Out-of-Pocket Costs for Biosimilars Likely Higher Than Branded Drugs under Medicare Part D

Under Medicare Part D, out-of-pocket costs for biosimilar medications are likely to be significantly higher than for their reference branded medications, warns a new report from Avalere Health. As a result, Medicare beneficiaries may resist using biosimilars.

“While there are still substantial savings to the government and other third-party payers from the use of biosimilars, fewer Medicare beneficiaries are likely to start treatments with biosimilars, or to transition to biosimilars from other treatments, due to higher out-of-pocket costs,” the report concluded.

For a branded drug costing $30,000 annually, Medicare patients would pay more than $1500 more per year, or 39% higher, for a biosimilar than they would for the reference medication, according to the health care consulting firm.

The higher out-of-pocket costs for biosimilars are an unforeseen result of changes initiated by the Patient Protection and Affordable Care Act (ACA). Although the ACA created a pathway for the approval of biosimilars, the drugs were left out of a requirement that manufacturers provide patient discounts for branded medications purchased in the “donut hole.”

“The unintended consequence of the ACA is that consumers have a financial disincentive to switch to a lower-cost biosimilar,” said Caroline Pearson, senior vice president at Avalere. “While the Medicare program will save money if beneficiaries take biosimilars, higher consumer out-of-pocket costs are a barrier to patient adoption.”

The report proposes 2 potential policy changes that could reduce out-of-pocket costs for Medicare patients prescribed biosimilars: requiring manufacturer discounts to close the coverage gap for biosimilars, or creating a biosimilar tier to drop beneficiary costs for biosimilars below costs for their reference medications.

The former would cut federal spending by $800 million over 10 years and increase manufacturer costs, Avalere estimated. The latter would increase federal spending by $300 million over 10 years.—Jolynn Tumolo

References

1. Avalere Health. Patient out-of-pocket costs for biosimilars in Medicare Part D. April 2016.
2. Medicare beneficiaries will pay more for biosimilars than for their biologic reference products in Part D [press release]. Avalere Health: Washington, DC; April 12, 2016.