While biosimilar drugs have the potential to lower Medicare Part B drug costs, alternative payment policies could generate even greater savings if implemented wisely, according to a new research paper.
The paper, from The Pew Charitable Trusts, explains that under the current Medicare payment policies, providers are paid the same add-on rate—the average sales price plus 4.3%—for both biologics and biosimilars. This policy creates equal financial incentives for providers to use either type of drug, which limits the potential for cost savings.
New @Pewhealth brief - can biosimilars reduce #Medicare Part B spending? Here's how: https://t.co/NG7xRmxWx6
— Erin W. Davis (@ErinEileen117) January 3, 2017
Yet there are two alternative payment policies to consider. For example, a consolidated payment rate would decrease Medicare payment for higher-cost reference biologics and increase payment for lower-cost biosimilars—thus steering providers toward using biosimilars. There is a major caveat, though: A consolidated payment rate will only lower costs if providers increase their uptake of less-expensive biosimilars.
Another option, called the least costly alternative approach, sets the payment rate for a higher-cost drug at the same rate as that of a lower-cost, comparable alternative. It could reduce drug spending even more than the consolidated payment rate policy, as it doesn’t require increased biosimilar uptake to produce cost savings.
To compare the three options, the paper examines their potential one-year effect on the combined costs of five biologics covered under Part B. In 2014, spending on those drugs totaled $5.47 billion, and the use of available biosimilars under the current payment policy could reduce that total to $4.55 billion. The consolidated payment rate, meanwhile, would drop it to $4.32 billion, and the least costly alternative policy would reduce it to $3.56 billion.
With these payment policy alternatives, however, it’s important to note some key considerations, the paper says. For example, neither approach may be appropriate if there are safety concerns about switching a patient to a biosimilar. There is also the worry that reducing Medicare Part B payments for biologics for which there are no lower-cost, interchangeable biosimilars could wind up limiting patient access to vital drug therapies.
Private payers also face challenges when deciding how to handle biosimilars, Mindy Prasad, a clinical pharmacist for Blue Cross Blue Shield of Michigan, said during a previous FierceLive! webinar. For example, if a reference product has more indications than a biosimilar that an insurer prefers, “payers must have a strategy to ensure that there is a treatment option available for any excluded indications,” she said.
Given these challenges, the paper concludes that before developing and implementing new Medicare Part B payment policies, “policymakers should consider clinical evidence, including research on interchangeability of biologics and biosimilars.”