April 1, 2015—The Centers for Medicare & Medicaid Services announced a policy decision about Medicaid drug rebates this week that will result in safety-net healthcare providers getting the same 340B discount percentage on biosimilar medicines as they receive on brand-name drugs. [ms-protect-content id=”2799″]
In a pair of Medicaid policy releases to drug manufacturers and states on March 30, CMS said it will classify biosimilars the same as conventional single-source (i.e. brand-name) pharmaceuticals for Medicaid drug rebate purposes. The Food and Drug Administration approved the first biosimilar in the United States, Sandoz’s Zarxio, on March 6. It is an alternative to Amgen’s Neupogen, which is used to reduce the risk of infection in patients receiving chemotherapy.
Biosimilars are often compared to generic drugs because they are intended to be less costly substitutes for original products (estimates range from 10 to 40 percent less). Unlike generics, however, they are not exact copies of their biologic predecessors.
The basic Medicaid rebate for generics is the average manufacturer price times 13 percent. For brand-name drugs, the rebate is bigger: the greater of AMP times 23.1 percent or AMP minus best price. Because the 340B ceiling price formula uses Medicaid’s rebate percentages, CMS’s decision about how to classify products for rebates determines how their 340B prices are calculated.
In its policy releases, CMS explained that it was defining biosimilars as single-source drugs for Medicaid rebate purposes because (1) biosimilars and the products they were created to substitute for are both licensed under the same type of application and (2) the definition of single-source drugs under the Medicaid statute includes those licensed under these types of applications.
“Therefore, in light of this provision, biosimilar biological products fall within the definition of single- source drugs in the [Medicaid drug rebate] program,” it said.
In response to a request for comment about CMS’s decision, the Health Resources and Services Administration said, “These drugs are considered covered outpatient drugs by CMS and are therefore considered 340B drugs if a manufacturer has a Pharmaceutical Pricing Agreement with HRSA.”
In a separate communication to healthcare professionals last week, CMS answered questions about billing Medicare Part B for newly approved biosimilars. The normal Part B drug reimbursement rate is average sales price plus 6 percent. But because biosimilars are new to the market, there are no existing sales prices to average. CMS said until such information is available, it will pay 106 percent of a biosimilar’s wholesale acquisition cost. “Once ASP information is available for this biosimilar product, Medicare payment will equal the ASP for the biosimilar product plus six percent of the ASP for the reference product,” it said.
CMS said it will assign a separate billing code for each biosimilar released to distinguish it from its reference product. It also said it “is considering policy options for coding of additional biosimilars, and will release further guidance in the future.” [/ms-protect-content]