Inflation Reduction Act Provision Aims To Further Spur Biosimilar Uptake With Temporary Add-On Payment In Medicare Part B

A temporary increase in payments from Medicare for physician-administered biosimilars is designed to further boost their uptake by physicians and patients. The increase went into effect on October 3rd and will last five years. It’s one of the lesser-known drug pricing provisions contained in the Inflation Reduction Act.

Biosimilars are biologics that are highly similar to a reference or originator biologic. There are no meaningful clinical differences in safety and effectiveness between a biosimilar and its reference product.

In the buy-and-bill process, which is characteristic of Medicare Part B, a physician purchases and then administers a drug to a patient in a clinic. After the patient receives the drug, the healthcare provider submits a claim for reimbursement from a third-party payer, such as Medicare.

Typically, physicians are reimbursed by Medicare at the Average Sales Price (ASP) of the drug in question, plus 6%. The ASP reported to Medicare by drug manufacturers every quarter is the volume-weighted average of the manufacturers’ average sales prices of drugs across commercial and public markets.

The change in add-on payment policy means that Medicare Part B payments for biosimilars will now be ASP plus 8%. The 8% markup will be calculated based on the price of the originator biologic. Several years ago, the Centers for Medicare and Medicaid Services (CMS) had already instituted a change in reimbursement of biosimilars, making the 6% markup a percentage of the price of the originator product, not the biosimilar.

In a statement, Centers for Medicare and Medicaid (CMS) Administrator Chiquita Brooks-LaSure said that the temporary increase “will foster competition in the drug marketplace for conditions such as diabetes, cancer, and immune disorders.”

Notably, the top 10 Part B drugs in terms of expenditures are are all biologics. Most do not have biosimilars yet, but several will have biosimilars soon.

In the U.S., the growth in biosimilar market share from 2019 until now has been remarkable. After a bumpy start in the 2015 to 2018 period, the U.S. has witnessed evidence of a sustained uptick in the uptake of biosimilars in the past few years. Biosimilar penetration is apparent across multiple therapeutic categories. Besides filgrastims and pegfilgrastims, there’s been significant erosion of the originator biologic market share in the trastuzumab, rituximab, and bevacizumab classes.

Also, beginning in 2019, for the first time Medicare Advantage plans were allowed to use formulary management tools that had previously been reserved for outpatient drugs only. So, for example, Medicare Advantage plans now assign prior authorization, quantity limits, and step edits to certain physician-administered drugs. Evidence suggests these cost-conscious payers are incentivizing the prescribing of cost-effective medications, such as biosimilars.

Another factor that contributes to biosimilar ascendancy is improved trust among physicians and patients alike. Experience with biosimilars has helped, along with physician and patient education campaigns, and improved regulatory guidance from the Food and Drug Administration.

As the latest government policy projected to inject competition among biologics, add-on payments for biosimilars may produce additional modest gains in market share by these products.