A Drug with Two Prices

Alex Brill

After 20 years, the monopoly for Abbvie’s Humira (adalimumab) has ended with the recent entry of Amgen’s biosimilar Amjevita. However, Amgen’s dual pricing strategy for its product has been raising some eyebrows. When the company launched Amjevita in January, it announced two list prices: one at a 5 percent discount to Humira’s price and a second at a 55 percent discount. Surprisingly, pharmacy benefit managers (PBMs) seem to be the focus of this pricing strategy, not Amgen.

Amjevita is the first non-insulin biosimilar available as a pharmacy benefit drug. All other existing non-insulin biosimilars are sold to and administered by physician offices and hospitals, where pricing and reimbursement structures are different. In the pharmacy benefit, drug manufacturers negotiate with PBMs for formulary placement and net price on behalf of health plans and employers.

Since Amgen announced two list prices for Amjevita, some commentators have expressed concern that PBMs will favor the higher-priced option, attracted by large rebates. Commentators’ concerns seem to arise from the fear that PBMs will keep some of the money for themselves and the harm to patients whose cost sharing is tied to the list price of the drug.

On the first point, the federal government, as the largest healthcare payer, has long been interested in how rebates are used. In 2019, the Government Accountability Office issued a report looking at the role of PBMs in Medicare Part D and concluded:

[The] data show that PBMs passed nearly all rebates received from manufacturers through to Part D plan sponsors in 2016. Part D plan sponsors reported to CMS that, of the approximately $18 billion in rebates that PBMs negotiated with pharmaceutical manufacturers that year, PBMs retained $74.3 million, or about 0.4 percent, and passed through the remaining 99.6 percent to plan sponsors.

In other words, rebates reduce the cost of health insurance. That’s a very good thing.

On the second point, it is true that the choice of the higher list price may have other consequences, even if the net prices are similar. A higher list price accompanied by a larger rebate may result in lower premiums for employers and employees but more cost sharing for patients. These tradeoffs are standard matters of benefit design but can have meaningful consequences separate from the aggregate cost of a drug. Nevertheless, the dual pricing strategy offers health plans a choice, and choices are good things too.

Ultimately, analysts and market watchers should remember to keep their eye on the bigger issue here: The first of many adalimumab biosimilars has launched, and we are in the early stages of what will likely be a robust competitive market. Manufacturers will be jockeying for market share, and PBMs will be negotiating for the best deal for their customers.