The slow development of the market competition for biosimilars in the US may be caused by several factors, according to Professor Richard Frank from the Department of Health Care Policy, Harvard Medical School, Boston, USA [1]. In this article, insurance payment arrangements for biologicals and biosimilars are discussed.
Payment arrangements in public insurance programmes that purchase biologicals have also been accused of deterring biosimilars and thus reducing competition for originator biologicals. The Centers for Medicare and Medicaid Services (CMS) had originally decided in January 2016 to assign a single billing code to all biosimilars of a particular reference product and reimburses them based on the weighted average of their average sales price under Medicare Part B [2]. However, responding to concerns that this could ‘unfairly disadvantages non-interchangeable biosimilars’ [3], the CMS changed this policy in November 2017 to separately code and pay for biosimilars.
Under Medicare Part B, physicians and institutions are paid a fee for administering drugs equal to the average selling price (ASP) of the drug plus 6%. However, despite claims of encouraging competition, Professor Frank says that ‘this approach fails to create an incentive that bolsters price competition’. He adds that it is ‘at best neutral’ … ‘since the payment for administering the drug is the same for the reference product and its biosimilar’. Because physicians are less familiar with biosimilars, and the economic rewards are similar, it is likely that the physician will prescribe the originator biological.
Professor Frank believes that consolidation of a reference product and all its biosimilars under a single billing code ‘would probably generate strong price competition’. This he argues is because ‘prices of the biosimilars and the reference product would be averaged together to establish the reimbursement level for the group’ and ‘physicians choosing a lower-priced product within the group could realize a higher net payment’.
This is not the first time that payments for biologicals have been highlighted as an issue when it comes to encouraging use of biosimilars. The complex distribution chain for biologicals in the US has been singled out as hampering widespread use of biosimilars due to rebate agreements between drugmakers, pharmacy benefit managers, specialty pharmacies and insurers. Such arrangements, it is thought, may create incentives that favour originator biologicals over biosimilars [4].
Conflict of interest
Disclosure forms provided by the author [1] are available at NEJM.org.
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References
1. Frank RG. Friction in the path to use of biosimilar drugs. N Engl J Med. 2018;378(9):791-3.
2. GaBI Online - Generics and Biosimilars Initiative. Physicians urge CMS to adopt unique billing codes for biosimilars [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2018 May 4]. Available from: www.gabionline.net/Policies-Legislation/Physicians-urge-CMS-to-adopt-unique-billing-codes-for-biosimilars
3. GaBI Online - Generics and Biosimilars Initiative. GPhA raises concerns over CMS biosimilars reimbursement policy [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2018 May 4]. Available from: www.gabionline.net/Policies-Legislation/GPhA-raises-concerns-over-CMS-biosimilars-reimbursement-policy
4. GaBI Online - Generics and Biosimilars Initiative. Reimbursement for oncology biosimilars in the US [www.gabionline.net]. Mol, Belgium: Pro Pharma Communications International; [cited 2018 May 4]. Available from: www.gabionline.net/Biosimilars/Research/Reimbursement-for-oncology-biosimilars-in-the-US
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