How Vertical Integration and Pricing Manipulation Are Shaping the Biosimilars Market

Biosimilars entered the market in 2015 with a promise: to lower prescription drug costs by offering clinically equivalent alternatives to expensive biologics. But nearly a decade later, that promise remains largely unfulfilled—not because of scientific limitations, but because of how the system is structured.

At the center of that structure is vertical integration.

Many legacy pharmacy benefit managers (PBMs) now operate within conglomerates that include drug manufacturers, pharmacies, and health plans. That level of integration can create incentives to prioritize affiliated products over more cost-effective alternatives—even when lower-cost biosimilars are available and clinically appropriate.

In this post, we’ll explore how vertical integration affects biosimilar access and pricing. We’ll also unpack related practices like formulary exclusions and private-label biosimilars—and explain why employers need a PBM partner whose model is designed to support value, not entrench opacity.

Understanding Vertical Integration—and Why It Drives Up Pharmacy Costs

Vertical integration refers to a business structure where one organization controls multiple parts of the supply chain. In the PBM space, that often means the same parent company owns the pharmacy benefit manager, the health plan, the pharmacy, and so on. 

When a PBM is vertically integrated, it has the ability—and the incentive—to favor affiliated products over more affordable alternatives– such as biosimilars. This can distort decision-making and limit access to lower-cost medications.

Pricing manipulation happens when that control is used to shape formularies and pharmacy networks in ways that increase total drug spend. Whether by steering members toward high-rebate drugs, excluding lower-cost options, or applying opaque pricing practices, these tactics can lead to inflated costs and limited visibility. For employers, the impact is real: inconsistent pricing, restricted access to value-based therapies, and higher pharmacy benefit costs overall.

How Vertical Integrations Lead to Restricted Access to Biosimilars

Once vertical integration is in place, the real influence shows up not at the structural level—but in the decisions that shape the formulary. PBMs embedded in complex corporate ecosystems don’t just manage the benefit—they decide which drugs to cover and how they’re tiered. And those decisions are often driven by financial return, not patient need or plan value.

The most expensive drugs, such as brand-name biologics, aren’t always the most appropriate for the member or the most cost-effective for the plan. But they’re often the most profitable—especially when paired with large manufacturer rebates that flow back to the PBM. Lower-cost biosimilars, which typically offer little or no rebate value, are deprioritized or excluded altogether.

Employers are left with formularies shaped by incentives they can’t see and pricing logic they can’t interrogate. Members may assume they’re being prescribed the best option, when in reality they’re being steered toward therapies that protect PBM revenue—not plan savings or clinical outcomes.

Private-Label Biosimilars: A New Twist On an Old Tactic 

As vertical integration deepens, legacy PBMs are evolving their strategies. One of the latest: launching private-label biosimilars under their own affiliated manufacturers and marketing them as “preferred” options.

At first glance, this seems like progress. But in reality, private-label biosimilars extend the same playbook. Because they’re exclusive to a PBM’s ecosystem, competition is limited, pricing is opaque, and employers lose the ability to evaluate alternatives. These products often come with markups, hidden administrative fees, or restrictive dispensing channels—all while claiming to promote savings.

Optum’s launch of Wezlana, the first biosimilar to Janssen’s Stelara, is a clear example. Released under Optum’s private-label manufacturer Nuvaila and prioritized on its formularies, Wezlana may offer the appearance of cost-conscious innovation. But employers have no visibility into whether it’s truly the best-priced option—or simply the one that benefits the PBM most.

Private-label biosimilars are not a shortcut to affordability. Employers should treat them with the same scrutiny as any formulary tactic: ask for proof of savings, demand visibility into alternatives, and insist on flexibility in how pharmacy benefits are managed. 

Don’t Let Vertical Integration and Pricing Manipulation Undermine Savings

Biosimilars hold great potential to lower costs and improve access to care. But that potential is being undermined by legacy PBMs through vertical integration, exclusion tactics, and private-label biosimilars. For employers, this isn’t just a frustrating trend - it’s a call to action. You need a PBM who puts transparency and your best interests first.

“By demanding transparency and supporting competition, organizations can help remove the barriers that stifle biosimilar innovation,” said our own CEO of SmithRx, Jake Frenz, in a recent Forbes article.  “This could lead to a more dynamic marketplace where new, cost-effective therapies can flourish—one that drives a future where breakthrough treatments are accessible and affordable for all.”

Want to see the difference partnering with a transparent PBM can make? Let’s talk.