In a recent release for the Medicaid Drug Rebate Program, CMS reiterated and expanded its position that biosimilar biological products should be classified as single source drugs, which means manufacturers must pay states the innovator rebate for Medicaid utilization of biosimilar products. Biosimilars will therefore be subject to pay rebates on state Medicaid utilization based on the rebate formula for single source (branded) drug products, not based on the rebate formula for multiple source generic drugs.
This policy is contrary to Medicare’s existing payment methodology for biosimilars under Part B. CMS treats biosimilars as multiple source drugs and places each biosimilar to the same reference product under the same Healthcare Common Procedure Coding System code and into a single payment rate in Part B. This inconsistency is troubling – CMS treats the same products as either brand or generic drugs depending on whether the product is used in Medicaid or reimbursed under Part B. These policies limit patient and provider access based upon economic considerations, and without consideration of heterogeneity of treatment effect.
Congress established a reimbursement policy for biosimilars via the Affordable Care Act that pays each drug independently because it believed that providing incentives for biosimilar development would lead to a robust market. This, in turn, would provide more treatment options for patients and their physicians as many patients are expected to benefit from biosimilars that address diseases for which there are currently no effective therapies. Moreover, the increased competition in the marketplace would drive costs down. In fact, a study published last year determined that greater savings would be achieved through a reimbursement system, where each biosimilar has its own billing and separate payment rate, rather than CMS’s chosen policy of blending the payment for all biosimilars tied to the same reference product.
CMS’ decision not to consider biosimilar products as multiple source drugs in the context of the Medicaid Drug Rebate program simply exacerbates policy inconsistency across the Agency. The inconsistency inherent in CMS’s decision to classify biosimilars as multiple source drugs in the context of Part B reimbursement is troubling for patients, providers and manufactures. It also thwarts the congressional goals of enhanced patient access and long term savings in a competitive marketplace.
By CMS’s own acknowledgement in the context of other federal health programs, biosimilars are not multiple source drugs, and should not be reimbursed under a payment methodology designed for multiple source drugs. This policy is inclined to stifle innovation in a bourgeoning field. The new age of biosimilars holds great promise for both lower costs and better health. However, to deliver on that promise, we need a robust, competitive market based on differentiated benefits, including price. For that market to thrive, each biosimilar needs a separate HCPCS billing code, with which we can measure its performance.
We hope CMS, the incoming administration and Congress work together to address these inconsistencies and reverse the current CMS biosimilar reimbursement policy to a payment policy that enhances access, achieves long-term savings, and supports a competitive marketplace.
Stacie Phan is the director of state government affairs and public policy at Boehringer Ingelheim Pharmaceuticals Inc. and president of the Biosimilars Forum.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Submission guidelines can be found here.