Medicare Part B Pricing Changes Aimed at Encouraging Biosimilar Use Begin

Temporary Medicare Part B payment changes went into effect Monday for the implementation of certain biosimilars, HHS said.

It is one of the first provisions of the Inflation Reduction Act (IRA) to start, and it is part of a strategy to increase access to lower-cost biosimilars, as well as to encourage competition between biosimilars and originator biologics, in the hopes of lowering overall drug costs and creatting savings for beneficiaries and the government.

In 2019, Part B drug spending in Medicare was $37 billion.

Section 11403 of the IRA calls for CMS to implement a temporary increase in Medicare payment for qualifying biosimilars for 5 years.

The new law provides for a temporary increase in the add-on payment for qualifying biosimilars whose average sales price (ASP) is not more than the price of the associated reference biological product.

By law, Medicare Part B generally pays 106% of ASP (ASP plus 6%) for separately payable drugs and biologics administered in physician offices, hospital outpatient departments, and ambulatory surgical centers, with some exceptions. ASP is calculated based on manufacturers’ sales to all US purchasers minus manufacturer rebates, discounts, and price concessions (with certain exceptions). Manufacturers report ASP data to CMS quarterly.

Before the IRA passed, CMS paid biosimilars a rate of the biosimilar’s ASP plus an add-on of 6% of the reference biological product’s ASP. Now, qualifying biosimilars will temporarily be paid ASP plus 8% of the reference biological product’s ASP for a 5-year period.

In an interview conducted earlier this year for The Center for Biosimilars^®, Julie Reed, executive director of the Biosimilars Forum, noted that Medicare reimbursement is critical for next year, when up to 10 adalimumab biosimilars referencing Humira, one of the most profitable drugs in the world, will launch.

The Biosimilars Forum was not in favor of the IRA but was pleased with the inclusion of the boost in ASP payments, she said.

“CMS is swiftly implementing the historic Inflation Reduction Act to make the new law and the benefits it provides a reality for the people we serve,” CMS Administrator Chiquita Brooks-LaSure said in a statement. “The temporary Medicare Part B payment increase for qualifying biosimilars that is now in effect will foster competition in the drug marketplace for conditions such as diabetes, cancer, and immune disorders, and will improve access to these life-saving medicines that help keep people with Medicare healthy.”

For existing qualifying biosimilars for which payment was made using ASP as of September 30, 2022, the 5-year period began on October 1, 2022.

For new qualifying biosimilars for which payment is first made using ASP between October 1, 2022, and December 31, 2027, the applicable 5-year period begins on the first day of the calendar quarter during which such payment is made.