On Wednesday August 23rd, CVS Health released information regarding an agreement with Sandoz, which will start its new venture called Cordavis in 2024. The fact that this agreement centers around Sandoz’s adalimumab biosimilar Hyrimoz® raises questions regarding the strategy and potential value of this option.
Sandoz introduced Hyrimoz in July of this year with both a high WAC and a low WAC cost option. The latter is available at an 81% discount from WAC in an unbranded product. The CVS Health announcement specifies that Sandoz will make a private label version of this low-WAC option available for its own commercialization. This brings to mind the deal between Coherus Biosciences and Mark Cuban’s Cost Plus Drug Company to market that particular adalimumab biosimilar (at 92% below the WAC price). The Cordavis announcement t also makes me consider the CivicaRx initiative, which seeks to manufacturer and distribute insulin biosimilars and other important pharmaceuticals at great discount.
CVS Health was the subject of separate news last week, in which Blue Shield of California announced that it was stripping some responsibilities from the pharmacy benefit manager (PBM) and handing them off to other partners. Notably, this did not include price and contract negotiations for specialty drugs, including biologics and biosimilars, which is one of the dominant cost centers for the health plan. And we should also mention the nearly constant pressure being exerted by Congress on the PBM industry to prove value other than rebate contracts.
Thus, it seems CVS Health, as well as other PBMs, are trying to evolve their business models. The press release from CVS Health announcing Cordavis and the Sandoz agreement (note: Sandoz did not issue a press release) stated that “Through Cordavis, CVS Health intends to develop a portfolio of products that it expects will facilitate broader access to biosimilars in the US—creating more competition that drives down prices—while encouraging investment in future products.” There are currently 9 adalimumab compounds marketed, with various formulations and pricing structures. It is unclear what CVS Health believes will be achieved with number 10, which will be introduced in 2024.
In one respect at least, the agreement may make sense for Sandoz. In its battle for marketshare and coverage of its adalimumab biosimilar (Hyrimoz and its unbranded version), a relationship of this type could have potential upside. It might also create a durable channel through which future pharmacy benefit biosimilars, like ustekinumab, can be covered.
However, the competitive pricing of Sandoz’s adalimumab biosimilar could be mostly a nonissue. According to the press release, the list price will be “more than 80% lower than the current list price of Humira.” That discount is already offered by Sandoz, Samsung Bioepis/Organon, and Coherus (though in low-concentration form only), and it likely will be offered by others before the beginning of 2024. Amgen’s initial 55% WAC discount may also need to be increased to match these existing reductions.
In the press release, Shawn Guertin, CFO of CVS Health stated, “Cordavis is a logical evolution for us and will help ensure sufficient supply of biosimilars in the US and support this market now and in the future, while ultimately improving health outcomes and reducing costs for consumers.” Whereas maintaining biosimilar supply has been voiced as an important consideration, payers don’t generally believe this is a serious concern with Sandoz. Perhaps the concern reflects some of the thinking behind the CivicaRx venture, where CVS Health believes that there will be widespread attrition in the market, which could lead to a dearth of biosimilar suppliers. In that case, ensuring an adequate biosimilar supply might be viewed as a new function of the PBM. That would indeed be novel.
I haven’t yet fully grasped the implications of this CVS Health-Sandoz arrangement. Neither CVS Health and Sandoz have responded to requests for comment by the time of publication. If there is a more strategic intent lurking behind the language, I’m not aware of it (yet).
This is a really great analysis.