Medicare Part D spending on biologics is growing and estimated to cost upwards of $12 billion annually. A report from the HHS Office of the Inspector General found that Part D spending could have been reduced 18%, or by $84 billion, if all biosimilars had been used as frequently as the most-used biosimilars in 2019.
Currently, most Medicare spending on biosimilars occurs in Part B, but the OIG report notes that Part D spending is expected to grow, especially as biosimilars for Humira (adalimumab) and Enbrel (etancercept) hit the market. Spending on adalimumab biosimilars is expected to increase significantly in 2023 when the approved biosimilars finally come to market. Humira and Enbrel are covered only under Part D.
Humira and Enbrel Biosimilars
There are 7 adalimumab biosimilar approved, but none have launched due to settlement agreements with Abbvie, the maker of Humira. The first adalimumab biosimilar expected to launch in the United States is Amjevita from Amgen. Cyltezo isn’t expected to launch until July 1, 2023, but it is the only interchangeable adalimumab biosimilar.
There are only 2 approved etanercept biosimilars: Erelzi approved August 2016 and Eticovo approved April 2019. However, neither has a launch date due to legal challenges from Amgen, the maker of Enbrel. A recent court decision in December 2021 ruled the patents on Enbrel are good until 2029.
The study from OIG analyzed trends in biosimilar utilization and spending in Part from 2015 to 2019 using beneficiary spending and prescription drug costs during the time period. In addition, it looked at formulary coverage, placement, and utilization management requirements for biosimilars vs the originator products. Although adalimumab and etanercept biosimilars won’t hit the market until 2023 and 2029, respectively, the report calculated 2019 Part D and beneficiary spending for the reference products.
Since 2015, use of biosimilars in Part D steadily grown, according to the OIG report, but they were still used significantly less than their reference products. Only filgrastim biosimilars were used more frequently with 62% of all filgrastim prescriptions for biosimilars in 2019 compared with just 3% in 2015. However, biosimilars were only 16% of epoetin alfa prescriptions, 12% of pegfilgrastim prescriptions, and 7% of infliximab prescriptions in 2019.
“In addition to being affected by time on the market, utilization of newer biosimilars may have been affected by other factors, such as the purpose of the drug, providers’ prescribing preferences, or the number of available biosimilars,” according to the report.
The total Part D spending on biosimilars was $60.8 million in 2019, which only accounted for 13% of the $466 million that Part D paid for all biosimilars and their reference products. The program pays less, on average, for biosimilars vs the reference product. For pegfilgrastim, Part D spending was $2109 lower on biosimilars vs the reference, for instance.
Beneficiaries spent a total of $2.8 million in out-of-pocket costs for biosimilars in 2019, up from $152,000 in 2015. However, this was less than 20% of the $14.5 million they spent on biosimilars and their reference products combined in 2019. Similarly, beneficiaries paid less for most biosimilars compared with reference products. Costs for pegfilgrastim biosimilars were $159 lower than reference products.
Ultimately, the report found that if all available biosimilars had been used at the same 60% utilization rate as filgrastim biosimilars, Part D could have saved $84 million in 2019 on gross spending on biosimilars and their reference products. If biosimilars had reached a 90% utilization rate, which is comparable to generics, spending could have decreased by $143 million.
Beneficiary out-of-pocket costs could have been reduced by 12%, or $1.8 million, if biosimilars had been used at the 60% utilization rate, and by 22%, or $3.1 million, if they were used at the 90% utilization rate of generics in 2019.
“The Part D program and its beneficiaries would have seen spending reductions with more widespread biosimilar use, but biosimilar use may have been limited by Part D formularies’ lack of biosimilar coverage,” the report noted.
In 2019, 38% of plan formularies that covered an epoetin alfa reference did not cover the biosimilar. One-third (32%) of formularies covering reference pegfilgrastim did not cover a biosimilar. In addition, even when biosimilars were covered by formularies, most also covered the reference product. Few formularies also used tools, such as preferential tier placement or utilization management, to encourage the use of biosimilars over their reference product.
The report recommends that CMS encourage Part D plans to increase access to and use of biosimilars and monitors Part D plans’ formularies to determine if they discourage use of biosimilars.
“CMS could do more to ensure that beneficiaries have access to currently available lower-cost biosimilars under Part D and to prepare the program for the launch of future biosimilars,” according to the report.