Why biosimilars will fail: and what we can do about it

To the casual observer, the optimistic discussions swirling around Humira biosimilars seems as if these competitor drugs will provide long-awaited relief to the country’s drug cost problem. Unfortunately, the opposite is true; our best opportunity in a generation to break the business model that has led to drug monopolies will likely be squandered.

With $21B annual revenue, Humira is the bestselling drug in history, but it’s only 3.5% of the $600B U.S. prescription drug industry. Even if Humira and its biosimilars were given away for free, our total spending wouldn’t change much. 

Humira biosimilars have given employers and policy makers a false sense of security about impending cost relief, but all that’s happened is the health industry has once again succeeded in making us lose sight of the real problem. The unanswered question is how and why Humira became the biggest selling drug in history. If we don’t reflect on the root cause of our drug problem, we’re going to have the same hand wringing conversation five or 10 years from now, with a different set of drug names.

The root cause: an anti-competitive PBM model

In a free and fair market, the drug with the best outcomes data for each patient at the best price would win. Humira has been on the market for so long that its patents have expired and biosimilars have been available to 96% of the world’s population outside of the U.S. for years.  Humira is not the best at anything; it is just one of many inflammatory drugs with average clinical data. As proven in clinical trials, different drugs work for different people. For instance, in rheumatoid arthritis (RA) trials, only 10% of those taking Humira achieved a great response (ACR 70 score), while 76% achieved a mediocre to no response.  Fewer than 25% of patients receive a good response from the best-selling drug of all time. 

How was a monopoly created around Humira?  Rebates, the PBM model’s pay-to-play agreements, and locked out competition. Drug manufacturers pay rebates to PBMs to get preferred placement for their drugs while restricting competitors; think of a grocery store cereal section stocked with only one type of cereal.  No, this doesn’t make sense.  For a drug like Humira, with many competitive options, rebates can exceed 50% of the drug cost.  Humira has paid more rebates to PBMs than any other drug and the result is preferential positioning, a record-setting pharmaceutical blockbuster, and PBMs that continue to profit massively.  More than 75% of all specialty drug rebates come from the inflammation class and with biosimilars, this number will likely be higher than 90%. All other drug classes, such growth hormone and multiple sclerosis, only contribute 10%, while drugs in classes like oncology generally don’t pay any rebates.   

Since some Humira biosimilars will be available without a rebate, it will be possible to buy more efficiently outside of a rebate contract.  The savings arguments that PBMs have touted for years are untrue and today PBMs are providing deeper rebates while claiming nothing has really changed. To perpetuate the rebate game, it’s imperative for PBMs to control biosimilar access the exact same way as Humira, through rebates. This means inflating prices and limiting access will continue. Humira’s manufacturer, AbbVie, who has more to lose than the Big 3 PBMs, is offering even higher rebates to keep the rebate façade alive. This is how it will likely play out:

• PBMs will continue to encourage doctors to keep patients on Humira as long as possible, even when lower-cost, or more effective, therapies are available.
• To be included in formularies, biosimilar manufacturers will be forced to offer rebates, locking out biosimilar competition, inflating prices, and improving PBM profits.
• PBMs will make more money as rebates increase; therefore, they won’t encourage lower prices or switching to lower cost drugs. 
• PBMs are opposed to drug switching, and along with AbbVie, are incentivizing use of AbbVie’s successor therapies, Skyrizi and Rinvoq, so the game will remain alive for another drug generation.
• Employers who could have just said, ‘no’, will continue to pay more.

New year, same fake competition

If biosimilars don’t achieve expected adoption rates, it’s not because they didn’t deliver; it’s because the only world in which they can make a difference is one where real competition exists. In a free market, consumers would pay the lowest price for things that work and biosimilars would be a staggering success, just like generic drugs. Instead, we will continue to pay more for less.

Imagine a world where formularies didn’t exist. For RA, everyone would have access to Humira, its 10 biosimilars, and 14 therapeutic competitors. Doctors and their patients would be free to choose the right drug at the lowest cost. When one drug fails, move on to the next.  When new drugs with poor effectiveness data and high prices hit the market, no one would buy them. This is the way that it should be.

Choice and access matter for two reasons. First, doctors and their patients shouldn’t settle for a mediocre response when other drugs could achieve better results. Second, the perverse financial consequences of choosing a drug that works for a patient, but is off formulary, could lead to financial ruin. If cars were bought the same way as drugs, the Yugo would still exist, and we would pay as much for it as for better cars that start. 

The PBM-Pharma-Rebate symbiotic model also allows perversions such as TV advertising to drive doctor prescribing patterns which results in mediocre, cost-ineffective outcomes. Prescribing should be based on data: the drug’s, the individual’s, and cost, nothing else. Prescribing choices should never be limited to therapies with poorer health outcomes and higher costs when better alternatives exist. In an alternative world of free and fair competition based on outcomes, we would also have better drugs for less.

Hope is not a strategy

Humira biosimilars could have broken the PBM model, and now, they’re looking like a squandered opportunity. Regardless, the glass is still half full and we can change the future. Some organizations such as The Mark Cuban Cost Plus Drug Company are plowing ahead and trying to create a functioning, competitive marketplace for drugs based on complete, transparent pricing. We need to encourage more efforts like this instead of continuing to keep the obsolete PBM business model on life support. 

As the saying goes, “There is only one way to eat an elephant: a bite at a time.”  An excellent first bite would be to require PBM to allow employees to buy from anyone who offers therapies for less. This includes Humira biosimilars and new pharmacy models like Cost Plus Drugs. Combating the entrenched PBM model seems daunting; however, this one big idea would start the process of putting you in control of your drug spend.

We have an opportunity to change the future. Business leaders have a moral and financial obligation to their members, stakeholders, and communities to stop perpetuating a flawed system, especially when we don’t need to. Just because everyone is doing it is no reason to continue. When there’s a better path forward, business leaders should not settle for the status quo.

Pramod John is CEO of VIVIO.