Tag: CMS

New CMS Proposal Lowers Cost Sharing for Part D Biosimilars and Follow-on Biologics

The Centers for Medicare and Medicaid Services (CMS) has released another proposal through the Federal Register, which attempts to correct an anomaly in how biosimilars, follow-on biologics, and brands are treated under Medicare part D.

This can be confusing, because CMS treats biosimilars as generics for the purposes of the part D coverage gap. It now wants to ensure that biosimilars are treated as generics in terms of the coverage gap for only those receiving low-income subsidies. Currently, biosimilars are more expensive for patients in the coverage gap compared with originator brands; the new policy could seriously lower overall cost sharing for patients.

CMS logoUnder the policy in place, patients receiving biosimilar therapy who enter the coverage gap are required to pay the same amount as they would for a branded biologic, rather than a generic. This discouraged the use of biosimilars in the coverage gap. The new proposal by CMS rectifies the situation for those receiving the low-income subsidy.

The Affordable Care Act seeks to reduce and eventually eliminate the coverage gap. The 2017 coverage gap begins once a patient has drug expenditures of $3,700 and ends after $4,950. After exiting the coverage gap, beneficiaries pay 5% of total costs. This seems straightforward, but complicating the matter is a provision to help close the coverage gap by 2020. That refers to the Coverage Gap Discount Program, in which drug makers must provide a 50% discount on brand-name products dispensed to Medicare beneficiaries who are presently in the coverage gap. In 2017, the health plan pays 10% of the costs in the gap (this increases through 2020 to 25%), and the beneficiary pays 40% (which decreases by 2020 to 25%). For generics and biosimilars, patients pay 51% of the cost, as CMS assumed that the prices of these would be far lower than that of brands. This is not the case with biosimilars, however; patients in the coverage gap would actually pay more for a part D biosimilar than for a brand until the coverage gap disappears.

Under the new proposal, CMS would “revise the definition of generic drug at § 423.4 to include follow-on biological products approved under section 351(k) of the PHS Act (42 U.S.C. 262(k)) solely for purposes of cost-sharing under sections 1860D-2(b)(4) and 1860D-14(a)(1)(D)(ii-iii) of the Act. Lower cost sharing for lower cost alternatives will improve enrollee incentives to choose follow-on biological products over more expensive reference biological products, and will reduce costs to both Part D enrollees and the Part D program.” This proposal is specific only to non-low-income subsidy beneficiaries’ catastrophic care (i.e., beyond the coverage gap threshold) and all low-income subsidy beneficiary cost sharing.

The real impact of this new policy on biosimilars will not be known for some time. After a comment period ends in January, implementation can take some time (perhaps around the time the coverage gap is closed). More pragmatically, no part D biosimilar is currently marketed (infliximab and filgrastim are reimbursed under part B). Follow-on biologics, such as insulins or growth hormones, are generally covered under part D, and the policy applies to these agents as well.

Additional Thoughts on CMS’s Changes to Biosimilar Part B Coding

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.

cropped-cropped-web-image-1As 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.

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.