After reading Dr. Adam Fein's blog about growth in the biosimilar market (here:https://www.drugchannels.net/2020/10/the-booming-biosimilar-market-of-2020.html) I decided to take my own look at Medicare payments for biologicals and their biosimilar competitors to see if there have been any recognizable changes. Read on to see what I found....
Biologicals are products that include blood, tissues, recombinant proteins and others that are developed using natural sources. Unlike small molecule drugs, which are chemically synthesized and have well known and understood chemical structures, biologics are exceptionally complex and can be complicated to manufacture.
Because of their nature, biologics are highly susceptible to production variations -- making them difficult to replicate. This manufacturing sensitivity is what makes it virtually impossible for manufacturers to develop an exact replica, or a “generic” biologic. This is part of what led to the development of biosimilars.
Biosimilars, as their name implies, are biologics that are highly similar to or in some cases interchangeable with their biologic reference product. There are no clinically meaningful differences between the reference product and the biosimilar, and both products are reviewed and approved by the FDA -- albeit using different pathways.
It is well understood that the entry of generic small molecule drugs has the effect of lowering prices for all drugs in the class. This becomes particularly evident when there are multiple generic competitors. Because generic drugs are exact duplicates of their branded competitors, price quickly becomes the main drivers of sales.
Medicare takes advantage of this by calculating a Medicare Average Sales Price payment rate by blending the sales prices and sales volumes of branded drugs and their generic competitors. By reimbursing providers the same amount for branded and generic drugs, Medicare -- and other payers -- encourage even greater price competition.
But does this same phenomenon happen with biologics? In short, it’s hard to say. Part of the difficulty is that biosimilars are still new and there aren’t many that have been marketed for long enough to draw any credible conclusions. There does seem to be some downward trends in payment rates, but whether these trends are due to the introduction of the biosimilar or to other market forces are unclear.
I did look at two biologicals that have longer-lived biosimilar competitor products to see what I could discern. I used the Medicare ASP files combined with Medicare Part B Summary data to look at payment rates for each product as well as overall spending. I focused on two classes that have longer-lived biosimilar competitors: filgrastim, filgrastim-aafi, and filgrastim-sndz; and infliximab, infliximab-abda and infliximab-dyyb. These two classes have had biosimilar products available for at least three calendar years.
What I found was interesting. First, actual Medicare payment rates for these products do seem to be falling. The ASP + 6% payment rates decreased consistently for the reference biologic and the biosimilar. This could be an effect of market competition. As more competitors enter the market, all products become more price sensitive and prices decrease. If this is the case in the broader biologic/biosimilar marketplace, then perhaps the introduction of biosimilars is having the intended effect of lowering payment rates.
There also seems to be some correlation between decreased overall spending on the classes with the introduction of biosimilars. In both cases, individual spending on the reference biologic decreased. While some of this decrease was offset by increased spending on the biosimilar products, the end result was an overall decrease in spending on each class.
While it appears that the introduction of biosimilars is having the intended effect -- that is, lowering prices and decreasing spending, this should be taken with some caution. There is limited claims data for biosimilars and fewer than 100 biosimilars have been approved by the FDA. Provider adoption of biosimilars also faces hurdles that could be limiting product adoption and claims data.
John Warren is the Owner and Principal Consultant at Gettysburg Healthcare Consulting in Hanover, Pennsylvania. He worked at CMS for 22 years and he directed staff at CMS responsible for establishing biosimilar payment policies and payment rates under the Average Sales Price methodology. He has consulted with numerous clients in the Medicare space interested in navigating Medicare coverage, coding and reimbursement. Visit http://www.policypros.net for information about GHC and it's services
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