Money Talks in Hospitals’ Adoption of Oncology Biosimilars

Hospitals’ adoption of biosimilars for three oncology biologics increased dramatically over a 5-year period, as did the facilities’ profit margins on the drugs, claims and drug acquisition data showed.

Adoption of the biosimilars at 1,541 hospitals increased from 18-37% in 2020 to 84-93% in 2024, coinciding with increased markup margins. The favorable impact on balance sheets resulted from a substantially slower decline in reimbursement for the biosimilars in comparison to the prices hospitals paid for the drugs.

For every additional dollar paid for biosimilars to bevacizumab (Avastin), trastuzumab (Herceptin), and rituximab (Rituxan), hospitals’ profit margins on the drugs increased by $1.82 to $2.72, reported James C. Robinson, PhD, of the University of California Berkeley, and colleagues in JAMA.

“These findings suggest that gainsharing methods of payment, in which the entity paying for a product, in this case the insurer, shares the savings with the entity generating the savings, in this case the hospital, potentially offer substantial improvements in the efficiency of the healthcare system,” the authors wrote in a summary of the results.

This study provides a financial snapshot of before and after Medicare’s adoption of gainsharing methodology in 2022 to encourage adoption of biosimilars. Medicare Part B reimburses hospitals at the average acquisition price paid for physician-administered drugs, plus a markup for costs related to inventory and handling, Robinson and colleagues noted. By itself, that would create an “undesirable incentive” to favor higher-priced over lower-priced drugs. To counter that, Medicare bases reimbursement for biosimilars on the acquisition price for the original drug, not the biosimilar.

“Reimbursement methods that embody gainsharing principles can encourage competition among drug manufacturers and generate a spiral of price reductions,” they continued. “Lower acquisition expenditures by hospitals can be followed by lower reimbursement expenditures by insurers, in turn moderating pressures to increase insurance premiums and consumer cost-sharing requirements.”

The study might be viewed as a positive story about hospitals’ increased use of biosimilars. Alternatively, the findings point to a need for more work to ensure more efficient adoption of biosimilars in clinical practice, according to the authors of an accompanying editorial.

The reported increase in biosimilar adoption occurred far more slowly as compared with generic adoption rates in the literature, noted Rachel E. Sachs, JD, MPH, of Washington University School of Law in St. Louis, and colleagues. Health systems “absolutely” could choose to drive biosimilar adoption and utilization, following examples such as Kaiser Permanente, which reached 90% adoption for all three biosimilars within 2 months of launch, as compared with the 5-year period of the study.

The findings also raise questions about the relative bargaining power of hospitals and insurers, Sachs and colleagues pointed out. Currently, insurers can set different reimbursements for reference and biosimilar products. In the current study, trastuzumab biosimilars were acquired at $20 per unit in 2024 but reimbursed at $90 per unit. In contrast, the reference product had an acquisition cost of $80 and reimbursement of $160, resulting in a higher margin. Why insurers would agree to the higher reimbursement cost for the reference product remains unclear.

“Ultimately, biosimilar adoption is important for lowering spending on prescription drugs,” Sachs and co-authors concluded. “Continuing to pay hospitals and healthcare purchasers marked-up rates far higher than the cost of prediction is not efficient, and consumers, policyholders, and taxpayers should expect more rapid price competition and lower prices for these products.”

As physician-administered oncology biologics lose patent protection, biosimilars increasingly will emerge to provide competition. With that background, the current study had a twofold objective: to test whether hospitals paid lower acquisition prices and earned higher markup margins and to see whether insurers reduced reimbursement prices paid to hospitals, thereby sharing in the savings from lower manufacturer prices.

For the study, Robinson and colleagues relied on several types of information: health insurance claims data linked to information on drug acquisition prices paid by hospitals, drug reimbursement prices paid by insurers, hospital eligibility for federal 340B drug price discounts, and additional information on hospital, patient, and market characteristics.

Each of the three reference biologics included in the analysis had two or more competing biosimilars during the study period of 2020-2024. The study included 66,139 patients who received the biosimilars at 1,541 hospitals. Biosimilars to bevacizumab accounted for the most patients (24,925), followed by trastuzumab (22,617), and rituximab (18,597).

The average prices of the reference biologics were $75.76 for bevacizumab, $94.29 for trastuzumab, and $81.29 for rituximab. Average prices for the biosimilars were $37.04 for bevacizumab, $43.13 for trastuzumab, and $42.92 for rituximab.

The biosimilars’ share of the biologics’ use during the study period increased from 32% to 93% for bevacizumab, 37% to 87% for trastuzumab, and 18% to 84% for rituximab. During the same period, hospitals’ acquisition prices decreased by 60% for bevacizumab, 72% for trastuzumab, and 63% for rituximab. Reimbursement prices from insurers for the biologics decreased by 32%, 36%, and 34%, respectively.

For every $1 increase in hospitals’ acquisition prices, reimbursement increased by $2.72 for bevacizumab, $1.82 for trastuzumab, and $2.32 for rituximab.