Changes Made in Medicare Biosimilars Reimbursement

The entry if new biosimilars in the market will not only reduce prices but also increase competition. This new
development will help patients get access to innovative medication. However, regulatory burdens and high
manufacturing costs make it difficult for biosimilar contract manufacturers to reduce prices to the same extent as generics.
On the other hand, there is apprehension among biosimilar manufacturers that reducing prices significantly will
eliminate the incentive for them to enter the biosimilar space. Addressing these difficulties presents an
opportunity to lower drug costs and improve patient access.

What’s the Current Practice?
For outpatients, reimbursement for medicines administered by providers is based on the Average Sales Price.
Medicare pays the provider Average Sales Price + 6% of the medicine. Due to the lag between published Average
Sales Price data and product launch, payers depend on Wholesale Acquisition Cost until the Average Sales Price
figures are available. Wholesale Acquisition Cost is often more than Average Sales Price as it does not consider
rebates and discounts. As a result, during the initial phases of the product launch, reimbursement is bound to be
more. To balance this rise, the president’s budget recommended that from 2020, reimbursement based on
Wholesale Acquisition Cost be lowered to 103% Wholesale Acquisition Cost from 106% Wholesale Acquisition
Cost.

What will Happen with Differential Reimbursement?
Differential reimbursement would permit greater markup on biosimilars. This will safeguard providers from
major losses. Commercial payers are likely to pay more, but as they have a lower average sales price, it would be
cheaper to pay for biosimilars with a higher markup than an originator product. This would lead to higher
reimbursement for payers but savings if providers have an incentive to prescribe biosimilars.
Overall, there is hope that reduced patient costs will lead to more patients having access to biologics, which could
increase revenues and market share for biosimilar contract manufacturers.
The latest rule would be applicable to all medicines except those with the status of pass-through. This status will
be valid for a period of up to 3 years to boost the use of modern technologies and innovation by offering extra
payment to those who use such new medicines.
Because of the complexity of the reimbursement landscape, it is difficult to say who benefits the most. Patients, manufacturers, providers, and payers must dive in to get the best deal and not be worried about all the minute details. A few years back, biosimilar contract manufacturers were about to save the healthcare system a great deal of money. Today, they are getting trapped in the complicated reimbursement system.

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