Changes for How Biosimilars are Reimbursed

Biosimilars have finally been accepted by the popular crowd. Coverage year 2019 (CY2019) is going to see some changes for how biosimilars are being reimbursed. In 2015, the first biosimilar product, Zarxio (filgrastim), was approved in the U.S. An approved biosimilar is a medication that has been shown to be highly similar to a Food and Drug Administration (FDA)-approved biologic, the reference product. Only minor differences in clinically inactive components between the biosimilar and reference product are allowed, and there must be no meaningful clinical differences. However, a biosimilar is not considered a generic drug, which is approved through a different pathway. Due to the inherent complexities of biologics, it is not possible to make an identical copy of a biologic. Traditional, small-molecule drugs are made through a predictable set of chemical reactions, but biologics are made using manufacturing processes (e.g., cell production, purification processes) and living organisms (e.g., cell lines) that are unique to each manufacturer. Although not a generic from a molecular or manufacturing perspective, biosimilars do function as a generic in intent. Meaning, biosimilars help increase access to biologic medications and potentially lower healthcare costs through competition. There have been several company announcements touting the cost savings potential of biosimilars. A recent example is Mylan’s approval of it’s biosimilar Fulphila, which has promised that it will come to market with “double-digits reduction” in price compared to the reference product Neulasta.

The topic of drug pricing transparency and reform has been addressed by the current administration. At the recent Pharmacy Quality Alliance Annual Meeting, the Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma spoke about “The American Patients First Blueprint” and the four-pillared strategy. The four pillars are as follows:

1. Reducing Americans’ out-of-pocket spending
2. Increasing competition in the drug market
3. Improving negotiation to get a better deal for patients and taxpayers
4. Creating incentives for manufacturers to lower list prices

As part of this initiative, the access to biosimilar agents was addressed. Biologic products are among the most expensive medications on the market today and include treatments for cancer, diabetes, rheumatoid arthritis, and multiple sclerosis. The Biologics Price Competition and Innovation Act (BPCI Act) created an abbreviated licensure pathway for biological products that are demonstrated to be biosimilar to or interchangeable with an FDA-approved biological product. Within the Medicare Part D program, biosimilar uptake has been dependent on a number of factors, with formulary inclusion/placement being significant. In general, plans encourage use of lower-priced products, but current coverage gap discounts have provided financial advantages to the reference biologic products. This approach incentivized inclusion of the biologic reference products and resulted in beneficiaries potentially having higher cost sharing.

Essentially, when the beneficiary is in the “donut hole,” his/her resulting scenario is higher out-of-pocket costs for lower-cost medicines. Passage of  the Bipartisan Budget Act of 2018 (BBA)  has provided forward momentum for biosimilar uptake. The BBA, enacted on February 9, 2018, amended the definition of “applicable drug” for purposes of the coverage gap discount program to include biological products (finally). Effective CY2019, biosimilar and interchangeable products will be “applicable drugs” for purposes of the coverage gap discount program. This policy change ensures patients in the “donut hole” won’t get stuck with a bigger bill for the biosimilar than the reference product. It is important to note that while biosimilars are considered applicable drugs for manufacturer GAP discount purposes, they are still considered to be generic entities for Low Income Cost-Sharing Subsidy (LICS) purposes.

Part D Sponsors should make sure measures are in place to ensure biosimilar claims are adjudicating and being reimbursed as expected for the 2019 changes. GHG’s Pharmacy Solutions experts can assist you with operationalizing the new regulations. Contact us today!

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