CMS Reverses Its Policy on Biosimilar Reimbursement, Will Issue Unique J-Codes

CMS has announced a change to its present policy on biosimilar reimbursement, stating that it will begin issuing unique Healthcare Common Procedure Coding System (HCPCS) codes (often referred to as “J-codes”) to each individual biosimilar product, beginning on or after January 1, 2018. Currently, Medicare Part B pays for biosimilars under the Physician Fee Schedule (PFS) based on the average sales price (ASP) of all biosimilar products within the same HCPCS code—grouping together all biosimilar products with the same reference product to calculate an ASP. This arrangement has meant that physicians are reimbursed the same amount for all biosimilars of the same reference product.

The coding system for biosimilars is also separate from the coding system for their reference products, so as a biosimilar’s price is reduced, the ASP also declines, as does reimbursement. However, the reference product’s ASP remains unaffected by changes to the biosimilar’s price.

The change to existing policy is being welcomed by pharma, many patient organizations, and biosimilar stakeholders. When CMS posted the proposed rule change in September 2017, nearly 200 patient and physician organizations and other stakeholders submitted comments requesting that CMS assign each biosimilar a unique HCPCS code and not address biologics and biosimilars in the same fashion as originator drugs and generics. Most of the comments asked that unique HCPCS codes be issued to each individual biosimilar to ensure a robust, competitive biosimilar market by increasing the potential for innovation while lowering the risks associated with developing and marketing these complex products.

The coding change may also help reduce concerns and confusion that has existed around pharmacovigilance among providers who might prescribe biosimilars, which could prompt them to continuing prescribing reference drugs instead of biosimilars.

The Biosimilars Forum, which represent the majority of companies with the most significant US biosimilars development portfolios, applauded CMS’ decision to reverse the existing policy on biosimilar reimbursement that has been in effect since January 1, 2016. “The Biosimilars Forum is delighted to learn of CMS’ decision, which is a huge win for patients,” said Stacie Phan, head of the organization. “A robust US marketplace is critical for American patients and even more important when one considers the costs savings potential that they represent.” A recently released RAND Corporation study suggests US savings of $54 billion from biosimilars over the next decade, with most savings passed on to patients and taxpayers in the longer term.

“CMS’ decision to assign separate HCPCS codes and payment rates to biosimilars will set the stage for a more vibrant and competitive biosimilars marketplace,” said Amanda Forys of Xcenda, a part of AmerisourceBergen. “The new system could also increase awareness and adoption of biosimilars as a whole, as more manufacturers would contribute to provider and patient education initiatives to drive long-term uptake of these products. Patients will ultimately benefit as physicians could be more likely to use physician-administered biosimilars in their practices, leading to system-wide cost-savings and an increase of treatment options available to patients.”

The American Society of Clinical Oncology (ASCO) told The Center for Biosimilars^® via email that the organization supports ongoing assessment of policies to encourage fair and adequate reimbursement, saying that "Supporting ongoing patient access through adequate reimbursement rates may result in lower out-of-pocket costs overall for Medicare beneficiaries treated with biosimilar biological products. As the market for biosimilar biological products continues to evolve, CMS should establish and revisit its reimbursement policies with an emphasis on supporting patient access while incentivizing biosimilar development, innovation, and value."

According to CMS, beginning in 2018, Medicare Part B will separately code and pay for biosimilar products, and effective January 1, 2018, newly approved biological products with a common reference product will no longer be grouped into the same billing code. CMS plans to issue detailed guidance on coding, including instructions for new codes for biosimilars that are currently grouped into a common payment code and the use of modifiers.