Biosimilar Management in the World’s Largest Integrated Delivery Network (IDN)

As it turns out, biosimilar price differentials were enough to allow for widespread adoption. One market has taken biosimilar management to the next level.

The first biosimilar product, Zarxio (filgrastim-sndz), was approved in the United States in 2015. Since then, 27 commercially available biosimilar products have come to market, with a slew prepared to launch this year, as patent settlements expire. Based on the meaningful cost differential between biosimilars and innovator products, it might have been predicted that biosimilars would be welcomed by all stakeholders in the US healthcare system. However, an array of factors has resulted in a reluctant uptake by the industry. For example, unfamiliar providers, encouraged by innovator manufacturers and higher reimbursement, have proven initially hesitant to prescribe biosimilars; therefore, financial rewards for the US healthcare system have been muted, despite the lower sticker price of biosimilars. In addition, until the approval of biosimilars for insulin glargine and now adalimumab, these products have generally been billed under medical benefits, either to CMS or insurance, resulting in provider incentivization to maintain high reimbursement for administration.

The slow uptake of biosimilars has not been consistent throughout the industry, however. Closed integrated delivery networks are more apt to adopt biosimilars than other health systems. The Veterans Health Administration (VHA) has been an industry pioneer in biosimilar adoption due to its financial structures and payer/provider relationships. The VHA also does not distinguish between medical and pharmacy benefit payment.

The VHA provides care in an integrated system constrained by a limited, congressionally approved budget; thus, the fiduciary priorities of the stakeholders in the system are aligned. One report compared utilization of products with biosimilar options at a local VHA medical center to the University of Pennsylvania Health System (UPHS) from 2015 to 2019. The report determined that the VHA utilized the infliximab biosimilar 37% more often than the UPHS hospital. While the institutional financial incentive favored the reference product, Remicade, the VHA yielded an 81% savings from utilizing the biosimilar. Additionally, the VHA observed quick transitions once the decision to prefer a biosimilar product was made.

Today, the VHA has adopted biosimilars nearly completely. Most of the preferred biosimilar products the VHA has contracted are the result of competitive bids from manufacturers that provide a price less than half the cost the originator product. These national contracts are typically only solicited when there are 2 biosimilar options available on the market, in addition to the originator. As such, it is anticipated the VHA will continue this management strategy, when the remainder of the adalimumab biosimilars launch this summer.

While the VHA formulary is typically heavily managed, products awarded national contracts are granted even more favor than a typical formulary product and are thus essentially able to achieve 1:1 exclusive use status. Currently, the VHA does not require patients on existing therapy regimens to transition to the national contract awardee; however, regional and local policy, coupled with physicians and pharmacists with heightened pharmacoeconomic awareness, has resulted in significant switching, regardless. It is likely the meaningful cost savings observed by the VHA from biosimilar adoption, combined with the rise in clinical data around biosimilar switching, will eventually result in a national policy requiring transition.

In the meantime, manufacturers of therapeutics with biosimilars on the market must be prepared to navigate a highly competitive environment to achieve the winner-take-all market of the nation’s largest integrated delivery system.

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