The Inflation Reduction Act (IRA) mandated that the federal government begin to negotiate prices for high-impact medications on behalf of its Medicare beneficiaries. On August 15, the Centers for Medicare and Medicaid Services (CMS) announced the negotiated prices for the first 10 medications on its target list. The discounted prices will go into effect in January 2026.
Two biologics are on that list, ustekinumab (Stelara) and etanercept (Enbrel), both of which will be targets for biosimilar competition. The first ustekinumab biosimilars will be launched in January 2025, 12 months before the IRA price discounts are implemented. The etanercept biosimilars, the first of which was approved in 2016, will finally be available in 2029.
In CMS’s announcement detailing its negotiated prices, Stelara’s discount was 66% from a wholesale acquisition cost (WAC) of $13,836 monthly cost for the 90-mg/mL dose for inflammatory bowel disease, which is given every 8 weeks ($166,032 per year). This works out to $4,695 per month (or $56,340 per year). Let’s be frank about the first assumption: No one pays the full WAC price. According to work by Inma Hernandez, PharmD, PhD, and her colleagues, based on data from SSRI, the average discount payers received in 2021 for this product was 36%. If we use this rebating figure against the current WAC, the commercial plans, insurers, and pharmacy benefit managers were paying on average $9,131.76 per month. One qualifier: these calculations do not include the first-year induction dose, which would add a bit to the monthly and annual totals. So, what is the real additional discount that CMS negotiated for Stelara? Something on the order of 30 points. That is a significant discount.
However, the biosimilar launches of ustekinumab should undercut this amount, perhaps by a considerable amount. By mid-year 2025, there could be at least 5 biosimilar competitors on the market. The likelihood of the availability of a low-WAC price option for these biosimilars is very strong, as it is a pharmacy benefit–covered biologic with a good deal of rebate dollars tied to contracting. In other words, we expect the reference product manufacturer, Johnson & Johnson, to follow AbbVie’s playbook and offer deep rebates to match the heavy discounts (which occurred with the launch of Humira® biosimilars). We’re not predicting net price discounts as steep as those seen with adalimumab (up to 92%, achieved in the first 18 months), but we can envision discounts of 70% or more almost immediately upon launch, applying to commercial, Medicare, Medicaid, and other payers. Biosimilar entry in 2025 will thus render CMS price negotiations for Stelara moot. I believe that the discounts on this product will have fallen below 66% without CMS’s negotiations.
For Enbrel, the situation may be different. Without biosimilar competition, Hernandez and colleagues referenced a current rebate of 44.5% to payers. Based on a monthly WAC of $7,106 ($85,272/yr), the payer price today would be $3,843 per month ($47,326/yr) compared with the CMS negotiated price of 66% to $2,355 per month ($28,260/yr). That’s a 39% difference, in favor of the CMS negotiated price.
Whereas Johnson & Johnson earned $7.0 billion in US sales in 2023 on Stelara (a 9% increase from 2022), Amgen reported total 2023 US sales of Enbrel of $3.6 billion, a roughly 10% decline from 2022, and 1% utilization growth. Consider that Amgen has reported lower Enbrel revenues year after year for some time, and that cuts into the potential revenue pie for biosimilar makers when they are able to launch 5 years from now. Undoubtedly, the CMS cuts will spread to other payers, and the 2026 hit to Amgen’s US Enbrel revenues will be huge. And with only two biosimilar competitors to launch in 2029, a large, immediate biosimilar discount will be less likely. And what happens if one or both biosimilar makers elect to shelve their product for good? Under that circumstance, the payers should be thanking CMS for their help in controlling biologic costs.
The biosimilar provisions of the IRA may prevent similar issues in the future, but as we’ve outlined in the past, there are plenty of reasons for concern, on behalf of biosimilar makers. We’ll just have to see how this plays out for the next group of CMS-negotiated products.
