PBM Private-Label Units Are Drawing Pharma Contracting, Scrutiny

The last of the so-called Big Three PBMs recently joined the others in offering a new private-label subsidiary when it unveiled upcoming changes to its commercial formularies. Those units, which are largely focused on biosimilars and generics, may offer benefits to pharma companies partnering with them, but such arrangements also pose potential risks as the offerings are already drawing scrutiny.

On Jan. 1, 2025, UnitedHealth Group’s Optum Rx will place Nuvaila-labeled biosimilars of Stelara (ustekinumab) from Johnson & Johnson Innovative Medicine and AbbVie Inc.’s Humira (adalimumab) on various tiers of three of its commercial formularies for a zero-dollar copay. In partnership with Amgen Inc. for its interchangeable Wezlana (ustekinumab-auub), Wezlana for Nuvaila will be available in both high-wholesale acquisition cost and low-WAC versions.

Stelara will remain on formulary.

Also on Jan. 1, Optum Rx will partner with Amgen to offer Amjevita for Nuvaila, a low-WAC version of Humira biosimilar Amjevita (adalimumab-atto). As with the other formulary move, the reference drug will remain on formulary.

The moves echo the trend of the other two large PBMs launching private-label companies that often focus on biosimilars. The Cigna Group launched Quallent Pharmaceuticals in 2021, and CVS Health Corp. unveiled Cordavis last fall.

Cigna’s Evernorth is offering zero-dollar copays on two interchangeable Humira biosimilars for eligible patients of its specialty pharmacy, Accredo, via Quallent: 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).

The company recently revealed that it will have a similar Quallent arrangement with an unnamed Stelara biosimilar “early next year.”

Similarly, CVS Health Corp.’s Caremark offers a Cordavis co-branded version of Sandoz’ Humira biosimilar Hyrimoz (adalimumab-adaz) — as well as a co-branded Humira.

The subsidiaries have drawn some not-so-welcome attention, however. In its July interim staff report on PBMs, the Federal Trade Commission (FTC) mentioned the private-labeler units, which it noted are established outside of the U.S. On Sept. 17, Cigna’s Express Scripts filed a lawsuit against the FTC over the report, claiming that the “seventy-four pages of unsupported innuendo” have “harmed” its “business and reputation.”

A few days later, the FTC filed a lawsuit against the Big Three, claiming that they had “created a perverse drug rebate system that prioritizes high rebates from drug manufacturers, leading to artificially inflated insulin list prices.”

Most recently, 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.

According to Precision AQ, partnering with these firms may have its pros and cons. “While co-branding can offer significant benefits in terms of market reach, resource sharing and brand credibility, it also comes with challenges that need careful management to ensure a successful partnership,” advise 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.

Speaking with AIS Health, a division of MMIT, the global consulting firm said that co-branding with companies like Nuvaila, Cordavis and Quallent can offer several advantages and disadvantages for manufacturers such as:

Advantages

• “Expanded market reach: Co-branding allows manufacturers to tap into the established customer base and market presence of these companies, potentially reaching new and broader audiences. Access to drugs may be expanded from vertically integrated organizations who are not as heavily reliant on rebate revenue since revenue stream is coming from elsewhere. Whereas PBMs will be more inclined to add their biosimilar quicker, than when it’s from external manufacturers (e.g., Humira).
• Surety of sales: Today product is produced with no promise of volume to be sold. These partnerships provide biosimilar markets with more assured sales volume and reduce risk of nonsaleable expired inventory.
• Shared resources and expertise: Partnering with established companies can provide access to additional resources, technology and expertise, which can enhance product development and marketing efforts.
• Enhanced brand credibility: Associating with reputable companies can boost the credibility and perceived quality of the manufacturer’s products, leading to increased consumer trust and loyalty.
• Cost sharing: Co-branding can lead to shared marketing and production costs, reducing the financial burden on a single manufacturer and allowing for more efficient use of resources.
• Innovation opportunities: Collaboration can foster innovation by combining the strengths and unique capabilities of both brands, potentially leading to the development of unique and competitive products.”

Disadvantages

• “Brand dilution: There is a risk that the manufacturer’s brand identity could be overshadowed or diluted by the more dominant partner brand, potentially leading to a loss of individual brand recognition.
• Complex coordination: Co-branding requires close coordination and alignment between the partnering companies, which can be challenging and time-consuming. Misalignment in goals or strategies can lead to conflicts and inefficiencies.
• Shared risk: Any negative publicity or product issues associated with one brand can impact the reputation of the other, leading to shared risks and potential damage to both brands.
• Profit sharing: While co-branding can lead to increased sales, the profits must be shared between the partners, which might result in lower margins for the manufacturer compared to selling products independently.
• Loss of negotiation leverage: The Big Three PBMs likely have retained the ability to competitive bid, thus ultimately eroding partner of choice’s negotiation leverage.
• Regulatory and legal challenges: Co-branding agreements can involve complex legal and regulatory considerations, including intellectual property rights and compliance with industry standards, which can complicate the partnership.”

The consultants also point out that Wyden and Brown’s FTC letter may have several impacts, including:

• “Increased scrutiny: The letter itself puts these companies under the spotlight from regulators, media and the public. The FTC may initiate an investigation to assess whether their practices comply with ethical and legal standards.
• Reputation damage: Public awareness of the senators’ concerns could harm the reputation of both companies. Consumers, investors and other stakeholders may view them less favorably if they are associated with unethical practices.
• Supply chain disruptions: If the investigation reveals any wrongdoing, it could lead to disruptions in their supply chains. Companies may need to reevaluate their relationships with suppliers and partners.
• Legal consequences: Depending on the findings, legal actions or penalties may be imposed. If evidence of unethical or illegal practices emerges, affected parties (such as consumers, competitors or other businesses) could file civil lawsuits against Cordavis and Quallent. These lawsuits might seek damages or injunctive relief. Violations that create barriers to competition (e.g., community pharmacies) and harm the ability of consumers to access lower cost prescription drugs can have legislative ramifications such as Congress enacting PBM reform legislation.
• Regulatory penalties: Regulatory bodies may impose penalties if the companies are found to have violated laws or regulations. These penalties could include fines, restrictions or license revocations.
• Market perception: Investors and markets may react differently based on the investigation’s outcome. Negative findings could impact stock prices, investor confidence and overall market perception.
• Industry-wide effects: Other companies in the same industry might also be impacted based on actions taken against Cordavis and Quallent.
• Access: We want to enable versus restrict access for biosimilars to the U.S. market. These entities potentially do both. They provide a portal of access for biosimilar manufacturers which is good, but…tight partnerships to select few might provide a marketplace that successfully blocks smaller and/or new competitors beyond these partners. So good news: Patients would have access to biosimilars. Bad news: Only a select few, which would serve to disrupt a free market economy.”

In summary, they say, “the senators’ letter has the potential to significantly impact Cordavis and Quallent, affecting their operations, reputation and legal standing. The extent of these impacts will depend on the investigation’s results and subsequent actions taken by relevant authorities.”