Drug pricing

Pharmaceutical companies raised the list prices of many of their drugs by about 5% to begin 2022, roughly in keeping with recent years' trend but significantly less than in the early and mid-2010s. Drugmakers typically take price increases on their products in the first part of January.

Reports from GoodRx and analysts at investment bank Raymond James estimated average list price increases of 5% and 4.5%, respectively, based on analyses of about 500 and 1,600 drugs. The non-profit 46Brooklyn, meanwhile, calculated an average hike to wholesale cost of about 4.8% across a group of nearly 460 drugs, based on data from the Elsevier Gold Standard Drug Database. These figures don't reflect the rebates and discounts offered to insurers that result in lower net prices.

"The median price increase for the drugs, and some anecdotes thus far in 2022, suggest slightly higher price increases behavior than in 2021," the 46Brooklyn report concludes. Raymond James' Elliot Wilbur, meanwhile, credited "accelerating inflationary pressures" for a slight uptick in drug price increases.

Double-digit list price increases for branded medicines in the middle of the last decade put drugmakers in political crosshairs. Under criticism and pressure, those boosts have slowed over time and by some measures, such as the U.S. Commerce Department's consumer price index, have periodically dipped below zero.

The number of drugs subject to price increases may also be on the decline, Wilbur wrote in a note to clients. So far in 2022, there have been 1,614 increases, compared with 2,711 in 2021.

That hasn't quieted calls for government to step in, however. Even though West Virginia Senator Joe Manchin has so far blocked legislation that would permit Medicare to negotiate the prices of some drugs, President Joe Biden and Democratic congressional leaders have said they'll continue to work on a compromise that would be acceptable.

"It’s safe to say that all of us — all of us, whatever our background, our age, where we live — we can agree that prescription drugs are outrageously expensive in this country," Biden said in a speech on Dec. 6, 2021.

Drugmakers, though, argue list price increases do not reflect what insurers pay because of the rebates that pharmacy benefit managers demand in order to keep drugs on their lists of covered medicines, called "formularies." Pharmacy benefit managers can also place drugs on their formularies in "preferred" positions that lower patients' out-of-pocket expenses.

Drug companies claim, too, that the gap between the list and "net," or post-rebate, prices has grown over time. According to industry analyst Adam Fein, that difference exceeded $200 billion in revenue in 2021.

Data from the consultancy Iqvia, for example, show that while list prices rose by 4.4% on a group of branded medicines in 2020, net prices actually fell by 2.9%. From 2018 to 2020, net price increases on those drugs tracked below the consumer price index, according to the company. Iqvia hasn't published figures for 2021 yet. 

Among the major January price increases tracked by GoodRx were Esperion Therapeutics' cholesterol-lowering pills Nexletol and Nexlizet at 9.9%; GlaxoSmithKline's ovarian cancer drug Zejula at 7%; Pfizer's breast cancer drug Ibrance at 6.9%; and Bayer's liver cancer drug Nexavar at 6.9%. Pfizer also raised prices for three of its vaccines, Prevnar 20, Prevnar 13 and Trumenba, by roughly 6.5%, according to GoodRx.

In addition, specialty and generic drug companies raised their list prices on range of products. Endo Pharmaceuticals took 9.9% increases on four products, Teva 9.4% increases on 24 products, and Bausch Health 7.9% increases on 11 products.

List prices of branded drugs in the U.S. rose by an average of nearly 5% last year, according to a report released in April by Iqvia, a consultancy and research services provider. After accounting for the rebates and discounts pharmaceutical companies often pay insurers, however, the average increase was 1%, the fifth year in a row that net price growth has tracked below general inflation.

Rebates and discounts on drugs don't necessarily translate to lower out-of-pocket costs for patients, and some, such as people covered by Medicare Part D or on high-deductible insurance plans, are more vulnerable to rising list prices, often referred to as a drug's wholesale acquisition cost.

Overall, Iqvia tracked a significant increase in U.S. medicine spending last year due to the market entry of COVID-19 vaccines and drugs, without which the rise in spending would have been more modest. Total out-of-pocket costs also rose, although the average amount paid per prescription fell slightly to $9.41.

Iqvia's report shows the difference in drug spending in the U.S. as measured by list prices versus net prices is large and growing, reaching $190 billion in 2021. That's up from $118 billion in 2016, an increase driven by higher rebating in competitive markets like diabetes and immune disease drugs as well as by statutory discounts on medicines dispensed under the federal 340B program.

Pharmaceutical companies, which for years have been heavily criticized for hiking the cost of their products, frequently argue that list prices don't reflect what patients pay or account for the money sent back to insurers.

The impact of rebates and discounts on drug prices isn't uniform, however, and varies widely depending on who is paying and when. List prices can still impact patients indirectly or, if they're uninsured, directly.

"These complexities mean that the price for each medicine can be unique, reflecting the drug, the insurance type, the other medicines a patient takes during the year, the time of year, the pharmacy, the coupons offered by manufacturers, and whether a patient chooses to use them," Iqvia wrote in its report.

In some markets, rebating can be extensive. Diabetes drugmakers, for instance, pay substantial rebates to insurers, with the weighted average net price calculated by Iqvia 78% below the wholesale acquisition cost last year. In immunology, an area in which pharmaceutical companies have launched many new medicines recently, the average difference between list and net prices has doubled over the past decade, to 49% in 2021.

Extensive rebating is less common for cancer drugs, however. The average net prices of those treatments were just 7% below their list prices, which can often reach six figures on an annual basis.

Patients don't always see the impact of rebates paid to insurers on a drug-by-drug basis, however, and their exposure to rising list prices varies by their insurance. For example, commercially insured patients with diabetes pay more than $35 for their insulin prescription about a fifth of the time, which Iqvia said was the result of high-deductible coverage.

Overall, about 8% of patients have annual out-of-pocket costs higher than $500, according to Iqvia. Among those on Medicare, though, 16% do, and 4% spend more than $1,500 per year out of pocket.

"For the millions of seniors who become Medicare eligible each year, the cost exposure difference as their insurance changes can be a significant shock as seniors have higher cost exposure than the commercially-insured," Iqvia wrote.

When faced with high costs, many people are also forced to "abandon" their prescription. One-third of prescriptions written that have a final cost above $75 are not picked up, Iqvia found, rising to two-thirds when final costs exceed $250.

Iqvia forecasts that list prices will continue to rise between 2% and 5% each year through 2026, while predicting that net prices will either remain flat or decline by as much as 3%. However, its estimates don't account for major macroeconomic changes, such as if inflation rises further or remains high for a prolonged period.

Iqvia's report is based on prescription and medical claims data it collects, as well as revenue figures from companies across the industry. The report defines branded, or "protected," drugs as those products that launched at least two years ago and remain patent protected.

Drugmaker acquisitions of all sizes could receive closer scrutiny in the future if the Federal Trade Commission follows the advice of experts who spoke at a two-day agency meeting on market concentration and anticompetitive conduct.

The experts, mostly economists and other antitrust regulators, warned that some drugmakers have gained unfair market power due to the breadth of their product portfolios, allowing them to negotiate for preferred or even exclusive status on insurers’ coverage lists and thereby squeeze out competitors.

Taken together with the FTC’s plans to investigate the practices of pharmacy benefit managers, the meeting signals the Biden administration may take a tougher line on monopolistic practices in an effort to spark competition and target drug pricing.

“Pharmaceutical mergers matter because pharmaceuticals matter,” FTC Commissioner Rebecca Kelly Slaughter, who initiated the agency’s broad review more than a year ago, said in a speech to begin the meeting in mid-June. “Access to medicine is already imperiled by untenable costs. When mergers diminish competition in pharmaceutical markets, the result is higher prices.”

Pharma company leaders did not speak at the meeting. But in public comments submitted to the FTC, the Pharmaceutical Research and Manufacturers of America argued the drug industry hasn’t become more concentrated, continues to innovate and is increasing research and development spending.

Any “additional processes and theories of harm will significantly and profoundly impact not just the ability of experienced pharmaceutical companies to partner up with promising science, but it could also fundamentally alter the ecosystem in which science is discovered and developed in the United States,” the group said in its letter.

The meeting covered a wide range of topics, from assessing the pharmaceutical industry’s market power to the effects of mergers and acquisitions on innovation. But its most immediate impact could come from the experts’ examination of how the FTC and other global authorities analyze and address market concentration in major M&A deals.

Regulators have tended to look only at product-level overlaps between buyers and their targets, and resolved them by forcing the merging companies to sell off some products.

For example, Celgene had to sell the psoriasis drug Otezla to Amgen to get the FTC to clear its $74 billion acquisition by Bristol Myers Squibb because of a competing treatment Bristol Myers was developing. Allergan, meanwhile, sold off a digestive drug called brazikumab so regulators would approve its $63 billion takeout by AbbVie.

Even Roche’s buyout of the gene therapy biotech Spark Therapeutics was slowed by FTC concerns the Swiss drugmaker’s hemophilia drug Hemlibra overlapped with an experimental gene therapy Spark was testing.

Experts argued that, to protect innovation, merging companies should be required to divest the product already being marketed. Robin Feldman, a law professor at the University of California San Francisco and director of its Center for Innovation, noted that of 56 pipeline products sold as part of merger settlements with the FTC, only 36 were approved and fewer had any significant sales.

Divesting an experimental drug to a biotech or spinning it out into a separate entity raises the risk of failure, as those companies could be less experienced in R&D manufacturing or marketing, experts noted. “It’s easier for a merged company to continue to develop a pipeline product,” said Arti Rai, a Duke University law professor and director of its Center for Innovation Policy.

Single-product divestitures also fail to take into account drugmakers’ broader business and the market power that can be gained by having a large number of drugs when negotiating with pharmacy benefit managers, or PBMs.

“It really becomes more important to assess the potential increase in market power from the size and the scope of the overall portfolio,” said Patricia Danzon, a professor of healthcare management at the University of Pennsylvania Wharton School. “These are already large firms with large portfolios, and they already have the potential for tying the rebates on their must-have products and access to some drugs in their portfolio to the ‘preferred’ position” in PBMs’ formularies.

Even serial acquisitions of small one-product biotechs, which typically result in less scrutiny from regulators, can result in a drugmaker amassing market power. “If a monopolist buys 100 startups, the chances are that competition has been restrained,” Feldman said.

How to forecasts whether consolidation will impede competition in the future is a harder question, the experts said. Still, Barak Richman, a Duke law and business administration professor, said regulators have been able to make similar predictions with hospital mergers based on economic models that have been accepted by the courts.

Experts and regulators at the meeting also expressed concern about protecting innovation as drugmakers acquire small biotechs. While the value of these drugmakers is boosted by the potential for a buyout or licensing deal, such transactions can become “killer acquisitions” if acquiring companies decide to shelve a biotech’s product because it would jeopardize another medicine they’re developing, too.

Deals can also have knock-on effects for other companies working on the same disease or drug types.

“Protecting innovation will require us to look at both the incentives of the merging firms, as well as the non-merging firms,” said Caroline Holland, an attorney adviser with the FTC. “For example, the incentives of non-merging firms may be relevant if a merger reduces the number of large firms that are the target sales audience for new innovation developed by a pharmaceutical startup.”

“This may affect the availability of capital to those startups,” she added.

A slimmed-down drug pricing plan from Congressional Democrats may not lower spending on pharmaceuticals by nearly as much as their most ambitious proposal would have, but it could still have a substantial effect on some of the industry's top-selling products if ever made into law. 

Pfizer, Bristol Myers Squibb, AbbVie and Regeneron, for instance, could potentially be impacted by the legislation, which emerged late last year after the Biden administration had seemingly given up on securing a place for drug pricing policy in its sweeping "Build Back Better" spending plan. Difficulties in advancing that plan, however, leave the fate of drug pricing legislation in 2022 unclear. 

The new bill would grant the federal government power to negotiate drug prices — a long-held Democratic goal — but represents a significant compromise as currently formulated because it scales back the number of older drugs eligible for negotiation. Previous legislation backed by dozens of House Democrats had sought to allow negotiation on at least 50 products.

Under the new proposal, these older drugs, defined as those no longer protected by regulatory exclusivity and lacking generic competitors, would be subject to price negotiation with the Centers for Medicare and Medicaid Services.

Initially, CMS would negotiate prices of 10 drugs in 2023, agreements that would then take effect in 2025. Drugmakers that do not come to the table would face a potentially steep excise tax — a feature the industry has fiercely objected to.

The legislation would limit eligible products to small molecule drugs that have been on the market for at least nine years and biologic drugs that have been available for at least 12 years. Small molecule drugs are typically given as pills, while biologics are infused or injected.

President Joe Biden has endorsed the plan, as have key Democratic lawmakers. While it's not clear which specific drugs could be affected by the plan, drug spending data from CMS provides some clues.

The tables below include five physician-administered drugs covered by Medicare Part B as well as five self-administered drugs covered by Part D that could be the subject of negotiation in the first round, based on the criteria outlined in the legislation.

Among physician-administered drugs, other products that could soon be subject to negotiation based on their time on the market are Merck & Co.'s Keytruda, Bristol Myers' Opdivo, and Novartis' Sandostatin LAR, the last of which has been on the market without competition for more than 20 years.

Bristol Myers and Pfizer's blood thinner Eliquis, as well as Eli Lilly and Boehringer Ingelheim's diabetes medicine Jardiance, meanwhile, might be targets in Part D.

Other self-administered drugs that could be under pressure soon if the measure passes include Amgen's Enbrel, J&J's Invega Sustenna and Sumitomo Dainippon's Latuda.

Under the legislation, once CMS and manufacturers conclude their negotiations, their agreement will remain in place until the government decides the drug is no longer a high-cost "selected" product. That could mean the list of drugs with negotiated prices grows longer over time than the original set selected. 

Negotiation isn't the only price control measure included in the package. The federal government would also be able to impose higher rebates on drugs that have price increases that exceed the rate of a certain type of consumer price inflation.

While the legislation is significantly pared back from prior proposals, the pharma industry is still vehemently opposed. "Under the guise of negotiation, it gives the government the power to dictate how much a medicine is worth and leaves many patients facing a future with less access to medicines and fewer new treatments," Steven Ubl, CEO of the drug lobby PhRMA, said in a November statement.

On an earnings conference call that same month, Pfizer CEO Albert Bourla noted that, through its managed care plans, Medicare already negotiates prices on many drugs, and criticized the new proposal as more government interference in the marketplace.

"What people in some parts of the political spectrum want to see is not negotiation, [but] price fixing," he said during the call.

Price hikes taken last year by AbbVie on its anti-inflammatory drug Humira increased U.S. healthcare spending by $1.4 billion, an amount unsupported by evidence showing any new health benefits, the Institute for Clinical and Economic Review said in a November 2021 report.

Humira, which treats rheumatoid arthritis and other diseases, was one of eight high-cost drugs singled out by ICER for large price increases without corresponding data proving greater effectiveness or new clinical uses.

Humira's net price rose 9.6% in 2020, the watchdog group said in its report. The increase in net price, which reflects what insurers pay after rebates, actually exceeded AbbVie's hike to the drug's list price, a reversal of what usually happens during negotiations with drugmakers.

Congress is considering legislation that could force drugmakers to pay steep rebates to Medicare for patent-protected drugs that have price increases exceeding inflation, as well as subject a limited number of high-cost drugs to price negotiation.

ICER's report could further fuel that debate on Capitol Hill and suggests a list of drugs and companies that might face price restraints should legislation advance.

The group uses a methodology the federal government could follow in its hunt to restrain costs, looking for drugs with significant healthcare spending and large increases. ICER started with 250 of the top-selling drugs in the U.S. in 2020, and excluded 228 that had list-price increases 2% or less above the medical consumer price index.

The group also excluded drugs for which increased prescription volume had a bigger impact on spending and, from there, identified the top 10 drugs for which net price increases were the biggest factor. Another, PTC Therapeutics' Emflaza, was added based on public input, as the research protocol for the report allowed. (ICER issued a correction removing one drug from its report after publication.) 

Besides the two aforementioned drugs, Novartis' Promacta; Biogen's Tysabri; Bausch Health's Xifaxan; Supernus Pharmaceuticals' Trokendi; AbbVie's Lupron Depot; and Horizon's Krystexxa were identified as having unsupported price increases.Together, the "unsupported" price increases for the eight drugs added $1.7 billion in spending last year, with Humira accounting for most, ICER said.

The price increases could help explain why Humira's 2020 revenue nearly matched its 2018 record of $19.9 billion despite increasing biosimilar competition outside the U.S. In 2021, Humira is on track to exceed $20 billion in sales.

ICER also noted three drugs with new clinical data that could support price increases taken by their makers. Those were AbbVie's Venclexta, Novartis' Entresto and UCB's Cimzia. The report pointed out, however, that the new clinical evidence doesn't necessarily justify a price increase.

Medicare will not pay for Biogen's new Alzheimer's medicine unless prospective patients are enrolled in a clinical trial, the U.S. government said April 7 in a decision that will sharply limit the drug's use.

The final policy, issued by the Centers for Medicare and Medicaid Services, largely affirms a draft proposal released in January, which Biogen and its pharmaceutical industry allies had sought to overturn.

In reaching its decision, the agency said the clinical trial data supporting the drug, now known as Aduhelm, were insufficient to conclude that treatment is "reasonable and necessary" — a government standard for coverage.

The policy also applies to other drugs that work similarly to Biogen's if, like Aduhlem, they are approved on the basis of an intermediary measure that predicts, but doesn't prove, clinical benefit.

"We know that there is potential for promise with this treatment," Lee Fleisher, CMS' chief medical officer, said on a call with reporters in April. "However, there is not currently enough evidence of clinical benefit to say that it is reasonably necessary for people with Medicare."

The final policy opens the door to somewhat less restrictive coverage should an Alzheimer's drug similar to Aduhelm win approval based on direct measure of clinical benefit. In that case, CMS would cover treatment in approved comparative studies, which may collect data through a registry.

The agency's decision is the latest controversial development for Aduhelm, which received a contentious FDA approval last June. Aduhelm is the first medicine cleared in the U.S. to slow the progression of Alzheimer's disease, rather than temporarily relieve some of its symptoms.

But the evidence gathered by Biogen to support its benefit was contradictory and equivocal, spurring substantial doubt among physicians and even some FDA officials about whether Aduhelm actually helps patients.

When Biogen first looked at data from Aduhelm's main two studies in 2019, it concluded they were likely to fail and discontinued testing. Months later, however, Biogen revisited the data and found signs of benefit in one of the two trials, which it used to apply for Aduhelm's approval.

Independent advisers the FDA later convened were sharply critical of Biogen's results and voted decisively against it. Three members of that committee resigned after the FDA overruled its advice and granted Aduhelm approval.

Notably, the FDA approved Aduhelm on an accelerated basis, citing its ability to remove a type of protein called amyloid from the brain. In seeking an OK, Biogen had emphasized data indicating Aduhelm slowed Alzheimer's progression.

Debate among doctors and researchers has simmered since, weighing on Biogen's rollout of the drug, which earned just $1 million in sales over the final three months of last year. That figure was far below what Wall Street analysts had expected, as it's estimated there are roughly 6 million people living with Alzheimer's in the U.S., and treatment options remain limited.

With its finalized policy, Medicare, which covers the largest proportion of Alzheimer's patients in the country, is refusing to cover Aduhelm outside of a strictly managed study known as a randomized clinical trial.

In a change from the draft, CMS included in its definition any trials cleared by the FDA or run by the National Institutes of Health, and removed a requirement that those trials take place in hospitals. For coverage, patients must have mild cognitive impairment due to Alzheimer's disease and evidence of amyloid accumulation in the brain.

Still, the decision will limit Medicare reimbursement for Aduhelm and curtail the market opportunity for experimental Alzheimer's drugs that also target amyloid protein. Three such drugs from Biogen partner Eisai, Eli Lilly and Roche are now in late-stage testing, with data expected this year or early next. Lilly recently decided to slow its approval application to the FDA because of CMS' policy.

Should Aduhelm or any of those drugs win full approval based on clinical benefit, CMS' policy will allow for slightly broader reimbursement by permitting coverage for patients enrolled in larger, registry-based or "pragmatic" clinical trials.

"This long term pathway is meant to be nimble and respond to any new drugs in this class that are in the pipeline and demonstrate clinical benefit," said CMS' Fleisher.

Biogen called the policy "unprecedented" in a statement, and urged CMS to reconsider its decision when more data from anti-amyloid drugs are available. 

Aduhelm's problems have led to drastic action at Biogen. With meager sales numbers and revenue declining from most of its other products, the company in March announced it was beginning layoffs as part of efforts to cut $500 million from its annual spending.

By May, that number had doubled, as Biogen announced CEO Michel Vounatsos would step down once a successor was appointed. The company said it would largely eliminate its sales infrastructure around Aduhelm, as well. 

The Institute for Clinical and Economic Review, a nonprofit and frequent critic of drugmakers for excessively high drug prices, plans to regularly assess how health insurance policies harm patient access to care, the group announced last May. This follows research by the group that argued cost-sharing should not be structured to shift healthcare costs to patients when they have no medically appropriate lower-cost option.

ICER's review will not, however, look at whether cost-sharing should be reduced for drugs on which payers receive large rebates or whether payers should be asked to demonstrate how their policies on drug access save overall healthcare costs.

Drugmakers have repeatedly tried to shift the blame for high out-of-pocket costs and limited access to drugs by pointing to the design of insurance plans. ICER's review suggests a new emphasis by the group on examining the role insurers play alongside pharmaceutical companies in determining patient access and costs.

While ICER usually judges new drugs to be priced above levels it considers cost effective, the group's public pressure may have helped shape the launch of several drugs that met its criteria, including the cell therapies Kymriah and Yescarta, as well as the gene therapy Zolgensma.

Now the nonprofit plans to shine a spotlight on insurance plan design, which can also put new drugs out of reach for patients. ICER's targets include "multi-tiered" health plans that increase patient cost-sharing for branded and specialty drugs, as well as policies that control access to more expensive drugs by requiring physicians seek permission to prescribe an expensive drug. The group will also look at policies that patients must first fail to gain relief on a cheaper drug, before accessing a newer, more expensive medicine — a practice called "step therapy."

Specifically, ICER will look into insurers' justification for placing similar drugs on differing tiers, particularly if they have all been shown to be cost-effective, and whether it is reasonable to increase cost-sharing on higher-tier drugs subject to step therapy.

For drugs subject to step therapy, ICER will consider whether it's appropriate for all or mostly all patients, whether there's a reasonable chance they will meet their goals on a lower-tier drug, and what harms can occur from any delays to moving to the higher-tier drug.

Whether step therapy saves overall healthcare costs will not be part of the ICER review, however, nor will whether patients who progress to a higher-tier drug as part of step therapy be subject to cost-sharing of the lower-tier drug.

ICER's work group also will not consider whether cost-sharing should be based on the list price or the "net price" — the amount that's paid by insurers once rebates and discounts are taken into account. The latter approach is one that's gained support from lawmakers as well as the former Trump administration.

The most lucrative pharmaceutical monopoly in industry history is almost at an end.

In January 2023, the first copycat version of Humira, an injectable drug approved for an array of inflammatory diseases, is set to launch in the U.S. Its arrival will mark the end of a two-decade run of market exclusivity during which Humira's maker, AbbVie, has earned nearly $200 billion from sales of the drug.

Eight more biosimilars — as copies of biologic drugs are called — are expected to become available over the course of 2023, putting AbbVie under pressure. Anticipating the competition, the company has spent the past several years attempting to lessen its reliance on Humira, which as recently as 2019 accounted for more than half its revenue.

While pharmaceutical companies periodically confront these "patent cliffs," none have been steeper than what AbbVie faces with Humira. Until now, the most lucrative product to go generic was Pfizer's cholesterol drug Lipitor, which at its height sold about $13 billion a year. Last year, sales of Humira totaled $20.7 billion.

The launch of Humira biosimilars also is likely to be a major moment for the broader industry, as their arrival is the biggest test yet of whether biosimilars can save the healthcare system significant amounts of money. So far, the biosimilars currently available have not lived up to previously high expectations of their impact.

The question will matter to more companies than just AbbVie, as several drugs like Humira, such as Enbrel and Stelara, also will lose their patent protection this decade.

"The sheer number of biologics facing competition is quite significant through the next decade," said Joe Azzinaro, commercial lead for biosimilars at drugmaker Organon, which expects to launch a Humira biosimilar in 2023.

Replacing a blockbuster

AbbVie sells Humira today because its former parent company, Abbott Laboratories, in 2000 acquired Knoll Pharmaceuticals, the drugmaking business of German chemicals company BASF. At the time, Humira was called D2E7 and analysts believed it might someday make between $500 million to $1 billion annually.

Yet Abbott and then, after a 2013 spinout, AbbVie proved Humira could work for many more diseases than rheumatoid arthritis, the condition it was first approved to treat, and steadily expanded its use. At the same time, AbbVie meticulously built a wall of intellectual property — sometimes called a "patent thicket" — around Humira and each new indication.

All told, AbbVie filed about 250 patent applications for Humira in the U.S., 90% of them following the drug's 2002 approval, according to the advocacy group Initiative for Medicines, Access & Knowledge. One hundred and thirty have been granted.

The strengthened patent shield has stretched AbbVie's legal monopoly in the U.S. for six years beyond the expiration of Humira's main patent in 2016. Since then, AbbVie has earned nearly $75 billion in U.S. Humira sales, bolstering the company's share price and allowing it to pay billions of dollars to investors in dividends. (The story is different in Europe, where biosimilars arrived in 2018 and quickly ate into Humira's market share.)

Moreover, the added revenue — padded by price hikes that increased Humira's price to Medicare by 41% between 2016 and 2020 — enabled AbbVie to spend money on deals, research and development to replace Humira.

Most notably, AbbVie paid $63 billion to acquire Allergan and its blockbuster product Botox, which last year earned almost $5 billion. Other deals have been less successful, such as the $5.8 billion takeout of Stemcentrx for an experimental lung cancer drug that ultimately failed.

Humira's extended patent protection also gave AbbVie time to launch two new immune disease drugs, Skyrizi and Rinvoq, which it believes will make up for lost Humira revenue.

Company executives now claim the hit to AbbVie's balance sheet will be short-lived.

"Following the U.S. Humira [biosimilar entry] in 2023, we expect to quickly return to growth in 2024 and deliver a high single-digit growth from 2025 to the end of the decade," CEO Richard Gonzalez said on a company earnings call in February.

Negotiating tactics

Others aren't so sure. The entry of Humira biosimilars will be gradual in 2023, with just one from Amgen on the market until mid-year, when five more will launch. This raises questions about whether enough drugmakers will have signed big enough contracts with insurers to influence the market by 2023. 

While AbbVie will primarily be negotiating against Amgen for 2023, the situation will shift for 2024 contracting when more biosimilar makers will have their drugs on the market.

Ronny Gal, a Bernstein analyst who covers AbbVie and has closely followed the biosimilar market, said the drugmaker therefore might be guessing wrong on the impact of biosimilars.

"I think the odds are that the erosion will be slower in 2023 and faster in 2024," he said.

AbbVie may have some say in the matter, depending on the negotiating tactics it chooses to use in its efforts to keep Humira the preferred treatment choice on insurer formularies next year.

Drugmaker tactics in these negotiations can be aggressive and, in at least one case, allegedly anticompetitive. In a 2017 lawsuit, Pfizer accused Johnson & Johnson of using exclusionary contracts and threats to withhold rebates if insurers made Pfizer's biosimilar of J&J's drug Remicade a "preferred" option. The two companies later agreed to have the suit dismissed.

As Remicade is administered at hospitals and other healthcare facilities, J&J had more leverage in retaining market share. For example, Pfizer claimed those facilities had no incentive to purchase its biosimilar if insurers wouldn't reimburse them.

By contrast, pharmacists can provide Humira to patients directly, potentially giving biosimilar makers more opportunities to make inroads. Gal says that rather than threaten to cut rebates if Humira isn't preferred, AbbVie "will use Humira discounts to protect Skyrizi and Rinvoq," its two newer drugs that are approved to treat some of the same conditions.

Nonetheless, biosimilar makers are anticipating that AbbVie won't give up easily. "Our expectation is that AbbVie will be very aggressive in protecting its product," Organon's Azzinaro said.

Price won't be the only factor. AbbVie's experience in navigating the immune drug market will give it advantages as well.

One tool AbbVie has on its side is its patient support program known as Humira Complete, which includes assistance such as nurse advocates, help with insurance and injection training. This assistance has been controversial at times and was cited in a 2018 lawsuit by the California insurance commissioner.

"Humira to my mind has never been just a drug," said A. Mark Fendrick, director of the University of Michigan's Center for Value-Based Insurance Design, who has consulted for AbbVie. "With Humira and Humira Complete, you have high utilization of a high-priced drug. With biosimilars, you might have low utilization of a lower-priced drug."

"I want to see the biosimilars have the exact same thing: not just a Humira biosimilar but a Humira biosimilar plus," he added.

But it's unclear how helpful such programs are and how much insurers might value them in weighing coverage.

"If there is actually evidence that these efforts improve real-world adherence that would lead to better clinical outcomes, there would be data," said Steve Pearson, president of the Institute for Clinical and Economic Research, a nonprofit organization that evaluates the cost-effectiveness of drugs and other medical interventions. "We have yet to be presented with actual data on it."

Pharmacy swap

Complicating forecasting of Humira's diminution are the different labels biosimilars can carry as well as the differences in device and formulation for the most popular form of Humira.

For example, some of the later biosimilar entrants will have an "interchangeable label" from the Food and Drug Administration, allowing pharmacists to choose the biosimilar over Humira when filling prescriptions, rather than requiring the prescribing doctor to specify one.

Amgen's biosimilar isn't approved as an interchangeable — at least not yet — nor does it come in the most-used Humira formulation. The first interchangeable biosimilars, from Boehringer Ingelheim and Alvotech, will premier July 1, 2023, with more expected in 2024. Of those first two, only Alvotech, which is still awaiting FDA approval for its biosimilar, would come in that more popular formulation.

How interchangeable Humira biosimilars perform versus other biosimilars should reveal how important that designation is to insurers. The designation was created by the legislation that authorized the FDA's biosimilar regulations, and doesn't exist in the European market.

"It's really important to know what interchangeability is and is not," said Steven Selde, director of the Biosimilars Council at the Association for Accessible Medicines. "It's not an indication of superior quality. It's just a regulatory designation. It's expensive to pursue the interchangeable designation, and it's unclear how many will incorporate it into their business model."

So far, the looming loss of Humira doesn't seem to be bothering AbbVie executives much. They talk confidently of Skyrizi and Rinvoq earning a combined $15 billion in sales by 2025, up from $4.6 billion in 2020, and forecast that top sales of the two products combined will exceed Humira's $20 billion peak.

Bluebird bio in October said it will withdraw from market a rare disease gene therapy recently approved in Europe as the company winds down operations there.

Skysona, a treatment for an inherited neurological disorder called cerebral adrenoleukodystrophy, was approved by European regulators last July. A month later, however, Bluebird said it would close down operations in Europe to focus on the U.S., a retreat driven by the company's difficulties in winning agreement from European payers on reimbursement for its gene therapies.  

Bluebird previously withdrew from Germany another gene therapy called Zynteglo, approved for severe beta thalassemia in June 2019, after failing to convince authorities there to cover the treatment's $1.8 million price tag. 

Only a handful of gene therapies for inherited diseases are approved worldwide. Bluebird, holding two of them, has been one of the leading developers. 

So Bluebird's struggles in Europe are notable for the dozens of other biotech companies advancing gene-based treatments for uncommon diseases like cerebral adrenoleukodystrophy or severe beta thalassemia. 

The company's decision also reflects the differences in how therapies approved in Europe are paid for, with decisions on reimbursement left up to the governments of individual EU member states. Compared to the U.S., European countries can be more aggressive in demanding lower prices and, as many have single-payer healthcare systems, are better able to negotiate for larger discounts. 

While Bluebird set a $1.8 million price for Zynteglo, the company proposed having countries reimburse for treatment over five years. Payments were linked to continued patient benefit.  

Germany, however, countered with an initial price of $790,000 per patient, rising to roughly $950,000 if patients were benefiting from treatment several years later, according to an April 2021 report from STAT News. 

That proved unpalatable to Bluebird, which pulled Zynteglo from Germany before later announcing a broader withdrawal from Europe. 

"Bluebird's decision to focus on the U.S. market is driven by the challenges of achieving appropriate value recognition and market access for Zynteglo in Europe, which makes bringing its transformative gene therapies like Zynteglo and Skysona to patients and physicians in Europe untenable for a small innovative company at this time,” said Andrew Obenshain, head of severe genetic diseases at Bluebird, in an August 2021 statement.

Along with the withdrawal of Skysona from Europe, Bluebird is also pulling back an application for approval in the U.K., according to a Thursday filing with U.S. securities regulators. Withdrawal of Zynteglo from the EU and U.K. will be complete by early 2022.

Bluebird said it will continue long-term follow-up of patients treated in clinical trials in Europe, but will not carry out further study of the treatments there. 

While specific numbers aren't available, few patients ever received Zynteglo. The first patient ever treated commercially only received the therapy in February of 2021, after manufacturing difficulties had delayed Bluebird's launch of the drug. 

Neither Zynteglo or Skysona were expected to be widely used given the small patient populations they were approved to treat. But clinical testing had shown both to be effective therapies, meaning their withdrawal leaves patients in Europe with one less treatment option. 

Bluebird recently asked the Food and Drug Administration for approval of Zynteglo in the U.S. and plans to do the same for Skysona by the end of this year. 

The company recentrly split in two, with its cancer research and programs spun out into a new independent company called 2seventy bio.