Avalere: Biosimilars More Expensive for Medicare Beneficiaries

April 11, 2016

Medicare beneficiaries are likely to pay more for biosimilars than for the biologic reference product in Part D under current law, according to a new report from Avalerea Washington DC-based healthcare consulting firm.

For a sample drug costing $30,000 per year, patient costs for a biosimilar would be $1,500 more per year (39 percent higher) than the reference product. Higher patient out-of-pocket costs may discourage use of biosimilars in Part D, reducing overall savings to the Medicare program.

To date, the US Food and Drug Administration has approved two biosimilars in the United States. The launch of these and other biosimilars has the potential to generate savings to patients and the healthcare system because these products are expected to be priced lower than the reference product. In Europe, the average price discount for a biosimilar is 25 percent less than the reference product.

The Affordable Care Act initiated a process to eventually close the Part D coverage gap by requiring manufacturers to provide patients discounts for branded drugs purchased in the “donut hole.” These discounts do not extend to biosimilars, which can result in increased beneficiary costs.

Two potential policy options to reduce consumer costs for biosimilars include requiring manufacturer discounts to close the coverage gap for biosimilars, consistent with current law for branded drugs; and creating a biosimilar tier that would reduce beneficiary costs for the biosimilar below that of the reference product. 

Both options could increase use of biosimilars and would decrease consumer costs, Avalere reports. One option, requiring manufacturer discounts for biosimilars, would reduce federal spending by $800 million over 10 years, while increasing manufacturer costs. Creating a biosimilars tier, would increase federal spending by $300 million over 10 years as a result of higher costs to the Part D benefit


Avalere included six reference products in its model, which account for the drugs with the highest spending in Medicare Part D that are likely to have biosimilars in the next 10 years. They assume biosimilars will have a list price 25 percent below the price of the reference product based on the current average cost per patient. The model does not account for discounts or rebates on either the reference product or the biosimilars. Under the baseline, adoption of the biosimilar product begins at 5 percent of the utilization for reference product and increases to a ceiling of 50 percent by year. They do not assume any therapeutic switching from other competitor biologics to the biosimilar. Options 1 and 2 assume higher rates of switching from the reference product to the biosimilar due to reduced consumer out-of-pocket costs for the biosimilar. 



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