HHS OIG Report Finds that Medicare Could Save Money with Increased Biologic Use

In early 2022, the United States Department of Health and Human Services Office of Inspector General (HHS OIG) issued a report that found that Medicare Part D and Medicare beneficiaries could experience a significant cost savings if they increased biosimilar use. A biosimilar is a lower-cost biologic that is highly similar to an existing biologic approg

ved by the United States Food and Drug Administration (FDA). Biologics cost Part D around $12 billion annually.

While a limited number of biosimilars are currently covered under Part D, multiple biosimilars for Humira – which is the best-selling prescription drug in the world – are expected to be available in 2023, which presents an opportunity to significantly decrease Part D drug costs.

Conducting the Study

In conducting the study, HHS OIG analyzed biosimilar utilization and spending in Part D from 2015 to 2019 and calculated several estimates to explore how Part D and beneficiary spending in 2019 may have changed with an increased use of biosimilars. HHS OIG also researched whether biosimilars were included on Part D plan formularies, and if so, whether they were on a less preferential tier or if they were subject to different utilization management requirements than their reference products.

Study Findings

HHS OIG found that since 2015, when biosimilars were introduced, the use of – and spending on – the drugs in Part D has steadily increased but they are still used far less frequently than their higher cost reference product alternatives. For example, in 2019, biosimilars’ reference products were prescribed about five times more frequently than biosimilars in 2019.

HHS OIG estimates that if biosimilar use were to increase in lieu of the reference products, Part D and beneficiary spending could significantly fall – Part D spending on biologics with available biosimilars could have decreased by 18% ($84 million) if all biosimilars had been used as frequently as the most used biosimilars. When it comes to out-of-pocket costs for beneficiaries, even they could have saved $1.8 million (12%). While these amounts may be modest in the context of overall Part D spend, the more biosimilars that become available, the greater the savings potential.

As noted above, Humira is expected to have available biosimilars in the coming years. Biosimilars for popular drugs have the potential to really reduce spending on prescription drugs. However, in 2019, not all plan formularies covered available biosimilars. Even the formularies that did cover biosimilars rarely encouraged their use over reference products through preferential formulary tier placement and utilization management tools. These restrictions would stunt any potential savings, too.

HHS OIG Recommendations and CMS Response

HHS OIG recommended that CMS encourage plans to increase access to, and use of, biosimilars in Part D. HHS OIG also recommended that CMS monitor biosimilar coverage on formularies to identify and potentially concerning trends.

CMS concurred with the first recommendation to encourage plans to increase the access to and use of biosimilars in Part D. CMS noted that its authority to review Part D plan formularies focuses on ensuring that drug plans provide access to medically necessary treatments and do not discriminate against particular types of beneficiaries. Therefore, the agency intends to review how demonstration projects might be used to test methods to lower beneficiary and program spending on drugs and incentivize the use of biosimilars and generics.

The agency neither concurred nor disagreed with the second recommendation, but reiterated its authority to review Part D plan formularies to ensure that drug plans provide access to medically necessary treatments and not discriminate against beneficiaries.