Biosimilars and the Employer Savings Opportunity Most Plans Are Missing

When biosimilars first entered the US market, there was considerable excitement about their potential to reduce specialty drug costs. The logic was straightforward: once a biologic drug loses exclusivity and biosimilar competitors enter the market, price competition should drive costs down, the same way generic drugs reshaped the small-molecule market over decades.

The reality has been more complicated. Biosimilar adoption in the United States has been slower and more uneven than many expected, and employer health plans have been inconsistent in capturing the savings that are available. For employers with meaningful specialty drug spend, understanding why that is, and what to do about it, is one of the more impactful conversations to have about pharmacy benefit design.

What Biosimilars Are and Why They Are Different from Generics

A biosimilar is a biologic medicine that is highly similar to an already-approved reference product, with no clinically meaningful differences in safety, purity, or potency. Unlike traditional small-molecule generic drugs, which are chemically identical to the brand, biologics are large, complex molecules produced through living cell systems. That complexity means biosimilars cannot be exact copies, but they are rigorously tested to demonstrate equivalence.

The FDA approval standard for biosimilars is demanding. A biosimilar that earns FDA designation as interchangeable, a higher bar than biosimilar alone, can be substituted for the reference product at the pharmacy level without requiring a new prescription in most states. This distinction matters for how plans can design their utilization management around these products.

Where the Savings Are Concentrated

The biosimilar opportunity is most significant in a handful of drug categories where the reference biologics carry some of the highest per-patient costs in a plan's specialty spend. Adalimumab, sold as Humira, is the most prominent example. The reference product held US market exclusivity for years and generated enormous annual costs for employer plans. Biosimilar competitors began entering the US market in 2023, and the price differential between the reference product and biosimilar alternatives is substantial.

Similar dynamics apply in categories covering other inflammatory conditions, oncology supportive care, and certain growth factors. Employers whose plans still have the reference biologic as the preferred option in these categories, without biosimilar step therapy or preferred placement requirements, are often leaving meaningful savings on the table.

Why Adoption Has Been Slower Than Expected

Several factors have slowed biosimilar uptake beyond what the market fundamentals would predict. One is the rebate structure. Reference biologic manufacturers have responded to biosimilar competition in some cases by offering larger rebates to PBMs and plans in exchange for maintaining preferred formulary status. When those rebates are significant, the net cost calculation can become complex, though the transparency of who captures those rebates matters enormously.

Physician and patient inertia is another factor. Prescribers who have managed patients successfully on a reference biologic are sometimes reluctant to switch, even when the biosimilar has a strong evidence base. Patient advocacy organizations funded by brand manufacturers have occasionally amplified concerns about biosimilar switching that are not supported by clinical evidence.

For employer plans, the result is that biosimilar adoption often requires active benefit design choices rather than happening automatically.

What Active Benefit Design Looks Like

Plans that are capturing biosimilar savings tend to share a few design characteristics. They place biosimilars in preferred formulary tiers with lower cost sharing than the reference product, which creates a financial incentive for members to use the biosimilar when one is available. They apply step therapy requirements for new starts on high-cost biologics, requiring a trial of the biosimilar before approving the reference product. For interchangeable biosimilars, they allow pharmacy-level substitution, which removes the need for a new prescription and reduces administrative friction.

These design choices work best when they are paired with member and provider communication. Physicians who understand the plan's biosimilar policy and the clinical evidence supporting interchangeability are better positioned to prescribe accordingly. Members who understand what biosimilars are and why the plan prefers them are less likely to push back on a switch.

Questions Worth Asking About Your Current Plan

If you are a benefits manager reviewing your specialty pharmacy spend, a few questions can help identify whether your plan is positioned to capture available biosimilar savings:

• For your highest-cost specialty drugs, is the reference biologic or the biosimilar in the preferred tier?

• Does your formulary apply step therapy for new biologic starts in categories where biosimilars are available?

• Are interchangeable biosimilars enabled for pharmacy-level substitution under your plan?

• If your PBM is receiving rebates from both the reference product manufacturer and biosimilar manufacturers, how is that affecting formulary placement decisions?

The biosimilar landscape continues to expand. Plans that build the right design infrastructure now will be positioned to capture savings from each new biosimilar entrant without needing to revisit the structure from scratch.

If you are a benefits manager or employer looking for a second opinion on your current pharmacy benefit structure, lets connect and start a conversation!

By Michael Lee, PharmD

Michael Lee, PharmD, is an independent pharmacy benefits consultant with a managed care background. He provides strategic guidance to optimize pharmacy benefit design and clinical care delivery, with expertise in formulary development, medical policy review, biosimilar strategy, Generic utilization, rebate optimization, and vendor-neutral PBM procurement.