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.”
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.