Shared Savings Models Could Yield Part B Savings

The establishment of a shared savings model has the potential to increase health care savings, biologic competition, and biosimilar utilization if implemented in Medicare Part B, according to Alex Brill, founder of Matrix Global Advisors (MGA) and a resident fellow at the American Enterprise Institute (AEI), who makes the case in a new research paper.

“If properly structured, such a program could yield significant savings to the Medicare program and establish valuable insights into the impact of pharmaceutical reimbursement on physician prescribing patterns among physician-administered drugs,” Brill said.

Currently, the FDA has approved 26 biosimilars, 17 of which have launched on the US market. However, this covers only a small share of the market, as 83% of reference biologics face no biosimilar competition.

“Now is the appropriate time for a biosimilars innovation model, because a sufficient number of products are available today, and more are expected on the market soon,” said Brill.

Since 2005, Part B spending on biologics has increased by 42%; however, biologic utilization has actually declined by 20% in the same time frame, Brill noted. The top 10 drugs, out of over 700 covered under Part B, represent 43% of total Part B drug spending. All 10 are biologics.

Brill explained that the model, which would be administered by the Center for Medicare and Medicaid Services Innovation Center (CMMI), would reform the reimbursement system and could yield significant savings for the entire health care system without reducing services or quality of care for patients.

Current Reimbursement Design

The incentive to use a biosimilar over a reference product is directly seen by Medicare plans, as their savings are based on the direct difference in average sales price (ASP) between the more costly reference biologic and the cheaper biosimilar. However, physicians are not incentivized to use one over the other.

A study by CMS in 2018 and a review in JAMA Oncology found that reimbursement policy for Part B drugs can affect physicians’ patterns of care, which includes the quantity and composition of drugs and services.

Normally, insurers give physicians reimbursements for reference products, which are monetary amounts based on the average sales price (ASP) of that product plus 6%. However, biosimilars are reimbursed at the ASP of the biosimilar plus 6% of the reference product’s ASP, meaning that a physician will get the same percentage returned regardless of whether the product is an originator or biosimilar.

Additionally, Medicare Part B plans are subject to mandatory sequestration as a result of the Budget Control Act of 2011. Sequestration reduces payments for Medicare by 2% and establishes a Part B reimbursement of ASP plus 4.3%. Currently, all available biosimilars in the United States are covered under Part B plans.

Brill argued that a shared savings model, in which physicians and Medicare Part B insurers would share the savings generated from using more biosimilars, would realign the incentives of using lower-cost products for physicians and lead to higher utilization rates for biosimilars.

Suggestions for the New Design

In addition to ensuring the incentives for utilizing biosimilar for physicians and Medicare programs are aligned, Brill outlined 4 principles for the successful design of a shared savings model: voluntary provider participation, minimal enrollment and ongoing participation costs, optimization for fiscal responsibility, and broad stakeholder appeal.

“Given the nature of existing payment policies and reporting requirements for Part B drugs, a biosimilars payment model would entail few, if any, additional reporting burdens on physicians and hospitals, while offering the Innovation Center valuable data on the effectiveness of payment alternatives for driving savings related to high-cost drugs,” said Brill.

Brill suggested several ways to redesign incentives, including giving physicians who prescribe biosimilars a fixed dollar amount or add-on payment that is equal to part of the difference in ASP between the biosimilar and the reference product.

Savings accrued from the model could be redirected to reduce beneficiary cost-sharing obligations, which would be helpful for patients without Medicare supplemental insurance (Medigap). However, it may not be feasible to share savings with patients who have little to no coinsurance due to Medigap, according to Brill.

Reference

Brill A. Shared savings demonstration for biosimilars in Medicare: An opportunity to promote biologic drug competition. MGA. May 28 2020.