Biosimilar Formulary Evaluation: A Pharmacist’s Guide

Biosimilars were introduced to the market with the goal of reducing overall healthcare costs and increasing patients’ access to medications. Per guidelines from the U.S. Food and Drug Administration (FDA), biosimilars must have no significant differences from their reference products in terms of purity, safety, or efficacy, as demonstrated by clinical studies. Laws pertaining to record keeping and communicating with physicians and patients about biosimilar substitutions vary by state, but per the FDA, only biosimilars with interchangeable status can be switched with their reference product without notifying the provider.

Biosimilars presumably cost less than their reference product, with estimates ranging from 10 percent to 30 percent in potential price cost reduction based on anticipated cost-savings models from small chemical molecule markets. However, specialty tiering could result in increased coinsurance rates. Various payment models, reimbursement schemes, and regulatory uncertainties may all affect just how much money patients save.

Since questions remain about biosimilars despite their increasing popularity, hospital facility staffs should have a plan when considering biosimilars as additions or substitutions in both the inpatient and outpatient settings. They should start by comparing the currently used formulary biological drugs to the available biosimilars. Assuming the biosimilar and reference product are the same in terms of safety and efficacy, the review will be to evaluate potential cost-savings associated with the product. There are differences with drugs in the inpatient and outpatient settings: reimbursement for inpatient drugs tends to go through diagnosis-related groups’ bundled payments, while outpatient cost analysis should take into account variables such as private insurers and Medicaid, as well as unique pricing for 340b-eligible institutions. This year, Medicare implemented hospital outpatient prospective payment system (OPPS) changes, reducing part B reimbursement from average sales price (ASP) + 6 percent to ASP – 22.5 percent (rural sole community hospitals, children’s hospitals, prospective payment system-exempt cancer hospitals, and medications with designated pass-through status are exempt). Hospital outpatient formularies may benefit from adding biosimilars to their list early on because innovative biologics—including biosimilars—receive pass-through status for two to three years.

When considering adopting biosimilars in the outpatient setting, institutions must also consider varying state regulations and reimbursement rules for specific payers. To avoid negative reimbursement consequences, hospitals should review their contracts with their manufacturer and wholesaler groups to be aware of any rules pertaining to biosimilar interchanges. Medicare has tried to avert this problem by altering some of its biosimilar reimbursement schemes, but it is still important to consider utilization, average sales prices, and percent reimbursed from private and government insurances.

If hospitals choose to add biosimilars to their formularies, it is up to the staff to stay up-to-date on their efficacy and safety, as well as those of their reference biologic products. A best practice would be to set electronic alerts linking biological reference agents with their biosimilar products in the event patients have had previous adverse reactions associated with either one.

As more biosimilars make their way onto the market, it will be efficient in terms of time and cost for providers to have a biosimilar policy in place that considers the process for review, addition, and monitoring of biosimilar agents. Rather than individually reviewing each biosimilar upon FDA approval, a strategic policy for adding biosimilars to the formulary will save time and resources. The policy should also make clear individual state regulations for interchanging outpatient biosimilar products.

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