Biologic drugs are the largest and fastest-growing segment of the US pharmaceutical markets. Biosimilars—near identical copies of reference biologics—can lower spending on biologic drugs, which is especially important for programs such as Medicare, whose patient population represents a significant share of biologic users. However, early evidence has shown that biosimilar use among Medicare patients has been slow and uneven. 

To examine this issue in more detail, Luca Bertuzziof Charles River AssociatesandAssociate Professor of Health Care Policy, Luca Mainiof Harvard Medical Schoolcompared formulary coverage in Medicare Part D plans with that of employer-sponsored plans. The study is featured in the current issue of Health Affairs. The authors found that Part D plans were more likely than employer-sponsored plans to prefer reference biologics to biosimilars:  throughout the first three years of a biosimilar’s lifespan, employer-sponsored plans coverage was 40 p.p. higher than that of Part D plans. Conversely, coverage of the reference biologic dropped by 27 percent in employer-sponsored plans after biosimilar entry but remained unchanged in Part D plans. The authors also showed that biosimilar coverage in Part D plans increased after a Part D benefit design reform contained in the 2018 Bipartisan Budget Act. 

The authors conclude that their study highlighted how Medicare Part D benefit design can inadvertently influence plans’ coverage decisions and predict that the Inflation Reduction Act has the potential of further correcting these discrepancies.