Rebate Walls Lock Cheaper Biosimilars Out of Insurance Formularies

Brand-name biologic manufacturers negotiate large rebates with PBMs — often 40-60% of list price — in exchange for exclusive or preferred formulary placement. When a biosimilar enters the market at a lower list price, it cannot match the rebate percentage because its list price is already lower. The PBM's net cost might actually be lower with the biosimilar, but the absolute rebate dollar amount is smaller, which reduces the PBM's rebate revenue. So the PBM keeps the expensive brand on the formulary and blocks or disadvantages the cheaper biosimilar. This directly prevents drug cost savings from reaching patients and plan sponsors. Humira (adalimumab) is the clearest example: the first biosimilars launched in January 2023 at list prices 55-85% below Humira's $7,000/month list price. Yet major PBMs continued to prefer branded Humira on their formularies through mid-2024 because AbbVie offered massive rebates that generated more revenue for the PBM than the biosimilar alternatives would. Patients and employers continued paying more than necessary for the same therapeutic outcome. The patient impact is direct: even when a biosimilar exists at a fraction of the cost, the patient's copay is calculated on the preferred brand's list price (minus whatever portion the plan design passes through). A patient on Humira might pay a $500 monthly copay when a biosimilar copay would be $75. Over a year, that is $5,100 in unnecessary out-of-pocket costs for a patient with a chronic autoimmune condition who has no choice but to take the medication. Rebate walls persist because PBMs retain a percentage of the rebates they negotiate, creating a direct financial incentive to maximize rebate volume rather than minimize net drug cost. The rebate flow is opaque — plan sponsors rarely see the exact rebate amounts or how they compare to biosimilar net pricing. Even sophisticated employer benefit consultants struggle to model whether a rebated brand or a lower-list-price biosimilar produces a lower total cost. The structural issue is that the U.S. drug pricing system is built on inflated list prices offset by hidden rebates, rather than transparent net pricing. This system rewards manufacturers for raising list prices (to fund larger rebates) and rewards PBMs for preferring higher-priced drugs (to capture larger rebate shares). Biosimilars, which compete on actual price, are disadvantaged by a system designed around kickbacks disguised as rebates.