A new provision in the recently signed Inflation Reduction Act should help spark biosimilar uptake. And considering the timing, it’s especially good news for the biosimilars industry as it readies for its most important test yet.
The new IRA measure—which hasn’t received much fanfare—came into effect on Monday and will remain in place for five years. It establishes an 8% add-on fee that Medicare Part B will pay (PDF) healthcare providers for qualifying biosimilars, replacing the previous 6% markup.
Julie Reed, executive director of the Biosimilars Forum, hailed the new policy, saying it “will increase competition, promote access and ultimately save American taxpayers and patients money.” Pointing to a study by IQVIA, Reed said in a statement that increasing the add-on payment for some biosimilars in the U.S. could reduce healthcare costs by up to $8.2 billion over the next decade.
The new provision will encourage more competition specifically in the “diabetes, cancer and immune disorders,” therapy areas, CMS administrator Chiquita Brooks-LaSure said in a website posting Monday.
The 8% markup is based on the average sales price (ASP) of the original product, which companies report quarterly. The ASP is calculated based on sales to all U.S. purchasers minus rebates, discounts and price concessions, the Department of Health and Human Services said.
To qualify new add-on fee, the biosimilar must have a lower ASP than its reference product, Mizuho analyst Salim Sayed wrote to clients.
While the biosimilars industry has taken off in Europe, it has been slow to develop in the United States. As recently as the fall of 2019, Europe accounted for 90% of biosimilar sales overall.
Since then, there have been improvements in uptake in the U.S. but legal and market constraints still remain in addition to physician and patient hesitance to switch to different product.
Citing the time commitment and cost required to develop—and in many cases legally defend a biosimilar—Reed has called the anticipated launch of several Humira biosimilars in 2023 as a “watershed moment” for the industry. If uptake goes well, the industry should continue to build. If not, companies will have to consider whether they are worth the effort.
Amgen is set to kick off the Humira biosimilar blitz in late Janaury 2023, but several other companies will follow with launches of their own later in the year. AbbVie's Humira generated more than $20 billion last year, making the drug a huge target for biosimilar companies.
There are several other measures in the IRA that are designed to reduce the price of drugs. Also already into effect are Medicare Part D rebates, which will require companies that raise prices of their products above the rate of inflation to pay penalties. Among the measures coming into effect next year will be price caps on insulin and free shingles vaccines for those on Medicare Part D.
The policy change that should have the most impact will begin in 2026 with the government negotiating prices for the drugs that it spends the most on. The number of drugs affected by this action will escallate over the following two years.