WASHINGTON — The Trump administration on Thursday boldly reversed an Obama-era policy that supporters said had helped lower prices for some costly drugs.
The policy centers on so-called biosimilar drugs, which are highly similar versions of biologic drugs manufactured in living cells or microorganisms. The Obama administration designed certain Medicare payments to encourage more price competition among those biosimilar drugs. Trump’s Centers for Medicare and Medicaid Services will reverse that policy beginning Jan. 1, 2018.
The reversal is a win for big drug companies and manufacturers, who had been urging the Trump administration to revise the policy — and to do so quickly. They have said the policy would discourage new innovation in the nascent biosimilar market, ultimately driving up prices.
But Obama officials who helped draft the current policy have defended it as a clear way to force competition among an expensive category of drugs.
The Biosimilars Forum, which represents Amgen, Merck, Samsung Bioepis, Boehringer Ingelheim, Pfizer, and other companies, said it was “delighted” by the change.
“A robust U.S. marketplace is critical for American patients and even more important when one considers the costs (sic) savings potential that they represent,” Stacie Phan, who heads the group, said in a statement.
The Trump administration agreed.
“By encouraging innovation and greater manufacturer participation in the marketplace, we believe that this policy change will result in the licensing of more biosimilar products, thus creating a stable and robust market, driving competition and decreasing uncertainty about access and payment,” the agency wrote in a fact sheet about the new regulation.
In essence, the policy would have Medicare pay for biosimilars in much the way it pays for branded and generic drugs administered by doctors.
Medicare reimburses doctors for what is known as the average sales price of most drugs administered by doctors. That average sales price takes into account the manufacturer price of both the branded drug and any available generics — plus an extra 4.3 percent.
It’s an approach that incentivizes clinicians to buy less expensive drugs, since they’ll only be reimbursed with the average sales price. Manufacturers hoping to entice doctors to use their drugs, in turn, will lower their prices to compete.
Biologic drugs, however, are treated differently. Each biologic drug gets its own pricing category, plus 4.3 percent, by statute. There’s no average — meaning there are fewer price competition incentives.
The Obama-era policy grouped all biosimilars into the same category — returning some of that price competition to the biosimilar industry, if not the biologic market. Under the Trump proposal, beginning Jan. 1, each biosimilar will get its own pricing category, like biologics.
CMS is reversing the policy more quickly and less transparently than a typical regulatory change requires. Though earlier this year the agency solicited public comments on the Obama-era policy, it did not give advance notice of its intent to reverse the policy.
Even in the new regulation, CMS warned that all of its systems won’t be ready to accommodate the change by the time it goes into effect.
“Completion of these changes, which will require changes to the claims processing systems, is planned to occur as soon as feasible, but should not be expected to be complete by January 1, 2018,” the agency wrote in the regulation.
The agency said it expects the updates to be in place by mid-2018.