Biosimilar competition could lower Medicare Part B drug spending by $65bn over 10 years if the Centers for Medicare and Medicaid Services would change its approach to reimbursing the products, the manufacturer-supported Biosimilars Forum argued in recent comments to the agency.
The comments respond to CMS' July announcement that it is reconsidering its current approach to Medicare Part B reimbursement for biosimilars. (Also see "Biosimilars Payments In Medicare: CMS Signals Willingness To Change" - Pink Sheet, 17 Jul, 2017.) The announcement was made in the 2018 Medicare Part B physician payment update proposed rule.
Under the current approach, all products referencing the same biologic are paid for under a single Healthcare Common Procedure Coding System (HCPCS) reimbursement code at a single blended payment rate, similar to the way Part B pays for generics. Medicare would reimburse the biosimilars' reference drug separately, under its own reimbursement code.
The blended reimbursement approach was established by the Obama Administration in 2015 as a way to help control biosimilar pricing outliers.
CMS' recent signal that it might reverse the policy was supported by many organizations submitting comments on the proposed rule, including individual biopharma manufacturers, patient groups, providers, pharmacy benefit managers and some payers. The comment deadline was Sept. 11.
Medicare Advantage plans should be allowed to apply utilization management controls in their Part B drug coverage to drive greater use of biosimilars, Humana tells CMS.
"It is imperative that this policy be reversed as soon as possible, and to take effect in CY 2018, in order to prevent lasting damage to the viability of this nascent biosimilars market," the Biosimilars Forum said. The group urged CMS to implement the policy change in an interim final rule to expedite the process.
Manufacturers are concerned the policy would create a "race to the bottom" on price and "there is a risk that only one biosimilar will survive this competition; other biosimilar competitors will either withdraw from the market or will be deterred from entry in the first place even though their prices may be lower than the reference biologic," the Biosimilars Forum said.
Biosimilars are expected to lower Medicare costs under either coding scenario but the savings will be significantly greater under the individual coding approach, the group maintained,
A budget impact model sponsored by the organization estimates the current coding approach may save the Medicare program $49.9bn from 2018-2027. However, "the savings could be much less if the development of future biosimilars is imperiled by the current policy," the organization cautioned.
On the other hand, "an appropriate coding policy, which would provide each biosimilar with its own billing code and separate payment rate, could increase savings by an additional $15.1bn, or 30%, to $65bn in total over 10 years," it pointed out.
The additional savings would be "generated primarily through the potential for increased biosimilar availability, longer-term price competition among manufacturers of biosimilars products and reference products, and higher rates of utilization over time," the group explained.
The economic model is based on 19 reference drugs expected to have biosimilar counterparts by 2027. The drugs represented approximately 58% of total Part B drug spending in 2015 ($9.1bn out of $15.9bn).
Providers Concerned With Administrative Burden, Price Uncertainty
With separate codes for each biosimilar, physicians may be more inclined to prescribe biosimilars, the forum suggested.
Other commenters made similar points.Sandoz Inc. sponsored a survey of providers and practice managers from hematology/oncology practices and rheumatology practices that "rendered several important findings relating to CMS' current payment policy," parent Novartis AG said in its comments.
The survey found 80% of providers preferred an alternative policy, in which the biosimilar receives its own HCPCS code and average sales price (ASP). A majority of respondents believe "this alternative policy would result in greater utilization of biosimilar products."
The primary reason for preferring the alternative was a desire to simplify the billing and administrative aspect of prescribing biosimilars. However, for nearly two-thirds of providers, "volatility of the ASP (which occurs when new biosimilars enter the market) is likely to deter providers from prescribing biosimilars over the reference product given the financial risk involved."
Allowing manufacturers to have a unique HCPCS code for each biosimilar will help counteract the effect of 'all or nothing' rebates employed in the commercial market. – Pfizer
ASP volatility could lead to situations where providers are reimbursed for the biosimilar at a rate that is below the price they paid.
It is too early to judge the actual impact of the policy in the market because it was only triggered for the first time a couple of months ago, when Merck & Co. Inc.'s launched Renflexis Iinfliximab-abda), the second biosimilar referencing Janssen Pharmaceutical Cos.'s Remicade (infliximab).
The Biosimilars Forum noted that Renflexis was introduced at a greater discount to Remicade than the first biosimilar, Pfizer Inc.'s Inflectra (infliximab-dyyb), which demonstrates "the importance of having multiple biosimilars introduced into the market for the same reference product." (Also see "What Renflexis Pricing Says About Medicare's Biosimilars Policy" - Pink Sheet, 27 Jul, 2017.)
Pfizer's experience to date with Inflectra underscores the importance of Medicare's coverage policy on overall uptake, the company maintained in separate comments.
"In the commercial market, Inflectra has faced strong competition in the form of 'all or nothing' rebate agreements with payers, under which the manufacturer of a reference product can strongly discourage commercial payers from authorizing use of a biosimilar," the company noted. (Also see "Exclusive Remicade Contracts Are Slowing Biosimilar Uptake" - Pink Sheet, 1 Aug, 2017.)
"While CMS does not have control of contracting strategies in the commercial market, the agency can use the levers it does control," Pfizer added. "By allowing manufacturers to have a unique HCPCS code for each biosimilar, that will help counteract the effect of 'all or nothing' rebates and similar strategies which may be employed in the commercial market."
MA Plans Need More Leeway To Promote Biosimilars, Humana Says
National insurer Humana Inc. agreed that CMS could encourage uptake of biosimilars by changing its current approach to coding and reimbursement. It also recommended the agency allow Medicare Advantage plans to apply utilization management controls on coverage of Part B drugs to drive greater use of biosimilars.
"The limited biosimilar sales data to date strongly suggests that existing financial incentives in the Medicare program are proving insufficient to bolster biosimilar utilization," Humana said, adding it is "concerned that the existing coding and payment policy may be unintentionally stifling the development of a robust biosimilar market."
Further, the insurer said, "we urge the agency to rescind existing prohibitions on utilization management, especially in situations where biosimilar competition exists, and use Medicare Advantage as a laboratory."
CMS current prohibits MA plans from imposing utilization controls, such as step therapy and prior authorization, on Part B drugs. As a result, "even when a biosimilar, interchangeable biologic or other drug alternatives exist, the options available to MA plans for encouraging high value and cost effective care are severely limited," according to the insurer.
"Because of these limitations, manufacturers of Part B drugs are generally unwilling to offer discounts and other price concessions to Medicare Advantage plans and their members."
To illustrate its point, Humana said that since the introduction of Sandoz Inc.'s Zarxio (filgrastim-sndz) in September 2015, the average sales price (ASP) for Amgen Inc.'s reference drug, Neupogen, has increased 1%. Similarly, ASP pricing for Remicade has risen 4.1% since Inflectra launched in October 2016, the payer added.