Employers are not benefiting from lower biosimilar costs

November 12, 2024

Source Fein, A Drug Channels Institute November 4, 2024

The Drug Channels Institute (DCI) reported this week that health plans are paying hospitals substantially more than the acquisition cost for biosimilar drugs. In some instances, major health plans paid hospitals more for a biosimilar medication than they had previously paid for a brand name medication. This was published as a blog post, which is not peer reviewed.

DCI reviewed claims payment data for four national health plans and 26 cancer hospitals using a third party vendor which collected contractual fee schedule files made available by hospitals and health plans under federal transparency rules. They focused on Avastin (bevacizumab), which is an injection used to treat multiple types of cancer. There are five biosimilars available for this medication, and two of them now represent 80% of this market by volume. They compared prices paid to hospitals with the average sales price (ASP), which takes into account rebates and discounts offered to commercial health plans.

They found that the list prices of the biosimilars was between 12-23% less than the brand name medication, but hospitals received 203% more than the ASP on the brand name drug, and between 219% and 262% more than ASP on the biosimilar medications. Each health plan’s hospital payment for the same drug could range ten-fold.

Further, in about one in five cases the commercial insurers paid more for the most commonly used biosimilar, Mvasi, than the list price of the brand name drug. DCI estimates that 80% of the drug acquisition cost is retained by hospitals while 20% is revenue to the pharmaceutical companies. I believe that the cost of intermediaries such as wholesalers is likely included in that 80%.

This data analysis is far from perfect. DCI was only able to report on the price paid to the hospital and was not able to incorporate any rebates obtained from biosimilar companies. Cancer hospitals might have higher markup rates than general hospitals. Still, this demonstrates that high costs borne by health plans for biosimilar medications are, in part, due to hospital markups.

Implications for employers:

• Biosimilar costs are still lower than brand name biologic medications, although hospital markups can mean that some plan sponsors will see only a small portion of the savings.

• Employers should ask their health plans to report on the costs that they pay for biosimilars to be sure that intermediaries and hospitals are not capturing too much of the value of lower prices.

• This demonstrates the value of federal price transparency rules to identify opportunities to lower acquisition costs for employer-sponsored health plans.

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Tomorrow: The financial strain of childbirth