Pharmacy Benefits Uncut

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Biosimilars can help employers reduce their drug spend, and implementing a strategy to maximize their use is key to realizing their full savings potential. This is particularly important now as drug spending is the fastest growing category of healthcare spending, and biologic spending is the fastest growing category of drug spending.

In an effort to reduce the cost of developing biosimilars and provide faster access to these therapies for patients the FDA is streamlining its criteria for their approval and taking steps to increase their uptake.

So today I’m resharing with you an updated newsletter on four key things you need to know about biosimilars and strategies to unlock the full extent of drug-spend savings they offer.

#1: What is a biosimilar?

Before we get talking about biosimilars, we need understand what a biologic drug is. Biologic drugs (often simply called biologics) are produced from cell lines of living organisms such as bacteria, plants, or animals. They are typically larger and more complex than conventional drugs (think acetaminophen, commonly known as Tylenol).

They are usually given to patients by injection or infusion and may require administration by a healthcare professional. Examples of commonly use biologics include insulins (e.g. insulin glargine sold under the brand name Insulin Lantus) and drugs to treat inflammatory conditions such as rheumatoid arthritis (e.g. adalimumab sold under the brand name Humira). Cell and gene therapies are also considered biologics (e.g. onasemnogene abeparvovec, sold under the brand name Zolgensma).

Biosimilars are biologic drugs that are highly similar to an existing biologic (often referred to as the reference biologic or originator biologic) that has already received market authorization. There are no expected differences in effectiveness or safety between a biosimilar and its reference biologic. Biosimilars were developed to reduce the cost of biologics, just as generic medications were developed to reduce the cost of branded conventional medications.

#2: How does the FDA regulate biosimiliars?

The FDA uses rigorous, specific evaluation criteria to ensure each biosimilar approved is clinically equivalent to its reference biologic, meaning it is equally effective and safe. To date these criteria have required manufacturers of biosimilars to conduct comparative effectiveness and switching studies to demonstrate clinical equivalence. But as of November 2025 the FDA announced a policy of using scientific analysis of data on safety and molecular structure to demonstrate equivalence of a biosimilar to its reference biologic in place of these burdensome studies.

The FDA is also moving away from the two-tier designation for approved biosimilars. Until now, there have been two categories of biosimilars, interchangeable and non-interchangeable ones. Those that met additional requirements were designated as interchangeable, meaning they could be substituted by a pharmacist for the reference biologic without approval of the prescriber, subject to state pharmacy regulations. Biosimilars not designated as interchangeable required approval of the prescriber before they could be substituted for the reference biologic.

This distinction between interchangeable and non-interchangeable biosimilars was a legal one originally designed to promote biosimilar uptake. However, it has led to confusion and misunderstandings among both patients and providers by creating the impression that biosimilars designated as interchangeable are more effective and safer than those not designated interchangeable. Because we now have data from many studies conducted over more than decade showing no risks of either decreased effectiveness or increased safety concerns when patients are switched from a reference biologic to a biosimilar, the FDA is doing away with the separate interchangeability designation and promoting pharmacy-level interchangeability of all biosimilars without intervention of the prescriber.

#3: How much will my pharmacy benefits plan save by increasing biosimilar uptake?

While biologics represent only 5% of all prescriptions in the US, they consume more than 50% of total drug spend, with $260 billion spent on these therapies in 2021. Spending on biologics has increased by 12.5% annually since 2017 and is likely to continue this trajectory since the drug development pipeline is dominated by biologics.

Using biosimilars in place of their reference biologics could reduce costs considerably since they typically cost 40% less than reference biologics upon market entry and also exert downward price pressure on the corresponding reference biologic. But their uptake remains low, in many cases less than 30%, in the employer-sponsored insurance market for several reasons: until recently slower regulatory approval of biosimilars in the US compared to other jurisdictions (e.g. Europe), financial disincentives for adoption, and confusion around interchangeability.

Historically the European Medicines Agency (EMA) has been quicker to approve biosimilars than the FDA, taking about 1-2 years to approve a biosimilar compared to 3-4 years for the FDA. As such, 74 biosimilars were approved in the EU compared to only 42 in the US as of 2023, although beginning in 2024 the EMA and the FDA have approved about the same number of biosimilars annually. Evidence from the generic drug market indicates meaningful drug price reductions are realized when more than three generic versions of a drug are available suggesting that greater price reductions are likely to be achieved when more biosimilars are available.

PBMs often negotiate rebates from manufacturers of reference biologics in return for favourable formulary placement of their products, thereby disincentivizing use of biosimilars. This practice drives profits for PBMs and manufacturers while increasing costs for employers and plan members. A recent study found that biosimilars are subject to more formulary restrictions than reference biologics in 20% of cases, with plans more likely to restrict coverage for biosimilars used to treat the most common conditions.

As mentioned above, the two-tier FDA system for approving biosimilars has caused confusion since the clinical and legal interpretations of interchangeability are often conflated. This has led to the incorrect perception by some providers that only biosimilars designated as interchangeable by the FDA can be used in place of the reference biologic, likely leading to reduced uptake.

The FDA’s recent actions to streamline the biosimilars approval process and promote pharmacy-level interchangeability of all approved biosimilars aim increase uptake and further reduce costs for employers and plan members.

#4: What can employers do to increase biosimilar uptake?

You need to use a two-pronged strategy to increase biosimilar uptake.

First, you need to ensure that both prescribers and plan members have access to unbiased, evidence-based information about biosimilars. When prescribers understand that any biosimilar can be used in place of its reference biologic, either when initiating therapy or when switching patients from a reference biologic, without concerns about effectiveness or safety adoption increases greatly. It may be difficult for prescribers to obtain this type of information since manufacturers of branded biologics may be, intentionally or not, creating confusion about the effectiveness or safety of biosimilars. That’s why employers need to ensure they share accurate information with prescribers in their network, including the significant cost savings of using biosimilars in place of biologics. The same goes for plan members. Many of them may hesitate in switching to biosimilars but developing a systematic outreach program and providing factual, understandable information on the benefits of biosimilars will help alleviate concerns. Pharmacists could play an important role in these biosimilar education initiatives.

Second, you need to take control of your formulary and eliminate misaligned incentives designed to limit or delay biosimilar adoption. Make sure you use a biosimilars first strategy that is not rebate driven but rather based on achieving the lowest net price. Further incentivize biosimilar use by streamlining administrative processes for prior authorization and making them affordable for plan members by offering low or no copays. Also be sure to communicate all formulary changes to prescribers, pharmacists, and plan members.

See you in 2 weeks,

Nina

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Pharmacy Benefits Uncut is produced by Healthcare Decision Making, a consultancy that helps small and medium sized employers optimize their pharmacy benefits plan. We offer a comprehensive range of services focused on three areas: PBM procurement, ongoing management of your pharmacy benefits plan, and self-policing and oversight of your pharmacy spend. To learn more about how Healthcare Decision Making can help you, email Nina Lathia at nina.lathia@healthcaredecisionmaking.com