The US regulatory environment is evolving to support the uptake of biosimilars. For example, Centers for Medicare and Medicade Services (CMS) has made important changes to the current US reimbursement system, such as establishing separate Healthcare Common Procedure Coding System (HCPCS) codes and payment rates for biosimilars. These changes, along with others, help to level the playing field between biosimilars and reference products, which will lead to increased competition and help to support a sustainable marketplace.

Medicare updates
Several reimbursement developments affecting biosimilars occurred in the last 12‒15 months that are worth noting.

The report highlights reimbursement developments that occurred in the 12‒15 months prior to its compilation. For example, as of January 2018 CMS, assigned each biosimilar an HCPCS code and determined that its acquisition sales price (ASP) would not be combined with those of other biosimilars. This is an improvement, as previously biosimilars had been grouped with common reference products.

It is noted that applying HCPCS codes in this way can help promote a stable competitive landscape by:

• Increasing the potential for innovation
• Lowering risks associated with product developing and marketing
• Helping create a level playing field for originators and biosimilars by reducing confusion and concerns related to traceability

The Affordable Care Act (ACA) contains language that promotes a level playing field between originators and biosimilars. In conjunction with this, Medicare part B reimburses physicians for biosimilars at their ASP, plus a 6% add-on of the reference’s ASP. In this way, the playing field was levelled by providing physicians the same add on amount irrespective of the biological product they prescribed.

Generally, there is a lag time of two calendar quarters between product launch and publishing of an ASP. In relation to this, it is noted that from January 2019, Medicare reimburses all Part B drugs based on their wholesale acquisition cost (WAC) plus a 3% add on until the official ASP is available. When data are available, Medicare reimburses using the aforementioned 6% ASP methodology.

As is illustrated in the report, Table 1 demonstrates hypothetical examples of physician office or community clinic and outpatient payments for a biosimilar under Medicare Part B.

As an important note, in April 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. In this, the sequester, including the 2% mandatory reduction for the Medicare programme, was suspended from 1 May to 31 December 2020.

340B Program
The 340B Drug Pricing Program which requires manufacturers taking part in Medicaid to sell discounted outpatient drugs to organizations that provide care for low-income and uninsured patients.

Prior to 2018, Medicaid paid both 340B and non-340B hospitals the same rate for treatments such as biologicals, even though 340B hospitals can obtain the products at a lower price. Now, Medicare pays for non-pass-through drugs and biologicals (excluding vaccines), purchased through the 340B Program at ASP minus 22.5% of the biosimilar’s ASP. However, this reduced payment methodology has been brought into question and is undergoing legal investigation. For non-pass-through biosimilars bought through the programme, the CMS is continuing to pay ASP minus 22% of the biosimilar’s ASP.

In 2020, the CMS is continuing to make all biosimilars eligible for pass-through payment, i.e., ASP plus 6% of reference biologicals’ ASP. It also continues its policy to exempt any biosimilar with pass-through payment status from Medicare’s alternative payment methodology for 340B drugs, i.e., ASP minus 22.5% of biosimilar’s ASP (not the reference product’s ASP).

The amount Medicare pays for products under the 340B Program varies depending on the product’s pass-though payment status. In addition, both provider’s payment and patient’s cross share vary substantially depending on the biological product prescribed. With respect to this payment system, hospital/healthcare system decision-makers should be aware of differences between biosimilar and reference product, as well as those of biosimilars with and without pass-through payment status.

Related articles
Biosimilars policy considerations in the US

Key considerations for payers, employers and patients in the US biosimilars market 

Key considerations for providers in the US biosimilars market

The US biosimilars market in 2020 

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Biosimilars policy considerations in the US