Implementation Of The Biosimilars Provisions Of The ACA — Where Are We Now?

Despite the passage of a 2010 law addressing such medicines, the Food and Drug Administration’s (FDA) approval this year of the first biosimilar has prompted a flurry of regulatory activity aimed at filling gaps left by the statute. For a helpful primer on the issue, see a recent Health Affairs Health Policy Brief. This post will address key concerns raised by recent FDA guidance, as well as other widely anticipated but yet-to-be released regulatory activity, such as the pivotal interchangeability standard.


Biologics are different from traditional drugs in that they are made from living organisms. NPR summed up the difference in the process for replicating biologics versus traditional drugs in a way that resonated with me. Think of generics as a copy of a cocktail drink — if you buy all the right ingredients and follow the recipe, you can make an almost exact replica of your favorite drink. Biologic replication is more like what the process would be if you wanted to re-create your favorite glass of wine: you would have to navigate the grape varietals and the fermentation and aging processes. Like winemaking, biosimilar production is a biological—rather than chemical—process and, as such, it is more difficult to get a result exactly the same as the original.


On August 27, the FDA released highly anticipated policies on biosimilar naming, set forth in a proposed rule, a draft guidance, and blog post. The regulatory documents had to do with the name that will be given to the active ingredient for biosimilars, known as the drug’s nonproprietary name. In the case of non-biologic small molecule drugs, both branded drugs and their generic counterparts share the same nonproprietary name. Competing biologic medications can also share the same nonproprietary name. Some stakeholders contend that a differing nonproprietary name between reference and biologic products creates clinical confusion for prescribing physicians. They further assert that different names could separate the biosimilar from safety data about its reference, making it more difficult to investigate safety concerns. Other stakeholders respond that unique nonproprietary names are necessary for pharmacovigilance in light of the underlying, inherent differences between products. The August FDA draft naming guidance and proposed rule predominantly sides with the latter camp. Under the proposed system, biological products will be assigned a “core name,” common between reference and biosimilar, as well as a designated four letter suffix unique to the reference and each related biosimilar. The unique suffix, FDA says, will be chosen by the manufacturer but must be “devoid of meaning” without “making misrepresentations with respect to safety or efficacy” or using abbreviations likely to cause confusion. The rationale behind this approach, the agency suggests, is “to help minimize inadvertent substitution” for products not designated as interchangeable and to “help facilitate pharmacovigilance for all biological products.” While both the guidance and rule are in the proposal stage, we can expect robust stakeholder feedback before (and likely after…) they are finalized.


Another hot topic surrounding biosimilars has to do with recent Medicare reimbursement proposals for the drugs. Medicare’s approach is important because of the population but also because the private sector usually follows its lead. In general, Medicare assigns to drugs a Healthcare Common Procedure Coding System (HCPCS) code that doctors and hospitals use to seek reimbursement. The Centers for Medicare and Medicaid Services (CMS) adopted the same strategy for biosimilar reimbursement in both its Medicare Physician Fee Schedule (MPFS) and Hospital Outpatient Prospective Payment System (OPPS) rulemaking. The reimbursement rate for biosimilars administered in a freestanding clinic under the MPFS was statutorily set at the drug’s average sales price (ASP) plus an additional 6 percent (as is the case for other physician-administered drugs). An analogous approach was proposed for the Hospital OPPS. Importantly, CMS established that all biosimilars for the same reference product will be grouped under one payment code, with the reference product having its own separate code. This effectively sets the reimbursement rate for any one biosimilar at the average ASP for all related biosimilar products. CMS also pegged the 6 percent add-on for biosimilars using the reference product’s ASP. The agency’s intent is to avoid branded biologics having higher “spreads” than biosimilars, which some think could induce greater utilization of the former. The decision to group all biosimilars for the same reference biologic under the same HCPCS code—only one biosimilar has been approved so none have been grouped together yet—has prompted some criticism from industry stakeholders. They have expressed concern that the proposed payment approach is at odds with distinguishable suffixes envisioned in the FDA’s draft naming convention and the Medicaid rebate policy of treating biosimilars as single-source drugs. Members of Congress weighed in, saying the reimbursement strategy treats biosimilars as generics and undermines the potential for a “vibrant” biosimilars market. On the other hand, the Medicare Payment Advisory Commission (MedPAC) has expressed support for the CMS proposal, saying it could form the basis of policies that would reduce the price of both biosimilars and the brand biologics they reference. Commissioners also said that if policymakers desire CMS claims data to complement the FDA’s post-market monitoring, CMS could develop a way to distinguish biosimilars on claims without assigning them a unique code. At a recent Senate HELP Subcommittee hearing, FDA officials confirmed that it is working with CMS to develop sub-codes to “help distinguish who got what [biosimilar]” for safety monitoring purposes.


The most important issue that the FDA has not yet addressed is how the agency intends to determine the threshold biosimilars must meet to obtain an “interchangeable” designation, as well as the naming and labeling of such products. Just because a biosimilar gets approval for being clinically equivalent to its reference product does not mean that it can be swapped in for that product without physician approval. An interchangeability designation for a biosimilar, however, would permit such substitutions. In its August 27 proposal, the FDA briefly touched on how biosimilars deemed interchangeable would be named. First, the agency said they could use the core-name-plus-suffix approach to naming that was proposed for use with other biosimilars. Alternatively, the interchangeable product could be given a unique suffix. Other forthcoming FDA work should include guidance regarding biosimilar labeling, expected at the end of 2015. A highly anticipated draft guidance addressing interchangeability remains to be seen, though it is expected in the coming months. Guidance dealing with statistical approaches to data extrapolation that biosimilar applicants may use with the FDA is also due to be released within the next six months. In sum, despite the recent rash of long-anticipated guidance, much remains to be resolved in the biosimilars space. These policies are an important aspect of the overall ACA regime to reform the health care system in its numerous manifestations. In this case, we are in the unique position of seeing products come to market while key issues relating to their approval and reimbursement have not been formally resolved. The ball is in the FDA’s court and stakeholders are watching closely for their next move.

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