Biosimilars Have Lowered Costs for Medicare Part B and Enrollees, but Opportunities for Substantial Spending Reductions Still Exist
Biosimilar competition has already led to lower costs for the Medicare Part B program and enrollees. However, opportunities exist to further reduce Part B and enrollee spending through increased use of more affordable biosimilars or with the implementation of different payment policies.
WHY WE DID THIS STUDY
Biologic drugs (biologics)-usually large, complex molecules produced in a living system-are some of the most expensive drugs available. They are estimated to cost Medicare Part B and its enrollees upwards of $32 billion annually.
A biosimilar is a biologic that is highly similar to and has no clinically meaningful difference from an existing Food and Drug Administration-approved biologic (i.e., the biosimilar's "reference product"), and biosimilars are often less expensive.
This study identifies opportunities to reduce spending for Part B and its enrollees by increasing use of lower-cost biosimilars, which aligns with OIG and Department of Health and Human Services goals. It provides insights into the impact of biosimilar market entry on Part B costs and how biosimilar use in Part B has developed under existing payment policies. It also estimates potential spending reductions that could be achieved through greater use of biosimilars or under a least costly alternative (LCA) payment policy.
HOW WE DID THIS STUDY
We analyzed quarterly biosimilar and reference product prices; use; and program and enrollee costs in Medicare Part B from 2015 to 2021. We used this information to calculate estimates of how Part B and enrollee spending could have changed if biosimilars that were more affordable than their reference products had been used more frequently, or if biosimilars and their reference products had been paid using an LCA policy.
WHAT WE FOUND
Biosimilar competition has led to decreases in costs for both biosimilars and their reference products. However, many biosimilars remain more affordable than their reference products and could be more widely used. We estimated that with increased use of these more affordable biosimilars instead of reference products, Part B and enrollee spending could have been reduced in 2021. Specifically, Part B and enrollee spending on these biologics could have decreased by $179 million, or 4 percent, if more affordable biosimilars had been used as frequently as the most-used biosimilars.
A different approach to Part B payment policies for biologics could have resulted in even greater spending reductions. One type of alternative payment policy that could help address the high costs of biologics for Part B and its enrollees is an LCA policy-under which payment would be based on the lowest-cost drug, regardless of which one was administered. We estimated that an LCA policy for biosimilars and their reference products would have reduced Part B and enrollee spending on these biologics by $419 million-or 9 percent-in 2021, even without an increase in the use of more affordable biosimilars.
WHAT WE RECOMMEND
To reduce Part B and enrollee spending on biologics, we recommend that the Centers for Medicare & Medicaid Services (CMS) pursue one or more payment changes that could further realize savings from biosimilars for Part B and enrollees, which could include seeking additional legislative authority. CMS did not explicitly concur or nonconcur with our recommendation, but stated that it is committed to taking action, as appropriate, within its authority.
This report may be subject to section 5274 of the National Defense Authorization Act Fiscal Year 2023, 117 Pub. L. 263.