2022 Must Do: Review Rx Biosimilar Contract Terms

As we kick off the new year, two major issues in the prescription drug arena remain front and center – rising drug costs and PBM revenue transparency. Over the past six years or so we’ve seen some marked shifts in how PBMs make money. Less revenue is being generated from rebates as PBMs lower their risks by handing off this slice of business to newer rebate group purchasing organziations (GPOs). Unfortunately, this practice leads to even less transparency in the industry. Plan sponsors need to find creative ways like rebate audits to manage their rebates now that these GPO entities have become involved.

As revenue from rebates has declined, we’ve seen an uptick in PBM fees and costs associated with specialty pharmacies. With these now the main source of profit for PBMs, plan sponsors must manage their contracts and contract negotiations differently and stay focused on specialty drug management.

PBM gross profit by profit

An important area of opportunity in 2022 is biosimilars – a class of infusible or injectable medications that are similar to generic drugs. This summer, Semglee, a biosimilar of Lantus (which is a long-acting insulin) was brought to market with two different pricing options: A high list price with a rebate, and a lower list price. The two pricing options have led to new contracting complexities, and plan sponsors should be prepared to move quickly to manage this new approach.

In addition, in early 2023 the final patent on Humira, an injectable anti-inflammatory drug, will expire. Humira is likely the number-one drug in terms of cost for every plan sponsor. Given that Humira generates over $20 billion a year in annual revenue in the US, this will be one of the most significant patent expirations we’ve experienced. Currently there are six manufacturers approved to bring their biosimilars to market as soon as the Humira patent expires.

As we are now seeing with Semglee, current PBM contracts that are either vague or mute around this class of medication will need to be renegotiated in 2022. PBM contracts need very clear language around biosimilars, including biosimilar rebate guarantees, not only to drive value to the plan when patents expire but also to drive value back to your members and help them spend less on their medications.

Alysha Fluno
by Alysha Fluno

National Pharmacy Practice Leader

Register for Mercer US Health News to receive weekly e-mail updates.