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CMS Takes Initial Steps to Address Medicare & Medicaid Coverage for Biosimilars

On March 30, 2015, CMS released guidance addressing Medicare and Medicaid coverage for biosimilar drug products.  The Medicare/Medicaid coverage guidance comes on the heels of the FDA’s landmark approval of a biosimilar version of the reference cancer drug Neupogen. Our colleague Tom Wintner previously wrote about the FDA’s review process for biosimilars, and the expected action on this product.

In its first biosimilar approval, the FDA found that the new product, Zarxio, was in fact a biosimilar to Neupogen and cleared it for use for the same indications as Neupogen.  Zarxio’s manufacturer, Sandoz, did not seek, and the FDA did not determine, however, that Zarxio is interchangeable with Neupogen -- meaning physicians will have to specifically prescribe the biosimilar; it may not be automatically substituted for the prescribed branded product.

Perhaps taking its cue from the FDA, CMS’s biosimilar guidance documents should be viewed as a first step: historic in some aspects, but at the same time tentative and incomplete.

Medicare Coverage Requirements

CMS issued two separate Medicare-related documents, one specific to Medicare Part B and one specific to Medicare Part D.

The Medicare Part B issuance notifies health care professionals that:

  • Medicare Part B reimbursement to health care professionals for approved biosimilars will be based on Average Sales Price (ASP) methodology. Once the manufacturer’s Wholesale Acquisition Price (WAC) is available for the biosimilar, Medicare will pay 106% of the WAC before transitioning to payment based on 100% of the ASP plus 6% of the ASP for the reference product.
  • CMS intends to create distinct codes for approved biosimilars to distinguish the biosimilar from the reference product. For the one approved biosimilar, CMS anticipates including a code for it in the coming weeks, retroactive to the FDA approval date.

Importantly, the Part B notice is specific to reimbursement for health care professionals; the materials are silent on Part B reimbursement for hospital outpatient use.   

When it comes to Part D benefits, CMS addressed several basic, but key issues:

  • A biosimilar and a reference product will not qualify as different drugs for purpose of satisfying CMS’ regulatory requirements on formulary drug access.
  • The addition of a biosimilar and removal of the reference drug from a formulary will be considered a non-maintenance change, to be evaluated on a case-by-case basis.
  • Because biosimilars are not interchangeable with the reference drug, CMS expects Part D Plan Sponsors’ Pharmacy & Therapeutics (P&T) committees to review newly approved biosimilars under the Part D Drug Benefit Manual, Chapter 6, §30.1.5.
  • For purposes of Part D transition supplies, biosimilars and the reference product should be treated as different products.
  • Biosimilars do not meet the CMS definition of generics or multi-source drugs and therefore are to be treated as brand products for reimbursement. This means that biosimilars are subject to the higher maximum copayments for LIS eligible individuals.
  • Biosimilars are non-applicable drugs when it comes to the Part D Coverage Gap Discount Program and are not otherwise subject to the requirements of that program.

Medicaid Coverage Requirements

With respect to Medicaid coverage, CMS has determined that biosimilars fall under the definition of a single source drug and will be subject to applicable Medicaid Drug Rebates.

While state Medicaid programs will likely set individual state regulatory or programmatic requirements for coverage of biosimilars, as with Medicare Part B, CMS requires that Medicaid prescribers specifically prescribe the biosimilar.  CMS also provides certain recommendations for state Medicaid programs, including:

  • States should consider adding biosimilars to state supplemental rebate programs.
  • States should consider using Drug Utilization Review (DUR) and state P&T Committees to educate physicians and pharmacists on appropriate prescribing and dispensing of biosimilars.
  • States should consider educating prescribers and pharmacists on biosimilars through electronic prescribing messaging and point of sale (POS) edits.

What’s Next

When it comes to how government health care programs will treat biosimilars approved by the FDA as non-interchangeable, CMS’s initial position appears to be “it depends.”  For now government health care programs will not treat a biosimilar as a different drug from the reference product when it comes to meeting drug access requirements and LIS discounts, but will treat the biosimilar as a different drug from the reference drug when it comes to other reimbursement issues, transition fill, and P&T approval.

But again, this is CMS’s toe in the water for biosimilars.  CMS promises more guidance to come. Stay tuned.

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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.