Even though generics and biosimilars provide consistent savings for taxpayers and consumers, today’s Medicare patients too often face obstacles to using these lower-cost options. This is a result of outdated policies that can unintentionally encourage plans to prioritize formulary placement of high-cost brand drugs and that fail to reflect the emergence of new competitive therapies.
The savings delivered by generic medicines – more than $292 billion in 2018 alone, including $90.3 billion in savings for the Medicare program – is well established. But less understood is the importance of savings from biosimilar medicines, which are FDA-approved lower-cost versions of some of the highest-priced biologic medicines. “Specialty” biologics represent roughly 40% of all spending on drugs in the U.S., even though they are only 2% of all drugs dispensed.
That is why the recent proposal released by the Centers for Medicare and Medicaid Services (CMS) is so important. The proposal would allow Medicare Part D plans to implement a new, updated structural framework around their formularies to encourage greater utilization of specialty generics and biosimilars by creating a “preferred” and a “non-preferred” specialty tier.
Today, Part D plans are only permitted to offer on their formularies one specialty tier for products that exceed a cost of $670 per month. This means that plans may not have the tools, or the incentives, to encourage adoption of generic or biosimilar versions of specialty brand drugs. In fact, the Part D program not only limits the ability of a plan to reward a patient with lower cost-sharing for using a lower-cost biosimilar, but it can also perversely reward a plan when it selects high-cost, high-rebate drugs over lower-cost alternatives.
Accordingly, a second, preferred specialty tier is an important step in bringing the Part D benefit up to date, and provides plans another tool to encourage the use of lower-cost specialty generics and biosimilars. AAM has consistently advocated for policy solutions in the Part D program that would reward seniors and plans for using lower-priced generics and biosimilars, and we recently submitted comments supporting the CMS proposal.
However, a preferred specialty tier will only work if it is designed and implemented correctly. As such, AAM presented several recommendations to improve the policy in the comments, including:
- CMS should only allow generics and biosimilars to be placed on the preferred tier.
- CMS should align the preferred tier proposal with other proposals that promote generics and biosimilars utilization.
- CMS should treat biosimilars the same way as generics for purposes of formulary changes, allowing earlier access to lower-cost biosimilar medicines to America’s patients.
A recent analysis demonstrated that the creation of a new specialty tier limited to generic and biosimilar products could result in savings of up to $11.9 billion over 10 years for the Medicare program. At the same time, patients could see savings of $8.1 to $22.4 billion over 10 years.
By driving additional Medicare Part D utilization away from higher-priced brands and reference biologics and toward lower-priced generics and biosimilars, this policy could save both Medicare Part D and patients a substantial amount over 10 years. A second, preferred specialty tier will help the Part D program encourage biosimilar competition in the coming years, including the expected introduction of biosimilar competitors for the two highest-cost biologic medicines in the U.S.— Humira and Enbrel— that collectively accounted for nearly $5 billion in taxpayer spending in 2018.
AAM appreciates the efforts of CMS to reduce drug spending for seniors and taxpayers. Now is the time for policymakers to act on these proposals to ensure the Medicare program is updated to appropriately encourage plans to prioritize lower-cost generic and biosimilar medicines and reduce out-of-pocket spending for America’s seniors.
By Craig Burton, AAM Vice President, Policy