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November 18, 2015 Practice Points

Medicare Part B Reimbursement for Biosimilars Could Change

The market will evolves based on the 2016 Physician Fee Schedule final rule.

By Kara Cardinale

Biosimilars could receive separate Medicare billing codes in future years depending on how the marketplace evolves, according to the 2016 Physician Fee Schedule (PFS) final rule published October 30, 2015.

“We agree that it is desirable to have fair reimbursement in a health marketplace that encourages product development, and we agree with commenters who support future refinements to policy as needed based on actual experience with this new segment of the market,” the Centers for Medicare and Medicaid Services (CMS) states in the preamble of the PFS final rule. As such, the “proposed revised regulation text would not preclude CMS from separating some, or all, of a group of biosimilars for payment (and the creation of one or more separate [Healthcare Common Procedures Code System] codes) should a program need to do so arise.”

Under the final rule, Medicare will assign all biosimilars to the same billing code—or HCPCS code—effective January 1, 2016. The final policy aligns with that initially proposed. However, the preamble language notably appears less stringent than the original proposal and clearly indicates that the agency has the statutory authority to consider alternative approaches to biosimilar reimbursement should a policy need develop. “While other interpretations of the statute may be possible, we believe our interpretation is consistent with statute.”

Medicare Part B and beneficiary spending on the 10 most expensive drugs and biologics totaled about $9.1 billion in 2010, of which eight were brand biologic products. The Affordable Care Act established a pathway for Food & Drug Administration approval of biosimilars to compete with brand biologics with the goal of lowering spending growth on high-cost specialty biopharmaceutical products. In the final rule, CMS suggests that the goal of “improving the quality, price, and access” of biosimilars to Medicare beneficiaries potentially could drive reimbursement changes in the future.

Biosimilar manufacturers advocated for Medicare to assign distinct billing codes for each biosimilar product. They argued that without separate billing codes, there would be insufficient financial incentive to develop these products. By contrast, CMS and other stakeholders such as the Medicare Payment Advisory Commission (MedPAC) have suggested that until more biosimilar products enter the market and more data become available, assigning individual HCPCS codes should result in artificially high biosimilar prices that will not significantly reduce costs for Medicare and its beneficiaries.

Section 3139 of the Affordable Care Act amends section 1847A of the Social Security Act to outline Medicare Part B payment methodology for biosimilars.

— Kara Cardinale, Kasper Cardinale Consulting, LLC, Washington, D.C.

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