Biosimilars pose problems for Medicare beneficiaries

April 25, 2016

Surprisingly, Medicare beneficiaries are likely to pay much more for biosimilars than the referenced brand medication, according to a new report.

Surprisingly, Medicare beneficiaries are likely to pay much more for biosimilars than the referenced brand medication, according to a new report.

While the Affordable Care Act (ACA) created an approval pathway for biosimilars that could produce millions of dollars in savings, the Act also initiated a process to eventually close the Part D coverage gap by requiring manufacturers to provide patients discounts for branded drugs purchased in the “donut hole.” “These discounts do not extend to biosimilars, which can result in increased beneficiary costs,” said the report from Avalere Health.

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“The unintended consequence of the ACA is that consumers have a financial disincentive to switch to a lower-cost biosimilar,” said Caroline Pearson, senior vice president at Avalere. “While the Medicare program will save money if beneficiaries take biosimilars, higher consumer out-of-pocket costs are a barrier to patient adoption.”

In a modeled example, Avalere found that, for a brand drug costing $30,000 per year, the biosimilar would be more than $1,500 more per year (39% higher) than the reference product.

Two potential policy options could reduce consumer costs for biosimilars:

1. Requiring manufacturer discounts to close the coverage gap for biosimilars, consistent with current law for branded drugs. This option would reduce federal spending by $800 million over 10 years, while increasing manufacturer costs.

2. Creating a biosimilar tier that would reduce beneficiary costs for the biosimilar below that of the reference product. This would increase federal spending by $300 million over 10 years as a result of higher costs to the Part D benefit.

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“Based on Avalere’s analysis, both options could increase use of biosimilars and would decrease consumer costs,” the report said. “Policymakers should explore options to share the financial benefit of increased use of biosimilars for the government with consumers.”

Avalere included 6 reference products in its model, which account for the drugs with the highest spending in Medicare Part D that are likely to have biosimilars in the next 10 years. The analysis also assumed that biosimilars will have a list price of 25% below the price of the reference product, based on the current average cost per patient. The model does not account for discounts or rebates on either the reference product or the biosimilars.

Read more: [BLOG]: 5 things you need to know about biosimilars