Posted: September 27, 2023
CSRO continues to hear from practices around the country about biosimilars being “underwater” in terms of acquisition cost versus reimbursement level. Although this issue first emerged with regard to Inflectra, it seems to exist for other biosimilars now as well.
How did this happen?
Our understanding is that the manufacturers contributed to this issue with their pricing strategies. Using Inflectra as an example, the company provided large rebates to the pharmacy benefit managers (PBMs)/insurers to obtain formulary access and favorable formulary placement. Those rebates were factored into the average sales price (ASP) for Inflectra, which resulted in the ASP dropping quickly without the acquisition price point being able to catch up fast enough. Although there are many factors influencing ASPs and acquisition costs, this issue seems to be a major contributing factor for certain biosimilars being significantly “underwater.”
What can be done in the near term?
ASPs are reported quarterly, so it is possible that the effects of the initial pricing strategy will smooth out over time; however, this does not provide certain or immediate relief to practices that are struggling with this issue right now, nor does this situation bode well for future biosimilar market entries, should this pricing strategy become standard.
There is a provision in the Inflation Reduction Act to temporarily increase the add-on payment for biosimilars from 6% to 8% (assuming the biosimilar has a lower ASP than the brand). Although that provision was not motivated by this problem, it may functionally help offset some of the financial impact of this problem.
In the meantime, we have also heard from some practices that they have been forced to stop offering these products due to the sizable, destabilizing financial loss associated with them, and to offer patients alternatives if the insurer will allow it, or to refer them to hospital-based infusion centers if the insurer will not. Keep in mind that hospital-based infusion can be more than double the cost of office-based infusion, so the insurer should have an incentive to avoid patients being referred out of your office and into an outpatient department. Perhaps for that reason, we have also heard from practices who were able to obtain exceptions for the patient after explaining the situation to the insurer.
The long game.
Given that this problem is the result of pricing strategies rather than some unintended market incentive, it is unlikely that Congress will intervene in the short term in this particular scenario. However, CSRO is using this fact pattern as another perfect example of why the current formulary design system needs federal reform – and fast. Our current system, in which the drug company must buy formulary access from the PBM, seems to inevitably result in reduced access and/or increased costs for patients. What’s more, it now seems to be interfering with biosimilar uptake as well.
Questions? Email us at info@csro.info.
