Biosimilars: What Employers Should Know About Lower-Cost Biologic Drugs
A biosimilar is a biologic drug that the FDA has found highly similar to an already approved biologic, with no clinically meaningful differences. Whether it lowers your costs depends on your pharmacy contract and your formulary, because rebates on the original drug can make the lower-priced product look more expensive to the plan.
What a Biosimilar Is and Is Not
A Biologic Copy, Not a Generic
Biologics are made from living cells, so a biosimilar is highly similar to its reference product rather than an identical chemical copy, as a generic is.
FDA Review
The FDA approves a biosimilar only after finding no clinically meaningful difference in safety, purity and potency from the reference product.
Interchangeable Designation
Some biosimilars carry an interchangeable designation, which can allow a pharmacist to substitute them for the reference product, subject to state law.
Specialty Drugs Drive Pharmacy Cost
A Small Number of Members, a Large Share of Spend
A few members taking high-cost biologics for conditions such as rheumatoid arthritis or Crohn’s disease can account for a large share of pharmacy spend.
Competition Can Lower Price
When biosimilars enter a market, the price of the reference drug and its competitors can fall. How much of that reaches your plan depends on your contract.
Rebates Can Hide the Savings
Net Cost, Not List Price
Compare drugs on what the plan pays after rebates. A biosimilar with a lower list price can cost the plan more if the original drug carries a large rebate.
Who Keeps the Rebate
Your PBM contract decides whether rebates pass to the plan, are shared or are kept. Ask for the terms in writing.
Formulary Placement
The drug the formulary prefers drives use. If the biosimilar is excluded or sits on a higher tier, members will not use it.
Questions to Ask Your PBM and Carrier
Is a Biosimilar Preferred on the Formulary
Ask which biosimilars are covered, at what cost share, and whether members are moved to them or only offered them.
How Are Rebates and Fees Reported
Ask the PBM to show net cost by drug, including rebates and any administrative fees, for the products your members use.
What Does the Member Pay
Cost sharing, prior authorization and step therapy affect whether members accept a switch and whether care is disrupted.
Who Reviews It
Have the pharmacy contract and formulary reviewed on net cost, ideally at renewal.
Common Questions
Are biosimilars safe?
The FDA reviews each biosimilar for safety and effectiveness before approval. Members should talk to their prescriber before any switch.
Will a biosimilar always lower my plan cost?
No. Savings depend on net cost after rebates, the formulary and member use. Review your contract.
Can members be required to switch?
Plans can use formulary design and utilization rules to encourage a switch. Design them with your PBM and clinical advice, and communicate early.
Do biosimilars apply to GLP-1 drugs?
Not generally. This page is about biologics. For GLP-1 and other specialty drugs, see our separate guide.
Where These Rules Come From
U.S. Food and Drug Administration: Biosimilars
CFH are licensed insurance brokers, not attorneys or tax advisors. This page is general information, so confirm your situation with your benefits attorney or tax advisor.
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