Unsustainable Biosimilar Market Hurts Practices, Patients

Biosimilars are often promoted as cost-saving alternatives to their reference medications. Designed to provide comparable therapeutic efficacy at a reduced price, they have the potential to lower healthcare costs for both patients and healthcare systems.

However, practices nationwide are facing the opposite issue with certain infused biosimilars. Rather than saving money, the acquisition costs of these drugs exceed reimbursement rates. As a result, many practices can no longer afford to offer these “underwater” medications.

The problem began with biosimilars for infliximab — a tumor necrosis factor inhibitor indicated for inflammatory bowel disease, rheumatoid arthritis, ankylosing spondylitis, and psoriasis/psoriatic arthritis. Pfizer’s and Celltrion’s Inflectra (infliximab-dyyb) was the first biosimilar to go underwater, followed by Avsola (infliximab-axxq), manufactured by Amgen.

This issue has now expanded to other biosimilars beyond the infliximab family.

This unsustainable situation threatens private practices and outpatient centers’ ability to continue to provide these infused biosimilars to patients, said Ashley Beall, MD, the managing director of Arthritis and Rheumatism Associates, P.C., a seven-office rheumatology practice in Maryland; Washington, DC; and Virginia. Many other biosimilars for rheumatologic medications are launching in the next 2 years, “and we’re very concerned about seeing the same thing happen again,” she told Medscape Medical News.

What Is Going on Here?

Drug manufacturers offer pharmacy benefit managers (PBMs) and insurers rebates in exchange for preferred formulary placement. For provider-administered drugs covered under Medicare Part B, these rebates are factored into calculating the average sales price (ASP) of a medication, which in turn determines reimbursement by the Centers for Medicare & Medicaid Services (CMS). Commercial insurers often use ASP and CMS reimbursement to determine their own rates as well.

These aggressive price concessions to PBMs and payors contribute to a rapidly falling ASP, which is updated quarterly. However, these rebates that lower ASP do not affect the price providers pay to acquire the medication from wholesalers.

“The drug may be bought for a certain price, but the reimbursement is lowered due to the rebates,” explained Chris Phillips, MD, the chair of the American College of Rheumatology Committee on Rheumatologic Care. He has a solo private practice in Paducah, Kentucky.

The result is acquisition prices that can exceed reimbursement rates by more than twofold or threefold.

For Local Infusion, which operates across 17 ambulatory infusion clinics in six states, the cost to purchase Inflectra is about $400 per 100-mg vial, while CMS reimbursement totals $115, Co-Founder Ashley Knapp, RN, MBA, shared with Medscape Medical News. Avsola has similar margins, with an acquisition cost of $490 and a reimbursement rate of $198.

By taking on a patient on Avsola, “you are agreeing to lose $300 per vial, per infusion,” Knapp said, “and a patient is generally on four to five vials, if not more.”

Although the Inflation Reduction Act temporarily increased Medicare reimbursement for biosimilars from ASP+6% to ASP+8% — if the biosimilar’s ASP is lower than that of the reference product — that doesn’t solve the issue.

“That 2% increase is just a drop in the bucket on what you are losing,” Phillips noted.

Since entering the market in 2017, the ASP of Inflectra has fallen by nearly 90%, according to CMS data. Avsola’s ASP has dropped by 60% since it launched in late 2020.

And the issue is growing. Truxima (rituximab-abbs), a biosimilar for rituximab by Teva and Celltrion, is also underwater. The tocilizumab biosimilar Tyenne (tocilizumab-aazg), which Fresenius Kabi launched in 2024, is already unaffordable for practices. Since October 2024, ASP has dropped by 16%, Phillips said.

“Our acquisition prices did not drop, so this one has gone underwater in record time,” he said.

At the same time, more payors are requiring that patients switch to these biosimilars. In 2018, 41% of individuals with commercial insurance had plans listing Inflectra as a preferred product, according to a report by IQVIA. In 2023, that percentage rose to 94%. Avsola has also seen increased uptake from commercial plans, while Remicade, the reference product, has experienced a decline.

In 2018, 93% of individuals with commercial insurance had plans that preferred Remicade compared with just 50% in 2023.

Restricting Patient Access

Despite increasing payor preference toward these “underwater” biosimilars, most private practices cannot afford to offer these medications to patients. Referring patients elsewhere likely will not work “because most other outpatient or freestanding infusion centers are having the same issue,” Beall said, “so these patients have nowhere to go.”

Because hospital-based infusion centers are billed differently, hospitals may be able to offer these biosimilars. However, payors can also turn down patients receiving infusions there because of the higher cost location of care.

Phillips, who also provides infusions to non-rheumatology patients from academic centers, recalled one gastroenterology patient whose insurance required that they receive care at a nonhospital facility and mandated the use of either Inflectra or Avsola. Appeals to the patient’s insurance were unsuccessful.

“We couldn’t treat the patient, and they couldn’t be infused at the hospital because the payer didn’t want to pay for that, so the patient was literally stuck with no options,” Phillips said, noting it was “the most egregious case of this that I’ve run into.”

But that patient experience is not uncommon, with both Beall and Knapp also dealing with this issue with patients.

Switching patients to a medication with a different mechanism of action, although not ideal, is another option, said Helen Hinkle, the office administrator for Rheumatology Associates of South Texas, which has two locations in San Antonio.

Her practice initially embraced biosimilars to reduce healthcare costs, she said. But once these infliximab biosimilars became unaffordable, “we either had to move [patients] to the brand name — because that was still somewhat profitable — or if the plan was not allowing that, we had to change that patient’s medication altogether.”

While most patients tolerated the switch, “there were some cases where patients had to try a third drug because the second drug that we moved them to didn’t work as well,” she said.

White Bagging

Through “white bagging” — where the patient’s medication is shipped directly to providers via a specialty pharmacy — a provider does not have to purchase the medication. However, they are only reimbursed for the administration of these medications.

“If we white-bagged everybody’s treatments, we wouldn’t be able to stay in business,” Phillips said.

Under buy-and-bill, a practice purchases the medication upfront and can provide that medication to any eligible patient on the day of their appointment. In white bagging, the drug is designated for one patient. The effort to get prior authorization and coordinate the delivery of these white-bagged medications adds administrative and personnel costs, Knapp explained.

“The administration [fees] barely cover the supplies,” she said. “When you factor in the nursing time, the time that the patient is in the chair, and the time our staff has spent on getting the patient approved, you are already in the red on administration.”

If there are delays in shipping, a patient’s drug might not arrive on time for their appointment, resulting in delays in care.

These specialty pharmacies can also have their own preferred formularies, which adds another layer of confusion, Knapp said.

For example, while a patient’s insurance may mandate using Avsola or Inflectra, the specialty pharmacy might prefer the reference product Remicade. So, via white bagging, a practice may end up administering a drug that initially insurance would not cover.

“It’s very confusing for everyone,” Knapp said, and results in further delays in treatment.

That also means white bagging a drug that would have been profitable under the traditional buy-and-bill system, she said.

Looking for Solutions

A coalition of over 40 provider and patient advocacy organizations is currently working to address this issue, meeting last year with CMS to discuss concerns around calculating ASP and the resulting inadequate reimbursement.

In a letter to leaders in Congress, the coalition outlined three potential solutions.

The first would base reimbursement on the provider’s acquisition cost, though this option could be “very burdensome” to providers, Phillips said. It would require all providers to report to the payer exactly what they paid for the drug, and the payor would reimburse them based on that number. “The workload on that would be massive,” he said.

The second, and currently favored, option is to base provider reimbursement on the wholesale acquisition cost (WAC) — the manufacturer’s list price — of a medication until the ASP stabilizes. CMS already uses WAC to inform reimbursement when a medication first comes to market, Phillips explained, until ASP information is available. Extending WAC-based pricing is currently the goal of advocacy groups, but it would require legislation.

“It’s not something that Medicare or CMS can just do on their own,” he said.

The ideal long-term solution, he said, would be to remove manufacturer rebates from the ASP formula, so it accurately reflects what providers pay for these medications. However, lobbying for that change is “a little more than we can bite off and chew in the first pass,” Phillips said.

Beall, Phillips, and Hinkle had no relevant disclosures. Knapp is on the advisory board for Cencora (a distributor) and the advisory committee for the National Infusion Center Association.