Latest Formulary Exclusions from Top PBMs Demonstrate Issues in the Drug Pricing Landscape

Question: Why would an employer or health plan place a biosimilar with a $6600 list price on its formulary rather than one for $995?

Answer: To use rebates to keep premiums low.

Welcome to what Adam J Fein, PhD, recently called the “warped incentives of [drug pricing’s] gross-to-net bubble.”¹ Reporting in Drug Channels on the 2024 formulary drug exclusions announced by the 3 largest pharmacy benefit managers (PBMs), Dr Fein noted that at least 600 drugs have been excluded by them in 2024. He used the Humira biosimilar market to illustrate the gross-to-net bubble’s impact. The Humira brand carries a $6,922 list price. Meanwhile, biosimilars range between $995 (Yusimry and adalimumab-fkjp) and $6595 (Hyrimoz).

One might assume that those 2 steeply discounted biosimilars would find their way onto at least 1 of the 3 largest PBM formularies if not all 3. But those medications appear on none of the formularies. One might also assume that Hyrimoz would not appear at all. Yet it’s on 3.

Dr Fein explains: “Sadly, these moves signal that far too many of the PBMs’ plan sponsor clients…remain addicted to rebates. The plans that adopt the higher-priced biosimilars will get bigger rebates, while patients with coinsurance and deductibles end up paying more out-of-pocket….Today, these rebates are mostly passed through by PBMs to the plan sponsors….Health plans want the rebate dollars so they can use lower premiums to compete for business.”¹

Thus, while employers and plans may use the rebates to lower premiums, those premiums will rise over time since covering higher-priced medications will require plans to cover those increased costs.

Alison Falb, health policy director, Applied Policy, Washington, DC, noted that changes to the Medicare Part D benefit under the Inflation Reduction Act change the incentives that promote this behavior regarding Part D plans. “Plans will be responsible for a greater share of costs, including once a beneficiary has met their out-of-pocket cap. This may lead to Medicare plans favoring products with lower list prices.”

F Randy Vogenberg, PhD, RPh, principal, Institute for Integrated Healthcare, Greenville, SC, pushed back on Dr Fein’s comment about where most rebate dollars go. “Due to opaque contracts, most rebates do not flow entirely to the plan sponsor, which creates an opening for breach of fiduciary responsibility. The plan sponsor pays higher drug plan costs that do not benefit beneficiaries.” A recent class action suit brought against Johnson & Johnson illustrates this point.²

Insulins are also being impacted, according to IPD Analytics.³ “The rebate amounts for the insulin products [whose prices were lowered] would substantially decrease. Insulin products that have received price reductions may be preferred by payers and patients because of a lower cost for the patient at the point of sale. Alternatively, payers may choose to conserve rebates and prefer the insulin products that did not receive price cuts. To do this, payers may rely on copay cards to lower out-of-pocket costs for patients, or…lower copays.”

Dr Fein explained that insulin price cuts “popped the gross-to-net” bubble for insulin, which gave PBMs little choice but to cover the lower-priced products, albeit differently.¹ IPD Analytics summarized each of the Big Three’s 2024 insulin exclusion policies:

• Express Scripts “appears to prefer products that did not have a price decrease”
• OptumRx “preferred insulins with price decreases”
• CVS Caremark “made no major changes to its formulary”³

Recent research demonstrates how formulary exclusions impact prescribing habits and patient choice. According to a study not yet peer-reviewed in medRxiv, a preprint archive, investigators concluded that 57% of Express Scripts’ 2023 formulary exclusions “had questionable economic or medical benefits or both for patients,” compared with 48% in 2022.⁴ Patients end up paying more or switching to a drug that is not as clinically beneficial. That last point is notable, considering the number of single-source brand medicines excluded (548 in 2022, compared with 50 in 2014).⁵

Ms Falb is not surprised by the findings. “There is ample research showing that cost for patients can lead to medication nonadherence because patients are not taking the medicine their doctor prescribed." In Dr Vogenberg’s view, “most pharmacoeconomic researchers have a vested interest in working with payers and drug manufacturers.” Other researchers “are not well-versed in health insurance real-world money flow or contract matters in pharmacy benefits.”

References

1. Fein AJ. The big three PBMs’ 2024 formulary exclusions: Biosimilar Humira battles, CVS health’s weird strategy, and the insulin shakeup. Drug Channels. Published January 9, 2024. Accessed February 5, 2024. https://www.drugchannels.net/2024/01/the-big-three-pbms-2024-formulary.html
2. Wiessner D. J&J faces class action over employees' prescription drug costs. Reuters. Published February 6, 2024. Accessed February 8, 2024. https://www.reuters.com/legal/litigation/jj-faces-class-action-over-employees-prescription-drug-costs-2024-02-05/
3. PBM drug exclusion list changes for 2024. IPD Analytics. January 2024. Accessed February 5, 2024. https://www.ipdanalytics.com/_files/ugd/96c908_a016c517306d4193b616c3ddd9a71c78.pdf
4. Chea S, Sydor A, Popovian R. Analysis of drug formulary exclusions from the patient’s perspective: 2023 update. Preprint. Posted online November 6, 2023. medRxiv. doi:10.1101/2023.11.01.23297921
5. Skyrocketing growth in PBM formulary exclusions continues to raise concerns about patient access. Xcenda. May 2022. Accessed February 6, 2022. https://www.xcenda.com/-/media/assets/xcenda/english/content-assets/white-papers-issue-briefs-studies-pdf/xcenda_pbm_exclusion_may_2022.pdf