CMS Makes Major Policy Change to Biosimilar HCPCS Coding

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.”

Biosimilar Industry Group Urges Congress to Address Part B Reimbursement

Reimbursement of biosimilars for Medicare Part B beneficiaries has long been an issue for biosimilar manufacturers. The Medicare Payment Commission recognized this problem in its own recommendations to Congress earlier this year, and the Centers for Medicare and Medicaid Services (CMS) asked for comments on its 2018 proposed payment policy.

The Biosimilars Council, in a letter to CMS, complained that instead of the current policy of using a single J code (and average sales price) for payment for noninterchangeable biosimilars (based on the same originator product), a unique code should be issued for each. Under the current policy, the Council argued, incentives for prescribing biosimilars are limited, which discourages the development of “a robust biosimilars market in the United States.”

In a press release, Christine Simmon, Executive Director of the Biosimilars Council, stated, “Shifting biosimilar reimbursement to unique codes will help facilitate the creation of a thriving market and greater, more affordable, patient access to these medicines. This is a critical opportunity for policy to have a positive impact on the future viability of the biosimilars market.”

A letter sent to CMS Administrator Seema Verma, signed by Citizens Against Government Waste, CVS Health, Express Scripts, FreedomWorks, National Association of Chain Drug Stores (NACDS), National Taxpayers Union, Pharmaceutical Care Management Association (PCMA), and Prime Therapeutics, stated “Under the current policy, all biosimilars for a single reference product are combined into a single ASP… This policy is a significant departure from how CMS treats other drugs in Part B, as no other blended codes exclude the original reference product from the blended code with its follow-on counterparts. The letter also asserted that the opportunity for expanded patient access to these innovative therapies, be fully realized,” only if the policy is changed.

 

Biosimilars and Generics: Are the Drug Companies Using Similar Tactics?

The rebate game seems to be overrunning patient affordability and common sense, according to an article in the New York Times. This has been a problem for biosimilars and other high-cost specialty brands, but now it seems to be extending to generics as well, with patients on the losing end of the deal.

Pharmaceutical manufacturers offer rebates to health plans and pharmacy benefit managerLee 2s to offset a drug’s higher wholesale acquisition costs (WAC) and entice these payers to cover their drug, often at preferred tiers. The result is that new products can be locked out of the formulary or placed on nonpreferred tiers, because the contract requires exclusivity. This has been called the “rebate trap.” The rebate trap was never really a problem for generics in the past, because they were far less expensive than the brands, and with generics made by several companies, the price and rebating competition was too fierce for branded manufacturers to compete.

The New York Times article cited the case of Adderall XR for people with attention deficit hyperactivity disorder (ADHD). The drug has been available as a generic for some time. However, Adderall’s manufacturer, Shire Laboratories, has aggressively rebated their product to compete with the generic, providing a net cost to the health plans and PBMs that is less than the generic. Shire wants to retain some revenues on their products rather than leave the battle to the generic manufacturers. There is nothing wrong with that, and it results in lower net costs—but not for many patients.

First, if the plan has a substantial copayment difference for generics and preferred products, this can mean the average patient will have to pay the higher amount (unless the plan makes adjustments and allows the patient to purchase the brand at the generic copayment level). Second, the rising number of people with high deductible plans (including pharmacy deductibles) will have to pay the higher full price of the branded drug than the generic (according to the Times’ sources, this is about $50/mo). Thus, until they have paid their deductible, these patients are disadvantaged by this rebate arrangement. Consider also that the rebate savings to the payer are rarely, if ever, passed on to the patient.

Here’s the kicker: The pharmacist may be required by the plan to go back to the doctor to ask that they redo their prescription, by checking off the box that requires it be dispensed as written (for the branded product only). This is after generations of pharmacists have been trained on automatic substitution of generics for brands and patients have been persuaded to accept it.

Although the problem is very evident with ADHD, the lack of multisource generics means less competition for other drug classes as well. This is not limited to one payer either. The article mentioned Humana specifically, but it is likely that other payers (national and regional) are also party to these contracts.

This scenario can also hurt competition for biosimilars. Before the entry of Merck’s Renflexis®, Janssen had only contended in the infliximab marketplace with Pfizer’s Inflectra®. Janssen has been willing to cut deals with payers to keep Inflectra off the formulary. However, this could also affect some patients, even though infliximab, an infusible product given in the doctor’s office is usually paid through the medical not pharmacy benefit. If these drugs were covered with a fixed copayment (e.g., $100), patients would not be harmed economically by using any particular product. However, if the patient pays a fixed coinsurance (e.g., 10%), that person may then pay more for the originator drug, because the co-insurance is often calculated according to the WAC (which does not include the rebate) instead of the average sales price ASP (which does).

The problem of rebate traps and the lack of transparency of the system is not new. It may be a different situation if the manufacturer–payer transaction was based solely on simple WAC discounts. There is simply too much rebate money up for grabs for plans and PBMs that the system can be changed easily.

Bipartisan Reaction Kills Medicare Part B Value-Based Proposal

Announced in March, the Centers for Medicare and Medicaid Innovation (CMMI) planned a far-reaching pilot that would affect how physicians are reimbursed for administration of part B drugs. Apparently, the pilot was too far a reach, as it elicited strong criticism from nearly all stakeholders. On December 15, the federal government announced that the plan was now withdrawn.

The centerpiece of the program was a change in the way physicians are reimbursed for purchasing and administration of the medications. Under the pilot, which was to extend to most Medicare participating medical practices, clinicians would be paidhhs at the average sales price of the drug plus 2.5% (presently at ASP + 4.3%) in addition to a flat rate of $16.80. From a biosimilar industry standpoint, this was objectionable, because higher priced drugs (presumably originators) would be subject to greater reimbursements to doctors, which ran counter to the concept of value-based alignment.

As reported in the New York Times, a spokesperson for the Department of Health and Human Services stated, “The proposal was intended to test whether alternative drug payment structures would improve the quality of patient care and the value of Medicare drug spending. While there was a great deal of support from some, a number of stakeholders expressed strong concerns.” The spokesperson concluded, “The complexity of the issues and limited time available led to the decision not to finalize the rule at this time.”

It is not known that the transition to a new administration may have also played a role, but the aggressive timeline set by the Centers for Medicare and Medicaid Services left little time to attempt adjustments to the pilot, accept public comments, and publish final rules.