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Late last week, the FDA approved yet another biosimilar product -- biotech giant Amgen Inc.’s (AMGN - Free Report) Amjevita (adalimumab-atto). Amjevita has been approved for use in all eligible indications of the reference product, AbbVie Inc.’s (ABBV - Free Report) blockbuster drug Humira (adalimumab), which is used for a wide range of inflammatory diseases.

A Short Background on Biosimilars

A biosimilar is basically a biologic product whose approval is based on evidence that it is highly similar to an approved biologic, known as the reference product. Moreover, there should be no clinically meaningful differences between the biosimilar and the reference product where safety and effectiveness is concerned.

Several pharma as well as biotech companies are involved in the development of biosimilars. The first biosimilar to gain approval in the U.S. was Sandoz’s (Novartis’ generic arm) Zarxio, a biosimilar version of Amgen’s Neupogen.

Other approved biosimilars include Pfizer’s Inflectra, a biosimilar to Janssen Biotech, Inc.’s Remicade (infliximab) and Sandoz’s Erelzi, a biosimilar to Amgen’s Enbrel (etanercept).

And then there is Eli Lilly and Company (LLY - Free Report) and Boehringer Ingelheim’s Basaglar, which while technically not approved as a biosimilar, is a “follow-on” insulin glargine product approved through an abbreviated approval pathway -- Basaglar was found to be sufficiently similar to Sanofi’s (SNY - Free Report) Lantus to scientifically justify reliance, and to establish its safety and efficacy for the approved uses. Lilly and Boehringer expect to launch Basaglar in mid-December.

Biosimilars to Drive Healthcare Cost Savings?

According to information provided in a 2015 report by pharmacy benefit manager (PBM) Express Scripts Holding Company (ESRX - Free Report) , about $250 billion could be saved between 2014 and 2024 if biosimilars for 11 products including Neupogen, Avastin, Epogen, Humira, Herceptin, Neulasta, Remicade and Rituxan are approved. According to the PBM, Neupogen and Remicade biosimilars alone represent potential savings of about $5.7 billion and $17 billion, respectively.

Formulary Coverage

Given the current scenario of increased political, media and public pressure on drug pricing, the growing interest in developing biosimilars and the potential of biosimilars to reduce healthcare costs, let’s take a look at steps taken by a few healthcare companies to add biosimilars to their formulary coverage lists for 2017.

CVS Health Corporation (CVS - Free Report) , a pharmacy innovation company, announced that biosimilars and follow-on biologics will be a key part of its 2017 standard formulary strategy, replacing higher cost drugs within the categories.

Specifically, the company said that its formulary list will include Zarxio, replacing Neupogen, to decrease the risk of infection in patients receiving treatment for certain forms of cancer, and the follow-on product Basaglar, replacing Lantus, for the treatment of diabetes.

CVS HEALTH CORP Price and Consensus

Meanwhile, UnitedHealth Group Incorporated (UNH - Free Report) , a diversified health and well-being company, will be moving Basaglar from Tier 3 to Tier 1 effective Apr 1, 2017. Basaglar is expected to enter the market in mid-December. Sanofi’s Lantus SoloStar and Lantus Vials will remain on Tier 3 until Mar 31, 2017 after which they will be excluded. Zarxio will be on Tier 2. UnitedHealth is a Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

UNITEDHEALTH GP Price and Consensus

As far as Express Scripts is concerned, the PBM, which excluded 85 drugs from its 2017 National Preferred Formulary, said that the basal insulins category may be reassessed later in the year to reflect anticipated product launches.

EXPRESS SCRIPTS Price and Consensus

The bottom line is that the introduction of biosimilars will help improve patient access and save billions of dollars in healthcare costs. Although biosimilars are mostly sold at a 20%-30% discount to the price of the reference drug, the market is highly lucrative and will remain a talking point in the coming years as several pharma and biotech companies come up with biosimilar versions of multi-billion dollar generating biologic products.

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