In the US, hospital acquisition prices for oncology biosimilars have dropped faster than reimbursement prices from insurers, leading to an increase in hospital margins, new findings showed.

In this observational study, published online in JAMA earlier this month, researchers tracked acquisition prices, reimbursement prices, and adoption of biosimilars for bevacizumab, trastuzumab, and rituximab over 5 years. Overall, the percent price markup hospitals received (the margin divided by acquisition price) grew about 2.6-to-5.1-fold , depending on the drug, and these increases were associated with greater adoption of the biosimilars.

The findings of this study indicate that “hospitals have absorbed substantial amounts of the collective savings that could have been realized from biosimilar adoption,” Rachel E. Sachs, JD, of Washington University School of Law in St. Louis, and colleagues wrote in an accompanying editorial.

Lead author James C. Robinson, PhD, of the University of California, Berkeley, explained that “these results highlight the role of ‘gainsharing’ payment arrangements, in which those who benefit from the savings, in this case Blue Cross and Blue Shield insurers, share them with those who generate the savings, in this case hospitals.”

Biologics, which can cost patients with cancer tens of thousands of dollars a month, account for half of total drug spending in the US, but comprise just 5% of prescriptions. After patent protection for biologics expires, these drugs can face competition from biosimilars, which are less costly.

To better understand how competition between biologics and biosimilars may affect healthcare spending, Robinson and colleagues looked at data from more than 66,000 privately insured patients taking one of three cancer biologics or their biosimilars between 2020 and 2024.

The acquisition prices hospitals paid drugmakers declined by 60% for bevacizumab biosimilars, 72% for trastuzumab biosimilars, and 63% for rituximab biosimilars while the reimbursement prices insurers paid to hospitals fell more slowly, by 32%, 36%, and 34%, respectively.

The average percent markups rose from 298% to 778% for bevacizumab, 181% to 924% for trastuzumab, and 284% to 916% for rituximab. The dollar margin hospitals retained climbed by about $5 per unit of bevacizumab to $19 per unit of rituximab.

These greater hospital markups were associated with greater adoption of biosimilars, which increased from 32% for bevacizumab, 37% for trastuzumab, and 18% for rituximab in 2020 to 93%, 87%, and 84%, respectively, by 2024.

To help counter the continuing rise in healthcare spending, physicians have an interest in “adopting less expensive options when they are therapeutically similar or superior,” said Robinson.

“Reimbursement methods that embody gain-sharing principles can encourage competition among drug manufacturers and generate a spiral of price reductions,” the authors wrote.

But exactly how much of the savings will trickle down to patients and taxpayers is unclear.

A study from 2024 found that, for privately insured patients, biosimilar competition was not consistently associated with lower out-of-pocket spending on biologics.

“When the reimbursement from private payers is de-linked from the hospital acquisition prices, it means that the savings from biosimilar competition aren’t shared with patients in the form of lower out-of-pocket costs,” said Benjamin N. Rome, MD, of Brigham and Women’s Hospital in Boston, a coauthor on the 2024 study.

“By contrast, Medicare pays based on [average acquisition price] and so when the cost of the drugs goes down, those savings are passed along to patients and out-of-pocket costs fall,” Rome added.

The new finding that hospitals retain a considerable part of the savings from the lower-priced biosimilars could be “a feature and not a bug of the system,” he said. “In other words, insurers may be willing to pay more to hospitals to incentivize them to use certain drugs.”

In the accompanying editorial, Sachs and colleagues explained that while the study can be viewed “as a positive story” about a rise in hospital adoption of lower cost biosimilars, the increase is “still far slower than the generic adoption typically cited in the literature.”

Overall, “policy interventions are needed to lower spending more automatically rather than leaving it to the discretion of insurers and hospitals,” the editorialists noted.

This study was supported by the National Institute for Health Care Management. Robinson and Rome reported having no relevant disclosures.