From The Editor | March 11, 2019

Rebates, Integrated Health Models, And Biosimilars: Employers On Lowering Costs Of Care

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By Anna Rose Welch, Editor, Biosimilar Development

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In the first of this two-part article, I shared several insights I learned from two employer organization experts (and Biosimilar Development editorial board members), Matthew Harman of Employers Health and Lauren Vela of the Pacific Business Group on Health (PBGH). At the 2019 CBI Biosimilars Summit, these two dynamos filled us in on how their organizations are educating their members on the importance of biosimilars. However, as several panels during the conference highlighted, the medical benefit — under which biologics and biosimilars are currently reimbursed — is a tricky realm to manage, especially because the tools PBMs use to manage the pharmacy benefit traditionally have not been available under the medical benefit. (Though we’re starting to see Medicare explore step-therapy in its Advantage plans, the medical benefit remains hands-off in commercial plans.) As such, Harman and Vela shared the challenges of making room for biosimilars under the medical benefit, as well as how employer groups and manufacturers could collaborate to create biosimilar educational tools.

Now, in part two, they continue to lay out the challenges rebates pose, both for employers and biosimilar uptake, as well as the increasing importance of greater integration amongst employers and health systems from both a biosimilar utilization and an overall cost savings standpoint. 

Rebates: How Employers Can Conquer Pharma’s Own Frankenstein

As this industry evolves and we set our sights on all of the ongoing policy developments, rebates remain a critical topic of discussion as it relates to all pharmaceuticals. In the employer realm, these also are one of, if not the biggest factor in formulary decisions. In fact, it can be immensely difficult for employers to prefer biosimilars, for instance, via a custom formulary because, in many cases, a health plan or PBM will emphasize how hard this will hit the employers’ rebates (and, ultimately, the payers’ rebates as well). This reliance on rebates often leads to a disconnect between an employer’s HR directors and the stakeholders that may want to see biosimilars preferred on the formulary.

According to Harman, this roadblock will take some more work to dismantle, but he does see a way it can be done over time. “Demonstrating that there are actual savings if you move away from the rebate-driven strategy is essential,” he explained. “Employers don’t often want to take the risk and lead that charge. As a coalition, we’re trying to help instigate that change.”

Employers may have the option of going with several different types of formularies for the pharmacy-benefit-reimbursed side of their health plan. (Employer involvement in formulary selection for medical channel drugs is a lot less common.) There is the standard formulary which offers several brands per therapeutic class. There is the rebate-driven formulary that favors one brand and excludes all the others in the same therapeutic class. And finally, there is the generics formulary which provides the lowest net cost but offers very low rebates. When healthcare brokers look at these different formularies from a spreadsheet level, the generics formulary will likely not be appealing because, on the surface, employers will be losing a big percentage of their rebates, Harman explained. “They cannot conceptualize the switch in drug utilization,” he said. Plus, the plan participant disruption posed by the generic formulary impacts roughly 25 percent of members, compared to five to seven percent of those that have rebate-driven formularies. Between this participant disruption and the hit to the rebate, the generics formulary is a tough pill for employers to swallow (pun intended), Harman qualified.

Now, what’s important to note is that many employers do not receive rebates from health plans for the drugs that are distributed via the medical benefit — including the biosimilars and their originator biologics on the market today. (As Vela notes, even should an employer see a rebate, there is even less transparency into the percentages they are entitled to receive for medical benefit drugs as well.)

Luckily, we’re starting to see some employers moving away from rebate-driven plans in certain therapeutic classes. Employers Health has established custom strategies that demonstrate how an employer can best move away from the high-cost, rebate-driven preferred brand products to generics.  Even though an employer may lose a certain amount by turning away from rebates, by increasing the use of generics, the employer ultimately is saving money. “We had several initial employers jump on board with the clinical strategies to promote generics, and now we’re able to share those savings results,” Harman shared. “Now, we’re seeing more employers explore this strategy. Having and sharing that data is essential.” And, as he pointed out, there is room for manufacturers to enter this equation by sharing data with employer coalitions about the cost-savings achieved by switching to biosimilars.    

The End Goal: Integrated Models Responsible For Total Cost Of Care

An effort Vela holds close to her heart is PBGH’s efforts to encourage a more integrated care system that takes accountability for both clinical outcomes and total cost of care. As she shared, there are a number of health plans today striving to build and incentivize health systems to make cost-effective treatment decisions. However, there are a number of reasons that these efforts do not always succeed. As such, a handful of large employers in the country have chosen to directly contract with a health system and have a third-party administer pay claims.

“We work with these large employers a lot,” said Vela. “What we’d really like to do is look at the efforts they’ve taken to work with an accountable care organization (ACO) or a delivery system directly. We’d like to take those lessons and spread them amongst other employers so that they can incorporate some of the lessons learned — even if most of the other employers are not directly contracting.”

After all, as she pointed out, these integrated health systems have an interest in controlling total cost of care and, therefore, are more interested in implementing biosimilars. As such, employers have a better chance of shifting their populations away from the reference biologics.

Even in situations where an employer has a contract with a specific health plan, there are still opportunities for greater collaboration between employers and integrated delivery systems (IDNs). During her presentation, Vela made a call to action for members of IDNs: “In your geographies, there are employers who should be working with an integrated delivery system, either directly through a contract or just by building relations. We are telling our employers to meet with the care systems that are treating their employees.”

In addition, IDNs should also be cognizant of and reaching out to large employers in their regions to discuss how the two can better work together to lower the total cost of care — even if the employer contracts through a commercial health plan.

Vela emphasized that the level of integration she’d like to see between health systems and employers is an aspirational vision. However, greater collaboration between the different stakeholders would not only lead to smarter, value-based decision-making, but it would also enable competition to happen at the physician level, rather than requiring them to stay tied solely to a payers’ formulary.

As she described, “I want that physician to be able to say, ‘I’m accountable for outcomes and the total cost of care. For this patient, the extra money to be put on this specific treatment is worth it. This patient is going to do well on this drug, and the outcomes will result in an overall lower cost of care.’ That’s a long-term vision we should all be aiming for.”