Update on Biosimilar Reimbursement

Biosimilar naming and biosimilar product reimbursement have been key areas for debate since the FDA announced the 351(k) approval pathway.  In November, Centers for Medicare and Medicaid Services (CMS) changed the reimbursement policy for biosimilars, forcing the industry to review the potential impact on marketing and coverage decisions.

Historically, CMS created a single Healthcare Common Procedure Coding System (HCPCS) code, i.e. J-code, and reimbursement rate (Average Sales Price (ASP)) for the innovator and biosimilar products. This strategy provided an incentive for physicians to use lower cost biosimilars, because their reimbursement margin would be higher as compared to the innovator product.  The specific product dispensed was identified by a HCPCS code modifiers, which are shown in the chart below.

Biosimilar HCPCS

Starting January 1, CMS will issue a unique HCPCS code for each biosimilar product.  Physicians will now be reimbursed different amounts, based on which manufacturer’s biosimilar product is selected.  This policy changes physician incentives to prescribe biosimilars and may dampen competition.  Since the innovator will have a higher ASP, the physician will generate additional revenues with higher priced products, due to the standard mark-up factor (ASP + 6%).   Although the HCPCS codes are only used for Medicare Part B reimbursement, it will be interesting to see what impact this change has on commercial reimbursement.  We will watch to see what other unintended consequences arise due to this new CMS policy and report them in a future blog post.


Published December 2017

Leave a Reply