Inflation Reduction Act Biosimilars Temporary Payment Increase

by | Jul 25, 2024 | Medicare

Question: What policy is CMS implementing regarding biosimilars temporary payment increase?

CMS is implementing a temporary payment increase for qualifying biosimilars under Medicare Part B. For biosimilars, Medicare Part B generally pays Average Sales Price (ASP) plus 6% of the reference biological product’s ASP when the biosimilar is separately payable in physician offices, hospital outpatient departments (HOPDs), and ambulatory surgical centers (ASCs).

Section 11403 of the Inflation Reduction Act includes a temporary increase in Medicare Part B payment for certain biosimilars. Starting October 1, 2022, existing qualifying biosimilars will be paid ASP plus 8% of the reference biological product’s ASP. The temporary payment increase remains in effect for five years. A qualifying biosimilar biological product is defined as a biosimilar with an ASP that is not more than the ASP of the reference biological.

For existing qualifying biosimilars for which payment was made using ASP as of September 30, 2022, the five-year period begins on October 1, 2022. For new qualifying biosimilars for which payment is first made using ASP between October 1, 2022, and December 31, 2027, the applicable 5-year period begins on the first day of the calendar quarter during which such payment is made.

Question: Why is Medicare payment for certain qualifying biosimilars in Medicare Part B changing from ASP plus 6% to ASP plus 8%?

Section 11403 of the Inflation Reduction Act requires a temporary, 5-year increase in the Medicare Part B payment for certain qualifying biosimilars that have an ASP that is not more than the ASP of the reference biological product. Such qualifying biosimilars will be paid ASP plus 8% (rather than plus 6%) of the reference biological product’s ASP. This temporary add-on payment is intended to increase access to and utilization of biosimilars and promote competition in the marketplace.

Question: Will this payment change cost sharing for Part B biosimilars for people with Medicare?

For most Part B drugs, beneficiary cost-sharing is 20% of the Medicare allowed charge. Section 11403 of the Inflation Reduction Act did not change the cost-sharing percentage. Since beneficiary cost-sharing is calculated using these payments, there may be a nominal increase in beneficiary cost-sharing. However, the increase for some beneficiaries may be mitigated by other factors, such as normal fluctuations in drug prices and supplemental coverage.

ASP for Part B drugs and biologicals fluctuates quarterly, and it is common for beneficiaries to experience slight changes in cost-sharing obligations every quarter. CMS anticipates that any increase in cost sharing for qualifying biosimilars will be relatively small. For example, if the qualifying biosimilar’s ASP plus 6% of its reference biological product’s ASP was $1,060, then cost sharing would be $212. With the temporary add-on payment, cost sharing would increase to$216 when the biosimilar’s add-on is increased to 8% of the reference biological product (a total increase of $4).

In addition, many beneficiaries have financial safeguards in place, including wrap-around coverage, such as a Medigap. These safeguards often cover some or all of the cost-sharing on Part B drugs, so beneficiaries do not have to pay the full 20% coinsurance.

Biosimilars temporary payment increase is intended to increase competition in the market, and price competition between products may lead to lower prices.

Question: In which settings will this temporary increase in the Medicare Part B payment add-on for qualifying biosimilars apply?

The temporary increase in the Medicare Part B payment add-on for qualifying biosimilars will apply for qualifying biosimilars administered in physician offices, hospital outpatient departments (HOPDs), and ambulatory surgical centers (ASCs).

Question: How many drugs will this temporary payment increase apply to?

Qualifying biosimilars are those that have an ASP that is not more than the ASP of the reference biological product. Since ASPs are updated on a quarterly basis, the number of qualifying biosimilars may vary from quarter to quarter. For the initial implementation period (Q4 of 2022), there are 15 qualifying biosimilars.

Question: How will this policy help lower overall health care costs for consumers?

The goal of the temporary add-on payment for providers is to increase access to biosimilars, as well as to encourage competition between biosimilars and reference biological products, which may, over time, lower drug costs and lead to savings to beneficiaries and Medicare.

Question: Will biologicals (both biosimilars and their associated biological reference products) continue to be covered by Medicare, and will beneficiaries continue to have access to them?

Yes; this provision does not change coverage rules under Part B. It makes a temporary change to increase payment limits for qualifying biosimilars, and is expected to drive competition and reduce prices of biosimilars and other biologicals, which could help expand access over time.

Question: How is CMS selecting “qualifying biosimilar biological products” that will be paid at ASP plus 8% of the reference biological product’s ASP, while others will continue to be paid at ASP plus 6% of the reference biological product’s ASP?

In accordance with section 11403 of the Inflation Reduction Act, Medicare will pay ASP plus 8% of the reference biological product’s ASP only for biosimilars that have an ASP that is not more than that of its reference biological product. Other biosimilars will continue to be paid a rate of ASP plus 6% of its reference biological product’s ASP.

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