US Biosimilar Reimbursement: Medicare and Medicaid

From FDA Approval to Medicare and Medicaid Payments: 6 Things to Know

1. Effective July 1, 2015, for biosimilars reimbursed under Medicare Part B, which generally covers services provided in physician offices and clinics (including clinics operated as hospital outpatient departments), CMS set the stage for its coding policy to group all biosimilar products of a single reference product under the same HCPCS code. For Zarxio, CMS established a temporary billing code, HCPCS code Q5101 (“Injection, Filgrastim (G-CSF), Biosimilar, 1 microgram"). Effective Jan. 1, 2016, the billing code for the reference product was revised to expressly exclude biosimilars. HCPCS code J1442 now reads: “Injection, Filgrastim (G-CSF), excludes biosimilars, 1 microgram.” CMS left the door open for future coding decisions to separate some or all biosimilars into their own codes.

2. Although CMS established a single HCPCS code methodology for the biosimilar payment calculations, the agency acknowledged a need for a better understanding of products being dispensed or administered. Mandatory modifiers, therefore, which identify the manufacturer of the administered biosimilar, must be appended to a HCPCS code on an individual claim. The modifiers are posted on a dedicated CMS webpage. For example, the modifier for Zarxio is “ZA.” In addition, under an FDA draft guidance, for pharmacovigilance and other purposes, the nonproprietary names of biological products would include a unique four letter suffix that is devoid of meaning (e.g., “filgrastim-bflm” instead of the current “filgrastim-sndz” for Zarxio). Inflectra was assigned the nonproprietary name “infliximab-dyyb” upon its licensure.

3. The payment for biosimilars under Medicare Part B is generally based on the products’ average sales price (ASP) of all national drug codes (NDCs) assigned to the biosimilar biological products included within the same HCPCS code. An additional amount of 6 percent of the ASP of the reference product would be added. The total payment limit for biosimilars therefore is 100 percent of the weighted ASP of all the biosimilar products sharing the same HCPCS code plus 6 percent of the ASP of the reference product. On March 8, 2016, CMS announced a proposal to test new Part B payment models for prescription drugs, including biosimilars. Spurred by the rising expenditures for Part B drugs (from $11 billion in 2007 to an estimated $22 billion in 2015), CMS promulgated a proposed rule that would proceed in two phases. In Phase I, CMS would test moving from the current ASP plus 6 percent add-on formula to an ASP plus 2.5 percent add-on, along with a flat fee of $16.80. In Phase II, CMS would use a value-based purchasing strategy, which may include discounting or eliminating patient cost sharing; feedback on prescribing patterns and online decision support tools; indications-based pricing; reference pricing; or risk-sharing agreements based on outcomes.

4. Under Medicare Part D, biosimilars may be added to a plan formulary at any time as a formulary enhancement, but are not considered interchangeable with the reference product. Biosimilars are not subject to the coverage gap discount and, because they are not generics, biosimilars are subject to higher maximum copayments for individuals eligible for low income subsidies or who have entered catastrophic coverage.

5 On Feb. 2, 2016, CMS restated its March 2015 guidance on the classification of biosimilars under the Medicaid program, confirming that biosimilars are “single source drugs” and subject to higher rebates under the Medicaid Drug Rebate Program.

6. CMS has repeatedly stated in its rules and guidance that the reimbursement policies are developing and that the agency would consider refinements in future policies and guidance. In addition, the FDA has not yet released draft guidance on what is needed to obtain approval of an “interchangeable” biosimilar product nor approved any biosimilars as interchangeable with their reference products. Stakeholders should therefore monitor for developments in light of the recent approval of Inflectra, pending biosimilar applications for FDA review and the possibility of future approvals of interchangeable products.