While the U.S. finally had biosimilar competition for AbbVie Inc.’s Humira (adalimumab) in 2023, it may take longer than anticipated for the agents to truly have an impact. That’s one of the trends moving into 2024 that Adam J. Fein, Ph.D., CEO of Drug Channels Institute, discussed during a recent webinar. While the impact of the glucagon-like peptide 1s (GLP1s) and patient-paid prescriptions will persist, the uptake of copay offset tools is subsiding, he said during the Dec. 15 webinar, titled Drug Channels Outlook 2024. In this first of a two-part series, AIS Health highlights the first half of the trends projected by the longtime industry expert.
Impact of Humira Biosimilars May Not Be Felt Much in 2024
The long-anticipated launch of biosimilars of best-selling Humira in 2023 kicked off somewhat of a price war within the pharmacy benefit space. Nine companies launched competitors, five of them at two different price points: a high list price/high rebate agent and a low list price/low rebate agent. Of the 14 available products, seven are high list prices with about a 5% discount off Humira’s price, two are intermediate list prices with a 58% discount, and five are low list prices at an 84% average discount, he explained.
“This is one of those bizarro aspects of our pharmaceutical system that people outside the industry say, ‘People must be crazy,’ and they’re not wrong,” he said. “But what’s interesting is now we have all this competition, so…you might imagine, that all this competition would lead to a loss of market share” for the reference drug — but that hasn’t happened yet.
Two of the biggest PBMs — The Cigna Group’s Express Scripts and UnitedHealth Group’s Optum Rx — have five adalimumabs on formulary, including two low list price agents. So will there be increased uptake of the low list price versions? At least for the near future, that’s doubtful. While some smaller PBMs have been placing these agents on formulary, the dominance of the larger companies likely means that “we’re going to be looking at another year before we really see deep penetration of biosimilars,” said Fein.
GLP-1s Are Impacting Multiple Drug Channel Trends
The GLP1s made a big splash in 2023. Fein noted that in 2020, the agents were used primarily for weight loss, and they had about 16 million prescriptions per year and about 10 million that were rejected or not filled. But since then, the drugs have gained approval in indications such as type 2 diabetes and hypertension, as well as grown in use for weight loss. Last year up until November, there were more than 51 million prescriptions and 64 million rejected or not filled.
“Metabolic diseases are a serious issue, and…more and more evidence is coming out that these products aren’t just a cosmetic thing, but there are actually health care benefits,” said Fein. “So it’s going to be harder and harder [for payers] to deny access to these products.…I think 2024 is going to be the year when prior authorization battles come to the forefront because enough people are going to want these products.”
In addition, PBMs and reimbursement hubs are seeing “a big boost in profits” from these products as they help people navigate utilization management requirements. But PBMs will go beyond traditional strategies to implement weight-based approaches, such as Cigna’s EncircleRx.
“This is an opportunity,” he asserted. “This market is not just the market for the products,…but it’s a market for all the services around the products,…and it’s going to be a driver of profits for all the companies in the channel that aren’t actually selling the product.”
Impact of Patient-Paid Prescriptions Will Persist
The momentum behind patient-paid prescriptions will continue this year, whether through cash-pay claims or discount card claims, Fein contended. This will create a challenge in that people are paying for insurance but not using it on these products because they can get them cheaper outside their coverage.
These drugs are sold at “widely different prices,” which is “a fundamental dysfunction,” he stated. “There’s a lot of reasons why it happens, dealing with PBM contracting and other things, but it results in wildly different prices that aren’t even tied to the acquisition cost of the drug.”
Retail Pharmacy Shakeup Will Remain Issue
The shakeup within the retail pharmacy world likely will persist, maintained Fein. Walgreens, CVS Health and Rite Aid — the biggest retail drugstore chains — all have closed numerous stores between the second quarter of 2018 and third-quarter 2023.
“More than nine out of 10 prescriptions dispensed out of a retail pharmacy is a low-cost generic drug with an average prescription price of $20 to $25,” he explained. “There’s only so much…gross profit baked into that prescription. And you just can’t sell enough to Doritos, cigarettes and Mountain Dew in the front end to make up for the loss there.” Combine that with professional pharmacist salaries of $120,000 to $160,000 a year and low profits from agents like the GLP-1s, and “this has been a perfect storm of overpharmacy.”
As pharmacies cut hours, and pharmacists move out of the retail setting to places like hospitals and physician offices, “this is what’s led to the cost-based reimbursement momentum, essentially saying, ‘Look, the price of the pharmacist services, the clinical services, shouldn’t be tied to the market price of a product,…especially a low -price commodity.’”
Many pharmacists want to be paid at the price they acquired a drug plus a professional service fee, but “how do you actually compute that cost?”
Adoption of Copay Offset Tools Is Slowing
Specialty drugs continue to drive net spending, representing only 2% of beneficiaries but 50% of costs. As payers try to keep costs down, many are turning to specialty drug cost offset tools, such as alternative funding programs and copay accumulators and maximizers. However, he said, uptake of these tools has begun slowing for a couple of reasons.
“One, I think there’s a recognition that there are some problems with them. Two, manufacturers have woken up to this threat and have started to change the way they do things. We’ve seen the growth of debit cards. We’ve seen the growth of direct-to-patient rebates. We’ve seen changes in the eligibility criteria for different programs. We’ve seen changes in the value available for the payers to extract. So it’s been a little bit of an arms race, but it has slowed down.”
PBMs’ Profit Models Are Murky
How PBMs make money, asserted Fein, “is a subject of a lot of concern and a lot of criticism. And what I’ve observed over the years is that as the PBM’s business model, as the black box, gets opened up, there’s another little black box inside.” That model, he says, continues to evolve.
Ten or 15 years ago, the bulk of their profits came from manufacturer rebates, but following pushback from plan sponsors, much of that money is now passed onto them. Now, he said, much of the business model is based on “novel profit sources that are harder to detect, harder for the plan sponsor to see, particularly things that happen inside the specialty pharmacy.” And the vertical integration within the industry makes it even less transparent.
Several pieces of legislation have been proposed in both the Senate and the House of Representatives, with the House passing the Lower Costs, More Transparency Act (H.R.5378) last month. However, Fein noted, that bill requires PBMs “to disclose certain information to their plan sponsors. It requests the GAO to do a study, it requests MedPAC to look at vertically integrated organizations, but it doesn’t really mandate anything outside of some specific mandates for Medicaid, which is…a small part of drug spending and clearly important because it’s…taxpayer funded directly.”
But the Senate version of the bill contains some different provisions, including “banning the spread pricing in commercial markets.” A recent survey, however, found that about one-third of employers use spread pricing, so the practice may be an odd one for Congress to legislate, he said.