Abstract
Importance
Price decreases of biologic and biosimilar products in Medicare Part B have been minimal, even with biosimilar competition. Medicare reimburses clinicians for biologics and biosimilars differently than for brand-name and generic drugs, which has generated greater price reductions.
Objective
To characterize the nature of price competition among brand-name and generic drugs under Medicare Part B and to estimate the cost savings to the program of subjecting biologic and biosimilar therapies to a similar price competition.
Design, Setting, and Participants
This cohort study analyzed all brand-name drugs and their approved generic versions as well as biologics and biosimilars that were reimbursed under Medicare Part B from quarter 1 of 2005 to quarter 2 of 2021. Two separate data sets were created: brand-name and generic drugs as well as biologics and biosimilars data sets. Brand-name products with generic versions that were introduced before 2005 were excluded, and so were vaccines.
Exposures
Number of generic and biosimilar competitors over time.
Main Outcomes and Measures
Price change as a percentage of the brand-name drug or biologic price in the quarter before generic or biosimilar competition. Price change was modeled using a linear, fixed-effects time series regression, with the number of generic or biosimilar competitors as the main covariate. Time was expressed as the number of quarters since the first generic or biosimilar competitor entered the market. Savings were estimated by projecting the regression model of brand-name and generic drug competition to observed biologic and biosimilar competition and by applying the estimated price reduction to actual Medicare spending for those products from 2015 to 2019.
Results
Of the 988 Healthcare Common Procedure Coding System codes identified, 50 (5.0%) met the inclusion criteria for the brand-name and generic drug data set and 28 (2.8%) met the criteria for the biologic and biosimilar data set. The first generic competitor was associated with reduced drug prices by 17.0%, the second competitor with a 39.5% decrease, the third competitor with a 52.5% decrease, and the fourth and more competitors with a 70.2% decrease (price decline was measured from brand-name drug price before the first generic competitor rather than from price established with fewer competitors). If biologics and biosimilars were subject to the same Medicare reimbursement framework as brand-name and generic drugs, Medicare spending on these products was estimated to have been 26.6% lower ($1.6 billion) from 2015 to 2019.
Conclusions and Relevance
This study found minimal uptake of biosimilars and limited price reductions for biologics and biosimilars under the current Medicare Part B reimbursement policy. Adopting the bundled biosimilar reimbursement structure for biologic and biosimilar therapies may be associated with substantial savings and encourage greater biosimilar market entry.
Introduction
Biologic therapies, which are complex combinations of sugars, proteins, and/or nucleic acids, account for most of Medicare Part B’s prescription drug spending and spending growth, reaching 80% of spending in 2017 and 92% of spending growth from 2006 to 2017.1 Despite these figures, biologics in the Medicare Part B program are not subject to direct price competition from biosimilar therapies. This situation differs from that for brand-name and generic drugs in the Medicare Part B program, wherein reimbursement is structured to encourage price competition.
Because of past policy choices, Medicare Part B reimbursement for biologics and biosimilars does not incorporate the price competition framework used for brand-name and generic drugs. Brand-name and generic drugs are reimbursed at 106% of the weighted average sales price (ASP)2 of the brand and all approved generic products, incorporating the lower generic drug prices into the reimbursement and encouraging clinicians to select the lowest cost option.3 Biologics and biosimilars, however, are each reimbursed at 106% of their own ASP, encouraging clinicians to select the highest cost option for the greatest reimbursement.1 Previously, under the Administration of former US president Barack Obama, biosimilars were reimbursed on the basis of a weighted ASP to promote competition among biosimilars (but not with biologics).4 This policy was revised by the Administration of then-president Donald Trump on the grounds that it had reduced the reimbursement for biosimilars, resulting in the current separate reimbursement for each biologic and biosimilar therapy (Table 1).5 Under this policy structure, however, biosimilar uptake remains low and prices remain high, differing from the experience in the US Department of Veterans Affairs and European health care systems.6-11 For example, in quarter 3 of 2018, Remicade (infliximab) still maintained 81% of the Medicare Part B market share of Remicade and 2 approved biosimilars, Inflectra (infliximab-dyyb) and Renflexis (infliximab-abda), even though the biosimilars were priced at a 17% to 23% discount off of the Remicade cost.12
Given this background, 2 key gaps remain in the literature. First, to our knowledge, no study has yet characterized the association of combined reimbursement of Medicare Part B brand-name and generic drugs with the rate of price decline over time and by the number of competitors, although similar investigations have been performed outside of the Medicare Part B program.13,14 Second, in the biologic and biosimilar market, the rate of price decreases and savings associated with combined reimbursement, which we called bundled biosimilar reimbursement, has not been estimated. Therefore, in this study, we aimed to characterize the nature of price competition among brand-name and generic drugs under Medicare Part B and to estimate the cost savings to the program of subjecting biologic and biosimilar therapies to a similar price competition.
Key Points
Question
Is generic drug competition associated with prices of physician-administered drugs, and what price changes could occur under increased biosimilar competition?
Findings
In this cohort study of 50 brand-name drugs and generic versions as well as 28 biologics and biosimilars, generic competition was associated with reduced prices, achieving a nearly 53% price decrease after 3 generic competitors were approved. If biosimilar products were treated similar to generic products in the Medicare Part B program, spending on biologics with their approved biosimilars was estimated to have been nearly 27% lower from 2015 to 2019.
Meaning
Findings from this study suggest that implementing the bundled biosimilar reimbursement model may be associated with substantially reduced Medicare spending and increased biosimilar market entry.