The biosimilar news articles of the last week have included more data and announcements from the American College of Rheumatology on clinical outcomes of biosimilars to the reference product, debates over their prescription and utility of interchangeability, and of course, and frustration over the delays in biosimilars reaching the market caused by patent litigation. As interesting as all of these are, it does mean that last week’s major announcement by the Centers for Medicare and Medicaid Services (CMS) remains number 1 at the biosimilar box office.
With less “new” news to report, I’ve had a chance to reflect on what Medicare’s change in the way biosimilars are coded and reimbursed will mean to various stakeholders.
As a reminder, all biosimilars for one originator product are given the same temporary Q code under the current policy. The reference product retains its unique 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 spread being based on the (higher) ASP of the reference product. The new policy would provide a specific Q code to any new biosimilar, and the ASP for reimbursement purposes would be calculated for individual drugs and not as a group.
From a provider standpoint, this might help alleviate any confusion that may exist now and in the future about which biosimilars are prescribed (or dispensed). Today, only infliximab has more than one biosimilar on the market for the same originator biologic. In the not-too-distant future, competition may be rife for etanercept, pegfilgrastim, trastuzumab, among others. However, the current policy, under which related biosimilars have the same Q-code, could also perpetuate the confusion that all of the biosimilars are biosimilar to each other. The new policy would remove that potential source of confusion. This may be less important, though, as National Drug Codes (NDCs) are unique today, and full NDC information includes descriptors regarding their manufacturer and biosimilar status. And many payers require NDC codes for physician reimbursement of buy-and-bill biologics.
In terms of cost savings, the positive effect of the new policy will be relegated to the future. In the short term, the current policy encouraged greater immediate discounts. Consider an originator drug that cost $5,000 per month. The first biosimilar, approved in 2017, for example, might be priced at a modest 15% discount ($4,250). The originator would have little reason not to meet that price through rebates. Under current policy, consider a second biosimilar that is approved in 2018. With the same Q code, there is little to differentiate the two biosimilars except price. Add a third biosimilar to the mix (at a 35% discount or $3,250), and you can see rapidly increasing discounts—a boon to the payer, and possibly the patient, but a real problem for the manufacturers. Since the product’s ASP reimbursement is volume weighted, as agents are introduced into the category at greater discounts, one would expect that reimbursement would rapidly decrease as well. In total, the biosimilar industry has argued, this would cool interest in biosimilar development over the long term, and could hurt the amount of competition for future biologics coming off patent (and future discounts).
Under the new policy, biosimilars having different HCPCS codes may slow this “race to the bottom.” Or it may not. The nature of biosimilar competition is not based solely on similar coding but on gaining marketshare through payer preference (or exclusions). The real issue is that an insufficient mass of providers are fully at risk who can take greatest advantage of lowest drug pricing and not rebate-associated costs. If your organization is at risk, that is the best incentive to use the lowest priced agent. It is a better exercise in cost-efficient medicine.
The Biosimilars Forum believes that using separate Q-coding for each biosimilar would result in an additional $15 billion in savings over 10 years. This would be attributable to a much higher utilization rate (projected by the Forum of up to 65% at 10 years vs. a projected 35% under current policy). Basically, if these assumptions were taken seriously, they would argue that more immediate price decreases under current policy would not yield greater utilization faster, and thus greater savings. The Forum posits that less competition over the long term will be the result of fewer manufacturers interested in the biosimilar market.