It May Be Time to Move Beyond Buy-and-Bill to Optimize Biosimilar Savings

The simple question of who purchases these biosimilars has the potential to substantially alter the savings associated with biosimilars. A new analysis lays bare the differences in charges associated with provider-purchased biologics compared with specialty pharmacy costs.

Frequent readers of this column may recall that I am not completely aligned with published savings estimates associated with biosimilars. These estimates typically (e.g, $38.4 billion in 5 years, biosimilars saved $7.9 billion in 2020) fail to incorporate important factors in the economic equation, such as savings accrued through avoidance of future price increases by the reference manufacturers and realistic rates of converting patients from reference products to biosimilars. In addition, they do not consider payers’ choices regarding biosimilar vs. reference drug coverage.

I’m no economist, but it does not take an advanced economics degree to understand that savings estimates will be unreliable unless they consider all stakeholders in the system. A new study by the payer trade organization AHIP does not attempt to quantify biosimilar savings, but it does emphasize a very important point: In order to maximize biosimilar savings overall, we must address the provider side of the equation.

To date, all of the biosimilars approved by the US Food and Drug Administration and launched by their manufacturers have been covered under the medical benefit—injectable or infusible drugs administered in the doctor’s office, hospitals, or clinics. The launch of the adalimumab biosimilars in 2023 will spotlight coverage under the pharmacy benefit, for the most part as self- injectable biologics.

Who Bills for the Drug Matters, Maybe a Lot

According to the AHIP study, physicians who purchase and administer Herceptin® (trastuzumab), and then bill the health plan back for the drug (i.e., the buy-and-bill process) charge an average 40% more than if the drugs were obtained and delivered to the provider’s office via specialty pharmacy. A hospital’s markup is on average three times higher than even the physician’s charge. The AHIP analysis found that the physicians’ charge for Remicade® was 15% higher and hospitals charge was 124% higher than that charged through specialty pharmacy. The numbers associated with Rituxan® are a bit a lower. However, the charged amounts for a future biosimilar target, Prolia® (denosumab), is far greater: The markup from physicians offices and hospitals is 49% and 215%, respectively, that from specialty pharmacies.

One caveat of the study is that the costs evaluated were based on charged prices as opposed to allowed prices by the payers. Another limitation is that the study did not evaluate charges permitted with biosimilars in these specific biologic categories.

Squeezing More Biosimilar Savings From the Health System

This investigation reaffirms the value to payers of further restricting the use of buy-and-bill reimbursement and towards the process known as “white bagging.” Under white bagging, the health plan or insurer purchases the drug at the price it negotiates through either its pharmacy benefit manager or other entity and uses its specialty pharmacy to deliver the drug to the physician’s office for administration. In that case, the provider is paid only for administering the drug. An alternative may be “brown bagging”, in which the specialty pharmacy delivers the drug to the patient who then brings it to the doctor’s office for administration. Once again, the physician or provider is paid only for administration services. A newer form of specialty pharmaceutical delivery and purchase is referred to as “clear bagging,” in which a health system’s own specialty pharmacy purchases and delivers the pharmaceutical to the physician’s office or clinic for patient administration.

Optimizing the savings associated with biosimilar coverage and utilization may require restricting providers’ ability to purchase these specialty drugs on their own. Will simply modifying the reimbursement formulas (like ASP + 6%) negate the effects of cost-bloating effects of buy-and-bill? I believe that health plans, insurers, PBMs, et al, can leverage their purchasing power and obtain lower net costs.

The buy-and-bill process remains a significant avenue through which healthcare dollars flow. Perhaps the AHIP study will further bolster the move to a more cost-effective drug purchasing system and take the greatest advantage possible of the opportunities for biosimilar savings.

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