Underwater Biosimilars

IPA supports expanding patient access to biosimilar products, which offer the potential to significantly lower costs for patients and the broader healthcare system. However, this potential is not being fully realized. Today, many physician practices and infusion centers are reimbursed at rates well below the cost of acquiring these therapies, creating an “underwater biosimilar” issue that is increasingly unsustainable. Without corrective action, this distorted market dynamic threatens the promise of biosimilars to improve access and reduce healthcare spending.

What are Biosimilars?

Biosimilars, which are typically a lower cost alternative to an existing biologic treatment, are vitally important therapeutic options for patients with certain chronic diseases, such as cancer, arthritis, and Crohn’s disease. In addition to reducing pain and dysfunction related to inflammatory, genetic, and ocular diseases, these medications reduce the frequency of costly disease-related complications, including cardiovascular diseases, metabolic syndromes, and expensive procedures and surgeries. Biosimilars undergo rigorous testing to demonstrate comparable safety and efficacy to their reference products (i.e., brand biologics). Biosimilars have the potential to promote a sustainable, robust market that encourages competition, cost savings, and better patient care. As biosimilars are a market-based solution to help with the affordability of specialty drugs in the U.S., there is a real opportunity for savings to the entire healthcare system, including the Medicare program and patient out-of-pocket costs.

Rebates to PBMs Are Driving Down ASPs and Put Providers Underwater on Biosimilars

Physician practices and infusion facilities that directly administer drugs, including biosimilars, to patients typically engage in a practice known as “buy and bill.” They pre-purchase drugs and bill the payer for reimbursement once the medication is administered to the patient. To maintain the viability of administering drugs in this setting, reimbursement must account for not only the drug acquisition cost, but also overhead costs such as intake and storage, equipment and preparation, nursing staff, facilities, and spoilage insurance. Reimbursement rates that do not sufficiently compensate for these costs at the current ASP formula risk putting these practices “underwater.”

Unfortunately, many insurers and their pharmacy benefit managers (PBMs) have exerted disproportionate sway on drug formularies by pressuring pharmaceutical companies to offer significant rebates in exchange for preferred formulary placement. Rebates between pharmaceutical companies and PBMs are reflected in manufacturers’ quarterly ASP reporting to the Centers for Medicare and Medicaid Services (CMS), and they have artificially lowered the ASP to the point that many providers’ acquisition costs substantially exceed Medicare and other private health plan payments.

It is important to underscore that this underwater biosimilar phenomenon is not limited to Medicare. Because commercial plans also reimburse providers on the ASP paradigm, commercially insured patients are also experiencing access problems with certain biosimilars. A January 2024 analysis further confirms how these rebates have led ultimately to a stall in biosimilar uptake, thus negating the intent of these drugs.¹

Below are examples of two different IPA members, each experiencing significant losses on two different biosimilar products:

• Company 1 acquires Avsola for $1,844.15 for a typical patient administration, but the ASP reimbursement is only $1,024.65, meaning that the company would take a $819.50 loss. The cost as a percentage of ASP is 180 percent.
• Company 1 acquires Inflectra for $2,117.50 for the typical patient administration, but the ASP reimbursement is only $825.55, meaning the company would take a $1,291.95 loss. The cost as a percentage of ASP is 256 percent.
• Both Avsola and Inflectra are biosimilar alternatives to Remicade and are often required first line treatments by the formulary controlled by the PBM. The company has no option but to take the loss or not provide the treatment.
• Company 2 acquires 500mg does of Ruxience (5 vials) for $658, but is paid $421.75 ASP, resulting in a $236.25 loss.
• Company 2 acquires Truxima 500 mg does (5 vials) for $2,165.45 but is reimbursed $1,501.60, resulting in a $663.85 loss.

On a per encounter basis, these losses are deeply concerning, however, the problem is further magnified by the fact that for each of the drugs referenced above, the patient will receive the therapy 4-8 times per year, thereby increasing the losses a non-hospital-based provider is expected to incur.

Flawed ASP Formula Forces Huge Losses or Blocked Access to Biosimilars

As a result, our members must decide between becoming financially insolvent and providing these products at a substantial loss or not providing the underwater biosimilar products at all. This is a lose-lose situation for our members and our patients.

Physician practices who control the products they prescribe will simply stop prescribing these revenue-losing biosimilar products, while freestanding infusion facilities who fill prescriptions ordered by referring physicians will take on tremendous losses. Neither situation is advisable or tenable.

The full promise of biosimilar cost savings cannot be achieved if these products cannot be administered by the providers at the front lines of patient care. While many hospitals have access to the significant 340B discounts, other profitable lines of business (surgery, diagnostic tests, labs) and endowments to offset losses, none of those revenue streams are available to physician practices and infusion facilities.

The plain fact is that without payment reform, patients will lose access to many biosimilar products.

The best scenario is that patients may only get access to them in the hospital which costs Medicare nearly three times more for the drug administration costs and will be a much less convenient place for patients to get their care. That unnecessarily raises costs and makes patient adherence more challenging.

Solution: Exclude Rebates to PBMs and Health Plans from ASP Calculation for Biosimilars

Congress must amend the ASP statute to recognize and respond to this new reality. Specifically, Section 1847A of the Social Security Act should be amended to exclude manufacturer rebates and price concessions that are not available to the providers administering Part B biosimilar drugs. The calculation of ASP for biosimilar products must exclude rebates provided to PBMs and health plans.

While IPA supports extending the ASP+8% reimbursement for biosimilars that is set to expire, it has a negligible impact on the underwater biosimilar problem.

About the Infusion Providers Alliance

The Infusion Providers Alliance (IPA) is committed to protecting the integrity of the provider-patient relationship by empowering providers and patients to choose the most appropriate treatment together. We advocate for policies that ensure timely and adequate patient access to high quality care in IPA members’ convenient, community-based, non-hospital settings. IPA members operate over 1,000 in-office or stand-alone ambulatory infusion centers across 43 states nationwide, delivering value to the health care system and improved outcomes to patients.

All inquiries should be emailed to ewarren@infusionprovidersalliance.org.