Co-Branding Could Offer Better Formulary Placement, Shift From Rebating

All of the Big Three PBMs have added private-label subsidiaries into their folds that are working closely with some manufacturers. And while industry experts say that the companies offer certain benefits to the U.S. health care system overall, questions about them remain. Still, the entities could offer benefits to their pharma partners, including better formulary positioning and potentially even moving away from rebates.

Two of the companies, both based in Ireland, seem to be mainly, if not exclusively, focused on biosimilars, starting with those of AbbVie Inc.’s best-selling Humira (adalimumab).

When CVS Health Corp. unveiled Cordavis in August 2023, CVS said that the subsidiary would “work directly with manufacturers to commercialize and/or co-produce biosimilar products…for the U.S. pharmaceutical market.” So far, Cordavis has revealed that it is offering a co-branded version of Sandoz’s Humira biosimilar Hyrimoz (adalimumab-adaz) — as well as a co-branded Humira, obviously not a biosimilar but “part of [CVS’s] continued commitment to access,” said the company.

According to the website for UnitedHealth Group’s Nuvaila, which launched this year, “once a manufacturer labels and exports an FDA-compliant product, we bring it to market and move it through the distribution process…creat[ing] a sustainable life cycle for therapies.…With a steady supply of therapies, providers and their patients can trust that they have choices. Some of these options may even cost less out of pocket.” Nuvaila, says the website, is focused “on products that treat broad patient populations. Many of these products are interchangeable biosimilars, or can be offered without a new prescription.”

The company recently revealed that as of Jan. 1, 2025, UnitedHealth’s Optum Rx will partner with Amgen Inc. to offer Amjevita for Nuvaila, a low-wholesale acquisition cost (WAC) version of Humira biosimilar Amjevita (adalimumab-atto), for a $0 copay. The reference drug will remain on three of its commercial formularies but will be excluded for new patients in two of those formularies.

Also on Jan. 1, Optum Rx will offer a Nuvaila-labeled biosimilar of Stelara (ustekinumab) from Johnson & Johnson Innovative Medicine on various tiers of three of its commercial formularies for a $0 copay. In partnership with Amgen for its interchangeable Wezlana (ustekinumab-auub), Wezlana for Nuvaila will be available in both high-WAC and low-WAC versions. Stelara will remain on formulary.

The third company, which is based in the Cayman Islands, has taken a broader approach. The Cigna Group’s Quallent Pharmaceuticals Health LLC, which was established in 2021, is focused on “bring[ing] greater quality consistency and stability to our global pharmaceutical supply chain” by “sourc[ing] select pharmaceuticals from U.S. Food and Drug Administration (FDA)-approved pharmaceutical manufacturers.” The company’s website lists more than 50 oral generic agents, from blood pressure and epilepsy medications to drugs for multiple sclerosis and cancer, that it offers under the Quallent label.

The website also lists two Quallent-labeled Humira biosimilars — Alvotech and Teva Pharmaceutical Industries Ltd. affiliate Teva Pharmaceuticals’ adalimumab-ryvk (also available as Simlandi) and Boehringer Ingelheim Pharmaceuticals, Inc.’s adalimumab-adbm (also available as Cyltezo) — that Cigna’s Express Scripts is offering for $0 copays to eligible patients of Cigna’s specialty pharmacy Accredo.

The company recently revealed that it will have a similar Quallent arrangement with an unnamed Stelara biosimilar “early next year.” The new agent’s price will be more than 80% less than Stelara’s list price. “For many employers, unions, municipalities and other health plan sponsors that choose to work with Accredo as part of their specialty pharmacy network offering, this represents an opportunity for significant savings,” said Cigna’s Evernorth Health Services in a press release.

The subsidiaries have not gone unnoticed, however. In its July interim staff report on PBMs, the Federal Trade Commission (FTC) mentioned the private-labeler units as it discussed “increasing PBM concentration…and vertical integration.”

On Sept. 30, Senate Finance Committee Chair Ron Wyden (D-Ore.) and committee member Sen. Sherrod Brown (D-Ohio) sent a letter to the FTC “strongly urg[ing]” the agency to examine the business practices of Cordavis and Quallent — which the senators called “new PBM tactics that appear to create further barriers to competition and harm the ability of consumers to access lower cost prescription drugs.”

CVS/Cordavis, Evernorth/Quallent and Optum did not respond to AIS Health requests for comment.

Will More Competition Drive Down Prices?

The organizations have some advantages and disadvantages for pharma companies, industry experts told AIS Health, a division of MMIT. Similarly, while they could result in benefits for the U.S. health care system, including increased use of biosimilars, they could pose a challenge to biosimilar uptake for some manufacturers.

“All three PBM vertical expansions into the biosimilar space are sure to introduce levels of competition that will bring prices down considerably from the original reference pricing,” says Ira Studin, principal at Stellar Managed Care Consulting, LLC. “In the high-cost biologic space, given the patient volume in play, savings to the health care system can expected to be in the billions.”

He tells AIS Health, a division of MMIT, it “would not be surprising, though, that as the market in any one therapeutic space stabilizes and no new agents enter, pricing begins to creep up.”

“Co-branding a manufacturer's biosimilar with one of these market-dominant PBMs assures favorable formulary positioning and patient access terms (such as prior auth, step therapy, copay/coinsurance) relative to the reference brand and to competing biosimilars, and, in addition, develops a new revenue stream for the PBM to more fully align the interests of manufacturer and PBM,” says Elan Rubinstein, Pharm.D., principal at EB Rubinstein Associates. It could also change prescribing patterns within certain metropolitan markets that PBMs dominate.

“This same logic suggests that a biosimilar manufacturer not going this route is disadvantaged both with respect to that PBM's enrollees (because its product is not preferred and likely disadvantaged relative to competing products) and, with respect to prescribing patterns…in geographic markets in which that PBM dominates,” he adds.

Industry experts at global consulting firm Precision AQ agree that multiple biosimilar manufacturers can encourage competition, resulting in lower prices. That said, “it has been a very complicated market in which to compete. This new model provides clarity as to the competitive landscape,” say Dominic Galante, M.D., chief medical officer of the access experience team, Amy Martin, Pharm.D., vice president of the access experience team, and Rachelle Wan, senior advisor on the access experience team.

Companies like Nuvaila, Cordavis and Quallent can increase access to biosimilars for conditions like cancer and autoimmune diseases. But as reference drugs use high WAC/high rebate strategies to retain market share, it can be a struggle for those biosimilar competitors.

That market, they say, “has been very fragmented with a large number of biosimilar manufacturers bidding for a select number of positions. This has created confusion with the biosimilar manufacturers and a nonviable marketplace where product is produced with a potential to have no buyers for this inventory. While the partnership with the Big Three creates additional certainty, it does serve to reduce competitive forces. Their partnership implies three winners in a game with many players, and thus we may see a reduction in biosimilar manufacturers.”

Overall, they say, “while companies like Nuvaila, Cordavis and Quallent can drive significant benefits in terms of cost savings and access to treatment, they also introduce risk of increasing opacity of our biosimilar market and moving some of the market savings to ensure their own profitability.”

Should Companies Follow AbbVie’s Cordavis Lead?

Beyond biosimilar companies working with private-label companies, should manufacturers with products facing biosimilar competition consider a similar approach, as AbbVie has done with Cordavis?

Studin advises that manufacturers evaluate each situation, but “it does seem likely that this option should be considered as brand planning anticipates the end of patient exclusivity.” Companies would be able to maintain some market share for a longer period of time than anticipated but may have less revenue.

“Other manufacturers with products facing biosimilar competition might benefit from considering a co-branding approach similar to AbbVie’s collaboration with Cordavis,” say Galante, Martin and Wan. “This provides confidence in sales volume. Past experience has shown manufacturers that the PBMs will continue to drive the purchase prices downward, thus reducing margin for their partners — so confidence in volume at the expense of reduction in rate.”

However, says Rubinstein, manufacturers working with these subsidiaries to co-label a reference product facing biosimilar competition “strikes me as messy.…I don’t think manufacturers co-branding their reference brand with a PBM is a good idea — any more than the manufacturer getting even more firmly into bed with a PBM. That’s happened before, and it didn’t go well. Years ago, Merck thought it had a solution to its then-PBM market control problem — it purchased Medco in 1993, and then we had Merck-Medco. But that created several new problems including a conflict of interest, resolved a decade later when Merck spun off Medco.”

Ultimately, the Precision AQ consultants recommend that companies “need to carefully weigh the benefits against the potential risks and ensure that any partnership aligns with their long-term business goals.”

Could Co-Branding Go Beyond Biosimilar Market?

When asked if they can foresee manufacturers whose drugs are in a competitive space without biosimilar or generic competition contracting with one of these companies to gain a formulary foothold, potentially as a way to move away from rebates, they say that “yes, it’s quite possible.” By securing favorable formulary positioning, pharma manufacturers can get more product uptake. Companies offering cost-effective pricing will make them “attractive to PBMs and health plans looking to manage costs.”

Manufacturers also would have more leverage in payer negotiations, “potentially leading to better formulary placement and reduced reliance on rebates,” point out Galante, Martin and Wan. In addition, “companies like Cordavis are already exploring novel contracting models that focus on value-based agreements and direct pricing strategies, which can help move away from the traditional rebate system.”

“Direct contracting and co-branding can promote more transparent pricing structures, reducing the need for complex rebate arrangements,” which, in turn, reduces the administrative burden on both payers and manufacturers, “making the overall process more efficient.”

“Whether payment to the PBM is via rebate or purchasing agreements, the PBM will be harvesting value from the market — both from their customers as well as manufacturers,” they explain. “It simply moves the funds from one type of payment to another. Consideration must be made for implications around this as it relates to current agreements with customers and share of rebate or rebate guarantees, potential rebate regulations and lack of consideration of this new cash stream, as well as increased level of opacity of these PBM revenue streams.”

Ultimately, “manufacturers and PBM customers must consider their current relationships with the PBMs and assess risks associated with these new entities. As PBMs gain a foothold in this realm, it should be anticipated that increased leverage will be used to drive down costs with a very real risk that these dollars will not be shared with patients and payers.”