Biosimilar Makers Carve New Path Via Contracting, Partnering
Humira’s loss of exclusivity in early 2023 was expected to be a watershed moment for the US biosimilar industry. Afterall, US revenue for AbbVie’s blockbuster drug was $18 billion in 2022. And starting last year, Humira has faced competition from 10 adalimumab biosimilars, likely contributing to a $6 billion drop in revenue in 2023. Despite that decline, Humira maintained a 97% adalimumab volume share as of the end of the year. But that dominance may be starting to wane as biosimilars gain more footing and manufacturers embrace more novel partnering and contracting models.
As they launched new products, biosimilar manufacturers deployed different pricing strategies, with some companies, like Amgen Amjevita, offering both high- and low-wholesale acquisition cost (WAC) options. Low-WAC biosimilar options, roughly 55%-85% discount to Humira WAC, would likely be beneficial for patients whose coinsurance is tied to the manufacturer list price, giving them a lower copayment. Conversely, a high-WAC pricing model, generally a 5%-6% discount to Humira WAC, is utilized to address pharmacy benefit manager and health plan concerns regarding the loss of large rebates associated with Humira.
Despite these tactics, AbbVie has maintained market share by contracting aggressively with payers. Notably, Humira and adalimumab biosimilars are managed as a pharmacy benefit and under Medicare Part D, unlike other biosimilars that are physician-administered medications and often managed as a medical benefit and Medicare Part B, affording payers greater ability to manage utilization. The immunology space has historically been heavily contracted, and AbbVie prepared the loss of exclusivity in advance by securing contracts to entrench Humira in formularies. Our research indicates that Humira discounts and rebates have reached 60%-85% off the brand WAC price. AbbVie also seems to have leveraged its broader immunology portfolio with Skyrizi and Rinvoq in contracting to solidify and defend its franchise. Biosimilar manufacturers have reportedly offered net prices that are competitive with, or perhaps slightly below, that of Humira.
Biosimilar manufacturers embrace partnerships, innovative pricing
Sandoz’s approach with Hyrimoz could disrupt this dynamic. CVS Health’s new subsidiary Cordavis is working with such manufacturers as Sandoz and AbbVie to commercialize a portfolio of biosimilars for the US market. CVS removed Humira from its national commercial template and instead covers Hyrimoz across all formularies. In parallel, Cordavis’ agreement with AbbVie will supply a certain volume of co-branded Humira, which may be covered across some formularies. The share of new biosimilar prescriptions increased from less than 5% of the adalimumab market to 36% since the formulary changes took hold in April, indicating that the total volume share of biosimilars is increasing. Express Scripts is following a similar approach by launching its private label adalimumab through its sister company distributor Quallent Pharmaceuticals, which has a manufacturing agreement with Boehringer-Ingelheim.
Another noteworthy force is the partnership between Mark Cuban Cost Plus Drug Company and Coherus Biosciences to launch the biosimilar Yusimry, which is available on Cost Plus for $584 per month, compared to more than $900 at some retail pharmacies.
Our research suggests that a net price differential of greater than 20% is needed to counter the cumulative impact of AbbVie’s contracting — most prominently, Humira rebates — and trigger greater use of biosimilar versions. We expect biosimilar manufacturers to get more aggressive and, for instance, offer a 25%-30% discount to Humira’s net price, which could trigger preferred access to biosimilars compared to the brand. CVS is likely to have agreed to a net cost well below this threshold with Sandoz as part of the co-commercialization agreement for Hyrimoz.
At net price levels below $1,000 per month, some payers could consider removing an adalimumab biosimilar from the specialty tier and removing the prior authorization. As a non-preferred brand, typically tier 3, patients would have a fixed fee copayment that is often significantly less than specialty tier coinsurance. This would introduce a financial incentive to choose a biosimilar over the specialty-tiered brand, thereby driving a greater share of biosimilars. But formulary placement of biosimilars would not move off the specialty tier for all plans, even below the $1,000 net price. Some payers manage injectable biologics such as adalimumab, a relatively complex drug with some specialty handling and storage requirements, on a specialty tier regardless of net price.
Other markets will be targeted as drugs lose exclusivity
Looking ahead, we expect Humira’s market share to decline as the impact of these competitive dynamics takes effect, although the prospect of significant erosion in 2024 remains to be seen. Going forward, look for some payers to sign exclusive contracts with a biosimilar manufacturer, with the intent to minimize net price via preferred formulary positioning and potentially exclude Humira. We think that such a binary win-or-lose market is a real possibility as biosimilar manufacturers come to realize that adalimumab has a horizon and that the molecule will eventually be displaced by newer immunology drugs. As the window of opportunity to capitalize on the adalimumab market is limited, biosimilar manufacturers will likely perceive a sense of urgency and become more aggressive.
We also expect biosimilar manufacturers to get more sophisticated with marketing and contracting, as the Sandoz-Cordavis agreement showed. Additionally, as scrutiny over the rebate-driven PBM business model increases, new price transparency-focused models will emerge. This may further tilt the scale in favor of biosimilars if PBMs reconsider the relative value of rebates versus a low WAC. Finally, policy changes, including those within the Inflation Reduction Act, will continue to support more favorable reimbursement for biosimilars.
The adalimumab market provides important lessons for manufacturers of other molecules facing impending patent expiration. Manufacturers of such therapies as Stelara (ustekinumab) and Xolair (omalizumab) will likely entrench their products in formularies through pre-loss of exclusivity (LOE) portfolio contracting and following through with aggressive rebates post-LOE to defend market share. Fewer biosimilars are expected to launch for each of these reference products compared to the adalimumab market, which could indicate a more favorable environment for biosimilars to capture the originator market share.
It will be interesting to observe how the US biosimilar market develops going forward, as manufacturers and payers work to increase biosimilar adoption which will ultimately produce cost-savings for patients.