CMS biosimilar coverage is at odds with its own biologics policy

Print 09 November 2015
Mari Serebrov / BioWorld

In a move that could hamstring the U.S. biosimilars market before it has a chance to fully open its doors, the Centers for Medicare & Medicaid Services (CMS) is sticking to a Part B biosimilars payment policy that would create a bifurcated biologics scheme when older proteins such as insulin and growth hormone are brought under the Biologics Price Competition and Innovation Act (BPCIA) in 2020, Pfenex Inc. CEO Bert Liang told BioWorld Today.

Despite all the comments CMS received opposing its Part B biosimilars payment proposal, the agency announced Friday it was finalizing that part of the 2016 Physician Fee Schedule rule with no changes. Under the rule, which is slated to go into effect Jan. 1, a reference biologic will have one payment code while all its biosimilars will be lumped together with another code. (See BioWorld Today, July 21, 2015.)

That's at odds with how CMS covers follow-ons of older biologics. Copies of insulin, human growth hormone and other proteins approved as 505(b)(2) drugs under the Federal Food, Drug and Cosmetics Act (FDCA) are assigned the same payment code and have the same nonproprietary name as their reference product, Liang said.

Unless CMS changes its coverage policy when those older proteins become subject to the BPCIA in five years, it will have two separate Part B policies for follow-on biologics, with no scientific justification for the difference, Liang said. Like 505(b)(2) biologics, biosimilars are expected to have no meaningful clinical differences from their reference product.

The policy also ignores how biosimilars are developed. Each one has to be compared with the reference biologic, but they are not compared with each other. "I don't understand their rationale," Liang said of CMS distinguishing between the reference biologic and all the follow-ons.

CHILLING THE MARKET

His concern is the impact the CMS policy will have on the newborn biosimilar market. By assigning the reference product one code while putting all the biosimilars under a separate one, CMS is creating "a perception of difference when it doesn't exist," Liang said. That's not the message that should be sent if policymakers want to encourage the uptake of biosimilars, he added.

The structure of the payment policy also could discourage development of the follow-ons. Under the new Part B rule, the Medicare payment for each biosimilar will be based on the average sales price and market share of all the biosimilars within that code, plus 6 percent of the covered price of the reference product. Subsequently, the opportunity cost for a drugmaker will be based on whether it can drive market share, most likely by offering a low price, creating "a race to the bottom," Liang said.

In that situation, many drugmakers would find it more profitable to focus on developing novel drugs rather than biosimilars. "It's going to be a challenge for some players out there," said Liang, who also serves as chairman of the Biosimilars Council, a division of the Generic Pharmaceutical Association.

CMS needs to think about how its policies will affect the biosimilars market in its opening stages, Liang said. "It's hard enough to make biologics," whether they be novel or follow-ons; having policies that discourage that development make it all the more difficult, he noted.

The Biosimilars Forum, another industry group, also is concerned that the CMS policy could dampen the biosimilars market. "This rule will lead to confusion with respect to proper product use, safety monitoring and will reduce investment in development of biosimilars, thereby reducing treatment options available to patients," said Michael Werner, policy adviser for the forum.

THE GENERICS MODEL

Like several other groups, the Biosimilars Forum urged CMS to use a separate payment code for each biosimilar. "The law, legislative history and biosimilar science support the requirement that CMS assign each biosimilar biological product a unique HCPCS code and not consider biologics and biosimilars in the same fashion as generic drugs," Werner said.

The FDA and Congress have taken great pains to distinguish between generics and biosimilars, but CMS admittedly modeled the biosimilar payment on its generic drug policy. "Because of the degree of similarity that biosimilars share with their reference products, we believe it is appropriate to price biosimilar products in groups in a manner similar to how we price multiple-source or generic drugs," the agency said in the rule, noting that generics are "biosimilars' closest analogues."

In justifying that conclusion, CMS pointed to what it called their parallel abbreviated pathways and competition in the market. "We believe that biosimilar products and multiple-source drugs will have similar marketplace attributes. . . . Like multiple-source drugs, we see biosimilars competing for market share with each other, as well as competing with the reference or innovator product," the agency said.

Noting the one distinction between its payment policy for generics and biosimilars – generics share a code with the innovator, CMS claimed it lacked the statutory authority to give the reference biologic the same payment code as its biosimilars. Liang refuted that claim, saying the agency has exercised that authority in other areas.

Liang and the Biosimilar Forum also expressed the same surprise that CMS ignored all the comments, especially the ones from Congress, urging it to reconsider the policy. The one bright point was that the agency acknowledged the policy would be "constantly under review," Liang said, so there may be room for change in the future.

One future change will be where interchangeables fit in. Since the FDA has yet to draft guidance on how interchangeable biologics should be developed, CMS saw no need to address them in a payment policy for next year.

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