Employers, Biosimilars, and Pharmaceutical Benefits: Something’s Gotta Give

This week, we asked veteran employer benefit advisor and consultant F. Randy Vogenberg, PhD, RPh, to write about the employer’s role in encouraging the use of biosimilars. Dr. Vogenbergs’ recent work with business coalitions and individual employers around the management of the medical or drug benefit, and specialty pharmaceuticals in particular, allows him to address the key reasons employers have not been early advocates for the greater biosimilar uptake.

Over the last several years, the number of biologic drugs being approved by the FDA for the treatment of chronic and rare diseases has outpaced the number of approvals for conventional small- molecule agents. Typically priced at higher than these non-biologic drugs, the cost impact of biologic drugs has become a major concern among employers with self-funded or fully funded health plans. Although employers value vendor management for these drugs, their high claims costs have prompted many employer coalitions to target biologic spending for action.

Randy Vogenberg, employers and biosimilars
F. Randy Vogenberg, PhD, RPh

The scientific issues involving the development of biosimilars were sorted out years ago, allowing the FDA to evaluate and approve biosimilars versions of branded (reference) biologic drugs. Former FDA Commissioner Scott Gottlieb, MD, was a champion of biosimilars, and that momentum has not been lost with his departure, according to Juliana Reed, MS, Vice President and Global Corporate Affairs lead for Pfizer, one of many traditionally branded companies (such as Amgen, Sandoz/Novartis, Merck) now marketing biosimilars.

Why Have Employers Not Embraced Biosimilars?

Several lessons can be learned from the marketing of generics, which received a big boost from the Hatch–Waxman Act of 1984. Provisions of that legislation spurred the development of generics while preserving incentives for innovator companies to develop new products. Hatch–Waxman kept the United States in the forefront of drug innovation but also enabled tremendous savings. Today, 89% of prescriptions filled in the US are with generic drugs. On the other hand, the value proposition for biosimilars remains mired in benefit transactions managed primarily by third-party vendors with little to no oversight by their employer clients. Employers have not strongly asserted their pharmaceutical benefit management oversight and their ability to leverage biosimilars as part of their benefit strategy. Additionally, employers have been confused early on about which biosimilars were available for use, owing to patent litigation. Opaque rebate agreements and pricing differentials have contributed to delays by employers in expanding biosimilar coverage and allowed vendors to keep the status quo.

Another key point is that aside from the above issues, employers cannot quickly make changes to benefit policies. Benefit policy alterations can require 2 to 3 years for implementation and communication, meaning that corporations may experience significant delays before biosimilars savings are registered.

Overall, these issues have led us to the current day situation, where we have lost considerable cost-saving opportunities from the introduction of biosimilars.

Right now, biologic products represent the minority of all prescriptions dispensed in the US, but a major driver of total benefit spend. And that latter figure is growing as the number and claims cost of prescriptions increase along with new biologic products approved by FDA. According to industry estimates, the US purchases 60% of all biologics globally, but 90% of all biosimilar sales occur in Europe. Typically, employers receive reports from their PBMs on top drug spending. Often, anywhere from four to seven of those most costly drugs will be biologics. However, biosimilars for these drugs have yet to achieve more than a toehold in the US marketplace. That represents a very significant savings being missed by employers and not registered on their balance sheets. Furthermore, this also results in higher out-of-pocket monies paid by their plan members.

What Employers Can Do

Since 2010, the National Employer Initiative on Specialty Drugs, led by Midwest Business Group on Health with the Institute for Integrated Healthcare, began addressing employer concerns about the costs of biologic or specialty drugs while supporting the clinical outcomes they have been able to achieve in patient care. In 2018, the Employer–Provider Interface Council (EPIC) of the Hospital Quality Foundation (HQF) was launched to assist more directly in making market change happen on a number of key benefit plan challenges, including coverage of biologics and biosimilars.

Employers can take action in their own benefit plans and support efforts by others. One way is to incentivize biosimilar uptake, by introducing policies that cut patient out-of-pocket costs, share savings with providers who prescribe biosimilars, and increase the average sales price add-on paid to physicians for biosimilar purchases. Additionally, employers can target anticompetitive practices that can cause patients and providers to lose confidence in the safety and efficacy of biosimilars despite the fact that FDA approval assures that biosimilars are as safe and efficacious as originator drugs.

Employers should refocus on changing their own benefit plan. This includes checking contracts for policy language that does not disadvantage biosimilars (or instead prefers them); auditing PBM coverage recommendations; designing biologic and biosimilar elements of coverage language in the vendor-contracting strategy; determining if site of care strategy is beneficial to your company, as many biosimilars may be prescribed by care setting; and a continuous communication strategy executed to all plan members about biosimilar coverage and what it means to the employee plan member.

From the employer’s perspective, the future of pharmacy benefit design should include at least three consistent elements: (1) formularies based on clinical efficacy, not rebates, discounts, exclusive contracts, or narrow networks; (2) drug costs based on net amounts, preferably at the time of dispensing or use; and (3) clinical outcomes balanced with drug costs to maximize savings with the highest quality of care possible. For employers as plan sponsors, the science and economics of biologic therapies illustrate clearly that doing nothing is no longer an option.


F. Randy Vogenberg, PhD, RPh, is principal of the Institute for Integrated Healthcare (IIH), Greenville, SC, where he focuses on commercial employee benefits, care delivery and outcomes research, education, and strategic benefit consulting on medical-legal, clinical, or economic issues in commercial health care. He currently serves as Co-Leader, National Employer Biologics & Specialty Initiative with the Midwest Business Group on Health. His most recent publication, Integrated Pharmacy Benefits for Specialty Pharmaceuticals: Access and Management, was published in 2019. e-book.

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