The potential for physicians to favor innovator biologics over follow-on biologics because of a reimbursement advantage would be eliminated under an amendment to health care reform legislation adopted by the Senate Finance Committee Sept. 23.

The amendment, offered by Sen. Charles Schumer, D-N.Y., says the goal is "to ensure that patients and the Medicare program utilize biosimilars appropriately" and "create parity between brand name biologics and biosimilars and save patients and Medicare money."

The basic problem the amendment is trying to solve is the fact that, under current law, each biological product must have a separate billing code for reimbursement by Medicare Part B.

Focus Is On Physician Administration Fee

Since the reimbursement rate under Part B is the average sales price of the drug plus six percent, if a biosimilar were introduced at a lower price than the innovator, there would be no incentive for physicians to use the lower-priced drug, since the six percent administration payment would be higher for the innovator. As a result, there would be no downward pressure on prices.

To eliminate this disparity, the amendment would provide equal administration fees for both the innovator, or reference product, and the follow-on biologic. The description of the amendment says a biosimilar approved by FDA and assigned a separate billing code would be "reimbursed at the ASP of the biosimilar plus six percent of the ASP of the reference product."

The committee adopted the amendment by unanimous voice vote, and brand pharma stalwarts Sens. Orrin Hatch, R-Utah, and Michael Enzi, R-Wyo., joined as co-sponsors.

Brands may be supportive of the idea of reimbursement parity for physicians because, if treated as the fix Medicare needs to accommodate FOBs, it would mean that brands avoided potentially much more consequential modifications to the program.

Brand Pharma May Dodge A CBO Bullet

The Congressional Budget Office has previously suggested that there would be additional savings from follow-on biologics if they are put on equal footing with innovators in government health care programs, not just in terms of physician reimbursement, but product coding as well, which would mean that brands would be reimbursed at the FOB price.

In a December 2008 score of legislation options, CBO said that putting a biosimilar in the same reimbursement code as its brand-name counterpart would save the government $10.6 billion over 10 years, about 30 percent more than the $8.1 billion it would save if they were not in the same code (¹ Also see "Follow-On Biologics Coding Tweaks Could Raise Savings By 30% – CBO" - Pink Sheet, 22 December, 2008.).

Many observers believe that such a coding change would need to be made by statute, and that without it Medicare would never fully embrace FOBs. Indeed, while the Schumer amendment removes a disincentive to prescribing FOBs, it does not seem to create an incentive for their use either.

While there is currently no regulatory approval process for follow-on biologics, it appears likely that if health care reform is signed into law, it will include creation of a process for FDA to approve biosimilars. Both the Senate Health, Education, Labor and Pensions Committee and the House Energy and Commerce Committee have included provisions for this in their versions of the legislation (² Also see "Follow-On Biologics: Defeat For Waxman, Win For Health Reform" - Pink Sheet, 3 August, 2009.).

The Finance Committee markup continued through the week and is scheduled to resume Sept. 29.

- Scott Steinke ( ³ s.steinke@elsevier.com )

Biosimilars Would Have Medicare Parity With Innovators Under Reform Bill

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