The world’s highest-selling drug, Humira, is facing its first competition from a copycat biosimilar. The entry of its first “generic” competitor represents a widely-anticipated test of biosimilars’ ability to increase price competition, savings, and patient access. In this piece, we briefly summarize how the new product is likely to affect markets.

Unlike most drugs, the Humira biosimilar, named Amjevita and manufactured by Amgen, was introduced at two different prices. One version is being offered with a posted price that is 5 percent lower than Humira’s current list price, and another that is 55 percent lower.

The higher priced biosimilar will surely be eligible for now-common rebates that lower ultimate prices for purchasers. This pricing arrangement mimics that of most brand drugs and appears designed to compete with Humira on familiar ground, by offering large rebates that can benefit key market actors, like Pharmacy Benefit Managers or insurers.

What is unique, however, is the option to take the lower-priced product. Like others, we assume that the low list price version of Amjevita will come with little-to-no additional rebates, meaning there will be little gap between the list and net prices.

We have previously argued in favor of policies that discourage the current rebating structure which can disadvantage patients who pay out of pocket for their drugs. Thus, the launch of a lower list price Amjevita is a notable and it is worth considering how this market is likely to evolve in the near term.

The current pricing structure of brand drugs—with high list prices and much lower post-rebate net prices—reflects current market incentives. Reimbursement for Pharmacy Benefit Managers, for example, is often a function of the list price of medications. Insurers may prefer this as well, because it implicitly offloads more costs to those taking expensive medications (through coinsurance), placing less pressure on premiums. These incentives have been particularly strong in Part D, where the program is thought to incentivize plans to prefer drugs with high list prices and large discounts. All of this has encouraged drug makers to maintain high list prices and offer large rebates, often to the detriment of patients who pay out-of-pocket costs based on the higher list price.

The Inflation Reduction Act should help lessen the preference for high list prices in Part D and there appears to be greater recognition of the distortions caused by high list prices in general. The two-tiered launch price of Amjevita adds more pressure on this current arrangement. It remains to be seen whether this is an isolated experiment, or a harbinger of a new wave of change.

For now, the potential market for the low list price version will be constrained to the modest portion of the market which does not prioritize rebates. This likely includes some integrated health systems like Kaiser which effectively act as both the insurer and provider. Evidence from the launch of an insulin product which offered a similar bifurcated pricing option suggests take up may be low in the commercial market and Medicare. Nonetheless, Amjevia will be an important test of the demand for this pricing model.

If nothing else, the availability of this two-tiered pricing option exposes the magnitude of the rebates paid on drugs and could put pressure on other drug makers to launch drugs in a similar fashion.

The other notable observation is the magnitude of the price reduction being offered by Humira’s first biosimilar. The low-list-price version of Amjevita is expected to come with no additional rebates, implying its net price is 55 percent lower than the current list price of Humira. This is lower than the current net price of Humira, which is estimated to be roughly 40 percent below its list price, after rebates are applied. It is not yet clear how much the biosimilar will initially sell at this price. In part, that depends on factors like Humira’s use of multi-year contracts and whether Humira’s net price adjusts in response to the biosimilar.

That said, it is important to recognize that this is the first launch of eight biosimilars which have been approved. The next wave of launches is anticipated this summer. We expect prices to fall with subsequent entry (particularly since some will be deemed interchangeable). It’s unlikely that prices for these biologicals will be reduced to the same magnitude seen with small molecule (pill) drugs, once those markets go generic, where pricing falls to some low increment above cost of goods. We would nonetheless expect additional price reductions as the market for Humira biosimilars becomes even more competitive.

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