Medicare Payment Policy Said Key for Biosimilars' Success

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By John T. Aquino

Feb. 23 — Medicare's plan to blend all biosimilars of a brand product into a single reimbursement code will rob manufacturers of price autonomy and discourage the advance to interchangeability, conference panelists said Feb. 23.

Speaking at the 2nd Annual Biosimilars Market Access Summit in Arlington, Va., Molly Burich, associate director of public policy for Boehringer Ingelheim Pharmaceuticals, said that the Centers for Medicare & Medicaid Services' approach to biosimilars is “confounding,” with Medicare Parts B and D and Medicaid each having different policies.

“You have to have the right framework and the right coding to make biosimilars work,” Burich said.

Unique Code Stops Pricing Overreaction

Jonathan Dunn, a pharmaceutical pricing and market executive, said that a major benefit of each biosimilar having its own unique J-code is that it helps pricing visibility and competitive intelligence. A J-Code is a number assigned to a drug, biologic or device that is used for reimbursement purposes by the CMS.

“Competitors don't tell us their pricing strategies, and unique J-codes help us do that. If we have a good idea what our competitors are doing, it's less likely we will overreact as to pricing. If all biosimilars share one J-code, there will be less pricing visibility as more biosimilars enter the market.”

The session was titled “Explore Reimbursement and Pricing Considerations for Biosimilars.” The summit was organized by the World Congress.

Inconsistent CMS Biosimilar Approaches

A biosimilar product is a biological product that is approved based on a showing that it is highly similar to an already-approved biological product, known as a reference product (RP). The biosimilar also must show it has no clinically meaningful differences in terms of safety and effectiveness from the RP. Based on additional data from the biosimilar applicant, the Food and Drug Administration may designate the biosimilar as interchangeable, a higher standard which would mean it could be substituted for the RP without the approval of physician.

The FDA has approved one biosimilar under the Biologics Price Competition and Innovation Act (BPCIA). That drug, Zarxio, Sandoz's biosimilar of Amgen's cancer treatment Neupogen, was approved in March 2015 and entered the market later in the year.

A second biosimilar could be on its way to the market. Recently, an FDA advisory panel Feb. 9 gave a favorable review of Celltrion's biosimilar of Johnson & Johnson's' rheumatoid arthritis treatment Remicade, which is awaiting full FDA approval.

The CMS issued its Medicare B biosimilar reimbursement policy in November 2015, and it was immediately criticized by the biopharmaceutical industry. Among the criticisms was that the Medicare agency mistakenly treated biosimilars like conventional generic drugs .

Medicare Part B a ‘Biggie.'

Burich said, “Medicare Part B is the biggie, where we expect a lot of biosimilars to be. It views biosimilars as multiple source, generic-like products that will share a J-code and payment. The biosimilar developers are concerned that they don't have pricing autonomy.”

In contrast, Burich said, Medicare Part D views biosimilars as non-branded products, “not brand but not generic either.” Under part D, biosimilars are excluded from the “doughnut hole” coverage gap. The doughnut hole occurs when beneficiaries have exhausted their coverage but have not yet reached the stop-loss limit.

“Medicaid, shockingly, views biosimilars as branded products that pay a 23.1 percent mandated rebate compared to generic rebates,” Burich said.

She noted that in being questioned on the inconsistency of biosimilar approaches during a recent House hearing, Sean Cavanaugh, the CMS's deputy administrator and Center for Medicare director, “didn't have a really good answer and appeared to hide behind the explanation that they are different programs” .

Decision Made in Vacuum

Burich said that the CMS's Part B coding decision will affect the overall biosimilars market.

“It will not incentivize manufacturers to pursue biosimilar development, and there is little incentive for interchangeability if all the products are all blended into the same pricing,” Burich said.

In addition, the lack of distinction between biosimilars from a coding perspective may affect the industry's ability to protect patient safety through pharmacoviligance.

The CMS “appears to have made a decision about coding in a vacuum and didn't look at the big picture,” Burich said.

Drivers of Pricing

Dunn said there are multiple drivers to biosimilar pricing that intertwine, including the number of competitors and the particular therapeutic area.

“When there are three competitors, it's a `Mexican stand-off.' Three people pointing pistols at each other, with each waiting to see what the other does. It's a stalemate. But I believe the triggers will eventually be pulled. When you get to three or four biosimilars for a single RP, you will have intense price competition.”

To contact the reporter on this story: John T. Aquino in Washington at jaquino@bna.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bna.com