Biosimilar Adoption Faces Serious Challenges Due to CMS Coverage Gap

The potential cost savings offered by biosimilars may never be realized in the United States if reimbursement incentives are not implemented to ensure their adoption and long-term use. According to Molly Burich, associate director of public policy, Biosimilars, Pipeline and Reimbursement, Boehringer Ingelheim, 2 of the biggest challenges concern the inconsistent policies on biosimilars that have been implemented by CMS and the Medicare Part D “donut hole” coverage gap.

Estimates of the potential savings that could be realized from widespread adoption of biosimilars vary from 20% to 40%; at the higher end of the range, those percentages suggest a savings of $66 billion by 2024. Burich argues that it is critical to ensure that the current reimbursement systems are appropriately structured to drive biosimilar uptake.

Citing inconsistency within the CMS rules, Burich says, “Unfortunately, at the federal level, the CMS has implemented a series of inconsistent policies on biosimilars that may impact their uptake and savings potential.” All biosimilars for the same reference product are assigned 1 billing and payment code (called a J-code) by CMS and are reimbursed at a blended rate; this approach treats biosimilars as generic products, and assumes that they are equivalent to one another. However, CMS’ policy for Medicaid pricing takes the opposite approach: biosimilars will be considered branded products, and manufacturers will be required to pay the 23.1% rebate for branded products as mandated by the Affordable Care Act (ACA).

With respect to the Medicare Part D coverage gap, the so-called “donut hole” coverage gap for patients on Medicare Part D begins after the patient hits $3700 in drug spending in 2017. Once the patient spends $4950, she will leave the coverage gap, and her out-of-pocket drug cost will be significantly reduced for the rest of the year. Through the ACA’s mandated Coverage Gap Discount Program (CGDP), manufacturers must pay a 50% rebate for all branded drugs subject to the coverage gap. The CGDP excludes both generic and biosimilar drugs from being discounted, however. Burich says that the exclusion of biosimilars from the CGDP program means 2 things for patients: first, patients will have higher cost-sharing for biosimilars, and second, they will remain in the donut hole for longer periods.

During the time that a patient is subject to the coverage gap, the 50% manufacturer’s rebate on branded drugs counts toward the patient’s true out-of-pocket (OOP) costs, a situation that moves the patient through the coverage gap faster. Being excluded from the CGDP, any discount offered on biosimilars under the plan would not count toward the patient’s true OOP costs; therefore, the patient would experience both a higher cost share and a longer gap in coverage than if she were using a branded drug.

The coverage gap will close for patients in 2020, when patients will begin to pay 25% of the cost of branded or generic/biosimilar drugs once they reach the coverage gap. But the impact on the true OOP costs will still force patients to remain in the coverage gap for longer periods if they take biosimilars.

Burich believes that the exclusion of biosimilars from the CGDP means that costs to the plan will be higher through 2020 and beyond. The plan’s reimbursement responsibility for a brand product in the coverage gap will be 25%, while its responsibility for a generic product will be 75%. “The result of this policy makes it potentially very unlikely for a Part D sponsor to push the use of biosimilars under Medicare Part D,” Burich explains. It is also unlikely that Part D sponsors will expend much effort on the matter as long as patient and Part D plan financial disincentives exist.

What are potential solutions? Burich cites an analysis by Avalere Health that proposed 2 potential actions: first, allowing biosimilars to participate in the CGDP and pay the 50% rebate, and second, allowing CMS to create a new biosimilar tier to give Part D plans flexibility on how they manage biosimilars. Both approaches would require legislative action. The first is a more likely and timely solution, according to Burich, because it could be used for biosimilars that have been approved but that are not yet marketed under Medicare Part D.

CMS is positioned to play a pivotal role in the development of policies, Burich states, that will allow biosimilars to realize their full potential in the United States. “Addressing the coverage gap in Part D is a critical place to start.”