Benefits Strategy

Biosimilars: Reviving the Conversation Amid Shifting Market Tides

Though biosimilar approvals and utilization have increased, market dynamics have prevented employers from realizing their full cost savings potential.

March 11, 2025

In March of 2015, the first biosimilar drug was granted Food and Drug Administration (FDA) approval in the United States. The market voiced optimism at the prospect of a new class of drugs curbing specialty drug spend going forward. At launch (in the U.S.), the list price differential between biosimilar drugs and their branded counterparts is usually between 15%-35% lower,¹ but sometimes the savings may exceed 40%.²Indeed, the competition resulting from biosimilars’ introduction is estimated to have saved the U.S. health care market $56 billion from 2015 to 2022 and is projected to save over 3 times that between 2023 and 2027 as more biosimilars come to market.³

2024 marked a huge milestone for the biosimilar category, with 18 drugs approved, making up over a quarter of the total 66 now approved in the U.S.⁴ However, approval is only the first step on the long path to success. From there, biosimilars face the challenge of gaining market share from their reference products, a process that is not without obstacles. The patent expiration of the biologic Humira (2023), the largest loss of exclusivity in the history of the U.S. pharmaceuticals, immediately increased competition in the autoimmune drug class and prompted the entry of new manufacturers into the market.

Biosimilar 101

In simplest terms, a biosimilar can be viewed as a “generic” version of a brand-name biologic drug. However, contrary to what we see with traditional generics, a biosimilar drug is not an exact chemical replica. In fact, biologics and biosimilars are not generated from chemical structures at all, but rather are made within living systems (e.g., yeast, bacteria or animal cells) and are structurally much more complex than small molecule generics. Given these natural sources of origin, the biosimilar ends up being highly similar to, but not exactly the same as, its biologic reference product. This may result in minor differences in clinically inactive drug components, but “no clinically meaningful differences” in terms of drug safety, purity and potency.^5,6 Because analytical, animal and clinical studies are based on a comparison of the biosimilar to the reference product, the FDA is able to approve a biosimilar without requiring as many clinical trials as for the reference product. Essentially, the biosimilar sponsor is able to rely on the safety and efficacy work completed by the reference product’s sponsor and focus on a comparative assessment.⁷

Approved biosimilars span several therapeutic categories, including oncology, autoimmune conditions, ophthalmology, endocrinology and diabetes. The majority of early biosimilars were indicated for oncology or supportive oncology care. Because oncology drugs are often administered by a physician in a medical setting, for some time, almost all biosimilar activity was flowing through the medical benefit. The first biosimilar to flow through the pharmacy benefit, Semglee, was approved for diabetes care in 2021. It was also the first interchangeable biosimilar on the U.S. market.

Approved But Not Interchangeable?

Interchangeable status of a drug allows the pharmacy to dispense a substitute, such as a biosimilar, in place of the prescribed reference product, without obtaining a new prescription from the doctor. FDA interchangeability approval is required, separate and in addition to the FDA drug approval. In June 2024, the FDA released updated draft guidance stating that the previously recommended “switching studies” may no longer be necessary for approval, as research and experience have now shown biosimilars to be as safe and effective as their biologic counterparts. If finalized, the new guidance reduces the data burden on biosimilars applying for interchangeability and simplifies their path to approval.

Meaningful savings have also been attained in Europe, where biosimilars’ lower list prices and resulting competition delivered an estimated €30 billion in savings from 2012-2022.⁸ Adoption occurred more quickly in Europe due in part to a robust regulatory framework established in 2003.⁹ Biosimilars are seen as a favorable market development that can improve overall affordability of certain drug classes, but adoption across the globe varies widely due to local regulatory approval processes, availability and public education efforts.

Headwinds and Tailwinds to Uptake

While shifting market dynamics offer new hope for savings from biosimilars, employers should be aware that in the coming years, the same barriers that have stood in the way of uptake are still at play and will continue to remain unless action is taken.

Biosimilar adoption still faces hurdles, such as:

Formulary restrictions;
Physician and patient reluctance to change, especially if the biologic has been effective;
Lower provider reimbursement from manufacturers;
Pricing and rebate dynamics resulting in manufacturers of reference products lowering their net costs to preserve market share as competition is being introduced; and
Lack of interchangeability, preventing automatic substitution and potentially reducing prescriber confidence in the biosimilar alternative.

Because of these variables, PBMs take different approaches in how they treat biosimilar formulary placement. This can lead to confusion, with 33% of employers unsure of how their vendor partners are managing biosimilars.¹⁰ PBM formulary approach is critical though, because it can dramatically drive each biosimilar’s market share. For example, Humira biosimilars became available in January 2023. After 1 year on formularies, these biosimilar alternatives were only capturing 4% of the market, with Humira still retaining the other 96%. It wasn’t until CVS Caremark removed Humira from their largest commercial formulary in April 2024 that the biosimilars saw traction, increasing to 12% of total market share within just 4 months of CVS making the change.¹¹

At the time, CVS was unique in its exclusion approach, a firm but progressive action in favor of biosimilars and moving away from rebate-driven formularies. (Humira is a heavily rebated specialty drug.) Other PBMs opted to continue covering Humira but “prefer” the biosimilar, putting it in a formulary tier that results in a lower cost share for the member or reducing prior authorization requirements. Such formulary choices can have an impact on patient cost share, as patients sometimes pay $0 for Humira due to available manufacturer assistance. To conquer that barrier to biosimilar adoption, PBMs began offering options that charge patients $0 for the biosimilar.¹²

PBMs’ decisions on biosimilar formulary placement, clinical edits and patient services continue to evolve. Some PBMs have established biosimilar production channels through their group purchasing organization (GPO) partners, which are often wholly owned subsidiaries of the PBM’s parent company. GPOs work directly with manufacturers to commercialize or co-produce selected biosimilars. Then their related PBM can assign preferential or exclusive formulary status to those products. While this may be a way to ensure broader access and sustainable supply,¹³ the biosimilars selected for in-house production may not necessarily be the lowest cost options on the market, and it remains to be seen if this vertical integration will bring cost efficiencies to employers. Furthermore, the expansion of GPOs’ scope and influence raises a separate but related concern of reduced audit rights and capabilities and revenue transparency. This could contribute to the industry reinforcing misaligned incentives, rather than moving toward a more transparent model for the future.

In comparison, oncology biosimilars accessed through the medical benefit have done well in earning market share as a result of:

Relatively lower rebates in the oncology channel, so drug prices and net costs are more transparent;
Oncology care incorporates more value-based payment structures, so oncologists are not incentivized to prescribe a lower-value drug;
Oncology treatments are less chronic in nature, so there are more opportunities for patients to start on new medications; it is a lot more difficult to switch a satisfied patient on an anti-inflammatory drug to a different chronic medication regimen;¹⁴ and
Health plans adopting step-therapy strategies vs. parity strategies.

Biosimilars vs Specialty Generics

Biosimilars are not the first to offer relief for high-cost specialty drugs. Many drugs that PBMs designate as specialty are not biologics; rather, they are small molecule drugs, which can be chemically replicated as a generic. A significant number of generic alternatives to specialty drugs continue to be classified as specialty by PBMs instead of moving them to the generic formulary tier, giving rise to yet another drug class: “specialty generics.” Specialty generics have been around for some time but face similar adoption challenges. An evaluation of a PBM’s biosimilar formulary strategy should include questions about other generic drugs on the specialty list that are not biologics and those that have multiple alternatives, potentially paving the way for adjustments in plan design for these more nuanced drug classes and bringing about greater clarity behind how PBMs define their specialty drugs.

Patient Experience

Compared to the usual generic-for-brand substitute, swapping in the biosimilar for the biologic requires more consideration of the patient experience and investment in supporting patients undergoing such changes in their medications.

When deploying a strategy that prioritizes biosimilars, be cognizant of:

Clinical and administrative support from PBM to assist with the transition;
Ease of access through utilization management clinical edits such as step therapy and prior authorization;
Out-of-pocket costs considering formulary tier, manufacturer assistance and coupons;
Interchangeability and connection with the prescriber to obtain a new prescription; and
Patient support and education about the safety of biosimilars.

Employer Recommendations

Pricing complexities, rebates and vertical integration should not prevent plan sponsors from realizing the full cost savings potential of biosimilars. Ultimately, it will take action by all stakeholders to capitalize on the opportunities offered by biosimilars while keeping the patient’s experience in focus.

Below are actions employers can take to drive utilization of biosimilars as part of the integrated strategy centered on high-value, cost-effective care.

Leveraging Benefit Design

1 | Talk to your vendor partners about their proposed coverage of biosimilars and how they adjust the formulary status of the biologic reference product when a biosimilar alternative is launched.
2 | Ask vendors for justification for the biologic or biosimilar they have chosen to favor in their formularies, especially when there are multiple biosimilar alternatives on the market.
3 | Ask which formulary tier biosimilars will be placed in and if there will be any differentiation in utilization management for biosimilars in the same tier as their biologic referenced product.
4 | Determine how the patient’s out-of-pocket cost will change if they switch to biosimilars, incorporating copay assistance and coupon programs.
5 | Consider creating a dedicated coverage tier for biosimilars and specialty generics or offering other incentives to ensure that members are financially motivated to choose a lower-cost option.
6 | Where appropriate, ask your partners to implement a step therapy policy requiring the biosimilar to be tried first.
7 | When evaluating a biosimilar strategy in a specific country, ensure that preferred biosimilars have met proper regulatory requirements and there is sufficient supply in the local market.

Improving Patient Experience

1 | Ask your vendor partners about efforts being made to educate physicians to encourage the acceptance and adoption of biosimilars and support their patients in making the change.
2 | Determine what steps you may take with care management, communications and patient support teams to educate your members about biosimilars and their efficacy and safety. When communicating with patients, emphasize the importance of shared decision-making between the patient and the physician, allow an open channel for questions and include appropriate FDA resources as applicable.
3 | Guarantee monitoring of patients who switch to biosimilars to ensure effectiveness and reduce any concerns about side effects.

Monitoring Cost, Pricing and Contractual Arrangements

1 | Examine your health plan and PBM contracts for updated biosimilar definitions and discuss with your partners how the upcoming biosimilar launches may impact the current preferred status of the reference product on formularies.
2 | Ask your vendor partners to run a customized modeling report for all biologics for which there are biosimilars available to assess the potential for savings. Conduct reviews regularly throughout the year and at market check, particularly as more biosimilars are approved and patients come on and off medications.
3 | Talk to your vendor partners about the need for price and rebate transparency and forecasting to evaluate what portion of your rebates is attributed to drugs with biosimilar equivalents and validate which product is the lowest net cost option.
4 | Examine your health plan and PBM contracts for biosimilar definitions, as these definitions can impact which pricing and discount guarantees the PBM is attributing these products against.
5 | Evaluate how any anticipated switch to biosimilars and the resulting reduction in rebates can impact your vendor’s performance against rebate guarantees. Vendors may make mid-contract adjustments to their performance against the guarantees or correct for an unforeseen loss in rebates.
6 | Ask your partners how biosimilars will impact any existing and future value-based pricing arrangements negotiated with manufacturers or providers.

When asked about pharmacy benefit concerns, cost is employers’ most significant concern.¹⁰ Experts agree that biosimilars offer one of the greatest opportunities to reduce drug costs in meaningful ways. However, making a timely and impactful change requires collaboration among stakeholders, understanding where the barriers of adoption may exist, overcoming the inertia of the pharmaceutical market and combatting misaligned incentives. Employers have the opportunity to fully leverage the advantages biosimilars offer by adapting to the shifting market with immediacy and ensuring that a multifaceted approach puts the patient at the center of their decision-making process.