Proponents of Uniform Billing Codes for Biosimilars Cite Generic Savings Success

November 30, 2021

Tony Hagen

Article

Generics and biosimilars are reimbursed differently, causing providers to prefer lower-cost generics and higher-priced biologics, authors of a study and opinion piece contend.

There is pharmaceutical industry opposition to the concept of bundling payment codes for biologic drugs in Medicare Part B, rather than continuing with the current system of assigning separate codes for each drug. But according to a recent study and opinion piece, this payment system has backfired by costing Medicare well over $1 billion in potential savings on biologics for which biosimilars are available.

According to the authors, the separate pricing structures for biologics under Medicare Part B incentivize physicians to use higher-cost biologics because reimbursement will be higher.

Benjamin N. Rome, MD, MPH

Biosimilars may bring substantial savings for US patients and payers. However, the achievement of these savings hinges on adequate competition, which is being hindered by current Medicare Part B billing rules.

The authors contrast what they describe as lackluster biosimilars savings with what has been achieved in the small-molecule, generics market, where pricing is more competitive and now 9 of 10 prescriptions are for generics rather than reference products, saving the health care system an estimated $2.2 trillion over the past decade.

Among 50 small-molecule clinician-administered drugs reimbursed under Medicare Part B, “generic competition was associated with dramatic price decreases of up to 71% with 4 or more competitors,” Benjamin N. Rome, MD, MPH, wrote in the opinion piece. He said these results are equivalent to price discounts that have been achieved in the commercial sector.

The problem is the Medicare Part B reimbursement rules, Rome said. For Part B drugs administered in an outpatient setting, such as intravenous injections or infusions, hospitals and clinics are paid the drug’s average sales price (ASP) plus 6% of the markup for the reference product.

For small-molecule drugs with generic competition, a single billing code applies for both versions of a drug, and payment is based on the ASP. “The result is direct price competition between a brand name drug and its generic equivalents, incentivizing clinicians to purchase and administer the least expensive option,” Rome said.

“By contrast, each biologic drug and biosimilar product receives its own reimbursement code and is paid on the basis of its own ASP. Even if prices fall for one biosimilar product, the prices of the originator biologics and other biosimilars can remain high,” he wrote.

In the study, which covered 2015 to 2019, the authors tracked the first 9 biologics to face biosimilar competition and said that, on average, prerebate invoice prices declined less than 10% within the first 2 years. During that same 24-month period, reference biologics maintained an average market share of 60% or better.

“In the past decade, Medicare Part B spending on clinician-administered drugs increased 8.3% per year, reaching $24 billion in 2017,” Rome said. “Biologics are disproportionately represented, accounting for three-quarters of this spending.”

Biosimilar industry veterans and providers have reacted cautiously to the idea of bundling billing codes for biologics, contending that this may cause manufacturers to lower their prices too much, leading some to exit the market entirely and others to avoid entering for fear of not breaking even.

The biosimilars and reference biologics industry has also argued that the high cost of developing biosimilars ($100 million-$300 million) is one reason why biologics prices have remained stubbornly high despite biosimilars competition: Manufacturers simply need a high return to break even and be encouraged to invest in new products.

Rome argues that “the bundled billing code model for clinician-administered generic products has been far more successful at inducing price competition than the separate billing code model for biosimilars.” He notes that the nonpartisan Medicare Payment Advisory Commission also has recommended bundled billing codes for biologics, as did a September 2021 report from HHS.