Does Insurance Cover Biosimilars?
Key takeaways:
Biosimilars are a highly similar version of a specific biologic. They’re complex medications made from natural or living sources that treat health conditions such as cancer, rheumatoid arthritis, and diabetes.
Private health insurance and Medicare both cover biosimilars.
Biosimilars are lower-cost alternatives to their original biologic. Factors such as formulary listings, billing and coding, and average sales price can affect biosimilar reimbursement rates.
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Maybe you’re living with diabetes or rheumatoid arthritis. Or, you’ve been diagnosed with a type of cancer. If so, your healthcare provider may have prescribed a treatment called a biosimilar.
Biosimilars are different from your over-the-counter medicines on pharmacy shelves — or your typical prescription medications. They are unique due to being made from living organisms or natural resources instead of chemicals.
Biosimilars have a quicker FDA approval process and tend to cost less than original biologics, which are more complex than other medications. Biologics come from a diverse array of living sources and are copied to make more affordable versions (biosimilars). Congress passed the Biologics Price Competition and Innovation Act (BPCIA) in part because of reduced costs. The law created the abbreviated approval pathway for biosimilars. The streamlined development process can result in greater cost savings and better value-based care without sacrificing safety and effectiveness.
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What are biosimilars?
Biosimilars are complex medications approved by the FDA. These medications are used to treat many common and rare health conditions, including:
Are biologics and biosimilars different from traditional medications?
You might consider biosimilars the offspring of biologics. Biologics are medications made from living cells (human, plant, or other organisms). Because of this, they are especially hard to copy and bulk-produce.
Technically, biologics have no generic versions since generics are manufactured from chemicals. But biosimilars are very similar both in structure and function to their original (“brand name”) medication.
For a clearer picture: Most of the medications in your medicine cabinet, such as aspirin and antihistamines, are made up of chemicals. These are called small molecule drugs.
Biosimilars are more complex, large-molecule medications. They usually are specially stored at very cold temperatures.
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As the name indicates, biosimilars are “ highly similar” — not identical copies — to their biologic parent. This class of biological medications includes injectables such as insulin. If you are prescribed a biosimilar, it’s likely because it is considered equally safe and effective but at a lower cost. Or, in some cases, it is deemed interchangeable in the treatment of your chronic illness or serious health condition.
An interchangeable biosimilar goes through extra steps during the FDA approval process to determine if it may be substituted for the reference biologic medication. This designation doesn’t mean the interchangeable biosimilar is significantly different or better. It is considered just as safe and effective as the regular biosimilar.
Examples of common biosimilars include:
Cyltezo (adalimumab-adbm), an interchangeable biosimilar to Humira (adalimumab)
Renflexis (infliximab-abda), a biosimilar to Remicade (infliximab)
Zarxio (filgrastim-sndz), a biosimilar to Neupogen (filgrastim)
Kanjinti (trastuzumab-anns), a biosimilar to Herceptin (trastuzumab)
Semglee (insulin glargine-yfgn), an interchangeable biosimilar to Lantus (insulin glargine)
Zirabev (bevacizumab-bvzr) a biosimilar to Avastin (bevacizumab)
Does insurance cover biosimilars?
Many health insurance plans, including Medicare, cover biosimilars. However, which ones are covered and how they’re reimbursed vary by plan. For example, Cigna is adding several Humira biosimilars to its preferred drug formulary. Among them is Cyltezo, which is used to treat a variety of autoimmune conditions in adults. Adding this biosimilar to the formulary, or reimbursement list, makes it a covered medication. But Cyltezo or other Humira biosimilars aren’t currently listed on Aetna’s specialty drug list.
A plan’s formulary may have up to five tiers. If your medication is listed in the highest tier, it’s typically a specialty, high-cost medication. You can expect higher out-of-pocket costs. Alternatively, in the lower tiers, medications cost less. You may still have out-of-pocket costs, so check with your health insurance policy on these questions:
Is there a copay? And if so, how much?
Is there a coinsurance charge?
Is prior authorization necessary?
There are two key reasons you might choose to switch from a biologic to a biosimilar:
Savings. Biosimilars typically cost less. According to the Association of Accessible Medicines, the average price of biosimilars is about 50% less than its biologic alternative.
Insurance coverage changes. Your health plan may require you to change your treatment plan if a lower-cost, FDA-approved biosimilar is available.
You can also discuss with your healthcare provider your interest in switching medications. Together, you can talk about the recommended biosimilar and new treatment plan.
In some cases, however, a biosimilar identified as interchangeable with a biologic doesn’t have to go through your prescribing healthcare provider. Your pharmacist may substitute the less expensive option for you, based on guidance under your state law.
If uncertain, check which is on your plan’s preferred (or nonpreferred) drug list. According to a 2020 JAMA article, some health plans require you to try the biosimilar before the original biologic.
Which biosimilars are covered by insurance?
There is no universal coverage for biosimilars. So, which ones are covered by insurance varies plan-by-plan. But there are private insurers that cover these types of medications. An insurer’s Pharmacy & Therapeutics (P&T) committee is responsible for deciding coverage policies for therapies and medications, including biosimilars, put on the formulary.
Are you insured through your employer? If so, contact your employer’s benefits administrator with coverage questions. Otherwise, call your health plan’s customer service representatives directly. Or, you can review your benefits booklet for details.
Ultimately, coverage varies by insurer, type of biosimilar, and health plan drug formulary.
Does Medicare cover biosimilars?
Yes, Medicare may cover biosimilars. Your coverage will depend on:
The specific biosimilar medication you need
Your Medicare plan
FDA approval
According to The American Journal of Managed Care, biosimilars are mostly covered under Medicare Part B. But they may also be covered under Medicare Part D, the prescription benefit under the federal government health insurance program.
Still, there are inconsistencies in coverage. For example, one report showed that not every Part D plan formulary in 2019 covered biosimilars when they were available.
Remember, the FDA doesn’t regulate insurance coverage or reimbursement for this type of biologic. So if you are enrolled in Medicare or Medicaid, talk to your plan provider. Or, contact the Centers for Medicare & Medicaid Services (CMS) for information about coverage.
How are biosimilars reimbursed?
Biosimilars are reimbursed much like other medications, but with consideration for their unique characteristics as biological therapies. For example, many are administered in a healthcare provider’s office, hospital, or other medical setting.
Both Medicare Part B and private insurance typically use what is called the buy-and-bill method for biosimilar reimbursement. Under this model, the health care provider (HCP) buys directly from the distributor, administers the specialty medicine, and bills the insurer. The insurer then reimburses the provider for the HCP-adminstered treatment. You may be responsible for out-of-pocket costs such as coinsurance, copayments, or deductibles. This can vary by plan. But according to the American Hospital Association, some larger private insurers are changing policies for this reimbursement method.
Among the factors influencing the reimbursement process for biosimilars:
Formulary listing. Where a medication falls and how it is characterized (such as preferred or nonpreferred) on the formulary listing can determine your copay, coinsurance, and other out-of-pocket costs — as well as reimbursement rates.
Average sales price (ASP). Medicare Part B reimburses at an average sales price plus 6% of the original biologic’s ASP. If the ASP is $100, the Medicare payment would be $106. The Inflation Reduction Act, in an effort to increase biosimilar use, temporarily (for five years, beginning Oct. 1, 2022) bumped up Medicare “add-on” payments for certain biosimilars to 8% to encourage healthcare providers to prescribe them more often.
Wholesale acquisition cost (WAC). In some cases, the ASP may be unavailable. If so, Medicare substitutes and generally pays based on the wholesale acquisition cost. WAC is the typically higher manufacturer’s listing price.
Billing and coding. Instead of grouping biosimilars, each receives its own unique billing code and is paid separately from its biologic parent. The codes and reimbursements are linked, so if the ASP goes down, so does reimbursement.
Why are biosimilars sometimes not covered by insurance?
Sometimes, biosimilars aren’t covered because insurers limit coverage. Despite the potential for cost savings, a recent study published in the journal BioDrugs found the following:
About 19% of coverage decisions put in place insurance or step therapy restrictions for this class of medications compared with reference products.
Of the 17 plans examined, five (or 29.4%) restricted biosimilar use in 30% or more of their coverage decisions.
Several factors influence insurer decisions to limit biosimilar coverage, including:
Patient population
Plan size
Number of people with the health condition (Generally, disease prevalence impacts plan biosimilar coverage decisions.)
Biosimilar competition (more than two on the market)
Partnerships with smaller pharmacy benefit managers, which may have less negotiating power
The bottom line
Biosimilars are FDA-approved biologic therapies made from human, plant, or other living or natural cells. They are developed to treat various cancers, autoimmune diseases such as rheumatoid arthritis, diabetes, and other health conditions.
Typically, biosimilars are more affordable than their biologic parent, can bring value to health care and can offer savings to the individuals using them as treatment. Both Medicare and private health insurance cover this class of biologic medications under certain conditions. However, billing and coding, formularies, and a law affecting average sales pricing can affect reimbursement rates — and ultimately, your out-of-pocket costs.
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References
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Association for Accessible Medicines. (2022). Report: 2022 U.S. Generic and Biosimilar Medicines Savings Report.
Centers for Medicare & Medicaid Services. (n.d.). Frequently asked questions: Inflation Reduction Act; Biosimilars temporary payment increase.
Chambers, J. D., et al. (2020). Coverage for biosimilars vs reference products among US commercial health plans. JAMA Network.
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