In early 2024, the Pharmacy Benefit Manager (“PBM”) CVS Caremark announced that beginning April 1, 2024, Humira® would be removed from its formulary and replaced with a biosimilar counterpart for most members. What was perhaps most shocking about this announcement was the fact that CVS Caremark was going to favor a biosimilar that it had partnered to produce and distribute, setting it up as one of the first PBMs to begin using its formulary to require the use of a medication that it produced. This decision marks even further vertical integration within the pharmacy benefits and drug channel space, and creates concern for patients, pharmacies and plan sponsors, alike. Further, recent data has shown that while overall biosimilar adoption remains flat, use of CVS Caremark’s co-branded biosimilar has skyrocketed, ushering in a new trend among PBMs to begin manufacturing their own drugs and requiring pharmacies to stock and dispense them.
CVS Caremark’s Biosimilar Strategy
CVS Health – the parent company to CVS Caremark – launched Cordavis in 2023, a generic drug and biosimilar “manufacturer” focused on distributing lower-cost products. Cordavis partnered with generic drugmaker, Sandoz, in late 2023 to produce and distribute a Humira® biosimilar called Hyrimoz® (adalimumab-adaz). After making this announcement, in January 2024, CVS Caremark announced that AbbVie’s Humira® would be excluded from all formularies, and that Hyrimoz® would be the only biosimilar covered on most of its formularies.
By doing this, CVS Caremark effectively became the price setter for pharmacies on both the “buy-side” and the “sell-side,” now controlling both the acquisition cost the pharmacies paid for the medication, as well as the amounts they were reimbursed under CVS Caremark plans. Furthermore, because CVS Caremark began requiring the use of Hyrimoz® through its formularies, pharmacies are effectively required to stock and dispense CVS Caremark’s product, and cannot seek to switch to a lower-cost alternative.
CVS Caremark and AbbVie’s “Authorized Biologic”
Interestingly, CVS Caremark also announced that Cordavis and AbbVie (the manufacturer of Humira®) would produce a co-branded version of Humira® that would be identical to Humira® in its formulation. The concept that a brand manufacturer allows a generics company to distribute the brand drug under a generic label is not a new idea, with such products being specifically allowed for as “authorized generics.” However, here, Cordavis’s co-branded product is a biologic, not a drug, and a clear legal pathway does not exist for what is essentially an “authorized biologic.” Moreover, it is not clear what meaningful price difference, if any, CVS Caremark seeks to drive with its “authorized biologic” version of Humira®. Even more unclear, though, is the fee structure between AbbVie and CVS Caremark. It is entirely possible that CVS Caremark/Cordavis has caused AbbVie to pay “licensing fees” over their co-branded product, in lieu of or in addition to rebates traditionally paid by brand manufacturers. This could serve as a means for CVS Caremark to now avoid passing these monies to plan sponsors as they are no longer classified as “rebates.”
Impact on Biosimilar Adoption
According to recent data from IQVIA, while monthly biosimilar prescription volume has quintupled since April 2024 (when CVS Caremark’s biosimilar policy went into effect), Cordavis co-branded Hyrimoz® accounts for over 70% of that new volume. Equally concerning is the fact that co-branded Hyrimoz® makes up nearly 90% of biosimilar fills through CVS Caremark. This data suggests that other PBMs will continue this trend and seek to expand similar biosimilar and generic manufacturing or co-branding operations, such as Express Scripts’ Quallent Pharmaceuticals and OptumRx’s Nuvaila. Further, while CVS Caremark has limited these activities to top-selling Humira® for now, it would not be unexpected if CVS Caremark expanded this strategy to other high-cost biologics, including oncology medications.
Legal Treatment of Vertical Integration Between PBMs and Drug Makers
Vertical integrations between PBMs and pharmaceutical manufacturers is not necessarily new. Such vertical integrations were the subject of Federal Trade Commission (“FTC”) scrutiny back in the 1990s when Merck acquired Medco, the largest PBM at the time. Since Merck’s drugs received preferential placement on the Medco formulary, FTC found antitrust violations and required that the PBM maintain an “open formulary” with drugs approved by an independent P&T Committee.
The vertical integration of CVS Caremark’s subsidiary, Cordavis, with the manufacturer for preferential formulary placement of their co-branded biosimilar places the PBM squarely in a conflict of interest in that it may dictate rebates, set designated volume thresholds for formulary placement, set prices for the biosimilar, drive-up patient out of pocket costs such as co-insurance and deductibles, and result in favoring products that benefit CVS Caremark over plan sponsors or patients. According to the 1999 Merck-Medco Consent Decree, “[r]eciprocal dealing, coordinated interactions, interdependent conduct and tacit collusion among the manufacturer and other vertically integrated companies will be enhanced.”
Importantly, this type of vertical integration with its risks of unfair competition and restraint of trade for the other 13 commercially available Humira® biosimilars may further de-incentivize manufacturers from developing biosimilars, and result in increased biosimilar prices, ultimately harming patients.
Biosimilar Switching and Interchangeability Laws
Distinct from the vertical integration issues, CVS Caremark’s actions require consideration of the patchwork of biosimilar substitution laws. Biosimilar substitution laws govern the conditions under which a biosimilar product can be substituted for a reference biologic drug, and typically require that such substitutions meet specific regulatory standards and that patients and healthcare providers are informed of the switch to ensure safety and efficacy. Some states require a pharmacist to obtain prescriber permission for the substitution, others require prescriber notification and some even require patient permission. Every state has unique requirements. Further, not all biosimilars are equally interchangeable.
Requiring pharmacies to dispense co-branded Hyrimoz® will create an administrative burden for pharmacists who must ensure a biosimilar is “interchangeable” before auto-substitution. According to the Purple Book, there are only two “interchangeable” biosimilars, which means that patients may be switched from a reference (brand) product to a biosimilar but not from one biosimilar to another. In addition, because the regulatory landscape for “authorized biologics” is not entirely clear or fully developed, there is even a question of whether it would be possible to switch Humira® with Cordavis’s co-branded “authorized biologic.”
How Frier Levitt Can Help
Additional “collaborations” between PBMs and biosimilar manufacturers resulting in preference and exclusivity on PBM formularies are expected in the near future and may encompass other therapeutics categories such as oncology drugs. Frier Levitt can advise pharmacies on biosimilar substitution requirements at a state and federal level. In addition, Frier Levitt can work with plan sponsors to ensure that all rebate dollars and discounts received by PBMs from manufacturers are duly passed through in accordance with contractual requirements. Finally, Frier Levitt can assist biosimilar manufacturers in navigating this complex and ever-changing drug channel. Contact us today.
