Taking the Profit Motive Out of Life-Saving Prescription Drug Coverage
Taking the Profit Motive Out of Life-Saving Prescription Drug Coverage
Prioritizing FDA-Approved Biosimilars to Deliver Substantial Taxpayer Savings
Adopting a "Biosimilars First" policy framework requires state health plans to prioritize lower-cost, FDA-approved biosimilars over brand-name originators or “reference brand”. Modeled on traditional generic drug substitution, this policy lowers state drug spending while preserving clinical discretion through documented medical exceptions.
Biosimilars are complex biological products that undergo rigorous FDA evaluation to guarantee they share the exact same clinical safety, efficacy, and purity profiles as their reference brand. Entering the market at price discounts ranging from 50% to 90% below originator prices, biosimilars introduce critical market competition that drives down total biologic drug spending.
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Real-world policy adoption demonstrates immediate financial returns for state budgets:
- California’s CalPERS program generated $3 million in single-year savings by deploying a Biosimilars First initiative within just one health plan.
- Colorado Medicaid projected $12 million in savings from prioritizing a single biosimilar product.
Economic modeling indicates that expanded biosimilar adoption across state employee health plans could save taxpayers $871 million to $1.8 billion annually. With 118 biologics worth $234 billion losing patent protection over the next decade, updating state policies now will secure lasting fiscal relief.
Beyond pricing and access, the legislation imposes rigorous transparency and accountability requirements on PBM contracts. This includes the required disclosure of comprehensive claims-level drug cost data, coupled with annual audit rights for health plans. This lifts the veil on the "black box" of PBM economics.
States can tailor the Biosimilars First policy to balance cost-savinggoals with provider concerns:Real-world policy adoption demonstrates immediate financial returns for state budgets:
• New-Start Model: Applies biosimilar preferences exclusively to newly treated patients, allowing existing patients who are stable on reference brand therapies to remain on their current treatments.
• Comprehensive Model: Applies biosimilar preferences broadly across all covered members, maximizing immediate state savings.
Lawmakers can enact directives through annual budget language orgeneral health benefit statutes. Alternatively, state health plan boards canutilize administrative authority through request-for-proposal (RFP)specifications and PBM contract mandates. By contractually requiring stateplans to favor lower-net-cost biosimilars, policymakers eliminate middlemanrebate distortions, lower out-of-pocket costs for public workers, and alignpublic purchasing power with fiscal transparency
Would you like to contact DPAC to work on legislation in your state? Drop us a line.
