Today, the Centers for Medicare and Medicaid Services (CMS) announced that it is implementing a major change that will affect the way biosimilars are coded and reimbursed by Medicare.
Currently, all biosimilars for the same reference product are given the same temporary Q code, while the reference product retains its J code. The average sales price (ASP) is calculated on the volume-weighted utilization of these grouped biosimilars. Physicians who buy and bill are paid ASP + 6% (actually + 4.3% because of the financial sequester), with that 6-point spread being based on the (higher) ASP of the reference product.
This was problematic for a number of reasons. Principally, it did not foster price transparency, and it raised the possibility of a death spiral in pricing—a real threat to the biosimilar manufacturing industry. The result, when multiple biosimilars were approved, could be little incentive for other manufacturers to produce biosimilars of their own.
In response to this fear; solicited comments from payers, manufacturers, and physician groups; and the Medicare Payment Advisory Commission’s recommendations issued in June; CMS has decided to change course and assign each biosimilar its own Q code. As with any ASP calculation, the reimbursement of newly approved biosimilars will be based on the first quarter’s WAC price, after which an ASP will be calculated.
Noting that this new policy will affect claims payment systems, CMS will not issue new Q codes until after January 1, 2018, perhaps as late as mid-2018. According to the notice in the Federal Register, CMS stated, “We will issue detailed guidance on coding, including instructions for new codes for biosimilars that are currently grouped into a common payment code and the use of modifiers.”