OIG: Biosimilars Can Save Money for Medicare and Beneficiaries

Increased use of biosimilars could reduce Medicare Part D spending by 18% and beneficiaries’ out-of-pocket costs by 12%.

Medicare Part D and its beneficiaries could save if biosimilars were used more often, according to a recent report done by the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services.

In 2019, biosimilars’ reference products were still prescribed about five times more frequently than biosimilars in Part D. But if biosimilars had been used instead, spending on all biosimilars could have been reduced by $84 million, or 18%. Additionally, beneficiaries’ out-of-pocket costs for these drugs could have decreased by $1.8 million or 12%.

Researchers, led by Suzanne Murrin, deputy inspector general for evaluation and inspections, analyzed biosimilar utilization and spending in Part D from 2015 to 2019. They also calculated multiple estimates to explore how Part D and beneficiary spending in 2019 could have changed with increased utilization of biosimilars.

The report noted that in 2019, not all plan formularies covered available biosimilars. For example, in 2019, 38% of plan formularies that covered an epoetin alfa (used to treat anemia related to cancer and other medications) reference product did not cover the biosimilar and 32% of formularies that covered the pegfilgrastim (used to reduce infection after cancer therapy) reference product did not cover a biosimilar.

Researchers found that those plans that did include biosimilars rarely encouraged their use over reference products through preferential formulary tier placement and utilization management tools. For example, more than 97% of these plan formularies placed all covered biosimilar and reference product filgrastims or pegfilgrastims on the same formulary tier.

“In addition to affecting beneficiary cost-sharing, tier placement on a plan formulary can influence prescribers’ preference. Specifically, a recent survey (conducted from December 2019 through January 2020) found that when both the biosimilar and its reference product are available on the formulary, prescribers will choose the reference product unless the biosimilar is in a preferred position on the formulary,” the researchers wrote.

The report recommends that the Centers for Medicare and Medicaid Services (CMS) monitor biosimilar coverage, cost-sharing, and utilization management requirements in Part D plan formularies, and suggests that CMS examine how a demonstration project could incentivize the use of biosimilars.

Researchers noted that the results are estimates and don’t account for how drug manufacturers might have responded, such as by renegotiating rebates with plans or changing pricing for reference products or biosimilars in response to greater biosimilar use. The analysis also doesn’t assess whether the increased utilization rates used to estimate spending reductions are achievable.