Kaiser’s formulary chief makes his case for a ‘total value’ model on biologics | HSES 2026

When we think about biosimilars, words like cost savings and innovation come to mind, but long-term stability is still in question. A 2025 study analyzing the impact of biosimilars on patients battling rheumatoid arthritis found the treatment highly successful, but not necessarily a first-line option. What’s worse, RA patients often don’t meet the clinical eligibility criteria to access those biologics, despite their success even as a second-line therapy. The disparities are an across-the-board problem in healthcare, but one that David Chen, PharmD, executive director of Formulary and Drug Use Management for Kaiser Permanente’s National Pharmacy program, doesn’t believe has to be.

At the Health System Executive Summit, Chen spoke candidly about how to build a “total value” market for biologics.

“We are not a traditional [pharmacy benefit manager] PBM model,” Chen said. “We do not have any hidden rebates. Typically, our contracts are straight off-invoice discounts. We utilize a PBM, but they simply use it for the adjudication and the pricing, and nothing more.”

It’s an important point of view to have. The dispensing rate of available biosimilars over brand-name drugs fell to 23% in 2025, down from about 40% in 2024, according to the Association for Accessible Medicines’ (AAM) 2026 U.S. Generic & Biosimilar Medicines Savings Report.

A biosimilar-first policy, with no flip-flopping once a product is chosen

Kaiser’s biosimilar-first stance means picking the single product with the most robust clinical evidence, then weighing formulation and manufacturer considerations — including supply.

Because Kaiser’s market share is large enough to “dry up a manufacturer in a day,” Chen said the system also must plan around warehousing and supply strategy before committing. Once it does, Kaiser sticks with that preferred product for the life of the contract, typically several years, rather than switching between biosimilars as pricing shifts.

That consistency is reinforced by unusually high member retention within the Kaiser system, he said — members aren’t moving between plans with different preferred products the way many patients do elsewhere. Kaiser does periodically renegotiate pricing, and has executed several biosimilar-to-biosimilar conversions, but always as a single, system-wide decision rather than one customized by plan or member.

Physicians drive the formulary, not administrators

“Our secret sauce actually is our physicians,” Chen said, crediting Kaiser’s results to a structure most health systems don’t have: physicians, not pharmacy administrators, sitting at the center of formulary decisions. “They are partners with us every step of the way, making formulary decisions based on clinical safety and quality, and then leveraging our collaboration with pharmacy to find the most affordable treatments.”

The physicians who chair those decisions — specialty and P&T committee chairs across the system — carry no conflicts of interest, he said, and understand that “every dollar saved goes either directly to the members or back into the health system for growth of our infrastructure and expansion programs.”

That structure is also why Kaiser avoids prior authorization in most of its markets. “Prior authorization is like a four-letter word in our organization,” Chen said. Because physicians — down to the front-linefrontline level — help build the formulary and guidelines themselves, they’re accountable to standards they set, not ones imposed on them. Decision support is built directly into the EMR to make the preferred, cost-effective choice the easiest one to make. “The fastest and the easiest thing to do is the right thing to do, and we make that happen for them,” he said. Physicians who fall outside that pattern get individualized education and feedback rather than a hard stop, and Chen said medical exceptions are granted without question when a case calls for it.

The numbers behind the model

Chen shared figures he said would “make any formulary director jealous”: 97.7% formulary compliance, achieved predominantly without prior authorization; 99.2% generic penetration when a generic is available; and 95% utilization of biosimilars overall. He pointed to one formulary switch in particular — moving the system’s preferred product to a newly available biosimilar — that delivered roughly $300 million in savings and took effect within about three days of the decision, though he noted the planning behind it took considerably longer. “You can’t [move] in three days if you’re a [laggard],” he said [transcription unclear on exact wording here — worth checking the recording before quoting directly].

Oncology pathways built by Kaiser’s own doctors, not borrowed from NCCN

Kaiser’s approach to specialty and cancer care follows the same physician-led model. The system’s roughly 300 oncologists each specialize in a specific tumor type and represent their subspecialty — breast, thoracic, and others — in developing the system’s own treatment pathways, built around outcomes and toxicity reduction rather than adopted wholesale from national guidelines.

“They are not a model of like, ‘Oh, let’s take NCCN and pick the best one,’” Chen said. “They evaluate the literature and they pick their [own].” Only after the clinical pathway is set does cost enter the conversation with manufacturers: “This is where our doctors need you to be.”

The same model extends to ultra-high-cost cell and gene therapies and other rare-disease treatments, Chen said, where pharmacy and medical groups jointly develop practice recommendations and, through consultative expert panels, effectively self-police appropriate use — without a prior authorization process behind it.

Chen’s advice for pharmacy leaders outside Kaiser

“I’ve led with physicians, physicians, physicians,” he said. “There has to be a true, honest engagement with them.”

His advice: don’t make formulary and P&T decisions in a vacuum, and don’t implement prior authorization criteria that serves pharmacy’s interests but not the patient’s.

“Have that honest conversation with the docs,” he said. “They’ll support it. They understand. They won’t be able to work in this ever-changing healthcare environment if they don’t come along.”