Playing the Spread

  • by: Peter Pitts |
  • 03/13/2020
When it comes to drug pricing, some questions are easier to answer than others. Here’s an easy one – why do physicians prefer innovator biologics to biosimilars? A big part of the answer is --  because the more expensive the product, the more money they make. (Although Medicare pays the provider the same administration fee for a biosimilar and the originator biologic – that is not the case with commercial plans.) That’s Econ 101. As Adam Smith reminds us, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.”

How can we make that “self-interest” work in the interests of lowering costs via a more robust use of biosimilars? (Hint: It’s not by making them more expensive.)
That’s the theory of the Increasing Access to Biosimilars Act. Its main idea is to develop a pilot program (run by the Department of Health and Human Services) to explore ways to encourage physicians to prescribe biosimilars within Medicare Part B. Since Medicare is the largest insurer in the country, any changes in its reimbursement policy will ultimately change behavior in the private insurer sector.

Better physician education as to the safety and efficacy of biosimilars? It’s in there. More education (properly scientific, balanced and vetted) is important. (This is also a legitimate focus of the joint FDA/FTC program to address the same issue.) More important, however, is the physician pocketbook strategy. Per this legislation, physicians would share in the savings. What does that mean? Simply put, it means doctors will receive a percentage of the spread between the cost of the innovator product and the biosimilar. De minimus, this will remove the perverse incentive for physicians to prescribe a more expensive product over its biosimilar cousin. Obviously, cost isn’t the only parameter in product choice – but it’s a potent counterweight to “their own self-interest.”

The proposed legislation also eradicates the need to pursue foolish policies such as the Administration’s concept of an International Pricing Index. Also, the Increasing Access to Biosimilars Act is a shot across the bow to payers who will swiftly recognize the incentives to stop using the tools of exclusionary contracting for non-Medicare Part B patients. Why? Because it will be in “their own self-interest” to do so.

More as more develops.

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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