The agency’s work culminated in March 2015 with the licensure of the first biosimilar product, Sandoz’s Zarxio. Zarxio’s reference product is Amgen’s Neupogen, which was originally licensed in 1991. The biosimilar product now is licensed for the same indications as Neupogen.
With the FDA’s licensure process in place, the next step was to establish Medicare reimbursement rates for biosimilar products. Presently, for each FDA-licensed biological product, CMS pays the provider that specific product’s average sales price (ASP) plus an additional six percent. The mark-up is intended to compensate the provider for the storage, handling, and other administrative costs associated with the biological product.
In the 2016 Medicare Physician Fee Schedule Final Rule, CMS announced that reimbursement rates for biosimilar products would be set in a manner different than biological products. The payment for a specific biosimilar product will be based on the ASP of all biosimilar products that share the same reference product (as opposed to the specific biosimilar product’s ASP), plus six percent of the reference product’s ASP. It is likely commercial payers will follow CMS’ lead, as is usually the case.
Thus, if the FDA were to approve another biosimilar product with Neupogen as its reference product, CMS would assign the new biosimilar product the same billing and payment code, or HCPCS code, as Zarxio. The Medicare payment for both biosimilar products would be the same, i.e., based on the ASP for that HCPCS code.
Many have stringently objected to CMS’ biosimilar product payment policy, arguing that it will stifle innovation by artificially controlling the price of biosimilar products. To acknowledge these concerns, CMS has decided to require each claim for payment for a biosimilar product to include a modifier identifying the product’s manufacturer.
According to CMS, this will help the agency to develop a better understanding of the use of specific biosimilar products. Stated another way, the modifiers will enable CMS to segregate the ASP for each biosimilar product under the same HCPCS code, and thus determine whether Medicare reimbursement for that product is artificially high or artificially low. With this information, CMS then can decide whether to change its payment policy.
For now, there is only one biosimilar product HCPCS code and only one modifier under that code:
|Biosimilar HCPCS Code
||Product Brand names
||Corresponding Required Modifier
|Q5101 Injection, Filgrastim (G-CSF), Biosimilar, 1 microgram
As more biosimilar products are licensed by the FDA, however, providers will need to implement processes to ensure the correct modifier is captured on the claims form. CMS will deny payment for any claim for payment for a biosimilar that does not include the required modifier.