On March 6, 2015, FDA released a statement announcing its issuance of the first biosimilar license to Zarxio. In the same month, CMS issued a number of guidance documents addressing reimbursement for biosimilars under the Medicare Part B, Part D, and Medicaid programs. This is an initial step for CMS, and more guidance is likely forthcoming as biosimilars become increasingly commonplace. The details of each of the guidance documents are summarized below.

Medicare Part D Requirements for Biosimilar Follow-On Biological Products (March 30, 2015)

Formulary Review Policies

  • CMS plans to address formulary change requests involving biosimilars on a case-by-case basis. CMS will determine if the biosimilar meets the requirements of its formulary review and approval process by examining its FDA-approved label and statutory compendia.
  • The biosimilar and reference biological product will not be considered different drugs for the purpose of satisfying the two distinct drugs requirement for formulary drug access purposes.
  • Biosimilars may be added to a plan’s formulary at any time if it is to be a formulary enhancement. Formulary changes, i.e., adding a biosimilar and removing a reference biological product, will be considered a non-maintenance change and reviewed on a case-by-case basis. Because they are not interchangeable with the reference product, CMS expects that newly approved biosimilars will be reviewed by Part D sponsor’s Pharmacy and Therapeutics (P&T) committees based on the formulary management guidance in section 30.1.5 of Chapter 6 of the Medicare Prescription Drug Benefit Manual.
  • Biosimilars and reference biologics should be treated like different products for purposes of Part D transition supplies.

Low Income Subsidy (LIS) and Catastrophic Cost Sharing

  • CMS does not consider biosimilars to be generic drugs, so LIS eligible individuals will pay higher maximum copayments for these drugs. Similarly, lower minimum payments for those in the catastrophic coverage portion of Part D will not apply to biosimilars.

Coverage Gap Discount Program

  • Biosimilars are non-applicable drugs for the purpose of establishing coverage gap cost sharing because they are specifically excluded by the SSA, thus they are not discounted or subject to the requirements of the Discount Program.

Medicare Part B Questions and Answers About Biosimilar Products

  • CMS plans to incorporate biosimilars approved under the abbreviated biological approved pathway into the Average Sales Price (ASP) payment methodology. Medicare plans to pay 106 percent of the wholesale acquisition cost of the product until the ASP is available. Payment will then equal to biosimilar ASP plus 6 percent of the ASP for the reference product.
  • CMS anticipates including coding for approved biosimilars in the next quarterly Healthcare Common Procedure Coding System, July 1, 2015. The code will be effective retroactively to the FDA approval date.
  • CMS will create a specific code for biosimilar released that is distinct form the reference biological, and is considering policy options for coding of additional biosimilars.

Biosimilars and the Medicaid Drug Rebate (MDR) Program (March 30, 2015)

  • Biosimilars fit within the definition of single source drugs in the MDR Program.
  • CMS made a number of recommendations to state Medicaid programs.
  • Consider adding biosimilars to state rebate programs.
  • Educate providers on how to prescribe and dispense biosimilars to maximize use.
  • Encourage prescribers to examine whether patients using biologics could use biosimilars to reach the desired therapeutic outcome in a more cost efficient manner.

These new reimbursement guidance documents published by CMS will have an impact on payors, manufacturers, and providers. Given that biosimilars may have a reduced cost, as compared to reference products/biologics, they will likely be of significant interest to payors when considering which products to include in plan formularies. Payors may consider incentivizing the choice of a biosimilar over a reference biologic with therapeutic equivalence to drive down costs.

In addition to the difference in price, manufacturers should also consider the impact of the MDR guidance on potential rebates and reporting obligations for these new products. Specifically, manufacturers will need to consider the impact of being considered a “single source” product for MDR purposes.

Finally, providers may have the opportunity to expose patients to alternative forms of treatments with therapeutic equivalence, at a reduced cost. By having more options at a potentially lower price, providers will have a greater potential to expand treatment options and access for patients. However, provider use of biosimilars will require further education as to their beneficial uses and to substitutability with reference products.

As FDA issues more biosimilar licenses and their use begins to grow, the healthcare and biologic industry are likely to continue to look to CMS for guidance on reimbursement for these products.