Giving a follow-on biologic the same reimbursement code as its brand name counterpart would increase the savings from FOBs by 30 percent for the federal government's mandatory health care programs, the Congressional Budget Office estimates.

These programs, primarily Medicare and Medicaid, would save $10.6 billion on their biologics' bill during the 2010-2019 period, CBO says in an analysis of 115 health care reform options that was released Dec. 18.

Without the same reimbursement coding, the FOB savings estimate for the mandatory programs is $8.1 billion for the 10-year period.

Just last summer, CBO estimated savings of $5.9 billion for 2009-2018 would occur with adoption of the FOB regulatory pathway created by S. 1695 from the Senate Health, Education, Labor and Pensions Committee (¹ Also see "Follow-on Biologics Get Modest Savings Score From CBO, Giving Legislation No Push" - Pink Sheet, 25 June, 2008.).

The higher savings estimates are a boon to advocates of an approval pathway for follow-on biologics. The previous score was seen as too low to generate much excitement for the program as a budgetary tool.

CBO does not explain the increase in savings, although at least some of the difference stems from the fact that the 10-year estimate now includes a later period when further inflation and patent expirations would drive the numbers higher. The report does note that the estimate could change further when new data are received on spending for federal programs, such as Medicare Part D.

Savings for discretionary health programs, which include those of the Veterans Health Administration and the Department of Defense, are pegged at about $1 billion for FOBs without the reference product billing code, and $1.1 billion with the same code.

The effects of the savings on taxes would result in increased federal revenues of $1.1 billion without the same billing code and $1.4 billion with it.

CBO also expects follow-on products to lower costs for private insurers and reduce premiums for employers by almost 0.2 percent by 2019.

The new figures are based on an exclusivity period of 12 years, the same as that provided in the Senate bill. CBO notes that a change in that timeframe or other alterations in the regulatory process would affect the cost estimates.

-Cathy Dombrowski (c.dombrowski@elsevier.com)

Follow-On Biologics Would Increase Savings By 30 Percent With Coding Tweaks, CBO Says

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