Will employers see upside to CVS Health manufacturing biosimilars? 

September 07, 2023

CVS Health has announced the launch of a wholly owned subsidiary, Cordavis, to work directly with manufacturers to co-produce biosimilar products. This development has a “back to the future” ring; roughly 20 years ago major PBMs were owned by pharmaceutical manufacturers (Merck-Medco is an example). In this latest development, a PBM will own part of the manufacturing process.

Employer plan sponsors are keenly interested in the economics of this new CVS solution. Biosimilars  usually available at a lower cost than the expensive, FDA-approved specialty biologics that are the largest driver of pharmacy trend today. It’s anticipated that the biosimilar market will grow ten-fold to approximately $100 billion in the next six years. So it’s understandable that CVS wants a foothold in this market.

Cordavis’ first product, Hyrimoz, is a biosimilar for Humira. Biosimilar competition for Humira started in January 2023 and we expect as many as 10 biosimilars will be available by year-end, contributing to meaningful cost savings for health plans. CVS expects the list price of the Hyrimoz to be more than 80% lower than the current list price of Humira. It’s unknown at this point what other products Cordavis might target.

CVS is the first of the “Big 3 PBMs” – CVS Caremark, Express Scripts, and OptumRx, which together hold about 80% of the market share – to integrate ownership of the formulary, dispensing channels and the product. Whenever a PBM develops a new solution, it’s a good bet that competitors will developed a similar option. A recent example is Express Scripts’ development of a rebate Group Purchasing Organization, Ascent -- both CVS Caremark and OptumRx developed their own versions soon after ESI's announcement. However, it’s too soon to say whether we’ll see the same competitive response here.

Given the current scrutiny of PBMs, we expect Congress and government regulators will want to know more about CVS’s new subsidiary. There has been significant debate regarding the pros and cons of vertical integration that exists today between large medical carriers and large PBMs. This move has a different twist as it moves CVS into manufacturing in addition to its current adjudication and utilization management functions.

It is possible that CVS could lose negotiating leverage with manufacturers who have products that compete with Cordavis products. Understanding the impact on drug costs overall -- not only costs for a certain therapeutic class -- will be important in evaluating the value that Cordavis will bring to plan sponsors and members.

We don’t expect CVS to make any changes to their utilization and clinical management process due to the introduction of Cordavis, at least initially. Programs such as PrudentRx will include Cordavis products if the drugs meet the program criteria.

CVS’ approach is innovative and has the potential for significant upside to plan sponsors, but it’s going to take some time for this solution to be operational. For now, we’ll need to wait for more information before we can assess the impact to employer health plans.