities. https://iih-online.com/.

Music by:
Hanu Dixit, https://www.youtube.com/hanudixit

Transcript

(0:00) You are listening to the only healthcare podcast created to inform you on the why's how's and (0:07) what's of healthcare. Hosted by industry leaders Michael Maven and Dr. Randy Bogenberg discussing (0:13) why cost and risk are so high and who should be held accountable. How will technological (0:19) advancements merge with the quality of care and when does the public gain access to advanced (0:25) medical treatments? Listen in as Michael and Randy answer industry concerns for the public (0:32) and all stakeholders involved.
Welcome back to another episode of the only healthcare podcast. (0:48) Today we are diving into the evolving world of PBM reform and the significant role of biosimilars (0:53) in healthcare. We are thrilled to have Dan Mayer with us who's an expert in the biosimilar space (0:59) and he can shed light on these topics.
Stan is renowned for his deep insight in the healthcare (1:05) policy and has contributed extensively to the understanding of market dynamics in the biosimilar (1:11) sector. Let's get ready to unravel the complexities of healthcare reform and what it means for (1:17) stakeholders across the board. Welcome Stan and Randy take it away.
Thanks Michael and it's great (1:24) to have Stan who's a collaborator with both of us over the years. He's got several decades of (1:31) experience in the pharmaceutical industry focusing on healthcare reform as well as biosimilars. (1:37) He currently serves as a consultant and provides strategic advice on healthcare marketing dynamic (1:43) commercialization strategies and regulatory frameworks.
He's noted for his in-depth analysis (1:48) as Michael mentioned and has been instrumental in shaping policy discussions around biosimilars (1:54) as well as pharmaceutical reforms. We are seeing a changing market right now in the United States (2:02) not only because of the presidential election but because of the R&D pipeline which also (2:06) contributed to the development of the biosimilar medications which we'll be talking about today. (2:13) For employers listening it's been a difficult time both from a financial perspective but also (2:20) from really having a good understanding on how to best leverage and optimize the use of biosimilars (2:27) in their pharmacy benefits as well as in some of the uses through the medical benefit.
(2:34) So there's a real opportunity that we'd like to explore today in our conversations around well (2:40) what could be done differently? How can manufacturers collaborate more effectively (2:45) with the employer plan sponsors and others? And as we get more biosimilar options assuming the (2:53) pharmaceutical biosimilar manufacturers can continue their growth how that's going to change (3:00) the marketplace what are some of the opportunities and how employers can get more engaged with their (3:06) administration vendors as well as potential collaborations with manufacturers? (3:12) So to start off with let's understand this landscape. We know that biosimilars have (3:19) been around now for more than a decade. They were slow to start.
They're still (3:24) struggling a little bit but now we have more patent expirations. So Stan can you give us (3:29) kind of the state of the marketplace right now when biosimilars where do they fit in? (3:35) Well thank you Randy and Michael for inviting me first of all to be part of the Only Healthcare (3:41) podcast. I'd love to talk about the environment.
So right now we just had another biosimilar (3:47) approval just yesterday in fact and that brings us to something in the order of 60 biosimilars now (3:54) being approved by the FDA. And as you know biosimilars the name of the game in biosimilars (4:01) is reducing the cost of expensive specialty medications. That's the whole reason for (4:07) biosimilars existence and for biosimilar competition.
And right now there are several (4:13) manufacturers who are leading the pack in the way of producing biosimilars. Some of them in the U.S., (4:19) some of them are out of Korean manufacturers for instance such as Samsung, BioEpis, and Celtrion (4:25) and some are Amgen in the U.S. And they really go across several drug categories including (4:32) oncology categories as well as now the immunology categories such as Adalimumab which is Umira, (4:41) Oostekinumab which is Stelara which has just been launched in January of 2025 as a biosimilar. So (4:49) this is all in terms of the immunology categories.
It's relatively recent. We've seen tremendous (4:57) cost savings because of the existence of biosimilar competition on the oncology and the immunology side (5:05) to the tune of over $25 billion so far I believe at this point approximately cumulatively over the (5:12) course of time since the first biosimilar introduction back in 2015. Now that cost savings (5:18) is going to continue to escalate rather rapidly with these immunology monoclonal antibodies (5:25) that are all going off patent and that are being more and more introduced or launched as biosimilars (5:32) today.
You know we've got a lot of reason for optimism. We've got a reason for cautious optimism (5:40) because on the immunology side especially we have pharmacy benefit covered biosimilars (5:47) that are really having a huge impact on cost savings and this is where the PPMs really come in. (5:53) The first biosimilar that the PBMs really control and manage is really Adalimumab, the Umira (6:00) biosimilar and that particular one launched in January of 2023 immediately saved something like (6:08) with at least some formulation something on the order of 80 to 85% off of the list price of Umira (6:15) very soon after launch and that really has cascaded with up to about 11 different or 12 (6:23) different biosimilar manufacturers launching a Umira biosimilar and offering similar cost savings.
(6:31) However, it has not been all smooth sailing. This obviously brings up you know where does (6:38) PBM reform fit into all this, what was started under the Biden administration, (6:42) what the Trump administration is talking about? So at kind of a baseline level just to fill in (6:51) the blanks for those that may not be as aware, employers utilize third-party administrators, (6:57) pharmacy benefit managers or PBMs. So what is the role of these PBMs and how are they affecting (7:04) in general drug pricing and access to the pharmaceuticals, biopharmaceuticals and biosimilars? (7:12) Well, across all product lines, commercial, Medicare and Medicaid, the big three PBMs, (7:19) that is OptumRx, CVS Caremark and ExpressGrips, they control 80% of all prescriptions written (7:28) in the country.
Now by controlling and managing that means for your audience simply that they (7:34) have a say over what gets covered or what doesn't get covered and the employers have a say too (7:40) whether they exercise that say is a different story but they control what's covered, how easy (7:46) it is to access or to get that prescription for that particular product because there might be a (7:52) step therapy, there might be prior authorization criteria that need to be filled. So the PBMs (7:57) have almost an oversized role in terms of managing access to those prescriptions, (8:03) to those biologics which are high cost specialty products and now to the biosimilars as well. (8:09) So if the, for instance, if the PBM decides that they're going to put a biosimilar of (8:15) your Myron formulary and just one or two, that means that the other manufacturers for those (8:21) biosimilars will not get coverage or may not get preferred coverage for that particular population (8:28) of patients managed by that PBM.
I just wanted to ask something about the, (8:36) really the process. So Stan, you mentioned having a significant cost savings which is great (8:44) but these brands still exist as brands. So why are there still brands on the market (8:51) in that form and then what is the, is there a clinical rationale or is there also a financial (8:57) rationale why the brand still exists? You're talking about the reference products or the (9:02) originators? Yeah, so the brand or the, we refer to them as the reference products or the (9:09) originator products.
They specifically exist for a number of different reasons. On the pharmacy (9:16) benefits side specifically, there is your rebates. Rebates that are involved that the PBMs get from (9:25) the manufacturers and that are either kept by the PBM, shared by the PBM with the employer or the (9:33) plan, the health plans that they service or maybe send fully back to the employer if they're a full (9:40) transfer, a full pass through PBM, which is a little unusual.
But the PBM, this is, and the (9:47) rebates and the transparency around the rebates are the main driving factors for why there is so (9:55) such talk about PBM reform today. And well, I shouldn't say today, today and in the last 10 (10:03) years. So you talked about the finding, again, financial side of it, but is there a clinical (10:08) value proposition for the reference product to still be available? Well, as long as they're (10:15) available, they're still going to be probably the preferred product or one of the preferred products.
(10:20) They're still going to get, you know, a lion's share of the utilization while everybody starts (10:27) switching over slowly to the biosimilars. And for an example, if you think about the oncology (10:35) products on the medical benefit, like Herceptin, it has taken about three to four years for Herceptin (10:44) to be over, the market share of Herceptin to be overtaken by all the biosimilars that (10:50) were available. I believe there were five or six at the time.
So in those three years, the reference (10:55) manufacturer still has an opportunity to gather, gain quite a bit of revenue for their product (11:03) and into the future too. Because what happens then, Mike, is the reference product (11:09) manufacturer will then be much more keen on competing with the biosimilars. They too will (11:15) drop their price.
So they'll become one of the players on the marketplace and still be able to, (11:22) you know, with some of these product categories, bring in quite a bit of revenue (11:29) for their company. Are there any ones that are doing parity pricing to the biosimilar or (11:36) are they always going to have a rebate attached to the reference product? (11:40) I think they'll probably, because they do what they call dual pricing, in which case there's a (11:48) high WAC price or wholesale acquisition cost, a low wholesale acquisition cost option. So that (11:55) if a PBM or a plan sponsor or an employer wants to still maintain those rebates and those high (12:03) rebate numbers, they can go with a high WAC cost, which means that there's only a slight discount, (12:11) maybe 5% discount off of the original list price, but the manufacturer still provides a hefty rebate (12:17) back to the PBM who then shares it back with the plan or the employer sponsor.
(12:24) You can get a low WAC discount on the other hand, which means that there's a very high discount. (12:31) It could be 80% off of the WAC price and there might be no rebate or a very small rebate attached (12:37) to that. So you have the opportunity as a PBM to contract for either one of those offerings.
(12:45) And the manufacturer will offer either one very happily because this net price is going to be (12:50) about the same. So whatever happens, the manufacturer is saying, well, we're still (12:56) in the game. That works for us.
Whatever works for you is best for us. (13:02) So that becomes an important talking point with employers or other plan sponsors (13:08) who are offering an insurance product or pharmacy benefit to perhaps leverage these biosimilars to (13:16) more effectively have a competitive benefit plan for their members, the patients. (13:26) That's what you're saying, right? (13:27) MARKO PAPICHONENKO Yeah, yeah, absolutely.
They can certainly (13:30) take a much stronger role in terms of deciding, well, do they want that big rebate or do they (13:36) want the biosimilar savings? Because even when you get down into the weeds, if you have a biosimilar (13:44) and a reference product that are supposedly at parity pricing, the biosimilar is generally going (13:50) to still be a little less costly. It just works out that way. (13:55) MIKE GREEN So this really highlights the critical nature (13:57) of transparent decision-making and contracting in particular with PBMs, something that we've (14:03) been talking about on some of the other episodes.
So employers really need to pay attention in their (14:09) contracting and be thinking about their decision-making, particularly as it relates (14:13) to biosimilars because we're in general talking about higher cost products than the typical (14:18) generic brands that we used to deal with in the pharmacy benefit. So one of the questions I have (14:27) is kind of leading into a couple other areas we want to explore is the impact of the Inflation (14:33) Reduction Act, the IRA, and how that kind of impacts or changes the pricing scenario for (14:40) biosimilar reimbursement. Can you talk about that? (14:44) MARKO PAPICHONENKO Yes.
Now, when we're talking about things (14:46) related to the Inflation Reduction Act and its impact on the biosimilar industry, we're (14:51) always talking about a few years ahead. So a decision being made by the IRA or CMS today (14:59) is going to affect biosimilar development for the future. It generally doesn't affect (15:03) the immediate biosimilars, except if you're talking about the Part D redesign.
I don't (15:09) know if you want to get into that specifically, Randy. (15:11) MIKE GREEN Yeah, not right now. (15:13) MARKO PAPICHONENKO Yeah, because it gets a little convoluted.
(15:15) But when you're talking about the IRA and biosimilars, what the Medicare price negotiation (15:20) is generally doing is they're setting a price of a reference price. Well, I shouldn't say (15:27) reference again. They're setting a negotiated price for a biologic that's a high cost to (15:33) Medicare.
They're setting that price that's going to take effect in, say, two or three (15:37) years' time for a specific biologic. Now, if you're working on a biosimilar candidate (15:44) for that product, and you're working in the development stage, you're thinking about, (15:51) okay, what are my, first of all, my revenue opportunity here, and what the savings might (15:56) be when my product finally makes it to the market. Once the Medicare price negotiated, (16:03) the price that is negotiated by CMS with the manufacturer is announced, that means that (16:09) it's going to be far lower than your original price when you started developing the product, (16:15) the biosimilar product.
So your revenue opportunity is going to be lower to begin with. (16:22) And IRA, of course, is supposed to be specific to Medicare. But we know that the way payers (16:32) and PBMs approach pricing, they may see the Medicare as a threshold price for when the (16:40) biosimilar first comes on the market.
And they say, okay, well, what's going to be our discount (16:44) below that Medicare negotiated price? So for commercial, and even, well, Medicaid's probably (16:51) going to be lower anyway, but certainly for commercial, that's going to be a lower revenue (16:56) opportunity than the biosimilar manufacturer had actually thought three years ago. (17:02) So in that respect, it's a very obvious and straightforward detriment to biosimilar (17:09) development. And you may even decide that, okay, well, I know there's going to be seven competitors (17:16) coming onto the market.
I know Medicare is going to negotiate a lower price for that product than (17:21) I originally anticipated. Maybe I'm going to stop development of that product. And it's going to (17:28) shrink competition for that drug category three years from now when the patent expiration occurs (17:34) and the drug could come onto market, assuming you receive FDA approval.
And then essentially, (17:40) the payers and the PBMs will lose the opportunity for that lower, for that additional cost savings (17:47) from the biosimilars. So it's a very serious concern right now that all biosimilar manufacturers (17:54) are looking very hard at. The folks I've spoken to, they've already taken a hard look at maybe (18:00) starting to pare back their biosimilar pipelines based on the IRA and the IRA-Medicare price (18:06) negotiation.
So clearly, there's a lot of challenges, yet there's still opportunities (18:12) with biosimilars. What I'm hearing, particularly from a commercial perspective, you're probably (18:18) going to see a decrease in rebate dollars available, although there may be some options (18:24) potentially. But IRA is really closing that opportunity around rebates continuing the way (18:30) they had in the past.
So employers need to be aware of that, be thinking about that. (18:35) And at the same time, we know PBMs aren't sitting still. The third-party administrators are going (18:40) to be looking at this as, okay, if I'm going to lose revenue potential as well off these rebates (18:45) and what I don't disclose due to my contracting practices, I'm going to be looking for other (18:51) opportunities to make money.
So again, as you said, aside from Medicaid, which gets the most (18:56) favored nation price, commercial and Medicare has some linkages that commercial needs to be aware of (19:03) in terms of what the impact could be, particularly on these biosimilar manufacturers. (19:09) So where does leading the PBMs to go stand? What are you seeing PBMs doing? (19:15) So the question is, is this a natural evolution or is this a way to replace revenue? (19:21) And that's what leads us to this new aspect of private labeling of biosimilars and drugs (19:28) competing in this specialty pharmaceutical space. So starting in April of 2024, (19:37) CVS Health introduced the distributor earlier, but they introduced a biosimilar form of adalimumab (19:43) that month under a distributor called Cordavis that is owned by CVS Health in Evernorth.
(19:51) No, excuse me, not Evernorth, it's CVS. So Cordavis introduced their own product, (19:59) which is a private label brand of a Sandoz biosimilar called Hyramaz. (20:05) They started offering that product at the same WAC discount offered by Sandoz and the other (20:12) manufacturers about 80% off of WAC for this private label Cordavis brand.
And in addition, (20:20) they also started offering a private label version of Umira, which was an unbranded version (20:28) that AbbVie, the reference manufacturer, made available to Cordavis at an 80% discount. (20:35) So immediately thereafter, they excluded the originator product, Umira, from formulary (20:42) and offered these products, Cordavis's private label brand, Cordavis's Umira unbranded version, (20:51) and Sandoz's branded Hyramaz at the high WAC version. The Cordavis brand immediately (21:00) grabbed a bunch of market share.
I think it rose to about 12% of total market share (21:07) for the Adalimumab category within five weeks. I think over the summer, I did an interview with (21:14) the CVS Health senior vice president there, Josh Friedel, and he said that they converted 97% of (21:20) all of their Adalimumab usage to the Cordavis or Umira brands, the biosimilars. (21:29) Wow.
(21:31) Now that sounds like a lot, but overall, it didn't translate to a lot of biosimilar conversion (21:39) for the entire marketplace. So if I can back up to December of 2023, at that time, the biosimilars (21:49) only had a 2% market share cumulatively between 10 competitors. That meant Umira had 98%.
(21:58) By April and May of 2024, that number shrunk to about 80% for Umira and 20% cumulatively (22:08) for the biosimilars, with the vast majority being the Cordavis brands. The problem was that (22:16) after that, it sort of flatlined. There was no further uptake, despite the fact that ESI, (22:25) Express Scripts, started their own distributor and their own private labeling of an Adalimumab (22:31) biosimilar, which was then followed by OptumRx and Nuvala, their own distributor for specialty (22:38) pharmaceuticals who introduced their own Adalimumab.
So the latest figures, which are (22:45) available as of November 2024, was that they still remained... I think Umira still has (22:52) 78% or 79% total market share, the originator brand, and the biosimilars cumulatively have (23:00) 21% or 22% market share, still dominated by Cordavis's brand. What's happened is the PBMs (23:09) who are marketing these private branded biosimilars are receiving revenue as, (23:16) what I call them, pseudo-manufacturers as part of the spread price that they now share (23:22) with Sandoz. After they get that discount, that 80% discount, part of that revenue goes to Sandoz, (23:32) and part of that revenue goes to Cordavis, and goes back to the PBM, which is used to replace (23:38) the rebate revenues that they're losing.
That's what the other PBMs are expecting will happen. (23:44) They're going to gain revenue through manufacturing of the biosimilars to replace the rebate revenue (23:51) that they've seen in the past. So from a Federal Trade Commission perspective and competitive (23:58) landscape, how is that fair to the consumer or the employer, right? How is it fair that the (24:03) PBM, who's really there to deliver a benefit, is now making a product that they're forcing you to (24:10) take? Very good point, Mike.
There is certainly conflicts of interest here that have to be (24:18) looked at and looked at very carefully. Quite frankly, if you're the employer and your pharmacy (24:27) benefit is being serviced by one of these PBMs who offer the private labels, you have to be aware of (24:32) it, aware of the conflict, and understand that you may not be getting the best deal from these (24:39) private labels, despite the fact you're getting a nice savings overall from biosimilars, but you (24:45) may not be optimizing it. The problem with that is an employer is not looking at that level of detail, (24:52) right? Correct.
Correct. 90% of employers, I think, are basically relying on the PBMs to (24:57) administrate that pharmacy benefit and manage it for them, or the benefit consultants. (25:02) And they've got to, at this point, be made aware of it.
I know there's certain organizations, (25:09) coalitions that are trying to get the word out, like the National Alliance, folks like that, (25:14) and folks like Randy's organization. But I think it's imperative right now that people understand, (25:20) and the FTC starts taking a close look at these arrangements and what it means for competitiveness (25:28) for the biosimilar industry itself. Because, quite frankly, if you don't have an arrangement with (25:34) the big three, at least one of the big three PBMs on these pharmacy benefit covered biosimilars, (25:42) your pathway to revenue success or sustainability is very limited.
And it might get more limited (25:50) in the future. I mean, you've already seen companies abandoning their own programs. (25:55) Yes.
Companies like Coherus has already sold their Adalimumab franchise. There's going to be others (26:01) who are seeing presently very, very minor revenue coming in and reporting it on their (26:08) quarterly reports and their annual reports. How much longer will their shareholders want them to (26:15) be in this area and not taking advantage of a new biologic that they should be investigating (26:22) itself, an innovative product? It becomes a very difficult situation, to the point at which (26:28) we have to be philosophically very aware that the biosimilar competitiveness that has brought down (26:35) the price of Adalimumab by so much, and it's going to bring down the price of Stelara by so much, (26:42) and Opdivo, and Keytruda, and these other major high-cost biologics, (26:48) you may be losing or at risk of losing this opportunity in the very near future.
(26:55) Yeah. Whether we're looking at the Medicare price negotiation that you talked about earlier, (27:01) creating unintended consequences, what you just described with the white label is creating some (27:07) unintended consequences for the self-insured employer. It's also creating potential (27:12) liability for the employer plans because of their fiduciary responsibility, (27:17) which is something that many organizations have been talking about for a while now.
(27:22) There's a lot of consumer advocacy groups that are beginning to look at this area, biosimilars, (27:29) because the biologic products in general is now becoming the major category driver (27:36) in the pharmacy benefit, and in some cases, the medical benefit. (27:41) No, that's correct, Randy. If you think about it, this goes back really to high rebates, (27:46) because what had happened was that when you've got a product that's got a very high price, (27:53) and you get a high rebate to equal a lower net price or net cost for the PBM or the plan sponsor (28:01) or the employer, the rebates are getting filtered through those levels.
The employer or the end (28:09) purchaser, if you will, the ultimate purchaser, is not receiving the ultimate savings. That savings (28:16) is being received by the PBM, and just means that, okay, the employer is not fulfilling that (28:22) fiduciary responsibility, whether they realize it or not, because they're not getting the savings (28:28) they should be getting. (28:30) What are your long-term projections or predictions of what's going to happen? Since you're talking (28:36) about maybe a three to five-year timeframe for all this to play out, where do you see this all (28:42) ending up? (28:43) Well, I think historically for the biosimilars, we've got 10 years under our belt with biosimilar (28:48) history right now.
We know it takes literally at least three biosimilar competitors to get the (28:56) price down from the originator product or the reference product down to where you're seeing (29:01) really large cuts, large savings. Now, we need to maintain having three biosimilar competitors in (29:11) every one of these categories or more to maintain those large savings, or you won't see the original (29:18) price cuts, or in some of the other categories that lose competitors, prices will start rising (29:23) again. So it's going to end up being a situation where who's going to be the biosimilar manufacturers (29:31) of the future? Will it be companies, unlike an Amgen or a Pfizer or Boehringer Ingelheim, (29:38) companies that can accept lower revenues and still feel like they want to be part of the game? (29:44) Or will it be generic companies? If they receive $50 million per year in revenue on a biosimilar (29:51) and have a very large portfolio of other products, well, that sort of fits in with (29:56) their whole philosophy and strategy.