CMS Finalizes Policy to Lower the Cost of Biosimilars

In November 2017, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that included the proposal to lower cost sharing for and improve enrollee incentives to choose biosimilars over reference biologics, and to reduce costs to both Medicare Part D enrollees and the Part D program. This objective would have been accomplished by revising the definition of generic drug (§ 423.4) to include follow-on biologic products approved under the section 351(k) biosimilar pathway. This change would impact Low-Income Subsidy (LIS) cost sharing and non-LIS catastrophic coverage phase cost sharing, and would not be universally applied across other CMS policy. 

In April 2018, CMS finalized the proposal to allow biosimilars to be covered at the generic copayment level for LIS-eligible beneficiaries and therefore achieve the intent of the original proposal. CMS did not revise the definition of generic drugs because their proposed approach "could be misinterpreted and create further confusion about the broader treatment of biosimilar and interchangeable biological products under the Part D program." But, instead, CMS established a lower maximum copay for biosimilar and interchangeable biological products that is equivalent to the lower co-pay required for generic and preferred multiple source drugs (revising § 423.782(a)(2)(iii)(A) and § 423.782(b)(3)) and will have the following impacts in 2019:

Institutionalized dual-eligible or receiving home- and community-based services:

• Co-payment up to out-of-pocket threshold: $0
• Co-payment above out-of-pocket threshold: $0

Dual eligible, below or at 100% of the Federal Poverty Limit (FPL):

• Co-payment up to out-of-pocket threshold: $1.25 generic (biosimilar), $3.80 brand (biologic)
• Co-payment above out-of-pocket threshold: $0

Dual eligible, above 100% FPL or Medicare-only below 135% FPL:

• Co-payment up to out-of-pocket threshold: $3.40 generic (biosimilar), $8.50 brand (biologic)
• Co-payment above out-of-pocket threshold: $0

Medicare-only, between 135% and 150% FPL

• Co-payment up to out-of-pocket threshold: 15%
• Co-payment above out-of-pocket threshold: $3.40 generic (biosimilar), $8.50 brand (biologic)

The final rule did not change the cost sharing for biosimilar drugs to the same level as generic drugs for non-LIS beneficiaries in the catastrophic coverage phase. Under the new approach, the one that does not revise the definition of generic drug, CMS did not have the flexibility within statue to establish a lower copay.

The good news is that this change will not have a negative impact on non-LIS cost sharing in the catastrophic phase because such enrollees are required to pay cost sharing that is equal to the greater of the applicable copay amount ($3.40 for generic drugs or $8.50 for other products including biosimilars in 2019) or 5%. Given the high cost of biological products in general, the non-LIS catastrophic cost sharing will almost certainly be 5%.