Increased Medicare reimbursement for biosimilars in the recently passed Inflation Reduction Act of 2022 

Signed on Aug. 17, 2022, the Inflation Reduction Act (IRA) is a pivotal piece of legislation. Despite being principally intended to combat inflation, it focuses on taxes, climate change, and healthcare in its 755 pages. The IRA directly impacts healthcare, with a critical provision that addresses prescription drug pricing reform for the Medicare program.

In addition to allowing Medicare to negotiate drug prices, the healthcare portion of the law addresses manufacturer rebates for both Medicare Part B and D, out-of-pocket caps for patients, and safe harbor exemption of rebates for point-of-sale discounts on prescriptions. Our emphasis for this blog relates to the portion that pertains to biosimilars, which is critical for health systems. Increasing biosimilar adoption helps reduce drug spending, increase reimbursement, and improve access to care.

Some key components of the IRA (Section 11403) include the following:

Reimbursement change: The temporary increase in the Medicare add-on payment for specific biosimilar products changed to the average sales price (ASP)+8%, up from ASP+6%.
Qualifying biosimilars: A qualifying biosimilar is one whose average sales price does not exceed that of the reference product. Currently, there are 15 qualifying biosimilars (listed below with their associated HCPCS codes) based on the October 2022 ASP pricing file on the CMS website:
- Herzuma® (Q5113)
- Inflectra® (Q5103)
- Kanjinti™ (Q5117)
- Mvasi® (Q5107)
- Nivestym® (Q5110)
- Ogivri® (Q5114)
- Ontruzant® (Q5112)
- Retacrit®, ESRD on dialysis (Q5105)
- Retacrit®, non-ESRD (Q5106)
- Riabni™ (Q5123)
- Ruxience® (Q5119)
- Trazimera™ (Q5116)
- Truxima® (Q5115)
- Zarxio® (Q5101)
- Zirabev™ (Q5118)
Applicable period: For existing products with payment made using ASP as of Sept. 30, 2022, the five-year period began on Oct. 1, 2022.For new qualifying products with the first payment using ASP between Oct. 1 and Dec. 31, 2027, the five-year period begins on the first day of the calendar quarter of the payment.
Setting: Applies to qualifying biosimilars administered in physician offices, hospital outpatient departments, and ambulatory surgical centers.

Unintended consequences

By increasing reimbursement, the law incentivizes the adoption of biosimilars, leading to improved access, value, and patient outcomes. That is the good news.

Certain portions of the IRA may have unintended and conflicting consequences. Section 11002 introduces a “Special Rule to Delay Selection and Negotiation of Biologics for Biosimilar Market Entry,“ which may add up to a two-year delay in a biologic’s price-negotiation phase prior to launch. The manufacturer of the biosimilar candidate that requests the delay must submit compelling evidence that their drug launch is forthcoming. If the biosimilar is not brought to market, the manufacturer would pay rebates instead of offering the maximum fair price.

In addition, the reference drug manufacturer could attempt to proactively negotiate with CMS to increase profits and discourage competition from biosimilar manufacturers. Without competing biosimilars on the market, the reference drug would have a larger market share, potentially driving up the cost of the reference drug.

These provisions will invariably have intended and unintended short-term and long-term consequences. The legacy of the Inflation Reduction Act of 2022 will be revealed over time, but in the meantime, it’s important to acknowledge the complexity of the law and its impact on biosimilar use.

Health systems will have the opportunity to explore and comment on proposed regulations related to the law during notice and comment period over the coming months. The Craneware Group will continue to provide analysis of the law and updates on how to utilize our software to assist our hospitals realize the full potential of the Value Cycle™.

More information on the increase in Medicare Part B reimbursement is available at the Centers for Medicare and Medicaid Services’ website.

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