Biosimilar reimbursement rules cost Medicare over US$1.5 billion

Biosimilars/Research | Posted 10/12/2021 post-comment0 Post your comment

Current Medicare Part B biosimilar reimbursement rules prevented healthcare savings of over US$1.5 billion between 2015 and 2019, revealed a study published in JAMA Network Open [1].

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In the US, the market entry of competitive generic and biosimilar drug products is designed to reduce prescription prices and grant access to affordable medications. This has worked well with market entry of generic drug products. However, since the passage of the Biologics Price Competition and Innovation Act of 2009 (BPCI Act), the entry of biosimilars in the market has not been associated with particularly noteworthy savings for the healthcare system. Dickson and Kent [1] set out to understand the reasons why biosimilars are failing to achieve predicted savings.

In their study, the researchers focused on drugs administered by clinicians in an outpatient hospital or clinic setting.

These are reimbursed under Medicare Part B which is based on a prospective fee schedule and is set at the average sales price plus a 6% markup to account for other supply chain costs.

Under Medicare Part B, small molecule originator and generic drug products are paid under a single billing code, with the average sales price set according to a weighted mean of the price for each version. This results in direct competition between originator and generic drug products. Clinicians are incentivized to prescribe the lowest cost product. The researchers found that, when investigating 50 small-molecule clinician administered drugs, generics competition was associated with dramatic price decreases of up to 71% when there were four or more competitors.

However, when it comes to biological and biosimilar products, through Medicare Part B between 2015‒2019, each received its own reimbursement code and was paid for based on its own average sales price. This meant that, even when prices of a biosimilar fell, those of the originator or other biosimilars may have remained high, and there is a lack of direct competition. In this scenario, rather than incentivizing clinicians to prescribe the cheapest product, they prescribe that with the greatest Medicare reimbursement, which is the most expensive. The researchers found that price reductions for the six biological drugs with biosimilars competition between 2015‒2019 were substantially lower than those seen for generics products, even if the low number of competitive biosimilars per product was considered.

The authors estimated that Medicare spending on the six biological drugs would have been reduced by about 27%, or US$1.6 billion, if the prices of originator biologicals and biosimilars decreased comparably to those of brand-name small-molecule and generic drugs.

Successive governmental administrations in the US have zig-zagged between bundling, or not bundling, originator biologicals and biosimilars billing codes. In 2017, the Medicare Payment Advisory Commission recommended bundled billing codes for originator biologicals and their biosimilars to promote greater competition. The policy has since been included in President Biden’s September 2021 Comprehensive Plan for Addressing High Drug Prices report.

The paper concludes that revision of Medicare Part B reimbursement is needed to incentivize biosimilar uptake in the hospital setting. However, this alone will not lead to their widespread uptake. Medicare only accounts for a small portion of the prescription drugs market in the US and biosimilars also have trouble reaching the market due to anticompetitive behaviour of originator manufacturers [2, 3].

A more recent commentary on the article [4], calls for US Congress and Centers for Medicare & Medicaid Services (CMS) to ignore the pharmaceutical industry’s lobbying efforts and rewrite the biosimilar reimbursement rules to access savings for the healthcare system.

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References
1. Dickson SR, Kent T. Association of generic competition with price decreases in physician-administered drugs and estimated price decreases for biosimilar competition. JAMA Netw Open. 2021;4(11):e2133451.
2. GaBI Online - Generics and Biosimilars Initiative. AbbVie accused of anticompetitive tactics to stop Humira biosimilars [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2021 Dec 10]. Available from: www.gabionline.net/policies-legislation/AbbVie-accused-of-anticompetitive-tactics-to-stop-Humira-biosimilars
3. GaBI Online - Generics and Biosimilars Initiative. Delayed biosimilars market entry costs US billions [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2021 Dec 10]. Available from: www.gabionline.net/biosimilars/research/delayed-biosimilars-market-entry-costs-us-billions
4. Rome BN, Sarpatwari A. Promoting biosimilar competition by revising Medicare reimbursement rules. JAMA Netw Open. 2021;4(11):e2134463.

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