Cancer Biosimilars: Falling Prices, Rising Hospital Margins

A new study published in JAMA has found that in the United States, hospital profits from cancer biosimilars have increased as drug acquisition prices have fallen faster than insurance reimbursement rates. This price gap has led to higher hospital margins and increased adoption of biosimilar drugs.

The observational study tracked pricing and usage data for three major cancer biosimilars — bevacizumab, trastuzumab, and rituximab — over a five-year period from 2020 to 2024. Researchers analyzed acquisition prices paid by hospitals, reimbursement prices paid by insurers, and the adoption rate of biosimilars.

The study found that the prices hospitals paid for biosimilars dropped significantly — by 60% for bevacizumab, 72% for trastuzumab, and 63% for rituximab. However, the reimbursement rates from insurers decreased more slowly, falling by only 32%, 36%, and 34%, respectively. Because of this difference, hospital profit margins increased substantially.

The average markup hospitals earned increased dramatically during the study period. For bevacizumab, markups rose from 298% to 778%. For trastuzumab, markups increased from 181% to 924%, and for rituximab, from 284% to 916%. In dollar terms, hospital profit margins increased from about $5 per unit for bevacizumab to around $19 per unit for rituximab.

These higher profit margins were linked to increased adoption of biosimilars. Usage rates rose significantly between 2020 and 2024, increasing from 32% to 93% for bevacizumab, from 37% to 87% for trastuzumab, and from 18% to 84% for rituximab.

Researchers explained that this trend may be due to “gainsharing” payment models, where insurers share cost savings with hospitals to encourage the use of lower-cost drugs. This system can help promote competition among drug manufacturers and reduce overall drug prices.

However, experts noted that the financial savings from biosimilars are not always passed on to patients. Some studies show that privately insured patients do not always see lower out-of-pocket costs, because insurance reimbursement is not directly linked to hospital acquisition prices. In contrast, Medicare reimbursement is based on average acquisition cost, so patients benefit more directly when drug prices fall.

Experts say that while increased biosimilar adoption is a positive development, adoption rates are still slower than what is typically seen with generic drugs. Additionally, it remains unclear how much of the savings from biosimilars will ultimately benefit patients and taxpayers.