MedPAC Calls for Removal of Financial Disincentives to Use Biosimilars

The Medicare Payment Advisory Commission (MedPAC), an independent congressional agency that advises Congress on issues affecting the Medicare program, provided a status report on Medicare Part D during a public meeting on January 11, 2018. MedPAC called for changes to Part D to remove the financial disincentives that block the use of lower-cost biosimilar therapies.

According to the report, the Medicare Part D program had nearly $80 billion in spending in 2016, with $79 billion spent on payments to Part D plans and $1 billion spent on the retiree drug subsidy. Plan enrollees paid approximately $13 billion in premiums (excluding premium subsidies for low-income enrollees), plus additional amounts in cost-sharing.

The status report notes that, while high-cost enrollees (those who have reached the catastrophic phase) were only 8% of Part D enrollees in 2015, these enrollees accounted for 57% of overall spending. “Nearly all of the growth in spending for high-cost enrollees is due to higher prices,” notes the report, and the “use of higher-priced drugs will continue to put strong upward pressure on program spending.” This trend is likely to continue long-term because of the increased focus on specialty drugs—including costly biologic therapies—in drug developers’ pipelines.

Growth in Part D enrollment, says the report, especially among non—low-income-subsidy (non-LIS) enrollees, has driven more catastrophic spending; enrollment in the Part D program has grown approximately 6% per year since 2007, reaching 42.5 million enrollees in 2017. Also driving up spending are the coverage gap discount, plan incentives to put high-price and high-rebate drugs on formularies, and higher drug prices overall.

MedPAC notes that high-cost biologics will only continue to grow in importance in the years ahead, increasing the cost burden on enrollees and on Medicare. Biosimilars, MedPAC says, are important tools that can to promote price competition.

However, some Part D policies, such as copays for LIS enrollees, are negatively affecting biosimilar uptake. MedPAC also notes that the coverage gap discount provides a financial advantage for originator biologics rather than for cheaper biosimilars, and calls for a removal of the financial disincentive for using lower-cost biosimilar options.