Biosimilars Could Cost More Than Reference Products for Some Medicare Beneficiaries

A recent report by Avalere Health found that Medicare beneficiaries are likely to pay more for biosimilars than for their biologic reference products in the part D program, but 2 policy options could potentially reduce these high costs.

Since the creation of the FDA’s biosimilar approval pathway, the Affordable Care Act (ACA) initiated a process that would eventually be able to close the coverage gap by requiring manufacturers to provide patients discounts for branded drugs purchased in the coverage “donut hole.”

“The unintended consequence of the ACA is that consumers have a financial disincentive to switch to a lower-cost biosimilar,” said Caroline Pearson, senior vice president at Avalere. “While the Medicare program will save money if beneficiaries take biosimilars, higher consumer out-of-pocket costs are a barrier to patient adoption.”

Two policy options that have the potential to reduce consumer costs for biosimilars were examined within the Avalere report. The options included requiring manufacturer discounts that close the coverage gap for biosimilars that are consistent with current law for branded drugs and creating a biosimilar tier that reduces beneficiary costs for biosimilars below the reference product.

These options could increase the use of biosimilars, while decreasing consumer costs. In fact, the option that requires manufacturer discounts would reduce federal spending by $800 million over 10 years and would increase manufacturer costs. The second option would increase federal spending by $300 million over 10 years as a result of the higher costs in the Part D benefit.

“The decision to switch to a biosimilar medication is a complex,” said Gillian Woollett, senior vice president at Avalere. “Patients and physicians should work together to consider potential options. Policymakers should explore options to share the financial benefit of increased use of biosimilars for the government with consumers.”