CMS Proposed Rule Would Treat Biosimilars as Generics for Cost-Sharing Purposes

A new CMS proposed rule seeks to encourage the use of lower-cost biosimilars instead of reference biologics under Medicare Part D. The proposed rule would modify the definition of generic drugs—for the purposes of non—low-income-subsidy (LIS) catastrophic and LIS cost-sharing—to include biosimilar therapies.

CMS reports that it has received numerous requests to redefine generic drugs, noting that advocates have expressed concerns that LIS Medicare enrollees are required to pay higher brand copayments for biosimilars, and that treating biosimilars as branded products for the purpose of LIS cost-sharing creates a disincentive for LIS enrollees (as well as non-LIS enrollees in the catastrophic portion of the benefit) to select lower-cost therapies.

The proposed rule would revise the definition of generic drug to include “follow-on biological products” for purposes of cost-sharing, which CMS predicts will incentivize enrollees to choose biosimilars and thereby reduce costs to the Part D program.

CMS emphasized that the rule would treat biosimilars as generics solely for cost-sharing purposes: “We want to avoid causing any confusion or misunderstanding that CMS treats follow-on biological products as generic drugs in all situations. We do not believe that would be appropriate because the same FDA requirements for generic drug approval (for example, therapeutic equivalence) do not apply to biosimilar biological products, currently the only available follow-on biological products,” according to the proposed rule. “Accordingly, CMS currently considers biosimilar biological products more like brand-name drugs for purposes of transition or midyear formulary changes because they are not interchangeable.”

Notably, the proposed rule does not include language to address reduced patient cost-sharing in Part D coverage gap (or the so-called “donut hole”), nor does it include language that would change the requirement for a biosimilar manufacturer to provide a 50% rebate for products while a patient is in the coverage gap.

CMS is also contemplating other changes to help reduce the price of drugs under Part D, including requiring a percentage of manufacturers’ rebates that have been negotiated for a drug covered under Part D to be included in the drug’s point-of-sale price. This change targets the rebates and discounts negotiated between manufacturers pharmacy benefit managers (PBMs) that are not being passed along to Medicare beneficiaries.

Currently, according to the proposed rule, “Part D sponsors are allowed, but generally not required, to apply rebates and other price concessions at the point of sale to lower the price upon which beneficiary cost-sharing is calculated. To date, sponsors have elected to include rebates and other price concessions in the negotiated price at the point-of-sale only very rarely.”

CMS will take comments on the proposed rule until January 16, 2018.