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Biosimilars Payment: New Market Could Reduce Drug Costs but Faces an Uphill Policy Battle


Because Medicare will be such a large payer for biosimilars, coding and payment policy set forth by CMS will have a significant effect on the success, sustainability, and availability of these lower-cost alternative products.

The United States is a growing market for biosimilar products—by 2020, approximately $100 billion worth of biologics will lose patent exclusivity, fueling competition among pharmaceutical manufacturers seeking to bring biosimilars to market.1 The current pipeline suggests that the majority of biosimilars in development are for physician-administered products that treat conditions prevalent in the Medicare population. Because Medicare will be such a large payer for these drugs, coding and payment policy set forth by CMS will have a significant effect on the success, sustainability, and availability of these lower-cost alternative products. This will also trickle down to the commercial market, which often looks to CMS for guidance on coverage and reimbursement policy.

In November 2015, CMS finalized a controversial payment rule for Medicare Part B biosimilars, announcing that, as of January 1, 2016, all biosimilars to the same reference product will share a Healthcare Common Procedure Coding System (HCPCS) billing code and payment rate, and that the reference product will maintain its own, separate HCPCS code. Because biosimilars will fall under a single HCPCS code, they will be reimbursed at a blended payment rate of average sales price (ASP) plus 6% of the reference product, while the reference product will maintain its own ASP.

CMS’ decision to group biosimilars into a single HCPCS code suggests that the agency does not fully acknowledge, or appreciate, the complexity of biosimilar products. Biosimilars may only be approved for some of the indications that are associated with their reference product, and not all biosimilars may be approved for the same indications. Grouping these products together under a single HCPCS code and payment rate could cause confusion among providers and lead to unintended off-label use. These concerns around pharmacovigilance, coupled with the likelihood that shared codes could increase administrative burden and claims processing delays as payers and providers establish and implement policies for biosimilar use and billing, could inadvertently prompt physicians to continue using reference drugs, which have better clarity in their coding and billing guidance. Ultimately, this scenario could limit patient access to products that could significantly reduce out-of-pocket payments for specialty medications.

In April 2017, the FDA approved a fifth biosimilar, Merck & Co and Samsung Bioepis' Renflexis (infliximab-abda). Renflexis is the second infliximab biosimilar approved in the United States to Janssen Biotech's Remicade, a top-selling branded product with estimated sales of nearly $6 billion in 2015.2 Inflectra (Pfizer) was the first Remicade biosimilar, approved in 2016. Because this is the first product class with 2 biosimilars available that will trigger the Medicare payment rule for the first time, industry experts consider it to be a bellwether for how successful the nascent US biosimilars market will be in future years.

Renflexis was immediately priced at 35% below Remicade, compared with Inflectra’s original 15% (now 19%) discount. Merck’s independent pricing strategy is competitive and highlights the importance of having multiple biosimilars available to a reference product. However, critics of CMS’ policy suggest that it could create an additional, unnecessary race to the bottom on pricing as manufacturers attempt to gain significant market share over their competitors, resulting in inadequate reimbursement for biosimilars. Unstable and volatile reimbursement would reduce incentives for physician uptake of biosimilars, which, over time, may hinder future manufacturer investment in these products or manufacturers could decide to withdraw these biosimilars from the market.

For the 2018 Medicare proposed rule-making cycle, CMS has reopened the biosimilar HCPCS coding policy for public comment. While the industry is waiting to note changes, if any, in November’s final 2018 rule, Inflectra and Renflexis will continue under current policy. These 2 products will provide insight to the Medicare program, commercial payers, providers, patients, and manufacturers as the biosimilars market moves forward.

In part 2 of this article, we will discuss a detailed report with research conducted by the Biosimilars Forum and Xcenda, a part of AmerisourceBergen, which examines the cost-savings that could be generated by biosimilars and an alternative coding policy, which would grant each biosimilar its own HCPCS code.


1. Blackstone, EA, and Joseph, PF. The economics of biosimilars. Am Health Drug Benefits. 2013;6(8):469-478.

2. Gibney, M. Remicade. FiercePharma website. fiercepharma.com/special-report/14-remicade. Accessed October 10, 2017.

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