Deciphering the code: incentive alignment and biosimilar reimbursement

In this study, we examine Medicare’s reimbursement policy for biosimilars. In particular, we mean biosimilar products not approved as “interchangeable” with the reference biologic product. At present, this refers to all biosimilar products approved by the Food and Drug Administration (FDA). Medicare’s reimbursement policy initially grouped all biosimilars under the same HCPCS code and reimbursed them all at the same rate based on a weighted average of their Average Sales Prices (ASPs). This effectively treated biosimilar products as if they are true generics, which they are not. In this study we examine the incentive effects of this reimbursement policy and its likely adverse effects on biosimilar adoption. This policy was recently changed by CMS, and each biosimilar will now be assigned a unique HCPCS billing code.