Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


Biotech Drugs Trigger Medicare Payment Tempest

By Kerry Young, CQ Roll Call

August 18, 2015 -- With biotechnology drugs generating an estimated $60 billion in annual sales set to lose patent protection by the end of next year, Medicare's plans to buy lower-cost, copycat versions of the medicines are becoming a hot topic for patient advocacy groups and some in Congress.

Administrators of the big health program are in the midst of staking out reimbursement policies for so-called biosimilars, with a 2016 payment rule for physicians serving as one of the chief vehicles. The Food and Drug Administration (FDA) in March approved the first such product for sale in the United States: a Novartis AG copy of Amgen Inc.'s Neupogen, for helping people on chemotherapy fight infections.

At issue is a Medicare plan to use a single payment calculation for biosimilars aimed at the same medical condition, instead of treating each drug as a distinct product. The plan, if finalized, could create confusion and lessen incentives for drug companies to expand the range of copycats, Paul Gileno, president and founder of the U.S. Pain Foundation, wrote in comments to the Centers for Medicare and Medicaid Services (CMS).

Smaller health organizations may hesitate to use the newer copies of biotech drugs if the government's reimbursement scheme is seen as in any way ambiguous, as there could be a potential for Medicare's administrative contractors to reject claims. The National Renal Administration Association told CMS that "a 'one-size-fits-all' approach to reimbursement is not appropriate," and asked for more clarity through distinct billing codes.

"Assigning biosimilars a unique and permanent J-Code will allow for proper reimbursement, competition, and investment, ultimately leading to sufficient access to biosimilars for patients in a range of therapeutic areas," wrote Debbie Cote, president of the renal administrators' group, in a comment to CMS.

Most biotech drugs are supposed to be administered in the offices of doctors or in clinics, which purchase and manage supplies of the medicines. Medicare pays doctors a premium above the average sales price, to compensate them for their time. The sum is intended to be a 6 percent bump, but recent congressional budget deals have sliced the premium to more than 4 percent. CMS is accepting comments on the payment rule through Sept. 8.

There are significant hurdles to enter the U.S. biosimilar market. Switzerland's Novartis had had to fight legal battles with Thousand Oaks, California-based Amgen, as well as make the investments in finance and scientific resources needed to develop the product in the first place. 

Amgen won FDA approval in 1991 of Neupogen, which is a near copy of a human protein that aids in the production of infection-fighting white-blood cells. In both cases, the protein is grown in colonies of altered E. coli. The FDA uses identical language in the prescribing labels for both products, Neupogen and Novartis' Zarxio, saying the copycat has a nearly identical genetic sequence, based on DNA analysis. 

Novartis had won approvals for its version of Neupogen in about 60 countries before securing the FDA approval. The United States has lagged in the field amid prolonged debate on how well companies can copy biotech drugs, which must be grown in living cells. Many lawmakers are intent on maintaining distinctions between original products and copies. The term biosimilars was used in the 2010 health care law that helped break the regulatory logjam and set the stage for March approval of Novartis' Zarxio.

Reps. Joe L. Barton, R-Texas, and Anna G. Eshoo, D-Calif., who had a hand in shaping the FDA's approval process, also have objections to the CMS payment plan that they outlined with more than 30 House colleagues in an Aug. 4 letter to acting CMS Administrator Andy Slavitt. 

"In this proposal, CMS treats biosimilars as if they are generic drugs," the lawmakers wrote, adding that there is "congressional intent" that separate billing codes be used for these products.

CMS is accepting comments through Sept. 8 on the physician payment rule, which it's then expected to finalize in October. There's growing urgency because Amgen is working to develop its own biosimilars while facing potential competition from Hospira Inc., which is working on a competing version of Amgen's Epogen anemia-fighting drug.

Publication Details