Two-thirds of plan sponsors lack a lowest net cost strategy for biosimilars. But the more important question is whether the metric itself captures the right costs. For employers in particular, it does not.
A recent industry analysis found that only 18% of employers use a lowest net cost strategy across both pharmacy and medical benefits for biosimilars, compared to 56% of health plans. The data are striking and the gap is real. Plan sponsors and employers are leaving meaningful savings on the table.
But buried in that framing is an assumption worth examining: that "lowest net cost" as currently operationalized by PBMs and benefit managers actually captures the full cost picture. It does not. The metric as applied in practice reflects pharmacy spend optimization, measured at the point of the drug transaction. What it does not capture is what happens in the medical benefit when a mandate disrupts a stable patient's therapy.
For health plans, pharmacy and medical accountability at least exist within the same organizational boundary, however imperfectly coordinated. For employers, both the pharmacy and the downstream medical spend come out of the same budget. That structural exposure makes the incomplete metric more consequential for employers than for anyone else in the system.
This analysis builds the case that a true lowest net cost biosimilar strategy requires four things: clarity on what biosimilarity actually means, a clinical distinction between treatment-naive initiation and non-medical switching in stable patients, transparency into where PBM incentives sit, and a total cost of care accounting that integrates both benefit lines. Without all four, the savings projection is partial and the risk exposure is underpriced.
The most persistent source of policy error in the biosimilar debate is the instinctive application of the generic drug mental model to biologic products. The two are not analogous, and the distinctions have direct consequences for how formulary mandates should be designed.
Bioequivalence, the standard for small-molecule generic drugs, requires that a generic release the same active ingredient into the bloodstream at the same rate and extent as the brand. Because the molecule is chemically identical, a pharmacokinetic study in healthy volunteers is typically the only human data required. The generic is a copy in the most literal sense.
Biosimilarity is a fundamentally different standard, necessitated by the nature of biologics. These are large, complex proteins produced in living cellular systems and they cannot be exactly replicated. A biosimilar is approved as "highly similar to the reference product notwithstanding minor differences in clinically inactive components," with "no clinically meaningful differences in terms of safety, purity, and potency." Demonstrating that requires a stepwise totality-of-evidence approach: extensive analytical and structural characterization, functional assays, animal toxicity studies, human pharmacokinetic and pharmacodynamic studies, clinical immunogenicity assessment, and at least one comparative efficacy trial. The biosimilar approval process is abbreviated relative to the originator biologic's pathway, not relative to generic approval. It is substantially more demanding than the generic standard.
Surveys consistently show that 2% to 25% of clinicians cannot accurately define a biosimilar, with many conflating it with generics. This knowledge gap runs in a paradoxical direction: providers tend to be more skeptical of biosimilars than of generics, despite the biosimilar pathway being more rigorous. The instinct that "do not substitute" directives at the prescribing level can resolve the issue reflects the same outdated frame. In specialty pharmacy, the PBM controls which pharmacy can fill the prescription, which products are on formulary, and in some cases private-labels the biosimilar it mandates for dispensing through its own subsidiary. A prescriber's DAW notation does not extend to the dispensing chain. The policy problem is structural, not administrative.
The biosimilar approval pathway requires more human clinical data than generic approval, yet clinician skepticism runs in the opposite direction. Formulary policy built on the generic analogy systematically misapplies the evidence base.
A second layer of confusion exists between biosimilarity and interchangeability. A biosimilar designation means the product is highly similar with no clinically meaningful differences. An interchangeability designation additionally means the product can be substituted at the pharmacy counter without prescriber intervention. Not all biosimilars carry interchangeability status, and the policy and clinical implications of each are distinct. Blurring these categories in mandate design compounds the risk.
The evidence base for biosimilar use in treatment-naive patients and the evidence base for non-medical switching in stable patients are not the same, and conflating them produces formulary strategy that is sound in one context and clinically risky in the other.
For patients initiating biologic therapy for the first time, the clinical argument for biosimilars is well-supported. The head-to-head randomized controlled trials used for biosimilar approval are conducted in treatment-naive populations and consistently demonstrate equivalent efficacy, safety, and immunogenicity. A meta-analysis of 25 RCTs involving more than 10,600 patients with rheumatoid arthritis confirmed therapeutic equivalence between biosimilar and reference TNF inhibitors, with similar rates of serious adverse events, discontinuation, and anti-drug antibody formation. Systematic reviews in psoriasis have reached similar conclusions. In this population, there is no established therapeutic relationship to disrupt, no psychological anchoring to the originator product, and the cost-savings argument is clinically uncomplicated.
Treatment-naive initiation is where biosimilar strategy should be most aggressively deployed. The clinical case is strong, the population is appropriate, and the savings are achievable without importing the risks associated with non-medical switching.
When a patient who has achieved stable disease control on an originator biologic is switched to a biosimilar purely for cost reasons, the clinical scenario changes in ways that the pharmacy spend accounting does not reflect.
The pharmacologic evidence for single switching is broadly reassuring. The NOR-SWITCH trial, a 52-week double-blind randomized noninferiority study, found that switching from originator infliximab to CT-P13 was noninferior on disease outcomes, with similar adverse event and immunogenicity rates. A large FDA-supported meta-analysis across 5,252 patients and 44 switch treatment periods found essentially no risk difference in deaths, serious adverse events, or discontinuation between switched and non-switched groups. Systematic reviews encompassing more than 14,000 patients have reached similar conclusions.
What the blinded trial data do not capture is the nocebo effect in real-world implementation. Open-label observational studies consistently report discontinuation rates in the range of 12% to 28% per year following non-medical switches, driven predominantly by subjective complaints such as pain, fatigue, and perceived disease worsening rather than objective markers of disease activity. In the BIO-SWITCH study, one quarter of patients discontinued after switching. A French retrospective study found a 13.1% nocebo rate with no corresponding changes in inflammatory markers, indicating that the discontinuations were expectation-driven rather than pharmacologically caused. These rates are not seen in blinded trials at comparable levels, strongly implicating negative expectations rather than product differences.
53% of patients who discontinued adalimumab experienced disease flare. Critically, 44% never regained remission upon retreatment. This is the downstream consequence that a pharmacy cost savings calculation does not price.
The nocebo effect is amplified by the conditions that characterize PBM-driven mandate programs: the switch is imposed rather than physician-supervised, the rationale is financial rather than clinical, and patients have no meaningful input into the decision. Real-world data show nocebo discontinuation rates as high as 33% in mandatory switching programs, compared to approximately 13% in physician-supervised transitions. The manner of implementation is itself a clinical variable.
Disease-specific risks add further dimension. In ankylosing spondylitis and related spondyloarthropathies, the 2019 joint guidelines from the American College of Rheumatology, the Spondylitis Association of America, and the Spondyloarthritis Research and Treatment Network carry a strong recommendation against mandated non-medical switching in stable patients. These conditions carry particular risk because loss of disease control can result in irreversible spinal fusion and permanent mobility impairment. The guidelines are not against biosimilars. They are against removing shared decision-making from the transition process.
In inflammatory bowel disease, real-world switching data for ustekinumab biosimilars remain limited. Approval was based on extrapolation from psoriasis trials, a scientifically valid approach, but one that adds a layer of uncertainty when a PBM mandates the switch without prescriber input in a patient who is stable and who may have limited retreatment options.
Understanding why the savings narrative persists despite the downstream cost evidence requires examining where the financial incentives sit and what they do not reward.
The three largest PBMs control approximately 80% of prescription volume in the United States. Each is now vertically integrated with group purchasing organizations, specialty pharmacies, and in some cases private-label biosimilar commercialization subsidiaries. The CVS Caremark formulary exclusion of Stelara in favor of ustekinumab biosimilars is the clearest current illustration of what this vertical integration produces. Cordavis, a CVS Health subsidiary, co-commercializes and private-labels Pyzchiva under its own brand while CVS Caremark places it as the preferred product on formulary. The PBM that mandates the switch is the same entity whose subsidiary commercializes the preferred product and collects the margin at multiple points in the supply chain.
This is not a formulary management decision in the traditional sense. It is prescriptive authority exercised without clinical responsibility. Multiple medical societies have drawn this line explicitly.
The American Academy of Dermatology states that patients who are stable on their medication should be allowed to continue that medication, and opposes financial incentive programs that prioritize payer business interests over patient safety. The National Psoriasis Foundation holds that individual treatment choices are best determined by the prescribing healthcare provider and their patient, and that non-medical switching can disrupt well-controlled disease. The American College of Gastroenterology acknowledges that while switching data are broadly reassuring, the decision should involve the prescriber.
A survey of more than 1,000 physicians found that 81% feel non-medical switching forces them to take responsibility for insurers' decisions, 85% reported increased administrative burden, and 77% felt insurer processes discouraged challenging the switch. These are not data points about biosimilar pharmacology. They are data points about a system that has transferred prescribing authority without transferring clinical accountability. The parallel to AI-assisted clinical decision support is not incidental: in both contexts, the entity whose output drives the decision bears no legal or financial responsibility for the outcome, while the clinician who signs off retains full liability. The liability architecture has not kept pace with the decision architecture.
When CVS excluded Humira from formulary in 2024, biosimilar prescriptions surged from near zero to over 25%, then dropped 12.3% the following month. Mandated adoption without prescriber engagement does not produce durable adherence.
The adalimumab experience is instructive on this point. The vertical integration model and the private-label biosimilar channel, now adopted by all three major PBMs, may pose transparency issues for payers and plan sponsors and create barriers to broader biosimilar competition rather than fostering it. The savings these arrangements generate may not fully pass through to patients or employers; they may disproportionately benefit PBM margins. Employers contracting under a lowest net cost pharmacy framework should be asking specifically where the net savings accrue and whether that destination aligns with their interests.
The structural problem underlying all of the above is this: the entity making the formulary decision optimizes pharmacy spend while bearing no financial responsibility for consequences in the medical benefit. The PBM books the drug cost savings. The employer, the health plan, or the patient absorbs the ED visits, hospitalizations, dose escalations, and treatment abandonments that follow.
The data on downstream medical costs from non-medical switching are consistent and quantified:
| Outcome | Finding | Benefit Line Affected |
|---|---|---|
| Hospitalizations | 3.6x higher in non-medical switch patients vs. continuers | Medical |
| ED visits | 5.7x higher in non-medical switch patients vs. continuers | Medical |
| Total healthcare costs | ~$4,000/patient/year increase from biologic switching | Medical |
| Healthcare resource utilization | 4-37% increase post-switch across studies | Medical |
| Treatment discontinuation (IL-17 mandate) | 27% stopped therapy entirely vs. 14% in unaffected patients | Medical + Pharmacy |
None of these costs appear in the pharmacy spend savings report. All of them appear in the medical benefit, which is managed separately and often reported separately. For employers receiving a pharmacy benefit savings summary from their PBM, the document is accurate as far as it goes. What it does not show is the downstream claim activity that was purchased by that switch decision.
The cost-shifting dynamic extends to patients in a way that undermines adherence and closes the loop back to employer medical spend. In commercial markets, biosimilar claims carry a 13% higher likelihood of nonzero out-of-pocket exposure compared to reference biologics, and annual patient out-of-pocket spending has increased following biosimilar market entry rather than decreasing. Medicare shows the opposite pattern, where biosimilar competition does reduce patient costs, because Medicare reimbursement is tied to average sales price. Commercial markets operate on rebate-based frameworks that can diverge from acquisition cost trends in ways that shift burden onto patients.
Copay accumulator adjustment programs compound this. These programs prevent manufacturer copay assistance from counting toward patient deductibles or out-of-pocket maximums, creating a cost cliff when the assistance runs out. Their measurable impact includes 233 fewer medication fills per 1,000 patients, 20% increased discontinuation, and 12% lower adherence in high-deductible plans. States that banned accumulators saw 41% to 63% reductions in patient liability, with 14% greater odds of adherence and 13% lower discontinuation risk.
Among new biologic initiators for rheumatoid arthritis, prescription abandonment was 1.3% when out-of-pocket costs were below $250 and rose to 32.7% when costs exceeded $550. Copay assistance was associated with 79% lower odds of abandonment. The plan captures the acquisition cost savings from the switch mandate. The patient absorbs the cost shift. Adherence falls. Medical spend rises on the employer's watch.
Prescription abandonment in RA climbs from 1.3% at OOP below $250 to 32.7% at OOP above $550. Benefit design that shifts cost to the patient is not a neutral administrative decision. It is a clinical outcome driver.
The Ontario mandatory biosimilar switching program reported $65.2 million in drug cost savings and acknowledged explicitly that research on clinical outcomes and broader cost implications had not yet been conducted at the time of reporting. The savings figure is real. The total cost of care accounting is incomplete. This is not a criticism of the program; it is an illustration of the measurement problem. Pharmacy savings are visible, bounded, and reportable in the near term. Medical consequences are diffuse, delayed, and attributed to clinical factors rather than to the formulary decision that preceded them.
The goal of biosimilar adoption is lower total cost of care without shifting burden to patients or externalizing costs onto the medical benefit. That goal is achievable. The current version of "lowest net cost" as operationalized by most plans does not reliably produce it. A strategy that does requires four structural corrections.
Treatment-naive patients are the appropriate primary market for biosimilar initiation. The clinical evidence is strong, the transition risks are minimal, and the savings are achievable without the nocebo and adherence complications that accompany switching stable patients. A tiered strategy that aggressively deploys biosimilars for new starts while preserving prescriber-patient shared decision-making for stable patients on established therapy captures the savings opportunity without importing the downstream risk.
The entity mandating a treatment change should bear responsibility for the total cost of care that follows. Until PBMs or plan administrators are evaluated on medical spend as well as pharmacy spend, the incentive structure will continue to optimize for the wrong metric. For employers specifically, requiring your PBM to report on medical claim trends in biosimilar-switched populations alongside pharmacy savings is a starting point. Outcomes-based contracts that tie PBM compensation to total cost of care benchmarks, not pharmacy line-item savings, are the structural solution.
When a PBM mandates a switch to its own private-label biosimilar, the savings destination is not self-evident. Employers should require disclosure of where rebates, spread, and margin land in vertically integrated arrangements. The California PBM reform enacted through Senate Bill 41, which prohibits spread pricing, requires 100% pass-through of rebates to the health plan, and limits PBM compensation to a flat disclosed fee, is the legislative model for this transparency requirement.
Biosimilar mandates that increase patient out-of-pocket exposure will produce adherence attrition that eventually increases employer medical spend. Evaluating copay accumulator policies using real-world adherence data, incorporating abandonment metrics into outcomes-based contracts, and applying value-based insurance design principles to specialty medications are the benefit design corrections that align the pharmacy and medical interests.
Biosimilars are a legitimate and important mechanism for reducing biologic costs. The pharmacologic evidence supporting their safety and efficacy is robust, particularly for treatment-naive initiation. The gap between employer adoption rates and health plan adoption rates is real and worth closing.
But the framing of biosimilar adoption as straightforwardly equivalent to cost reduction requires scrutiny. Lowest net cost on the pharmacy benefit line is not lowest net cost in the total claim. The savings that PBMs report are real within the boundary of the pharmacy transaction. The downstream costs that follow mandated non-medical switching in stable patients are equally real, measured in hospitalizations, ED visits, treatment abandonment, and adherence attrition, and they land in the medical benefit, which is the employer's other budget line.
A true lowest net cost strategy deploys biosimilars where the evidence supports it, preserves shared decision-making where clinical risk warrants it, demands transparency on where savings actually accrue, and evaluates outcomes across both benefit lines before declaring success. The data to build that strategy exist. What is missing is the organizational will to require it from the entities that control the formulary.
All views, analyses, and content presented here reflect the independent professional perspective of Erik Abel, PharmD, MBA, informed by published peer-reviewed literature and publicly available data. This analysis does not represent the views or positions of any current or former employer or affiliated organization. Nothing in this analysis constitutes legal, financial, or clinical advice.