CVS: Generics and Biosimilars Are Key to Its Drug Spending Decline

While patients, Congress, advocacy groups, and others are alarmed about prescription drug spending increases, pharmacy benefit manager CVS Caremark actually experienced a drop in drug spending in 2016.

Generic and biosimilar drugs are the key to lowering drug spending – now and in the future, according to the company.

“We believe that increasing the number of generic alternatives to branded drugs promotes competition in the market and tightens the reins on branded drug price increases,” the retailer said in an article published on its web site.

CVS Caremark noted that FDA analysis has found that the price of a branded drug falls most dramatically with the entry of the first few generic competitors, and continues to fall incrementally as additional generic competitors enter the market.

The United States needs to speed approvals of both generics and biosimilars, in order to increase competition and drive down prices, the company noted.

“At the start of 2017, more than 4,000 generic drugs were pending approval at the FDA. In comparison to the European Union, the U.S. has much catching up to do: Europe approves drugs more quickly and has 20 biosimilars on the market compared to our four,” CVS Caremark stated. “As the health-care landscape continues to evolve, increasing the flow of generics and biosimilars is an important step to unlock the cost savings potential for patients, taxpayers and the health system as a whole.”

Despite those challenges, generics had the largest deflationary impact on prescription drug spending for CVS Caremark in 2016, according to the PBM’s

, released in mid-March.

Generic drug spending fell, thanks to a 1.4% increase in generic dispensing rates, combined with relatively low overall inflation (0.4%) and falling prices for the vast majority of generics.

“Our track record shows that encouraging [generic drug] use is containing spending growth,” CVS Caremark said. Conversely, there was an 8.6% increase in brand drug inflation across the PBM.

Compared to previous years, fewer new generics were launched in 2016. Still, rosuvastatin, the generic of Crestor, was a major approval, according to CVS. “Despite the dearth of new launches, generic dispensing rate rose by 1.4 percentage points to 85% across our book of business,” CVS Caremark said in the report.

In addition, most payers recognize the value of generics, and many have taken a more aggressive approach in promoting their use, according to CVS Caremark.

The launch of more biosimilars in the future is expected to aid overall prescription drug spending, particularly on specialty drugs. “Specialty pharmaceuticals account for roughly 36%of spend for our PBM clients, increasing competition with biosimilars could help bring down prices for these expensive products,” CVS Caremark said.

For example, a biosimilar for Humira (adilmumab), used to treat rheumatoid arthritis and other inflammatory diseases, was approved in 2016, and more biosimilars for the drug are in the pipeline. “However, Humira has multiple patents and it’s expected that patent litigation will delay the launch of any competitive products in 2017,” CVS Caremark said.

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, CVS Caremark said in its report.