Simon Glairy is a recognized authority in insurance law and the evolving landscape of Insurtech, with a particular focus on how regulatory shifts impact risk management. As health insurance frameworks move toward more patient-centered models, his expertise in navigating the intersection of clinical necessity and statutory compliance has become invaluable for carriers. In this discussion, we explore the nuances of Delaware’s recent regulatory clarifications regarding step therapy and the critical distinctions between traditional pharmaceuticals and biologics that insurers must now address.
How has the shift toward a patient-centered framework changed the way carriers manage step therapy overrides, and what internal systems are required to ensure clinical judgment remains central?
The transition to a patient-centered framework, particularly under the standards set by Delaware’s 2020 statutes, has forced a major architectural shift in how carriers process exception requests. Internally, insurers must now maintain highly transparent, accessible portals that prioritize the provider’s medical necessity rationale over rigid, automated “fail-first” algorithms. This requires a robust clinical review layer where medical directors can quickly evaluate individual patient histories rather than relying on a one-size-fits-all checklist. The primary challenge lies in standardizing these processes across diverse plans while ensuring that the 2020 provisions—which safeguard a provider’s ability to override protocols when a treatment is medically inappropriate—are not buried in administrative red tape.
State law allows for a trial of an AB-rated generic before covering a branded drug, but this does not technically include biologics or biosimilars. What are the operational risks of conflating these categories?
Conflating biologics with traditional branded drugs is an operational minefield because it ignores the fundamental chemical and legal definitions that regulators are now strictly enforcing. When a carrier treats a biosimilar as if it were an “AB-rated generic,” they are effectively expanding a narrow statutory exception beyond its intended scope, which invites immediate regulatory scrutiny and potential fines. From a structured coverage standpoint, this means health plans cannot simply copy-paste their generic-first logic onto biologic tiers. They must build distinct clinical pathways for biologics that acknowledge the lack of a legal “generic” equivalent in that space, ensuring that patients aren’t forced through unnecessary hurdles that the law doesn’t actually permit.
When regulators clarify that specific step therapy exceptions do not apply to biologics, what immediate steps should compliance teams take to audit their existing protocols?
Compliance teams need to move with a sense of urgency, starting with a deep-dive audit of their internal “branded drug” definitions to ensure they haven’t been colloquially stretched to include complex biologics. The first action is to scrub all policy language and automated adjudication systems for any references to subsection (e) exceptions being applied to non-AB-rated products. It is vital to retrain claims adjusters and update the logic in pharmacy benefit management (PBM) software to reflect that biologics are excluded from the generic-trial mandate. This isn’t just a paperwork change; it’s about decoupling these two very different classes of medicine in the code that drives daily approvals and denials.
While biosimilars often function like generics, the legal requirements for their use are more restrictive. How do these rigid definitions impact long-term cost-containment strategies?
These rigid definitions create a friction point between fiscal responsibility and legal adherence, as carriers can no longer rely on the same aggressive cost-saving “step” mandates for expensive biologics that they use for small-molecule drugs. To balance the books, carriers must shift their metrics toward “total cost of care” and “provider adherence rates” rather than simple “generic substitution rates.” They need to track the speed and accuracy of exception approvals to avoid the litigation costs and regulatory penalties that follow improper denials. In this environment, cost-containment relies more on negotiating better rebates or specialized formulary placement rather than relying on the “fail-first” protocols that the Delaware Department of Insurance has now flagged as overreaching.
What is your forecast for the regulation of biologic step therapy?
I anticipate a significant wave of similar clarifications across other jurisdictions as state regulators realize that “biosimilar” and “generic” are not legally interchangeable terms. We will likely see a move toward even more explicit statutory language that removes any “gray areas” carriers currently exploit to manage the high costs of specialty drugs. For insurers, this means the era of using generic-equivalent exceptions as a catch-all for biologics is ending, and they must prepare for a future where patient-centered clinical judgment is the primary, if not the only, path for biologic treatment plans. Success in this new landscape will belong to carriers who can integrate these legal nuances into their digital health platforms faster than their competitors.
