The End of the Rebate Era? What HR Leaders and Pharmacy Consultants Need to Know About Biosimilars

The pharmacy benefit landscape is at a turning point. For over a decade, self-funded health plans have relied on rebates from brand-name specialty drugs (many of which are biologics) to offset skyrocketing pharmacy costs.

These products account for upward of 50% of drug spend for many employer plan sponsors, despite only representing about 2% of prescription drug claims. Now, regulatory pressures and the emergence of biosimilars are creating a decrease in “rebate value” throughout the pharmacy supply chain.

The imminent end of the rebate era means human resources (HR) benefits decision-makers and pharmacy consultants are about to see a paradigm shift. They will need to act quickly to adjust benefits strategies in order to maintain sustainable benefit offerings, control costs, and support employee health outcomes.

What are biosimilars?

Biosimilars are FDA-approved biologic drugs that are highly similar to existing brand-name biologics. They are typically launched at 15%–35% lower list prices than their branded counterparts, making them more affordable for plans and members without sacrificing safety or effectiveness.

While many biosimilars on the market are “interchangeable” in the same way as generic drugs (which automatically substitute for branded ones at the pharmacy), some biosimilars require provider engagement and formulary strategy changes to drive uptake.

Examples of biosimilars include:¹

In 2023 and 2024, multiple Humira biosimilars entered the market. Some are offered with rebates to compete, but others are launched as “low-list-price” options without traditional rebate structures. This helps to reduce the net cost for a health plan even with the loss of rebate value.

For example, if a plan that averaged 100 prescriptions for Humira per year shifted to a biosimilar, it could save approximately $400,000 annually in prescription costs. Still, Humira remains one of the top-selling pharmaceuticals on the market today, making up a significant portion of self-funded plans’ healthcare costs.

The impact of biosimilar introductions on rebates

For self-funded employers, biosimilar availability creates a paradox. While lower net-drug costs are the desired result, a shift away from branded products means fewer rebates flowing back to the plans.

Traditional pharmacy benefits managers (PBMs) have historically favored high-rebate originator biologics because rebates contributed to formulary position and overall plan performance metrics.

As biosimilars enter the market with competitive pricing and lower (or no) rebates, the flow of rebates may begin to dry up. For plans that have grown addicted to rebates to subsidize overall healthcare costs, this will require an adjustment—and action to adjust their plan design accordingly.

In addition, plans may want to consider adding more low-WAC and interchangeable biosimilar products to the formulary to ease access and improve overall utilization of biosimilars.

What self-funded plan sponsors should do now

• Reframe the value equation. Historically, PBM reports focused on rebates received and rebate guarantee fulfillment. Going forward, sponsors should pivot to net-cost evaluations to ensure they’re getting the most value beyond the rebates they’re used to. Key questions to ask include:
  • What is the total plan-paid cost for branded products (before and after rebate)?
  • How do biosimilar costs compare on a total and per-member basis?
  • Are members accessing the lowest net-cost option?
  • It’s likely that the total and per-member costs will be higher for branded biologics than biosimilars. If so, it’s time to reevaluate your formulary to prioritize better value for your members.
• Reassess PBM contracts. Not all PBMs are aligned on biosimilar strategies. Some PBMs may profit off plan utilization of high-cost, branded products, often leading them to disincentivize biosimilar usage. Plan sponsors should consider their PBM’s motivations, asking about their policies for biosimilar adoption and avoiding language that disincentivizes their use in contracts, especially if the PBM owns a manufacturing plant that makes biosimilar drugs. Plans should also push for transparent, pass-through pricing models that reward lower list prices—not bigger rebates.
• Enhance clinical engagement. Many prescribers remain hesitant to switch patients from branded products to biosimilars, and members may be wary of “non-brand” alternatives. A coordinated education and communications plan—developed with PBMs, specialty pharmacies, and care coordinators—can help overcome resistance to swapping branded products for biosimilars on your formulary. Examples of this include lettering campaigns, which provide a searchable formulary link to physicians, or active outreach to providers who seem reluctant to switch patients to biosimilars.
• Evaluate alternate funding models with caution. Programs offering alternate funding or manufacturer assistance, such as coupons, can offset specialty drug costs—but come with compliance, integrity, and reputational risks. Plans that have elevated high-deductible health plan (HDHP) membership rates will not likely benefit much from coupon programs when the program provider uses a shared savings model. HR leaders should fully vet these options in collaboration with legal and compliance teams, especially in light of recent state level regulatory changes that specifically impact coupons (e.g., there are 20 states requiring the value of the copay coupon to apply to patients’ deductibles or out-of-pocket accumulators).
• Start to segment your formulary. As biosimilar uptake grows, plan sponsors will benefit from formulary strategies that segment:
  • Newly diagnosed versus established patients.
  • High-value biosimilars versus legacy biologics.
  • Site-of-care optimizations for infusion therapies.

These changes will help plans control any potential new utilization by starting patients on the less expensive, high quality biosimilar options. The shift to a post-rebate, biosimilar-driven pharmacy world is underway. It will require data transparency, clinical collaboration, and contractual agility.

Especially as the availability and utilization of ultra-high-cost, long-term specialty products such as GLP-1s and cell and gene therapies grows, HR decision-makers and pharmacy consultants must embrace a more value-oriented mindset where they can. Total cost and health impact—not rebate size—should drive plan design.

Emerging unified claims systems now allow plan sponsors to see medical and pharmacy data together, enabling precision formulary decisions that automatically favor the lowest-net-cost therapy while maintaining provider choice.

Self-funded employers that act now will be better positioned to deliver sustainable, high-quality pharmacy benefits in a marketplace no longer reliant on rebate economics.

Reference

https://www.fda.gov/drugs/biosimilars/biosimilar-product-information