News & Commentary

Reimbursement changes might get biosimilars off the waiting list

Tinkering with reimbursement policies so providers have an incentive to prescribe biosimilars would help increase their acceptance. In a white paper published in November, Milliman’s Jennifer Carioto and Harsha Mirchandani discussed a couple of ways that commercial insurers might change their payment policies.

Fixed reimbursement. Reimbursement to providers for the lower-priced biosimilars would be the same as for the reference product. The incentive math is pretty straightforward: A fixed, or uniform, reimbursement rate might encourage providers to preferentially prescribe biosimilars because of the greater difference between the average sales price (ASP)—the price that providers pay for the drug under the typical buy-and-bill arrangement—and the fixed reimbursement amount.

Differential markup. The Milliman experts called this “differential reimbursement,” but differential markup does a better job of capturing the idea. With differential markup, biosimilars would have a larger markup, on a percentage basis, than markup for reference products. But because biosimilars have a lower ASP, the overall payment (ASP plus the markup) for the biosimilars would still be lower than the reference product’s reimbursement. Carioto and Mirchandani used Remicade (infliximab) and two biosimilars, Renflexis (infliximab-abda) and Inflectra (infliximab-dyyb) to illustrate how differential markup might work. Using the ASP as of the third quarter Rof last year and a uniform markup of 10%, the reimbursement rate for Remicade would be $871 compared with $709 for Renflexis (a $162 difference with Remicade) and $603 for Inflectra (a $268 difference). But, say, the markup for the biosimilars was 14% instead of 10%. Remicade would still be reimbursed at $871, but the Renflexis would be reimbursed at $735 (a $136 difference with Remicade) and Inflectra at $686 (a $185 difference). The result: Providers wouldn’t stand to “lose” as much by prescribing a biosimilar. What this means, though, is a lessening of the reason-to-be for biosimilars, a lowering of price and cost.

As Carioto and Mirchandani point out, reimbursement adjustments and other policies designed to tip things to favor biosimilars aren’t just theoretical. For example, CMS reimburses biosimilars at the biosimilar’s ASP plus 6% of the reference product’s ASP, not 6% of the biosimilar’s ASP. Eliminating any difference in the markups for reference and biosimilars should encourage providers to prescribe biosimilars because, that way, the biosimilar doesn’t cost them anything in terms of getting a lower markup.

Another reimbursement adjustment that should help biosimilars win over patients (and Part D plan sponsors) is the elimination of the exemption of certain biosimilars from the Part D coverage gap discount program. The discount program lowers the price of prescription drugs when seniors hit the “donut hole” in the Part D plan.

A third possible boost for biosimilars: Medicare Advantage plans can now use step therapy for Part B drugs. As a result, in some cases, patients may need to start on the (presumably less expensive but just as effective) biosimilar rather than the originator product.