PhRMA: Federal Biosimilar Payment Policies Are Having a Positive Effect

Tony Hagen

Tony Hagen is senior managing editor for The Center for Biosimilars®.

Katie Verb, director of policy and research for the biopharmaceutical industry group PhRMA, discusses recent policy changes that have increased biosimilar uptake and additional measures that could lead to greater use of biosimilars and savings for CMS and patients.

A perspective from the biopharmaceutical industry on achievements in bringing biosimilars to market and what more can be done to incentivize biosimilar uptake was provided by Katie Verb, director of policy and research for PhRMA at the World Biosimilar Congress 2020 at the Festival of Biologics USA in San Diego, California.

PhRMA, which represents biopharmaceutical manufacturers, believes that amid a spectrum of opinion on the health of the biosimilars market, biosimilars are helping to bring down the cost of drugs in the US market and stand poised to achieve further savings via programs such as the Oncology Care Model (OCM) and its scheduled replacement, the Oncology Care First model, both of which can drive the use of biosimilars, Verb said. The OCF is slated to start early next year.

Under Medicare Part B, 3 policy changes have given biosimilars a significant “leg up,” Verb noted. The Biologics Price Competition and Innovation Act required Medicare Part B to pay for biosimilars at the average sales price (ASP) of the biosimilar plus 6% of the innovator product’s ASP, which incentivize providers to prescribe these drugs.

Another thing CMS did in Medicare Part B was provide a unique payment code for each biosimilar, in the process reversing earlier policy that grouped drugs under single codes. This change, in January 2018, was much preferred by the biosimilar industry, as it allowed individual prices for individual biosimilars, Verb said.

A third important 2018 policy change for Medicare Part B drugs allowed biosimilars “pass-through” status under the 340B Drug Pricing Program, meaning they could be paid at ASP plus 6%, rather than being heavily discounted (—22.5%), which gave hospitals an incentive to use biosimilars over innovator drugs. The imposition of the –22.5% discount for drugs under 340B was coincidental to the awarding of pass-through status, but it magnified the value of pass-through status, which is granted to individual biosimilars for up to 3 years, Verb said.

Under Medicare Part D, the Bipartisan Budget Act of 2018 changed the treatment of biosimilars in the coverage gap (doughnut hole) discount program, requiring manufacturers to give discounts for biosimilars. “Prior to this change you might have had a situation where patients were in the doughnut hole and biosimilars were actually more expensive than the innovator product,” Verb said.

Another Part D change was a lowering of the maximum copay amount on biosimilars to rates commensurate with generic copay amounts for lower income beneficiaries. This occurred in 2019.

There are a high number of diverse opinions—both positive and negative—over whether the biosimilar market in the United States is successful or not, Verb said. Scott Gottlieb, MD, former commissioner of the FDA, once advised not to give up on biosimilars, whereas Peter B. Bach, MD,and Mark Trusheim suggested that it’s “time to throw in the towel on biosimilars,” Verb noted.

“But from our perspective [PhARMA], when biosimilars are introduced, prices are lower, and that only increases competition. Almost always, when a biosimilar enters the market, the ASP for the innovator and all other biosimilars goes down. We’re seeing that happen over and over again,” Verb said.

There have been situations where a competitor biosimilar has entered the market and prices have remained static, but the important thing to note is that the innovator “lost market share,” she said.

These downward trends of prices signify that Medicare Part B has been saving money from biosimilar introductions, she said.

With the rising number of biosimilars introduced to market, particularly in 2019, data are going to emerge over the next few years that quantify the actual savings and show that it is significant, she predicted.

In the Medicaid program, biosimilar introductions have led to discounts from innovator product prices of between 20.1% and 35.2%, she said. This competition from biosimilars has forced the reduction in prices of innovator products, Verb said.

Further, an analysis of the uptake of 1 drug under Medicare Part B showed that higher use of a biosimilar for filgrastim (Zarxio) led to an overall 30% decrease in overall spending on filgrastim. The analysis also showed that use of filgrastim biosimilar since 2015 has eclipsed use of the originator product (Neupogen).

“All of that being said, there are a couple of things that can be done to continue to support the market” for biosimilars, Verb added.

One of those is increasing provider education about biosimilars, Verb said. PhRMA actively supports CMS policy and legislative initiatives that emphasis evidence-based decision making by providers, whether for brand, generic, or biosimilar products, she said.

She also noted the power of alternative payment models, such as CMS’ OCM, which is nearing the end of its 5-year pilot (June 2021), and the Medicare Access and CHIP Reauthorization Act of 2015, also a value-based initiative partly designed to move physicians away from costly fee-for-service billing practices. “These types of things, if they are appropriately structured and voluntary, really have the opportunity to increase competition.”

Such value-based models are occurring in specialties, such as oncology and rheumatoid arthritis, where “there are a lot of biosimilars coming,” which means that they can have a huge impact on biosimilar uptake, Verb said.

As a footnote to her discussion, Verb said PhRMA also supports pass-through rebate policy under which a portion of rebates awarded by manufacturers to Medicare Part D health plans are passed along to seniors at the prescription counter, “rather than on the back end,” she said.

“For patients, their copays would be determined by upfront discounts and not the list prices, which is how it is now. We think that increases transparency, it increases affordability for patients, and it takes away some of the misaligned incentives for pharmacy benefit managers to put higher-cost drugs on formularies because they might get bigger rebates for that,” she said.