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CMS Urged To Reverse Obama-Era Biosimilar Reimbursement Policy

A bipartisan congressional effort is underway to convince CMS to reverse its biosimilar reimbursement policy implemented under the Obama administration. We discussed the current reimbursement policy in a March 2016 blog post when CMS initially released the guidance.  CMS implemented the controversial guidance as a final rule in October 2016.

The current policy requires all biosimilars that are related to a reference product to be given a shared Healthcare Common Procedure Coding System (HCPCS) code. For Medicare Part B, reimbursement is then calculated based on the average sales price (ASP) of all of the biosimilars with that HCPCS code plus 6% of their reference product’s ASP.

This policy is controversial because it treats biologics in the same manner as CMS treats generic drugs for reimbursement purposes: all the biosimilars for a reference product will have the same Medicare Part B reimbursement rate. But unlike generics that are chemically produced, biosimilars are not identical to their reference product since they are created from living organisms.  Biosimilars are also not required to treat the same indications as the reference product.  This means that some biosimilars may treat more or fewer conditions than the reference product or other biosimilars and may be more expensive to make than others.  When CMS released its initial guidance, advocacy groups argued that a uniform reimbursement approach would dampen the fledgling biosimilar market and force higher-value biosimilars out of the market (why make better products if you get paid the same as the lesser ones?).

The impact has yet to be seen as there are only two approved biosimilars on the market. With more on the way, it now seems the issue is gaining renewed interest.  Congress itself is stepping in to make the case that each biosimilar should have its own HCPCS code assigned.  This would provide for individual reimbursement calculations for each biosimilar in an effort to encourage a “vibrant” biosimilars market.

With a new administration keen on rolling back regulations, the congressional and advocacy group support for reversal may gain some traction.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.

Ryan Cuthbertson