[1]pic thx to pictures of money flickr creative commons
File this under ‘code red.’
A coterie of drug makers is upset with the Centers for Medicare & Medicaid Services over a proposal they fear would undermine the nascent biosimilar market in the United States. And over the past several weeks, the companies have enlisted the help of more than 70 lawmakers – Republicans and Democrats from both the House and Senate – to convince the federal agency to change its bureaucratic mind.
The focus of all this activity is a code that governs how physicians would be reimbursed after they purchase and administer biosimilars, which are lower-cost versions of brand-name biologic medicines often used for hard-to-treat diseases. Reimbursement codes are a little-known but crucial component of the wider health care economy, which is why the CMS proposal is causing so much consternation.
Here’s the deal: CMS wants to create [2] just one reimbursement code for all biosimilars that a physician might prescribe, instead of the corresponding brand-name biologic. The brand-name treatment would have a separate code. In doing so, the agency is, essentially, treating biosimilars in the same way that cheap generic pills are categorized – pointing doctors toward a one-size-fits-all reimbursement code.
But drug makers and others – including a big pharmacy benefits manager [3], a prominent teaching hospital, and a patient advocacy group [4] – maintain the CMS proposal would cause safety issues by making it harder to determine which treatment caused a side effect. The proposal also runs counter to federal law for setting codes for reimbursing biosimilars. We asked CMS for a response and will update you accordingly.
The companies raise a larger issue, though.
By adopting a single code for all biosimilar versions of each brand-name biologic, they argue CMS will rob drug makers of incentives to pursue further development. If that happens, drug makers and their allies warn the reverberations would be widely felt, since biosimilars are forecast to save an estimated $44 billion in US health care costs over the next decade.
For instance, different drug makers may charge different prices for biosimilar versions of a brand-name biologic. Different pricing may reflect different development costs. Physicians, however, purchase these types of treatments from drug makers, so they are more likely to be sensitive to pricing.
Yet under the CMS proposal, physicians would be reimbursed at the same rate by CMS. So physicians who can choose between competing biosimilars may opt for the lower-priced treatment. Drug makers argue that such a scenario would create a race to the bottom , because it would become harder to recoup investments for some treatments.
The proposed CMS code would “eventually forc[e] most or all of the manufacturers to exit the market,” Amgen senior vice president Joshua Ofman warned in a letter [5] to CMS. “…It is reasonable to expect that manufacturers will doubt their ability to generate a favorable return on their investment and will simply decline to make the investment in biosimilars in the first place.”
Ofman also noted that universal coding may inadvertently encourage physicians to believe biosimilars are interchangeable with one another, even though that may not always be the case. In fact, the FDA, which only recently approved the first biosimilar in the US, has not yet issued guidelines for establishing interchangeable biosimilars.
This raises another issue: whether the CMS proposal would make it harder for regulators to track safety issues. Researchers at Harvard Medical School and Brigham and Women’s Hospital wrote [6] CMS to argue individual codes for each biosimilar would be the best way to know which medication may have caused a side effect. They added that individual coding would make it easier to determine which biosimilar works better than another.
Meanwhile, nearly three dozen members [7] of the US House in August wrote CMS to urge the agency to reconsider its coding proposal. Last week, 20 Senators wrote [8] their own letter in which they encouraged CMS to defer the coding at least until the FDA issues guidelines on interchangeability.
Whether CMS will back down is unclear. But by raising the argument that innovation will suffer and, implicitly suggesting consumers will wind up paying more for medicines, the drug makers and their supporters may have hit on an argument that will be hard for the Obama administration to ignore.
[UPDATE: A CMS spokeswoman send us this: “CMS is committed to establishing appropriate payment for biosimilars. We have proposed an approach and received extensive public comments. As we work to develop a final policy, we will consider the public comments. We expect to finalize our regulation in the coming weeks.”]