Patient Cost Sharing for Biosimilars in Part D Coverage Gap Likely to Cause Headaches

The Medicare part D coverage gap is seemingly an enigma for biosimilar manufacturers. Legislative language that seeks to close the coverage gap by 2020 incorporates a huge slip—pairing biosimilars with generics in how the Medicare eligible’s cost share is lowered over time.

An analysis by the health care consultant Avalere shows that Medicare patients will pay much more for the biosimilar drug in the coverage gap than for the innovator product. This may well result in a parallel prescribing situation: innovator products for the Medicare-eligible populations and biosimilars for everyone else.

The problem lies in the structure of the part D program, particularly, the coverage gap, authors of the Avalere paper point out.Image result for donut hole

The Affordable Care Act seeks to reduce and eventually eliminate the coverage gap (or “donut hole”). For this year, the coverage gap spans $3,310 to $4,860 in drug spending. After exiting the coverage gap, beneficiaries pay 5% of total costs. This seems straightforward, but complicating the matter is a provision to help close the coverage gap by 2020. That refers to the Coverage Gap Discount Program, in which drug makers must provide a 50% discount on brand-name products dispensed to Medicare beneficiaries who are presently in the coverage gap. In 2016, the health plan pays 5% of the costs in the gap (this increases through 2020 to 25%), and the beneficiary pays 45% (which decreases by 2020 to 25%). This manufacturer discount applies only to brands, not to generic and biosimilar drugs.

Avalere’s model assumes that the reference product at issue costs $30,000, and the biosimilar is discounted by 25%, which reflects the average discount seen in Europe. If patients A and B take the reference product and biosimilar, respectively, throughout the year, and this is the only agent he or she is prescribed, payments for either drug product will take the patient through the coverage gap and beyond. However, patient B will pay $1,536 (or 39%) more over the course of the year than his or her counterpart, because of the manufacturer’s required discounts on the branded product in the coverage gap.

There are 2 possible policy or regulatory options to correct the situation: (1) require the biosimilar manufacturer to provide coverage gap discounts as well by changing the legislative language or (2) add flexibility for part D providers to add biosimilar tiers, where biosimilars can be offered at substantially lower cost sharing compared with branded products.

Just after the meeting took place, the Medicare Payment Advisory Commission (MedPAC) met and discussed this issue, favoring the first option. MedPAC is the key resource Congress relies on for advice on Medicare financing and reimbursement issues, so there is hope that their recommendation will prompt a legislative fix.

At the Fall meeting of the Academy of Managed Care Pharmacy, this was a looming concern of several pharmacy and medical executives with whom I spoke. They think that, with rapid Congressional action, parallel prescribing is a possibility, to prevent unnecessary patient pain on reaching coverage gap.

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