Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use

Why We Did This Study
Biologics—usually large, complex molecules produced in a living system—are some of the most expensive drugs available, and spending for biologics is growing in Medicare Part D because they treat diseases common among Medicare beneficiaries. Biologics are estimated to cost Part D upwards of $12B annually.

A biosimilar is a lower cost biologic that is highly similar to an existing biologic approved by the Food and Drug Administration (i.e., the biosimilar's "reference product").

Although a limited number of biosimilars are currently available for Part D covered reference products, multiple biosimilars for Humira—the best selling prescription drug in the world—are expected to be available in 2023, thereby presenting an opportunity to significantly decrease Part D drug costs.

How We Did This Study
We analyzed biosimilar utilization and spending in Part D from 2015 to 2019. We also calculated multiple estimates to explore how Part D and beneficiary spending in 2019 could have changed with increased utilization of biosimilars.

Lastly, we determined the extent to which Part D plan formularies encouraged the use of biosimilars rather than reference products. Specifically, we examined whether biosimilars were included on Part D plan formularies and, if so, whether they were on a less preferential tier or subject to different utilization management requirements than their reference products.

What We Found
Since biosimilars were introduced in 2015, use of and spending on these drugs in Part D has steadily increased. However, they are still used far less frequently than their higher cost reference product alternatives. In 2019, biosimilars' reference products were still prescribed about five times more frequently than biosimilars in Part D.

We estimated that with increased use of biosimilars instead of reference products, Part D and beneficiary spending could have been considerably reduced in 2019. Specifically, Part D spending on biologics with available biosimilars could have decreased by $84M, or 18 percent, if all biosimilars had been used as frequently as the most used biosimilars. Additionally, beneficiaries' out of pocket costs for these drugs could have decreased by $1.8M, or 12 percent. Although these amounts are modest in the context of overall Part D spending, far greater spending reductions will be possible as additional biosimilars become available.

Biosimilars have the potential to significantly reduce costs for Part D and beneficiaries if their use becomes more widespread, particularly with the expected launches of biosimilars for blockbuster drugs Humira and Enbrel. However, a lack of biosimilar coverage on Part D formularies could limit this wider utilization. In 2019, not all plan formularies covered available biosimilars. Moreover, those formularies that did cover biosimilars rarely encouraged their use over reference products through preferential formulary tier placement and utilization management tools.

What We Recommend And How The Agency Responded
Without further changes to the Part D program, the impact of limited coverage and promotion of biosimilars on formularies may be magnified as biosimilars for blockbuster drugs become available. To help ensure that Part D and beneficiaries can capitalize on potential savings, we recommend that CMS encourage plans to increase access to and use of biosimilars in Part D. We also recommend that CMS monitor biosimilar coverage on formularies to identify concerning trends. CMS concurred with our first recommendation and neither concurred nor nonconcurred with our second recommendation.