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Episode 28 – A Look at Biosimilars and the Employee Benefits Plan

We recently sat down with Michelle Wang, senior pharmacy management consultant at Milliman, one of the world’s largest independent actuarial and consulting firms. Listen as she explains the importance of biosimilars for plan sponsors, the potential savings opportunities for plan sponsors and their participants and what employers/plan sponsors can do to take advantage of these opportunities. 

Congratulations to Episode 28’s gift card giveaway winner, Sandra Elka from Enterprise Holdings. 

Mike Stull (00:09) 

Hi, and welcome to this month’s episode of the Employers Health HR Benecast, your source for expert commentary and insights on current health benefits-related news and strategies. This is your host, Mike Stull.  

We’re excited to announce our 2021 annual meeting covering forces driving benefit costs with PwC’s Health Research Institute. Attendees will hear what will drive medical cost trend in 2022 and discover key factors employers should consider when budgeting for future years. Register today to join us virtually on November 18th at employershealthco.com/ annual meeting. Again, employershealthco.com/annual meeting. 

As always, don’t forget to listen until the end for the keyword to enter to win a $50 Amazon gift card just for listening. You must enter the keyword to be eligible for the gift card drawing. So be sure to listen all the way through and enter it on the form on the HR Benecast page. 

Today’s guest is Michelle Wang, Senior Pharmacy Management Consultant at Milliman. In this role, Michelle works with healthcare organizations, employers, employer coalitions, commercial providers, and Medicare plans to produce data-driven insights and create effective strategies to increase access, decrease costs, and improve overall quality of life. So, let’s hear from Michelle. 

Michelle Wang (1:38) 

Thanks so much, Mike, for having me on this podcast. I am primarily a pharmacist by background and trained specifically in a specialty residency to get into the managed care space. I started off with a PBM, understanding the pharmacy benefits and also the spend and then moved on into consulting where I expanded my role consulting with manufacturers, state Medicaid agencies, lots of employers, really having a great understanding, an extensive understanding about pharmaceutical drugs and their costs. 

Mike Stull (2:11) 

Very good. Well, I know the reason we wanted to talk today was about biosimilars. And for the audience, maybe we can start at a very basic level in terms of, you know, what is a biosimilar? I know there’s sometimes confusion about the difference between a biosimilar and a generic. 

And then from an employer perspective, why should employers be interested in biosimilars? 

Michelle Wang (2:38) 

 Sure. So, in the world of drugs, most of my employer clients are very familiar with brands and generics. Generics are a much more simpler, smaller molecule. They can be replicated using the manufacturing process to create the same identical chemical compound. And many of our clients are very familiar with using generics and the savings for generics. And biosimilars are relatively newer. They’re slightly different from generics, given that they are usually very large proteins that are made from living cells. And so, they may not be completely identical. They’re also slightly different in terms of when biosimilars are approved, they do file to the FDA and demonstrate that it is highly similar, not identical, but highly similar. And so that’s why they’re called biosimilars. And one other thing that they have to demonstrate that is different from generics, is that there are no clinically meaningful differences. That is also one key point. 

And in terms of employers being interested, this is really one of the next opportunities that employers can leverage to drive the cost of specialty drugs down. Specialty drugs are a really large growing part of pharmacy spend. And this is one of the things beyond formularies, beyond other types of programs where now this is the focus and looking at what biosimilars can do in terms of a savings opportunity. 

Mike Stull (4:08) 

Yeah. And I know when a lot of employers think about biosimilars and what’s next, kind of one of the first questions that comes up is, how should we think about biosimilars as it relates to my contract with my PBM? And so, we talked a little bit about the differences between biosimilars and generics from just the way that they’re created and brought to market. But I’m curious in the PBM contract, how you’re seeing biosimilars defined as it relates to generics and brands. 

Michelle Wang (4:45) 

And given that most of the PBM space is controlled by three very large players, which we all know as CVS, Optum and ESI, generally the biosimilars in those types of contracts are excluded from pricing guarantees and also rebate guarantees. For quite some time, no one really knew the impact of what biosimilars would be. And so, given that there was some uncertainty, there was a reason to exclude those from the pricing and discount guarantees until a little bit more information is known. And so for those contracts, it is important for employers to kind of understand and look at their own contracts, see if that is the case in their own contracts, and make sure that if they do take upon the opportunity of biosimilars, there is like a mechanism in order for them to either receive the discounts or receive the savings and have that passed on back to them.  

Mike Stull (5:45) 

And since we’re talking a little bit about pricing in rebates and discounts and whether they’re included or not included, could you talk a little bit about how an employer should balance the difference in list prices of drugs and the discounts that they receive versus rebates? So asked another way, when you’re advising employer clients on how to take advantage of biosimilars, how do you look at quantifying that potential savings? 

Michelle Wang (6:19) 

 And that is really a major challenge for many of the employers who may not get access to the specific rebates. It is very hard to determine what the net price is after discounts and after rebates to understand what the cost of the biosimilar is. Biosimilars are a little bit different in terms of providing a lower list price, but on the flip side, then they don’t necessarily provide higher rebates for that regard. And it is important to look upon the savings that a PBM may provide and also take into account what those rebate improvements will be, or if there aren’t any improvements in the rebates, then what the improvement in the discounts will be. And both of these things will affect different stakeholders separately. So, for example, if there is a higher list price, what may happen is that this may benefit the employer, or the plan sponsor a little bit more in terms of getting a higher discount and higher rebate. However, for a member level, if there is a coinsurance that is based on that list price, using a biosimilar might result in a lower cost sharing for that member, especially if it is based on coinsurance.  

Mike Stull (7:39) 

Yeah, so it sounds like employers in making the evaluation are really going to have to get off of simply the value or the level of the rebate guarantee. They’re going to have to look at what’s this going to cost me up front as well from a list price difference perspective, and then try to net that out versus the rebate guarantees that they’re being offered by the PBM. 

Michelle Wang (8:04) 

 Yeah, I think that is definitely it, Mike. That’s been a big challenge in many of the clients that I consult to, is getting away from those rebate guarantees. 

And you have to look at the entire picture for both the list price and the net price, as well as impacts to the plan sponsor costs as well as the member costs. And that is key to gaining traction, driving a lot of competition. And the way to get lower price is really to give biosimilars a fair shot and look at adopting or evaluating it. And that’s the way that it will allow for these manufacturers to compete. The more competition that it generates, then the bigger the discounts are, the bigger the rebates that may occur from this process. 

Mike Stull (8:56) 

 Yeah, I think there’s definitely a balance from a short-term perspective and a long-term perspective. And unfortunately, when we look at the rebate guarantees, a lot of times that’s in the short-term. But certainly, we want a healthy marketplace out there. And so long-term, I have to think about how do we make sure that we’re not locking out competition from the marketplace through our formulary strategies.

I think there’s been a lot of talk around biosimilars for a while. It is, you know, we’re having this discussion now because employers are going to have more opportunities to see the impact of biosimilars coming up in the near future. So, could you talk about some of the specific opportunities that we expect in the near future? And then as a follow-up to that, and I know you’ve hit on this a little bit, you know, what are some of the things that employers should be doing now to take advantage or make sure they’re in a position to take advantage of these opportunities when they arise? 

Michelle Wang (9:54) 

 Yeah, so on this note, currently in the short-term, especially as you mentioned short-term versus long-term, in the short-term, there are about seven reference products with biosimilars that are on the market today. So, there aren’t nearly that many currently. And when employers evaluating what the savings may be, they may not be very large. However, the disruption on that end also may not be as large as well. The difference is that in the next, you know, few years, over the next 10 years, that number of biosimilars is expected to grow. And we expect that there may be around 20 reference products with biosimilars. And so, growing that to be, you know, even a substantial amount, especially in places like oncology, where there have been very few savings and very few rebates, very few discounts. 

And so that opportunity is going to get larger and larger as we go through, you know, getting more and more biosimilars approved. One of the main ones that many of my employer clients are looking at is Humira. This is one of, you know, the top drug, if not the second drug with the highest spend on the pharmacy benefit. 

And that one is expected to be around in 2023. And so, you know, one of the things that I also tell my clients is basically to start preparing and start planning. There is a lot to plan and decide for biosimilars.

With generics, that foundation or layout has always been there in terms of having a generic tier, using all of the generics available. But for biosimilars, it is going to take a little bit of time to understand what that opportunity is and also plan for it. So, two things, you know, that come to top of mind is, you know, does your contract offer that ability to capitalize on those savings and receive it? Definitely taking a look at that. 

One of the second things that, you know, that is also important is how will these be covered? So, there is currently a generic tier available for many generics, but there isn’t a biosimilar tier. So how do you incentivize patients to use biosimilars in a way that will be beneficial to both the employer as well as the employee?  

Mike Stull (12:34) 

And when you talk about incentivizing employees or patients to use the biosimilar, I think that also is a foreign concept for some employers when they are thinking about biosimilars in the same way that they think about generics, and in particular, a term that we call interchangeability. Could you talk just a little bit about interchangeability and biosimilars? 

Michelle Wang (12:52) 

 So, when we talk about interchangeability, it will be dependent on the specific biosimilar and how they get approved by the FDA. There are going to be some biosimilars that are going to get interchangeable status from the FDA, in which that interchangeability allows for that drug to be substituted by the pharmacy and would not have to go back to the doctor to get a new prescription. And some products will not have interchangeability. Some may have interchangeability, but in general, the biosimilars that have been approved so far, there is only one product on the market right now with interchangeability. So, this will make it a little bit challenging because of the fact that there may be, let’s say intake, for example, that there are six biosimilars available for this one particular product. If there is only one that is interchangeable, which one do you actually select as the employer? Do you select the one that is interchangeable? Do you select the one that is the best price? Which makes it a very complicated process in terms of figuring out what that particular biosimilar strategy may be. 

Mike Stull (14:09) 

 Awesome. Thank you for that. So, we’ve talked a little bit about savings as it relates to biosimilars. We talked about list price. And so, there’s an opportunity for lower list prices. And so, there’s an opportunity for both plans and patients. But certainly, one of the things as we talk about lower list prices for patients and specialty drugs is that there are some, you know, there are limits that are federally prescribed for plans as it relates to patient cost sharing. And so, one of the questions that we do get is, you know, even if I take a lower list price drug, it may be a lower list price for the patient for that first fill or second fill. But, you know, what’s the chance that the patient’s actually going to hit his or her deductible or his or her max out-of-pocket anyways, and the plans left with the cost? So, I guess what we’re trying to get to, and even the way that I phrased the question kind of leads to some of the complexity that you just talked about. But I think what we’re trying to get to is, I think it reemphasizes the need to look, you know, truly at trying to get to what is the lowest net cost. Because if you only look at it from the plan’s perspective, the patient suffers. If you only look at it from the patient perspective, you might miss the fact that, hey, this person based on this course of therapy is going to hit his or her max out-of-pocket anyways. And so, you know, then it’s to the detriment of the plan. 

So, I guess just any final thoughts on how do you balance the complexity of this decision? 

Michelle Wang (15:58) 

 When it comes to evaluating biosimilars and the strategy, what we recommend employers to do is to take a look at the full benefit. So not just looking at the pharmacy benefit, but also looking at the medical benefit and weighing the pros and the cons and understanding how it will impact those different stakeholders. So, one of the things that we do specifically for our clients is take a look at their specific spend on those reference products and what those biosimilars may be. 

There are some analytics that, you know, either the health plan or the PBM can assist with and understanding what the potential savings may be and have it modeled so that you can understand what those costs are to the employer versus what those costs are to the employee and really have that insight into, you know, what this impact may be if an employer were to be considering adopting a biosimilar strategy. It is very important to get insight from all those different angles so that that employer can be really prepared and help plan on what those impacts and making sure that the message also gets communicated appropriately to ensure that the program is successfully implemented as well.  

Mike Stull (17:21) 

Very good. 

Well, I think we’ve covered, you know, some of the basics around biosimilars. Obviously, as we both mentioned, a lot to take into account for employers as we move forward. Anything that we’ve missed?  

Michell Wang (17:35) 

No, I don’t think so. There’s always more to talk about biosimilars, but I think that we’ve hit on the most important key points and, you know, hopefully this helps get those conversations started because they do need to happen soon. You don’t want to wait until 2023 once it’s available and then scramble on what to do. So, you know, have those conversations very early on and start thinking about, you know, what to do with these biosimilars. 

Mike Stull (18:01) 

Very good. Well, we’re certainly appreciative of you taking the time to share your expertise with us, Michelle, and hopefully we’ll get the chance to talk again in the future. 

Michelle Wang (18:11)  

Thank you so much for having me, Mike. 

Mike Stull (18:13) 

Thanks to Michelle and Milliman for the time today. I really appreciate her emphasis on the importance of plan sponsors and their teams in monitoring the pharmacy and biosimilar pipeline and going over some strategies that employers can use in incorporating biosimilars into their overall pharmacy strategy. As these drugs become more prominent, they’re also going to account for more and more of a plan sponsor’s spend, so certainly something to keep our eye on. 

Before I share the keyword, I’d like to congratulate episode 27’s gift card winner, Natalie from Enterprise Holdings. Natalie will receive a $50 gift card for submitting the keyword from last episode. Congratulations to Natalie. 

With that, it’s time for today’s keyword. This episode’s keyword is biosimilar. If you’d like to be considered to win the gift card, be sure to submit the keyword on the Employers Health podcast page at employershealthco.com/ hrbenecast. 

Again, this month’s keyword is biosimilar. Submit the keyword now to be entered to win a $50 gift card.  

Finally, I want to thank our sponsors for helping to not only make this podcast possible, but for supporting us and providing great employee benefits-related content. 

Thanks to annual supporters, CVS Health and Elixir. Our executive supporters, Pfizer, EMGen, Greenwich Biosciences, and OptumRx. And premier supporters, Takeda, Lundbeck, Novo Nordisk, iMed, Delta Dental, HelloHeart, Quantum Health, Sanofi, and Business Solver. 

Again, don’t forget to submit your questions by completing the field on the landing page or clicking the link titled submit your questions here. And then be sure to subscribe to HRBenecast to be notified when the latest episode is out. And so, you can hear the answers to your benefits-related questions. 

There’s always something new at Employers Health, so be sure to follow us on our social media accounts, LinkedIn and Twitter to stay up to date. You can also check out our Benefits Insights blog on our website for relevant resources on trending topics. That’ll conclude this month’s episode. 

Thanks again to Michelle and Milliman for providing her insight into this constantly evolving world of pharmacy and particular biosimilars. And thank you for taking the time to listen and for your continued membership, participation, and interest in Employers Health. Be well and we’ll see you soon. 

In this podcast

Michael Stull, MBA

Employers Health | Chief Sales Officer

Since 2004, Mike Stull has been a contributor to Employers Health’s steady growth. As chief sales officer, Mike works to expand Employers Health’s client base of self-insured plan sponsors across the United States.

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