As AbbVie’s Humira faces copycat biologics, the biggest beneficiaries will be the middlemen negotiating and dispensing the drugs such as Cigna and CVS.
Starting next year the highest-grossing drug of all time, AbbVie ABBV -0.75%decrease; red down pointing triangle‘s Humira, will finally face competition from copycat biologics in the U.S.
Yet the makers of the complex generics known as biosimilars won’t necessarily be the biggest winners. The top beneficiaries could instead be the middlemen such as Cigna CI -1.36%decrease; red down pointing triangle and CVS Health CVS -0.84%decrease; red down pointing triangle, which will negotiate and dispense the drugs to patients.
AbbVie’s Humira—a drug used to treat diseases from rheumatoid arthritis to gut disorders—has raked in about $200 billion over its lifetime and is on pace to bring in more than $21 billion this year alone, according to data from Visible Alpha. While biosimilars have been available in Europe since 2018, a thicket of patents has shielded Humira from competition in the U.S. until 2023, when companies including Amgen and Teva Pharmaceutical TEVA -2.93%decrease; red down pointing triangle will begin rolling out versions of the medication.
While manufacturing biosimilars will be a big opportunity for other drug companies, the Food and Drug Administration has approved seven versions of the drug, meaning there will be pressure on margins as companies compete to grab a slice of the blockbuster. AbbVie itself will continue making money from Humira for several years, with annual revenue for the drug exceeding $4 billion until 2026, according to data from FactSet. The competition between biosimilar makers will benefit the U.S. consumer and taxpayer as bills start coming down for the drug. Specialty drug costs, including Humira, represent 2% of prescriptions, yet account for 50% of drug spending, according to UnitedHealth Group’s Optum Rx. Potential savings related to biosimilars could exceed $100 billion over the next five years, it said.
But the savings will also benefit pharmacy-benefit managers, or PBMs, such as Optum Rx, Cigna’s Evernorth/Express Scripts, and CVS’s Caremark, which negotiate those discounts and then provide the medication to patients through specialty pharmacies.
The key is how the drugs are administered. Biological drugs are a class of medications that are produced using a living system, such as a microorganism or plant cell. Biologics are usually taken via injection or infusion. So far, most of the 24 biosimilars approved in the U.S. are administered under the close supervision of a medical professional in a clinical setting.
But an analysis by Morgan Stanley earlier this year suggests that more than 70% of total branded sales going off patent through 2025 will be covered by pharmacy-benefit managers and dispensed directly by their specialty pharmacies to patients. As such, Morgan Stanley argues, that will place “greater influence on how demand is shaped” in the hands of pharmacy-benefit managers.
Unlike in, say, Europe, where government regulators decide what drugs to cover, for-profit pharmacy-benefit managers in the U.S. are responsible for negotiating with drug companies and deciding which ones to place in their formulary. Drug companies can win over PBMs by offering juicy rebates, or discounts from the list price. Each PBM will take a different approach in how it covers Humira biosimilars, but the common thread is that there could be a hike in earnings for the companies dispensing the drug.
United’s Optum Rx became the first PBM to disclose how it plans to transition to Humira biosimilars. Heather Cianfrocco, chief executive officer of Optum Rx, said during a conference in November that AbbVie’s drug would be offered alongside as many as three other medications next year. Optum Rx’s decision is expected to generate double-digit-percentage savings on the drug for clients next year, the company said in a statement. What went unsaid is that it will be a boon for the companies administering it, too.
WSJ Reporter: David Wainer at david.wainer@wsj.com.