CVS Caremark Ties Decline in Its Drug Spending to Generics, Biosimilars

CVS Caremark reported a decline in drug spending for its clients in 2016, and the pharmacy benefit manager (PBM) believes unbranded drugs—generics and biosimilars—are key to the decline in drug spending, now and in the future.

The company cited the FDA’s research showing that the price of a branded drug drops most dramatically with the entry of the first few generic competitors and continues to fall incrementally as additional generic competitors are marketed. CVS noted that The RAND Corporation estimates that the entry of biosimilar products into specialty markets could reduce spending on biologics by an estimated $44.2 billion over the next decade. The United States needs to speed approvals of generics and biosimilars in order to increase competition and drive down prices, the company believes.

At the beginning of 2017, more than 4000 generic drugs were pending approval with the FDA, CVS noted. In comparison, Europe approves drugs more quickly than the United States and has 20 biosimilars on the market compared with just 4 in the United States (5 after the recent approval of adalimumab-abda). To unlock cost savings for US patients, taxpayers, and the healthcare system as a whole, the flow of generics and biosimilars must be increased, CVS Caremark stated.

Generic drugs had the largest deflationary impact on prescription drug spending for CVS Caremark in 2014, the company reported. Generic spending fell following a 1.4% increase in generic dispensing rates, along with relatively low overall inflation and falling prices for most generics. Even though fewer generics were launched in 2016, rosuvastatin (the generic for Crestor) was a major approval, the company noted. In addition, many payers have taken a more aggressive approach to promoting generics.

The approval and launch of more biosimilars in the future will also help overall prescription drug spending, especially for specialty drugs, which account for about 36% of what is spent for CVS’ PBM clients. Competition from biosimilars could help bring down prices for these expensive products, CVS Caremark stated, pointing out that although a biosimilar for adalimumab (Humira) was approved in 2016 and more adalimumab biosimilars are in the pipeline, it is expected that patent litigation will delay a launch of any competitive products in 2017.