It's True: Biosimilars Save Money for Medicare

Biosimilars were touted as an important answer to the problem of soaring drug costs, but whether they've had a genuine, measurable impact in the U.S. hasn't been obvious. Now, two researchers analyzing Medicare Part B spending on biologic drugs have come up with proof, or at least some hard dollar figures approaching it.

After biosimilar competitors came on the market in four product categories -- infliximab, filgrastim, pegfilgrastim, and epoetin alfa -- monies paid to providers for standardized doses had all declined as of 2019, according to Emma Boswell Dean, PhD, of the University of Miami, and Amelia M. Bond, PhD, of Weill Cornell Medical College in New York City, writing in JAMA Health Forum.

In particular, they calculated the following annual average declines in Medicare Part B spending following introduction of biosimilars:

• Infliximab: -7%
• Filgrastim: -13%
• Pegfilgrastim: -1%
• Epoetin alfa: -13%

Although prices for biosimilars were lower than for originator drugs in these categories, that was only partly responsible for the overall effect. "Declines in Medicare spending after biosimilar entry came from a range of sources: biosimilar prices and market share drove filgrastim declines, originator prices drove infliximab and epoetin alfa declines, and biosimilar market share drove pegfilgrastim declines," Dean and Bond wrote.

In each case, their data showed that Part B spending per dose was increasing in the years prior to biosimilar product launches, but then either stabilized or declined. (In some cases, overall spending on originators was already in decline because sales volumes were falling.)

By 2019, biosimilars owned the market for filgrastim, accounting for about 75% of sales. For the other three product types, however, originators were still dominant; overall market share for their biosimilar competition hadn't yet reached 20%.

Just the fact of competition impelled manufacturers of originator biologics to moderate their pricing behavior, it appears.

That this would occur -- and the new study comes with a host of limitations -- wasn't a slam dunk.

In 2017, 2 years after the first infliximab biosimilar (Inflectra) was approved, one prominent rheumatologist predicted it would have no impact on overall prices.

Speaking during an American College of Rheumatology conference debate, Roy Fleischmann, MD, of the University of Texas Southwestern Medical Center in Dallas, argued that pharmacy benefit managers and integrated health systems would prevent biosimilars from making serious inroads, because that would hurt their bottom lines.

And, in fact, the study by Dean and Bond, focusing on Medicare Part B spending, doesn't contradict his point. Medicare reimbursement for Part B is tied to list prices and there is no formulary that sets preferred products.

That doesn't mean there is zero incentive, however. Medicare Part B pays for drugs administered in a physician's office or hospital outpatient clinic -- typically those that require infusion, which is the case for many biologics, including the four covered in the new study. Medicare pays the physician a fixed amount based on a drug's average sales price plus 6%, meant to cover administration costs. Thus, that extra percentage has been seen as an encouragement for physicians to prefer higher-priced drugs.

Still, the new study didn't examine what has happened in the market for biologics reimbursed by private insurance.

Dean and Bond obtained Part B data files from the Centers for Medicare & Medicaid Services (CMS) for 2013 to 2019. "For each product, we converted administration volume to a consistent dose (filgrastim, 1 μg; infliximab, 10 mg; epoetin alfa, 1,000 units; and pegfilgrastim, 6 mg) and calculated observed prices by dividing Medicare spending by the standardized volume," the pair explained. They derived market shares for each product type from the standardized dosing volumes. Notably, because the CMS data includes all Part B spending, no statistical tests or estimations were needed.

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