The Push and Pull of Buy and Bill for Biosimilars on the Medical Benefit

The Office of the Inspector General (OIG) issued a new report in late September on savings associated with part B biosimilars, reiterating that the Medicare program could have saved $419 million in 2021 if it did more to incentivize biosimilar utilization. Similarly, a panel discussion at last week’s GRx+Biosims meeting emphasized that adoption for medical benefit biosimilar use has been successful in some drug categories but less so in others.

The sole provider incentive in buy-and-bill practices was a reimbursement calculated as the average sales price (ASP) of the biosimilar product plus an add-on payment of 6% of the ASP of the reference product. Under the provisions of the Inflation Reduction Act, providers are incentivized to utilize biosimilars through a higher payment (ASP + 8%). The OIG report noted that this policy “has not provided sufficient incentive for providers to change prescribing p and maximize savings.”

Instead, the OIG advocates a move to a “least costly alternative” (LCA) payment strategy, in which the provider is paid based on the lowest ASP in the drug category. Since biosimilars are almost always the lowest priced agent, biosimilar utilization should rise, according to the OIG.

A couple of thoughts around this LCA strategy: It closely approximates the maximal allowable cost (MAC) program used by payers in pharmaceutical categories with multiple generic drug options (generally older drugs covered by the pharmacy benefit). However, the strategy does not account for competition driving down prices to the point that manufacturers decide to withdraw their agents from the market. On the generic drug side of the fence, that incurs the risk of drug shortages.

The OIG studied part B prescribing during the 2015–2021 timeframe.

Part B Biosimilar Adoption: No One Dynamic Dominates

At the GRx+Biosims meeting, Nick Adolph, Principal, US Market Access Strategy, IQVIA, reviewed IQVIA data on the part B biosimilars, showing these buy-and-bill products do not fit one model of uptake. For example, it took 5 years for biosimilar infliximab (Inflectra®) to gain considerable marketshare, but this was not the case with the cancer oncolytics, he pointed out. (The reasons for this had as much to do with Pfizer’s initial pricing policy and the reference manufacturer’s rebating strategy.)

(From Left to Right) Nick Adolph, Mary Jo Carden, Shannon Holden

“In some cases,” Mr. Adolph said, “prescribing the reference product (e.g., Lucentis®) can result in a higher margin for the provider versus the biosimilar.” For others, their practice setting can make a difference: For participants in the oncology care model, which has risk-based reimbursement, biosimilars were adopted more quickly and at higher overall levels than were reference products.

Shannon Holden, PharmD, Senior Clinical Manager, Vizient, pointed out that adoption rates are also affected by the 340B system. Health systems often receive 340B pricing because they serve (to some extent) underserved populations, and this pricing allows them to make greater profits when reimbursed by payers at non-340B rates. “Many of the reference products are still contracted by institutions that participate in 340B, unlike many biosimilars,” she said. Mr. Adolph agreed, “The 340B question is huge. The large institutions are cognizant of the margins that they can extract from commercial payers.”

Mary Jo Carden, RPh, JD, Head, Policy, Corporate Affairs, Sandoz, added, “Making changes to part B (which is driven by the Centers for Medicare and Medicaid Services [CMS]) is a big challenge, because payers don’t want to see big changes. The question is, how do we enact commonsense policies that undo the perverse incentives and market dynamics that result in noncompetitive pressures?” She continued, “We need to drive towards lowest out-of-pocket costs for the government and for beneficiaries.” Ms. Carden noted that, based on the proposed rule released by CMS in July 2023, the agency seems to agree: CMS proposed that biosimilars would not be packaged with other services when their reference products are separately paid. This packaging refers to the hospital outpatient prepayment system rule, in which certain pharmaceutical products, costing no more than $140 per treatment, would fall into an all-inclusive reimbursement to the health system. Certain biosimilars (at least one biosimilar pegfilgrastim) would have fallen under that threshold at present.

Ms. Carden summarized, “The goal is to lower overall cost. We need to stabilize ASP prices. We’re injecting competition into the market. Can we fairly apply discounts in the market? We have to use commonsense approaches.”

And we have to avoid driving costs below a point at which biosimilar makers no longer want to compete.

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